10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 27, 2014
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Transition Period from _______ to _______
		Commission File Number 0-27026

Pericom Semiconductor Corporation

(Exact Name of Registrant as Specified in Its Charter)

California	77-0254621
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

1545 Barber Lane

Milpitas, California  95035

(408) 232-9100

(Address of Principal Executive Offices and

Issuer’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 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.

Large Accelerated Filer	¨	Accelerated Filer	x
Non-accelerated Filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of the Exchange Act)

Yes ¨ No x

As of October 27, 2014 the Registrant had outstanding 21,843,000 shares of Common Stock.

Pericom Semiconductor Corporation

Form 10-Q for the Quarter Ended September 27, 2014

INDEX

PART I.  FINANCIAL INFORMATION			Page
	Item 1:	Condensed Consolidated Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of
		September 27, 2014 and June 28, 2014	3
		Condensed Consolidated Statements of Operations
		for the three months ended September 27, 2014 and
		September 28, 2013	4
		Condensed Consolidated Statements of Comprehensive Income
		for the three months ended September 27, 2014 and
		September 28, 2013	5
		Condensed Consolidated Statements of Cash Flows
		for the three months ended September 27, 2014 and
		September 28, 2013	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2:	Management’s Discussion and Analysis of
		Financial Condition and Results of Operations	20
	Item 3:	Quantitative and Qualitative Disclosures about
		Market Risk	29
	Item 4:	Controls and Procedures	29
PART II.  OTHER INFORMATION
	Item 1A:	Risk Factors	30
	Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6:	Exhibits	42
	Signatures

2

PART I.  FINANCIAL INFORMATION

Item 1: Condensed Consolidated Financial Statements

Pericom Semiconductor Corporation

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	September 27,		June 28,
	2014		2014
ASSETS
Current assets:
Cash and cash equivalents	$	27,587	$	33,020
Short-term investments in marketable securities		96,248		86,104
Accounts receivable
Trade (net of reserves and allowances of $2,303 and $2,461)		24,863		24,036
Other receivables		2,882		2,878
Inventories		11,918		12,288
Prepaid expenses and other current assets		1,053		2,458
Deferred income taxes		795		726
Total current assets		165,346		161,510
Property, plant and equipment – net		58,083		58,537
Investments in unconsolidated affiliates		2,495		2,445
Deferred income taxes – non-current		2,576		2,460
Intangible assets (net of accumulated amortization of $13,579 and $12,849)		6,285		7,009
Other assets		8,062		8,118
Total assets	$	242,847	$	240,079
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,697	$	8,927
Accrued liabilities		10,120		9,934
Total current liabilities		19,817		18,861
Industrial development subsidy		6,133		6,354
Deferred income taxes		5,577		5,460
Noncurrent tax liabilities		1,041		1,041
Other long-term liabilities		888		871
Total liabilities		33,456		32,587
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock and paid in capital - no par value, 60,000,000 shares authorized; shares issued and outstanding: September 27, 2014, 21,968,000; June 28, 2014, 21,974,000		113,039		113,118
Retained earnings		85,699		83,204
Accumulated other comprehensive income, net of tax		10,653		11,170
Total shareholders' equity		209,391		207,492
Total liabilities and shareholders' equity	$	242,847	$	240,079

See notes to condensed consolidated financial statements.

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Pericom Semiconductor Corporation

Condensed Consolidated Statements of Operations

 (In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	September 27,		September 28,
	2014		2013
Net revenues	$	33,259	$	32,608
Cost of revenues		19,179		19,800
Gross profit		14,080		12,808
Operating expenses:
Research and development		4,588		5,045
Selling, general and administrative		7,300		7,687
Total operating expenses		11,888		12,732
Income from operations		2,192		76
Interest and other income, net		1,274		486
Income before income taxes		3,466		562
Income tax expense		1,010		231
Net income from consolidated companies		2,456		331
Equity in net income of unconsolidated affiliate		39		43
Net income	$	2,495	$	374
Basic income per share	$	0.11	$	0.02
Diluted income per share	$	0.11	$	0.02
Shares used in computing basic income per share		21,936		22,794
Shares used in computing diluted income per share		22,262		22,951

See notes to condensed consolidated financial statements.

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Pericom Semiconductor Corporation

Condensed Consolidated Statements of Comprehensive Income

 (In thousands)

(Unaudited)

	Three Months Ended
	September 27,			September 28,
	2014			2013
Net income	$	2,495		$	374
Other comprehensive income:
Change in unrealized gain or loss on securities available for sale, net		(174	)		307
Foreign currency translation adjustment		(458	)		945
Tax benefit (provision) related to other comprehensive income		115			(128	)
Other comprehensive income, net of tax		(517	)		1,124
Comprehensive income	$	1,978		$	1,498

See notes to condensed consolidated financial statements.

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Pericom Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

 (In thousands)

(Unaudited)

	Three Months Ended
	September 27,			September 28,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,495		$	374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,260			2,695
Share-based compensation		709			729
Tax benefit resulting from share-based transactions		293			109
Excess tax benefit resulting from share-based transactions		(29	)		—
Loss on disposal of equipment		301			42
(Gain) loss on sale of investments		6			(44	)
Equity in net income of unconsolidated affiliate		(39	)		(43	)
Deferred taxes		50			(103	)
Changes in assets and liabilities:
Accounts receivable		(1,033	)		(2,276	)
Inventories		370			341
Prepaid expenses and other current assets		1,400			(212	)
Other assets		11			144
Accounts payable		371			(2,227	)
Accrued liabilities		(41	)		501
Other long-term liabilities		—			17
Net cash provided by operating activities		7,124			47
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(1,136	)		(1,243	)
Purchase of available-for-sale investments		(25,719	)		(20,624	)
Maturities and sales of available-for-sale investments		15,292			16,538
Net cash used in investing activities		(11,563	)		(5,329	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance under stock plans		1,498			—
Proceeds from short-term debt		—			514
Payments on short-term debt		—			(514	)
Excess tax benefit resulting from stock option transactions		29			—
Repurchase of common stock		(2,302	)		(765	)
Net cash used in financing activities		(775	)		(765	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(219	)		166
NET DECREASE IN CASH AND CASH EQUIVALENTS		(5,433	)		(5,881	)
CASH AND CASH EQUIVALENTS:
Beginning of period		33,020			30,844
End of period	$	27,587		$	24,963

See notes to condensed consolidated financial statements.

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Pericom Semiconductor Corporation

Notes To Condensed Consolidated Financial Statements

(Unaudited)

1.  BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared by Pericom Semiconductor Corporation (“Pericom” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission.  In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the Company’s financial position as of September 27, 2014, the results of operations for the three months ended September 27, 2014 and September 28, 2013 and cash flows for the three months ended September 27, 2014 and September 28, 2013.  This unaudited quarterly information should be read in conjunction with the audited consolidated financial statements of Pericom and the notes thereto included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on August 29, 2014.

The preparation of the interim condensed consolidated 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 and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the period.  Actual amounts could differ from these estimates.  The results of operations for the three months ended September 27, 2014 are not necessarily indicative of the results to be expected for the entire year.  The three month periods ended September 27, 2014 and September 28, 2013 each had 13 week periods.

The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position or results of operations:  advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; changes in the overall demand for products offered by the Company; changes in customer relationships; acquisitions and the subsequent integration of the acquired entity with the Company; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; risks associated with changes in domestic and international economic and/or political conditions or regulations and environmental laws; availability of necessary components; interruptions at wafer suppliers and subcontractors; fluctuations in currencies given the Company’s sales and operations being heavily weighted and paid in foreign currencies; and the Company’s ability to attract and retain employees necessary to support its growth.  

These interim condensed consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Global Limited (“PGL”), PSE Technology Corporation (“PSE-TW”), and Pericom Asia Limited (“PAL”). PGL has two wholly-owned subsidiaries, Pericom International Limited (“PIL”) and Pericom Semiconductor (HK) Limited (“P­HK”). In addition, PAL has three 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”). The Company eliminates all intercompany balances and transactions in consolidation.

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 June 28, 2014 is referred to as fiscal year 2014 or fiscal 2014, whereas the current fiscal year 2015 or fiscal 2015 will end on June 27, 2015.  Both fiscal 2014 and fiscal 2015 contain 52 weeks or 364 days. Periodically, the Company adds a 53^rd week to a year in order to end that year on the Saturday closest to the end of June.

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 return material authorizations (“RMA”s) 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

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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.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The Company adopted the provisions of ASU 2013-11 this quarter. Since ASU 2013-11 only impacts financial statement disclosure requirements for unrecognized tax benefits, its adoption has had no impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a single comprehensive model for accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for annual and interim reporting periods beginning after December 15, 2016. The impact on the Company’s financial condition, results of operations and cash flows as a result of the adoption of ASU 2014-09 has not yet been determined.

2. INTANGIBLE ASSETS

The following table summarizes the components of intangible assets and related accumulated amortization balances for each of the period-ending dates shown, which were recorded as a result of business combinations:  

	September 27, 2014							June 28, 2014
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	6,068	$	(4,167	)	$	1,901	$	6,056	$	(3,913	)	$	2,143
Core developed technology		13,401		(9,412	)		3,989		13,402		(8,936	)		4,466
Total amortizable purchased intangible assets		19,469		(13,579	)		5,890		19,458		(12,849	)		6,609
SaRonix trade name		395		—			395		400		—			400
Total purchased intangible assets	$	19,864	$	(13,579	)	$	6,285	$	19,858	$	(12,849	)	$	7,009

Amortization expense related to finite-lived purchased intangible assets was approximately $725,000 and $785,000 for the three month periods ended September 27, 2014 and September 28, 2013, respectively.

The Company performs an impairment review of its intangible assets at least annually.  Based on the results of its most recent impairment review, the Company determined that no impairment of its intangible assets existed as of September 27, 2014. However, future impairment reviews could result in a charge to earnings.  

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The finite-lived purchased intangible assets consist of customer relationships and existing and core technology, which have remaining useful lives from one to three years.  The Company expects future amortization expense associated with its intangible assets to be:

	Months from September 27, 2014
(in thousands)	Next 12 Months		13-24 Months		25-36 Months		Over 36 Months		Total
Customer relationships	$	992	$	909	$	—	$	—	$	1,901
Core developed technology		1,919		1,808		262		—		3,989
Total	$	2,911	$	2,717	$	262	$	—	$	5,890

 3.  INCOME PER SHARE

Basic income per share is based upon the weighted average number of common shares outstanding.  Diluted income per share reflects the additional potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Basic and diluted income per share for the three month periods ended September 27, 2014 and September 28, 2013 are computed as follows:

	Three Months Ended
	September 27,		September 28,
(in thousands, except per share data)	2014		2013
Net income	$	2,495	$	374
Computation of common shares outstanding – basic earnings per share:
Weighted average shares of common stock		21,936		22,794
Basic earnings per share	$	0.11	$	0.02
Computation of common shares outstanding – diluted earnings per share:
Weighted average shares of common stock		21,936		22,794
Dilutive shares using the treasury stock method		326		157
Shares used in computing diluted earnings per share		22,262		22,951
Diluted earnings per share	$	0.11	$	0.02

Options to purchase 1,256,000 and 2,366,000 shares of common stock, and restricted stock units of zero and 4,000 were outstanding during the three months ended September 27, 2014 and September 28, 2013 respectively, but are not included in the computation of diluted earnings per share because the options and units would be anti-dilutive under the treasury stock method.

4.  INVENTORIES

Inventories consist of:

	September 27,		June 28,
(in thousands)	2014		2014
Raw materials	$	5,433	$	5,829
Work in process		2,843		2,468
Finished goods		3,642		3,991
Total inventories	$	11,918	$	12,288

The Company considers raw material inventory obsolete and reserves it if the raw material has not been placed into production within 365 days.  The Company reviews its assembled devices for excess and records a reserve if the quantity of assembled devices in inventory is in excess of the greater of the quantity shipped in the previous twelve months, the quantity in backlog or the quantity forecasted to be shipped in the following twelve months.  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 the last twelve months’ sales levels will not continue and

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reserves inventory in line with the quantity forecasted. As of September 27, 2014 and June 28, 2014, the Company had reserved for $3.1 million and $3.2 million of inventory, respectively.  

5.  ACCRUED LIABILITIES

Accrued liabilities consist of:

	September 27,		June 28,
(in thousands)	2014		2014
Accrued compensation	$	6,564	$	6,892
Income taxes payable		1,726		1,140
Sales commissions		302		307
Other accrued expenses		1,528		1,595
Total accrued liabilities	$	10,120	$	9,934

6.  COMMITMENTS AND CONTINGENCIES

The Company’s future minimum commitments at September 27, 2014 are as follows:

	Months from September 27, 2014
(in thousands)	Less than 12 Months		12-24 Months		24-36 Months		Over 36 Months		Total
Operating lease payments	$	423	$	48	$	20	$	—	$	491
Capital equipment purchase commitments		216		—		—		—		216
Facility modification commitments		238		65		—		—		303
Total	$	877	$	113	$	20	$	—	$	1,010

The operating lease commitments are primarily facility leases at the Company’s various Asian subsidiaries.

The facility modification commitments have been made at the Company’s Shandong, China manufacturing operation for a general contractor and architecture firm to develop feasibility studies, plans and cost estimates for potential additional development of the plant site. The Company has no other purchase obligations beyond routine purchase orders as of September 27, 2014.

7.  INDUSTRY AND 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.

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The following table indicates the percentage of the Company’s net revenues and accounts receivable in excess of 10 percent with any single customer:

	Net Revenues
	Three Months Ended
	September 27,			September 28,
	2014			2013
Customer A		29	%		25	%
Customer B		12	%		10	%
All others		59	%		65	%
		100	%		100	%
		Accounts Receivable
		September 27,			June 28,
		2014			2014
Customer A		28	%		29	%
Customer B		7	%		8	%
All others		65	%		63	%
		100	%		100	%

For geographical reporting, the Company attributes net revenues 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 Cuba, countries located in referenced regions identified as state sponsors of terrorism by the U.S. Department of State and subject to U.S. economic sanctions and export controls. The following table sets forth net revenues by country for the three month periods ended September 27, 2014 and September 28, 2013:

	Net Revenues
	Three Months Ended
	September 27,		September 28,
	2014		2013
China (including Hong Kong)	$	16,178	$	15,092
Taiwan		10,805		9,767
United States		1,462		1,814
Other (less than 10% each)		4,814		5,935
Total net revenues	$	33,259	$	32,608

Long-lived assets consist of all non-monetary assets, excluding financial assets, deferred taxes and intangible assets. The Company attributes long-lived assets to the country where they are located. The following table sets forth the Company’s long-lived assets by country of location as of September 27, 2014 and June 28, 2014:

	September 27,		June 28,
	2014		2014
China (including Hong Kong)	$	31,530	$	32,234
Taiwan		12,297		12,914
United States		13,056		12,154
Korea		1,023		1,067
Others (less than 10% each)		177		168
Total long-lived assets	$	58,083	$	58,537

8.  STOCK REPURCHASE PROGRAM

On April 26, 2012, the Board authorized a share repurchase program for $25 million of common stock, and on April 24, 2014 the Board authorized an additional $20 million for the share repurchase program. The Company may repurchase the shares from time to time in open market or private transactions, at the discretion of the Company’s management.

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During the three month period ended September 27, 2014, the Company repurchased 250,547 shares for an aggregate cost of approximately $2.3 million. During the three month period ended September 28, 2013, the Company repurchased 106,645 shares for an aggregate cost of approximately $765,000. Current cash balances and the proceeds from stock option exercises and purchases in the employee stock purchase plan have funded stock repurchases in the past, and the Company expects to fund future stock repurchases from these same sources. As of September 27, 2014, the Company had approximately $24.3 million of repurchase authority remaining under the 2012 and 2014 share repurchase programs.

9. 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 September 27, 2014, the Company has issued no shares of preferred stock.

STOCK OPTION PLANS

At September 27, 2014 the Company had two stock incentive plans and an employee stock purchase plan, consisting of the 2001 Stock Option Plan, 2004 Stock Incentive Plan and the 2010 Employee Stock Purchase Plan.  

Under the 2004 and 2001 stock incentive plans, the Company has reserved an aggregate of 4.2 million shares of common stock as of September 27, 2014 for issuance to employees, officers, directors, independent contractors and consultants of the Company in the form of incentive or nonqualified stock options, or grants of restricted stock.

The Company may grant stock options at the fair value on the 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 stock 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 for periods within the contractual life of the option on the U.S. Treasury yield corresponding to the expected life of the underlying option.

The Company’s did not grant any stock options under its stock incentive plans during the three months ended September 27, 2014.

The value of the Company’s stock options granted under its stock incentive plans during the three months ended September 28, 2013 was estimated at the date of grant using the following weighted average assumptions:

	Three Months Ended
	September 28,
	2013
Expected Life		5.9 years
Risk-free interest rate		0.81	%
Volatility		54	%
Dividend Yield		—

The weighted average fair value of options granted during the three months ended September 28, 2013 was $3.81.

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The following table summarizes the Company’s stock option activity for the three months ended September 27, 2014:

	Shares			Weighted Average Exercise		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(years)		(in thousands)
Options outstanding at June 28, 2014		2,085		$	10.25		4.54	$	1,077
Granted		—			—
Exercised		(181	)		8.29
Cancelled or expired		(36	)		13.05
Options outstanding at September 27, 2014		1,868		$	10.39		4.50	$	1,700
Options vested and expected to vest at September 27, 2014		1,847		$	10.42		4.44	$	1,652
Options exercisable at September 27, 2014		1,607		$	10.79		3.82	$	1,171

At September 27, 2014, 916,000 shares were available for future grants under the incentive plans. The aggregate intrinsic value of options exercised during the three months ended September 27, 2014 was $190,000.  

At September 27, 2014, expected future compensation expense relating to options outstanding is $843,000, which will be amortized to expense over a weighted average period of 2.5 years.

Additional information regarding options outstanding and exercisable as of September 27, 2014 is as follows:

					Options Outstanding						Exercisable Options
Range of Exercise Prices				Number Outstanding as of September 27, 2014		Weighted Average Remaining Contractual Term (years)		Weighted Average Exercise Price		Number Exercisable as of September 27, 2014		Weighted Average Exercise Price
$	4.89	$	7.87		387,085		6.85	$	7.49		201,593	$	7.42
	7.88		8.85		457,845		4.04		8.44		395,731		8.39
	8.86		10.25		379,050		4.24		9.87		365,550		9.90
	10.26		15.45		453,007		3.74		12.76		453,007		12.76
	15.46		18.10		191,500		3.13		16.32		191,500		16.32
$	4.89	$	18.10		1,868,487		4.50	$	10.39		1,607,381	$	10.79

Restricted Stock Units and Performance Stock Units

Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs and PSUs 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.  PSUs are granted to executives of the Company and will vest in approximately 12 months subject to the achievement of each participant’s performance goals established at the beginning of the fiscal year. The fair value of RSUs and PSUs granted pursuant to the Company’s 2004 Stock Incentive Plan is the

13

product of the number of shares granted and the grant date fair value of the common stock. A summary of activity of RSUs and PSUs for the three months ended September 27, 2014 is presented below:

	Shares			Weighted Average Award Date Fair		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Value		(years)		(in thousands)
RSUs outstanding at June 28, 2014		649		$	8.23		1.58	$	5,901
Awarded		114			9.55
Released		(65	)		8.16
Forfeited		(8	)		8.34
RSUs and PSUs outstanding at September 27, 2014		690		$	8.45		1.39	$	6,864
RSUs and PSUs expected to vest after September 27, 2014		618		$	8.46		1.32	$	6,145

Of the 114,000 shares awarded during the three months ended September 27, 2014, 500 shares were RSUs while the remaining shares awarded were PSUs. At September 27, 2014, expected future compensation expense relating to RSUs and PSUs is $3.8 million, which will be amortized to expense over a weighted average remaining recognition period of 2.3 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 this Plan, of which 1.6 million remain available at September 27, 2014. 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. Thus there were no purchases under the Stock Purchase Plan for the three months ended September 27, 2014 and September 28, 2013. 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 offering period.  The maximum number of shares of Common Stock that any employee may purchase during any offering period under the plan is 1,500 shares, and an employee may not accrue more than $15,000 for share purchases in any offering period.

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 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 offering period.  The expected term is determined by the time from enrollment until purchase, and the Company uses the U.S. Treasury yield for the risk-free interest rate for the offering period.

At September 27, 2014, the Company had $20,000 in unamortized share-based compensation related to its employee stock purchase plan which will be amortized and recognized in the consolidated statement of operations over the next month.

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SHARE-BASED COMPENSATION

The following table shows total share-based compensation expense classified by Consolidated Statements of Operations reporting caption for the three months ended September 27, 2014 and September 28, 2013 generated from the plans described above:

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Cost of goods sold	$	33	$	36
Research and development		218		297
Selling, general and administrative		458		396
Pre-tax share-based compensation expense		709		729
Income tax impact		230		238
Net share-based compensation expense	$	479	$	491

Share-based compensation by type of award is as follows:

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Stock options	$	97	$	239
Restricted stock units		340		438
Performance stock units		217		—
Stock purchase plan		55		52
Total share-based compensation expense	$	709	$	729

The amount of share-based compensation expense capitalized in inventory at September 27, 2014 and June 28, 2014 is immaterial.

10. INCOME TAXES

Income Tax Expense

Income tax expense for the three months ended September 27, 2014 and September 28, 2013 was $1.0 million and $231,000, respectively, and was comprised of domestic federal and state income tax and foreign income tax. The effective tax rate for the three months ended September 27, 2014 was 29%, which resulted from the allocation of earnings between different tax jurisdictions and the inability to utilize losses in certain non-includable entities. The effective tax rate for the three months ended September 28, 2013 was 41%. As of September 27, 2014 and June 28, 2014, the Company has recorded a valuation allowance of $5.1 million against its deferred tax assets.

The Company’s effective tax rate may differ from the federal statutory rate primarily due to the permanent differences related to the benefit of foreign rate differentials, the benefit of generating federal research and development tax credits, income inclusions under Subpart F tax rules, and non-deductible share-based compensation from equity grants.

Accounting for Uncertainty in Income Taxes

The Company’s total amount of unrecognized tax benefits as of September 27, 2014 was $1,846,000.  Of this amount, $719,000 would affect the Company’s effective tax rate if recognized. In addition, as of September 27, 2014 the Company had accrued $229,000 for any interest and penalties related to unrecognized tax benefits.

The Company is subject to examination by federal, foreign, and various state jurisdictions for the years 2008 through 2014.

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11. INVESTMENT IN UNCONSOLIDATED AFFILIATE   

The Company’s investment in an unconsolidated affiliate is as follows:

	September 27,		June 28,
(in thousands)	2014		2014
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,495	$	2,445

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 and supplies PSE-TW with blanks for its surface mount device (“SMD”) production lines. For the first three months of fiscal 2015 and 2014, the Company’s allocated portion of JCP’s results was income of $39,000 and $43,000, respectively.

12. EQUITY AND COMPREHENSIVE INCOME

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

As of September 27, 2014, accumulated other comprehensive income of $10.7 million consists of $10.6 million of accumulated currency translation gains and $126,000 of net unrealized gains on available-for-sale investments, which was recorded net of a $53,000 tax provision. As of September 28, 2013, accumulated other comprehensive income of $11.3 million was made up of $11.6 million of accumulated currency translation gains partially offset by $318,000 of net unrealized losses on available-for-sale investments, which was recorded net of a $73,000 tax benefit.  

13.  SHORT-TERM DEBT

As of September 27, 2014 and June 28, 2014, the Company has no outstanding debt. However, the Company’s subsidiary PSE-TW has two loan and credit facilities in place for equipment purchases or inventory financing via short term loans, letters of credit, and trade financing. The first is an unsecured facility for $100 million New Taiwan Dollars (“NTD”), approximately U.S. $3.3 million. Loans under this facility are limited to $70 million NTD (U.S. $2.3 million), are for up to 180 days, and are based on the Taiwan Interbank Offered Rate (“TAIBOR”) plus 1.25% and may be in NTD, USD, Japanese yen (“JPY”) or other currencies. The second is an unsecured facility for $80 million NTD (U.S. $2.6 million). Loans under this facility are limited to $60 million NTD (U.S. $2.0 million), are for up to 180 days, with the interest rate determined on a case by case basis, and may be in NTD, USD, or JPY.

14.  INDUSTRIAL DEVELOPMENT SUBSIDY

As of September 27, 2014, industrial development subsidies in the amount of $12.8 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 September 27, 2014 was $6.1 million, which is expected to be recognized over the next five to seven years.

A portion of the $12.8 million in subsidies was previously recorded as a receivable. As of June 28, 2014, the Company concluded that the remaining $843,000 of receivables will not be paid and accordingly the balance was written off.

The Company recognized $188,000 and $188,000 of industrial development subsidy as a reduction of cost of goods sold and $47,000 and $46,000 of industrial development subsidy as a reduction of operating expenses in the consolidated statements of operations for the three month periods ended September 27, 2014 and September 28, 2013, respectively.

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15.  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. At September 27, 2014, a summary of investments by major security type is as follows:

		As of September 27, 2014
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time deposits	$	30,257	$	—	$	—		$	—		$	30,257
Repurchase agreements		501		—		—			—			501
National government and agency securities		4,916		96		(4	)		92			5,008
State and municipal bond obligations		7,801		36		(15	)		21			7,822
Corporate bonds and notes		40,971		138		(137	)		1			40,972
Asset backed securities		7,231		12		(14	)		(2	)		7,229
Mortgage backed securities		4,445		23		(9	)		14			4,459
Total	$	96,122	$	305	$	(179	)	$	126		$	96,248

At June 28, 2014 a summary of investments by major security type is as follows:

	As of June 28, 2014
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)		Fair Value
Available-for-Sale Securities
Time deposits	$	17,693	$	—	$	—		$	—	$	17,693
Repurchase agreements		500		—		—			—		500
US Treasury securities		526		1		—			1		527
National government and agency securities		4,962		95		(2	)		93		5,055
State and municipal bond obligations		7,090		63		(4	)		59		7,149
Corporate bonds and notes		42,675		249		(143	)		106		42,781
Asset backed securities		7,592		28		(6	)		22		7,614
Mortgage backed securities		4,766		26		(7	)		19		4,785
Total	$	85,804	$	462	$	(162	)	$	300	$	86,104

The above investments are included in short-term investments in marketable securities on the Company’s condensed consolidated balance sheets.

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The following tables show the unrealized losses and fair market 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, at September 27, 2014 and June 28, 2014:

	Continuous Unrealized Losses at September 27, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
National government and agency securities	$	946	$	3	$	32	$	1	$	978	$	4
State and municipal bond obligations		3,867		11		471		4		4,338		15
Corporate bonds and notes		10,466		44		5,425		93		15,891		137
Asset backed securities		2,760		9		1,080		5		3,840		14
Mortgage backed securities		1,933		8		399		1		2,332		9
Total	$	19,972	$	75	$	7,407	$	104	$	27,379	$	179
	Continuous Unrealized Losses at June 28, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
National government and agency securities	$	282	$	1	$	91	$	1	$	373	$	2
State and municipal bond obligations		—		—		695		4		695		4
Corporate bonds and notes		3,901		11		5,801		132		9,702		143
Asset backed securities		895		1		1,195		5		2,090		6
Mortgage backed securities		1,083		3		504		4		1,587		7
Total	$	6,161	$	16	$	8,286	$	146	$	14,447	$	162

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 in shareholders’ equity.

The Company records gains or losses realized on sales of available-for-sale securities in interest and other income, net on its condensed consolidated statements of operations. The cost of securities sold is based on the specific identification of the security and its amortized cost. For the three months ended September 27, 2014 and September 28, 2013, proceeds from sales and maturities of available-for-sale securities were $15.3 million and $16.5 million, respectively, and realized gains (losses) were $(6,000) and $44,000, respectively.

The following table lists the fair market value of the Company’s short-term investments by length of time to maturity as of September 27, 2014. Securities with maturities over multiple dates are mortgage-backed (“MBS”) or asset-backed securities (“ABS”) featuring periodic principle paydowns through 2052.

(in thousands)	September 27, 2014
Contractual Maturities
Less than 12 months	$	27,393
One to three years		32,947
Over three years		28,486
Multiple dates		7,422
Total	$	96,248

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16. 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 standard describes a fair value hierarchy 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 the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis.  All of the investments are classified as Level 2 at September 27, 2014. 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.

	As of September 27, 2014
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments
Time deposits	$	30,745	$	—	$	30,745	$	—
Repurchase Agreements		9,679		—		9,679		—
National government and agency securities		5,008		—		5,008		—
State and municipal bond obligations		7,822		—		7,822		—
Corporate bonds and notes		40,972		—		40,972		—
Asset backed securities		7,229		—		7,229		—
Mortgage backed securities		4,459		—		4,459		—
Total	$	105,914	$	—	$	105,914	$	—

(1) $488,000 of the time deposits and $9,178,000 of the repurchase agreements are included in cash and cash equivalents; the balance of the investments are included in short-term investments in marketable securities on our consolidated balance sheet.

The Company had no transfers into or out of Level 2 during the three months ended September 27, 2014.

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 September 27, 2014 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 September 27, 2014.

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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Item 2: Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Pericom Semiconductor Corporation

The following information should be read in conjunction with the unaudited financial statements and notes thereto included in Part 1 - Item 1 of this Quarterly Report and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended June 28, 2014 (the “Form 10-K”).   

Factors That May Affect Operating Results

This Quarterly Report on Form 10-Q 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 our sales to Taiwan and China, the continuation of a high level of turns orders, higher or lower levels of inventory, future gross profit and gross margin; the plans and objectives of management for future operations; our tax rate; currency fluctuations; the adequacy of allowances for returns, price protection and other concessions; the sufficiency of cash generated from operations and cash balances; our exposure to interest rate risk; expectations regarding our research and development and selling, general and administrative expenses; and our possible future acquisitions 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 (i) in Item 1A, Risk Factors, of Part II of this Form 10-Q, and (ii) in Note 1 to the Notes to Condensed Consolidated Financial Statements. All forward-looking statements and reasons why results may differ included in this Quarterly 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.

Executive Overview

We design, develop and market high-performance integrated circuits and frequency control products used in many of today’s advanced electronic systems.  A few years ago, we embarked on a strategy to transform our business, as sales of our products used in personal computers and laptops declined with the transition to mobile devices such as tablets and smart phones where we had lower market shares.  Our strategy was to increase sales from those market segments offering higher gross margins and growth potential, such as the ultramobility and embedded markets, including automotive.

During the three months ended September 27, 2014, net sales increased 2% as compared with the three months ended September 28, 2013, with gains in the embedded, PC/notebook and server end market segments, partially offset by declines in the networking, telecom and ultramobility market segments. We increased gross profit for the three months ended September 27, 2014 to $14.1 million for an increase of $1.3 million from $12.8 million for the three months ended September 28, 2013, primarily due to improved product mix in both IC and FCP products.  The resulting gross margin for the three months ended September 27, 2014 was 42.3%, a 300 basis point improvement, as compared to 39.3% for the three months ended September 28, 2013.

Operating income was $2.2 million for the three months ended September 27, 2014, as compared with operating income of $76,000 for the three months ended September 28, 2013. Net income for the three months ended September 27, 2014 was $2.5 million, or $0.11 per diluted share as compared to a net income of $374,000 or $0.02 per share for the three months ended September 28, 2013.

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In summary, our progress in the execution of our market segment transition and gross margin expansion activities are evident in our financial results for the first quarter of fiscal 2015.

Results of Operations

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

	Three Months Ended
	September 27,			September 28,
	2014			2013
Net revenues		100.0	%		100.0	%
Cost of revenues		57.7	%		60.7	%
Gross profit		42.3	%		39.3	%
Operating expenses:
Research and development		13.8	%		15.5	%
Selling, general and administrative		21.9	%		23.6	%
Total		35.7	%		39.1	%
Income from operations		6.6	%		0.2	%
Interest and other income, net		3.8	%		1.5	%
Income before income taxes		10.4	%		1.7	%
Income tax expense		3.1	%		0.7	%
Net income from consolidated companies		7.3	%		1.0	%
Equity in net income of unconsolidated affiliates		0.1	%		0.1	%
Net income		7.4	%		1.1	%

Net Revenues

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

	Three Months Ended
(in thousands)	September 27,			September 28,			%
	2014			2013			Change
Net revenues	$	33,259		$	32,608			2.0	%
% of net sales accounted for by top 5 direct customers (1)		52.0	%		47.0	%
Number of direct customers that each account for more than 10% of net sales		2			2
% of net sales accounted for by top 5 end customers (2)		29.9	%		29.8	%
Number of end customers that each account for more than 10% of net sales		—			1

⁽¹⁾

Direct customers purchase products directly from us and include distributors, contract manufacturers and original equipment manufacturers (“OEMs”).

⁽²⁾

End customers are OEMs and their products are manufactured using our products.  End customers may purchase directly from us or from distributors or contract manufacturers.  For end customer data, we rely on information provided by our direct distribution and contract manufacturing customers.

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We design, develop and market high-performance integrated circuits (“ICs” or IC products) and frequency control products (“FCPs” or FCP products) used in many of today's advanced electronic systems. Our IC products include products 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, oscillators, and hybrid timing generation products 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.

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

Net revenues increased $651,000 or 2.0% in the first three months of fiscal 2015 versus the first three months of fiscal 2014. Net revenue for IC and FCP products in the first three months of fiscal 2015 versus the first three months of fiscal 2014 reflected:

· an increase of $531,000 or 2.7% in sales of IC products to $20.2 million, and

· an increase of $120,000 or 0.9% in sales of our FCP products to $13.1 million.

The increase in sales of IC products was primarily driven by increased sales in the embedded, PC/notebook and server end market segments.

The following table sets forth net revenues by country as a percentage of total net revenues for the three months ended September 27, 2014 and September 28, 2013:

	Three Months Ended
	September 27,			September 28,
	2014			2013
China (including Hong Kong)		49	%		46	%
Taiwan		32	%		30	%
United States		4	%		6	%
Other (less than 10% each)		15	%		18	%
Total		100	%		100	%

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

Our net revenue levels have been highly dependent on the number of new orders that are received for products to be delivered to the customer within the same quarter, also called “turns” orders.  Because of our lack of visibility into demand when turns orders are high, it is difficult to predict which products to build to match future demand.  We believe the current high level of turns orders will continue indefinitely.  The sustainability of customer demand is uncertain and our markets are highly dependent on worldwide economic conditions.  The high level of turns orders together with the uncertainty of product mix and pricing makes it difficult to predict future levels of sales and may require us to carry higher levels of inventory.

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Gross Profit

The following table sets forth our gross profit for the periods indicated:

	Three Months Ended
	September 27,			September 28,			%
(in thousands)	2014			2013			Change
Net revenues	$	33,259		$	32,608			2.0	%
Gross profit		14,080			12,808			9.9	%
Gross profit as a percentage of net revenues (gross margin)		42.3	%		39.3	%

The increase in gross profit in the first three months of fiscal 2015 as compared to the first three months of fiscal 2014 of $1.3 million is the result of:

· a 2.0% increase in sales, which led to $276,000 of increased gross profit, and

· a gross margin increase from 39.3% to 42.3%, resulting in a $996,000 improvement in gross profit.

The sales increase was discussed above. The gross margin increase resulted primarily from our initiative to focus on higher-margin opportunities in server, storage, networking, telecom and embedded market segments, as well as increased sales mix of crystal oscillator products.

Future gross profit and gross margin are highly dependent on the level and product mix of net revenues. This includes the mix of sales between lower margin FCP products and our higher margin IC 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.

During the three months ended September 27, 2014 and September 28, 2013, gross profit and gross margin benefited as a result of the sale of inventory of $88,000 and $108,000 respectively, that we had previously identified as excess and written down to zero value.  

Research and Development (“R&D”)

	Three Months Ended
	September 27,			September 28,			%
(in thousands)	2014			2013			Change
Net revenues	$	33,259		$	32,608			2.0	%
Research and development		4,588			5,045			-9.1	%
R&D as a percentage of net revenues		13.8	%		15.5	%

Research and development expenses consist primarily of costs related to personnel and overhead, non-recurring engineering charges, and other costs associated with the design, prototyping, testing, manufacturing process design support, and technical customer applications support of our products.  The expense decrease of $457,000 for the three month period ended September 27, 2014 as compared to the same period of the prior year included decreases of $337,000 in total compensation expenses including stock-based compensation and $116,000 in depreciation expenses.

We believe that continued spending on research and development to develop new products and improve manufacturing processes is critical to our long-term success, and as a result we expect to continue to invest in research and development projects.  In the short term, we intend to continue to focus on cost control as business conditions improve.  If business conditions deteriorate or the rate of improvement does not meet our expectations, we may implement further cost-cutting actions.

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Selling, General and Administrative (“SG&A”)

	Three Months Ended
	September 27,			September 28,			%
(in thousands)	2014			2013			Change
Net revenues	$	33,259		$	32,608			2.0	%
Selling, general and administrative		7,300			7,687			-5.0	%
SG&A as a percentage of net revenues		21.9	%		23.6	%

Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management.  The expense decrease of approximately $387,000 for the three month period ended September 27, 2014 as compared to the same period of the prior year is attributable primarily to the incurrence in the prior year quarter of $558,000 in lease restructuring and moving costs related to the relocation of corporate headquarters and $215,000 in reduced rent and utilities expenditures in the three months ended September 27, 2014, partially offset by increased expenditures of $205,000 for sales commissions and $181,000 for increases in legal and payroll services.

We anticipate that selling, general and administrative expenses will increase in future periods over the long term due to increased staffing levels, particularly in sales and marketing, as well as increased commission expense to the extent we achieve higher sales levels.  We intend to continue our focus on controlling costs.  If business conditions deteriorate or the rate of improvement does not meet our expectations, we may implement further cost-cutting actions.

Interest and Other Income, Net

	Three Months Ended
	September 27,		September 28,			%
(in thousands)	2014		2013			Change
Interest income	$	647	$	635			1.9	%
Other income (expense)		44		47			-6.4	%
Foreign exchange transaction gain (loss)		583		(196	)		NM
Interest and other income, net	$	1,274	$	486			162.1	%
NM = not meaningful

Interest and other income for the three month period ended September 27, 2014 increased $788,000 as compared with the same period of the prior year due primarily to a swing from foreign exchange transaction losses last year to foreign exchange transaction gains in the current quarter with the principal impact coming from the strengthening U.S. dollar against the New Taiwan Dollar.

Income Tax Expense

	Three Months Ended
	September 27,			September 28,			%
(in thousands)	2014			2013			Change
Pre-tax income	$	3,466		$	562			516.7	%
Income tax expense		1,010			231			337.2	%
Effective tax rate		29.1	%		41.1	%

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The difference in the effective tax rate for the three months ended September 27, 2014 as compared with the same period of the prior year is due primarily to the allocation of earnings between different tax jurisdictions and the inability to utilize losses in certain non-includable entities.

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, stock-based compensation from equity grants, and the utilization of research and development tax credits.

Equity in Net Income of Unconsolidated Affiliate

Equity in net income of unconsolidated affiliate consists of our 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 the three month periods ended September 27, 2014 and September 28, 2013, the Company’s allocated portion of JCP’s results was income of $39,000 and $43,000, respectively.

Liquidity and Capital Resources

As of September 27, 2014, our principal sources of liquidity included cash, cash equivalents and short-term investments of approximately $123.8 million as compared with $119.1 million on June 28, 2014.   

Our 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 FNMA, FHLMC and FHLB. Those issued by banks are AAA-rated. At September 27, 2014, unrealized gains on marketable securities net of taxes were $73,000. 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 September 27, 2014 to recover in fair value up to our cost bases 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 September 27, 2014.   

As of September 27, 2014, $27.6 million was classified as cash and cash equivalents compared with $33.0 million as of June 28, 2014.  The maturities of our short term investments are staggered throughout the year so that cash requirements are met.  Because we are a fabless semiconductor manufacturer, we have lower capital equipment requirements than other semiconductor manufacturers who own wafer fabrication facilities.  For the three month period ended September 27, 2014, we spent approximately $1.1 million on property and equipment, compared to $1.2 million for the three month period ended September 28, 2013.  We generated approximately $647,000 of interest income for the three month period ended September 27, 2014, as compared with $635,000 of interest income for the three month period ended September 28, 2013. In the longer term we may generate less interest income if our total invested balance decreases and these decreases are not offset by rising interest rates or increased cash generated from operations or other sources.  

Our net cash provided by operating activities of $7.1 million for the three months ended September 27, 2014 was primarily the result of $2.5 million of net income and the addition of non-cash expenses of $2.3 million in depreciation and amortization, $709,000 of share-based compensation expense, $301,000 from write off of equipment and $293,000 of tax benefit from share-based transactions, partially offset by deductions of $29,000 of excess tax benefit from share-based transactions and $39,000 of equity in net income of unconsolidated affiliate. An additional contribution to cash included reductions of $370,000 in inventories and $1.4 million in prepaid expenses and other current assets, and an increase of $371,000 in accounts payable. Such contributions were partially offset by increases of $1.0 million in accounts receivable. Our net cash provided by operating activities was $47,000 in the three months ended September 28, 2013.

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Our cash used in investing activities of $11.6 million for the three months ended September 27, 2014 was the result of purchases of available for sale investments exceeding sales and maturities of available for sale investments by approximately $10.4 million, and additions to property and equipment of approximately $1.1 million. Our cash used in investing activities was $5.3 million for the three months ended September 28, 2013.

Our cash used in financing activities for the three months ended September 27, 2014 of $775,000 was the result of expenditures of $2.3 million for the repurchase of our common stock, partially offset by $1.5 million of proceeds from common stock issuance under stock plans. Our cash used in financing activities was $765,000 for the three months ended September 28, 2013.

A portion of our cash may be used 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 efforts, 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. We believe our current cash balances and cash flows generated by operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures.

Contractual Obligations and Commitments

Our contractual obligations and commitments at September 27, 2014 are as follows:

			Payments Due by Period
(in thousands)	Total		Less than 1 Year		1 – 3 Years		Thereafter
Operating lease payments	$	491	$	423	$	68	$	—
Capital equipment purchase obligations		216		216		—		—
Facility modifications		303		238		65		—
Total obligations	$	1,010	$	877	$	133	$	—

The operating lease commitments are primarily facility leases at our various Asian subsidiaries.

The facility modification commitments have been made by our Shandong, China manufacturing operation for a general contractor and architecture firm to develop feasibility studies, plans and cost estimates for potential additional development of our plant site. We have no other purchase obligations beyond routine purchase orders as of September 27, 2014.  

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, defined by Regulation S-K Item 303(a)(4).

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Critical Accounting Policies

Our condensed 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 our financial condition and results of operations, and require us to make our 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 intangible assets and investments, which impacts the intangible asset and investment accounts; and stock-based compensation, which impacts costs of goods sold and operating expenses. These policies and the estimates and judgments involved are discussed further below.

REVENUE RECOGNITION. We recognize revenue from the sale of our products upon shipment, provided title and risk of loss has passed to the customer, the price is fixed or determinable and collection of the revenue is reasonably assured.  A provision for estimated future returns and other charges against revenue is recorded at the time of shipment.  For the three months ended September 27, 2014, the majority of our revenues were from sales to distributors.  

We sell products to large, domestic distributors at the price listed in our price book for that distributor. We recognize revenue at the time of shipment. At the time of sale we record 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 sales reserve is offset against revenues, which then leads to the net revenue amount reported.

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

Our distribution agreements provide for semi-annual stock rotation privileges of typically 10% of net sales for the previous three-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 grant Asian distributors stock rotation privileges between 1% and 10% even though we are not contractually obligated to do so. Each month a sales reserve is recorded for the estimated stock rotation privilege anticipated to be utilized by the distributors that month. This reserve is the sum of product of each distributor’s net sales for the month and their stock rotation percentage.

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. These requests are reviewed by management and when approved result in a RMA being established. 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 a sales reserve is recorded for the approved RMAs that have not yet been returned.  We do not keep 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 parts can frequently be re-sold to other customers for use in other applications.

Price protection is granted solely at the discretion of our management. The purpose of price protection is to reduce the distributor’s cost of inventory as market prices fall, thus reducing SSD rates. Our sales management 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, the dollar impact will be estimated based on the book price reduction per unit for the products approved and the number of units of those products in the distributor’s inventory. A sales reserve is then recorded in that period for the estimated amount.

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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.  The rebate is recorded at the time of shipment.

Customers are typically granted payment terms of between 30 and 60 days and they generally pay within those terms.  Relatively few customers have been granted terms with cash discounts.  Distributors are invoiced for shipments at book price.  When they pay those invoices, they claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, these debits are then processed against the approvals.

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. Our estimates are based 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 management believes such estimates are reasonable.  

PRODUCT WARRANTY.  We offer a standard one-year product replacement warranty.  In the past we have not had to accrue for a general warranty reserve, but assess the level and materiality of RMAs and we then determine whether it is appropriate to accrue for estimated returns of defective products at the time revenue is recognized. On occasion, we may determine to accept product returns beyond the standard one-year warranty period. In those instances, we accrue for the estimated cost at the time the decision to accept the return is made.  As a consequence of our 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 are charged to cost of revenues as incurred.

INVENTORIES. Inventories are recorded at the lower of standard cost (which generally 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 of time. Raw material inventory is considered obsolete and reserved if it has not moved in 365 days.  We review our assembled devices for excess and write them off if the quantity of assembled devices in inventory is in excess of the greater of the quantity shipped in the previous twelve months, the quantity in backlog or the quantity forecasted to be shipped in the following twelve months.In certain circumstances, we will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. We occasionally determine that the last twelve months’ sales levels will not continue and reserve inventory in line with the quantity forecasted. The semiconductor markets that we serve are volatile and actual results may vary from our forecast or other assumptions, potentially impacting our assessment of excess and obsolete inventory and resulting in material effects on our gross margin.  

IMPAIRMENT OF INTANGIBLE ASSETS.  We perform an impairment review of our intangible assets at least annually and more frequently if certain indicators of impairment are present. In the event that management determines that the value of intangible assets has become impaired, we will record an expense for the amount impaired during the fiscal quarter in which the determination is made. Based on the results of our most recent impairment review, we determined that no impairment of our intangible assets existed as of September 27, 2014. However, future impairment reviews could result in a charge to earnings.

INVESTMENTS. We have made investments including loans, bridge loans convertible to equity, or asset purchases as well as direct equity investments. These loans and investments are made with strategic intentions and have been in privately held technology companies, which by their nature are high risk. These investments are included in other assets in the balance sheet and are carried 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 a decline in value is deemed to be other than temporary.

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DEFERRED TAX ASSETS. 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 carryforwards. 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

At September 27, 2014 our investment portfolio consisted of investment-grade fixed income securities, excluding those classified as cash equivalents, of $96.2 million.  These securities are subject to interest rate risk and will decline in value if market interest rates increase. However, we do not believe that such a decrease would have a material effect on our results of operations over the next fiscal year.  Due to the short duration and conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk.

When the general economy weakens significantly,  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 September 27, 2014, 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 unrealized gains net of tax of $73,000. 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.

We transact business in various non-U.S. currencies, primarily the New Taiwan Dollar, the Hong Kong Dollar and the Chinese Renminbi. We are 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.  Of our $123.8 million of cash, cash equivalents and short-term investments at September 27, 2014, $64.0 million is in our foreign subsidiaries. A hypothetical 10% favorable or unfavorable change in foreign currency exchange rates would have a material impact on our financial position and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain 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”)) that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information 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.

Our management, with the participation of our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures.  Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 27, 2014.

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 quarter ended September 27, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1A: Risk Factors

This quarterly report on Form 10-Q contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking statement as a result of various factors, including those set forth below. The listing below includes any material changes to and supersedes the description of the risk factors affecting our business previously disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 28, 2014.

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;

·

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

·

the impairment of our 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.

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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, and over the past two years we’ve been impacted by declines in the markets for PC’s and notebook computers. 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;

·

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.

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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. With the increasing complexity of new generation products the development cost of each new product increases, making the selection process ever more critical with limited staff and financial resources. 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 leading to excess and obsolete inventory writedowns (for further detail, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies – Inventories). 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, Avago Technologies, Cypress Semiconductor, Fairchild Semiconductor, Hitachi, Integrated Device Technology, Maxim Integrated Products, Motorola, On Semiconductor, NXP, Parade Technologies, 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 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

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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, overcapacity and excess and obsolete inventory 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. In the past, financial disruptions affecting the banking system, investment banks, insurance companies and the financial markets negatively impacted general domestic and global economic conditions. These economic conditions have resulted in our facing very challenging periods leading to reduced sales and earnings.

Our sales have been adversely impacted due to continued economic softness in many parts of the world and only tepid growth in others.  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 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.

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

34

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 the past, a wafer supplier 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 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, or at all.

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.

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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.

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 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.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required the SEC to establish new disclosure and reporting requirements for those companies who use “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in their products, whether or not these products are manufactured by third parties. We filed our initial report with the SEC in May 2014. There will be future

36

costs associated with complying with the disclosure requirements, including for due diligence in regard to the sources of any conflict minerals used in our products and, beginning with the report for calendar year 2015, an audit report of our Conflict Minerals Report prepared by an independent private sector auditor. In addition, depending on the outcome of such verification activities, there may be costs of remediation and other changes to products, processes, or sources of supply.

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 our most recent Form 10-K, our management does not believe that we had any material weaknesses in our internal control over financial reporting as of June 28, 2014, and management has determined that as of June 28, 2014, 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.  

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 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

37

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 96 patents covering certain aspects of our product designs and have six 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, and 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 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

38

jurisdictions in which we operate which subjects us to potential increases in our tax liabilities. The Internal Revenue Service completed their examination of the federal tax returns for fiscal 2010 and 2011 during fiscal 2014, and the Company made additional tax payments of approximately $208,000 including interest charges for the two years that were examined.

In addition, in fiscal 2013 we began implementation of an operating structure to more efficiently align the Company's transaction flows with the Company's geographic business operations. As a result we formed new legal entities and realigned existing ones, completed an intercompany transfer of intellectual property rights, inventory and fixed assets across different tax jurisdictions, and implemented intercompany intellectual property licensing agreements between our U.S. and foreign entities. These changes may result in unanticipated changes to our tax rates and tax payments. All of these factors could have an adverse effect on our financial condition and results of operations.

If our liability for U.S. and foreign taxes is greater than we have anticipated and reserved for, our operating results may suffer.

We are subject to taxation in the United States and in foreign jurisdictions in which we do business, including China. We believe that we have adequately estimated and reserved for our income tax liability. However, our effective tax rates may not be as low as we anticipate. Our business operations, including our transfer pricing for transactions among our various business entities operating in different tax jurisdictions, may be audited at any time by the U.S., Chinese or other foreign tax authorities.

A number of factors may adversely impact our future effective tax rates, such as:

·

changes in the tax laws of any of the countries in which we pay substantial taxes, including changes to tax rates or to transfer pricing standards, or more fundamental changes such as the various proposals that exist from time to time for U.S. international tax reform;

·

changes in the valuation of our deferred tax assets and liabilities;

·

changes in U.S. general accepted accounting principles; and

·

the repatriation of non-U.S. earnings with respect to which we have not previously provided for U.S. taxes.

A change in our effective tax rate due to any of these factors may adversely impact our future results from operations.  Also, changes in tax laws could have a material adverse effect on our ability to utilize cash in a tax efficient manner.

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 distributor channels increases 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 three months ended September 27, 2014 and September 28, 2013. As a percentage of net revenues, sales to our top five direct customers during the three months ended September 27, 2014 and September 28, 2013 totaled 52% and 47%, respectively.

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 three months ended September 27, 2014 and September 28, 2013, sales to our domestic and international distributors were approximately 66% and 67% of net revenues, respectively. 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 distributor channels increases the complexity of our business, requiring us to, among other matters:

·manage a more complex supply chain;

39

·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, or the occurrence of an unforeseen change in the supply-demand dynamic, could cause us to inaccurately forecast sales and carry excess or insufficient inventory, thereby adversely affecting our operating results and cash flows. For further detail on credits, return rights and price protection, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies – Revenue Recognition.

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;

·

changes in tax laws, tariffs and other barriers, and freight rates; and

·

compliance with Generally Accepted Accounting Principles in the United States (“U. S. GAAP”).

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 the three months ended September 27, 2014, we generated approximately 91%, 6% and 3% of our net revenues from sales in Asia, the United States and the rest of the world, respectively. In the three months ended September 28, 2013, we generated approximately 92%, 6% and 2% of our net revenues from sales in Asia, the United States and the rest of the world, respectively. We expect that foreign sales will continue to represent by far the majority of net revenues. This 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 FCPs in Taiwan as well as in the Jinan Development Zone in the Shandong Province of the PRC. The development of the Jinan facility depended 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 profitability of this facility. In addition, there can be no assurance we will be able to assemble and maintain sufficient management resources in our Asia subsidiaries, including a sales force knowledgeable about our target markets and an accounting staff with sufficient U. S. GAAP accounting expertise.

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

40

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 now measures 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 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 has suffered severe earthquakes in the past. Taiwan is also exposed to 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, 2011, 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.

System security risks, data protection or privacy breaches and cyber-attacks could disrupt our internal operations and harm the reputation of the Company.

Breaches of our information technology systems caused by computer viruses, unauthorized access, sabotage, vandalism or terrorism could compromise our information technology networks and result in unauthorized release of our, our customers’ or our suppliers’ confidential or proprietary information, cause a disruption to our manufacturing and other operations, result in release of employee personal data, or cause us to incur increased information technology protection costs, any of which could adversely affect our financial results, stock price and reputation.

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,

41

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 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On April 26, 2012, the Board authorized a share repurchase program for $25 million of our common stock, and on April 24, 2014 the Board authorized an additional $20 million for the share repurchase program. We were authorized to repurchase the shares from time to time in the open market or private transactions, at the discretion of our management. The following table summarizes the stock repurchase activity during the three months ended September 27, 2014.

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 That May Yet be Purchased Under the Plans or Programs
	July, 2014		142,676	$	8.90		142,676	$	25,341,792
	August, 2014		31,348		9.22		31,348		25,052,879
	September, 2014		76,523		9.72		76,523		24,308,903
	Total		250,547	$	9.19		250,547	$	24,308,903

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 we expect to fund future stock repurchases from these same sources.

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Item 6.

Exhibits.

Exhibit

Exhibit

Number

Description

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 Kevin S. Bauer, 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 Kevin S. Bauer, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

43

SIGNATURES

Pursuant to the requirements 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

(Registrant)

Date:	October 31, 2014	By:	/s/ Alex C. Hui
			Alex C. Hui
			Chief Executive Officer
		By:	/s/ Kevin S. Bauer
			Kevin S. Bauer
			Chief Financial Officer

44

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 quarterly report on Form 10-Q 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:

October 31, 2014

/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, Kevin S. Bauer, certify that:

1.

I have reviewed this quarterly report on Form 10-Q 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:

October 31, 2014

/s/ Kevin S. Bauer    

Kevin S. Bauer

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 quarterly report of Pericom Semiconductor Corporation (the “Company”) on Form 10-Q for the three months ended September 27, 2014 (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.

October 31, 2014

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 quarterly report of Pericom Semiconductor Corporation (the “Company”) on Form 10-Q for the three months ended September 27, 2014 (the “Report”), I, Kevin S. Bauer, 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.

October 31, 2014

By:	/s/ Kevin S. Bauer
	Kevin S. Bauer
	Chief Financial Officer
	Pericom Semiconductor Corporation

XML

Income Per Share (Details Textual)	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Common Stock [Member]
Income Per Share (Textual)
Number of shares excluded from the computation of diluted net earnings per share	1,256,000	2,366,000
Restricted Stock [Member]
Income Per Share (Textual)
Number of shares excluded from the computation of diluted net earnings per share	0	4,000

XML

Shareholders' Equity and Share-Based Compensation (Details Textual) (USD $)	3 Months Ended
	Sep. 27, 2014
Shareholders' Equity and Share-Based Compensation (Textual)
Aggregate intrinsic value, Options vested and expected to vest	$ 1,652,000
Options exercised during the period	181,000
Board of Directors [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Preferred stock, shares authorized	5,000,000
Preferred stock, shares issued	0
Restricted Stock Units (RSUs) [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Options vesting period	4 years
Number of shares awarded during the period	500
Performance Stock Units [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Options vesting period	12 months
Restricted Stock Units And Performance Stock Units [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Unamortized sharebased compensation expense	3,800,000
Weighted average period of recognition	2 years 3 months 18 days
Number of shares awarded during the period	114,000
Stock Option Plan [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Number of stock option plan	2
Reserve of common stock for issuance to employees and officers	4,200,000
Options vesting period	48 months
Option expiration period	10 years
Unamortized sharebased compensation expense	843,000
Weighted average period of recognition	2 years 6 months
Shares available for future grant	916,000
Aggregate intrinsic value of options exercised	190,000
Weighted average fair value of options granted	$ 3.81
2010 Employee stock purchase plan [Member]
Shareholders' Equity and Share-Based Compensation (Textual)
Reserve of common stock for issuance to employees and officers	2,000,000
Unamortized sharebased compensation expense	20,000
Shares available for future grant	1,600,000
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	1,500
Maximum amount that can be accrued in offering periog for stock purchased	$ 15,000

XML

Shareholders' Equity and Share-Based Compensation (Details) (Stock Option [Member])	3 Months Ended
	Sep. 28, 2013
Stock Option [Member]
Shedule of weighted average assumptions of stock options granted under its stock incentive plans
Expected Life	5 years 10 months 24 days
Risk-free interest rate	0.81%
Volatility	54.00%
Dividend Yield

XML

Income Taxes (Details) (USD $)	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Jun. 28, 2014
Income Taxes (Textual)
Income tax expense (benefits)	$ 1,010,000	$ 231,000
Effective rate of tax	29.00%	41.00%
Valuation allowance	5,100,000		5,100,000
Unrecognized tax benefits	1,846,000
Unrecognized tax benefits that would affect the Company's effective tax rate if recognized	719,000
Accrued interest and penalties related to unrecognized tax benefits	$ 229,000
Income tax examination year, range	2008 through 2014

XML

Industry and Segment Information (Details Textual)	3 Months Ended
	Sep. 27, 2014 Segment
Segment Reporting (Textual)
Number of operating segments	3
Number of reportable segments	1
Net revenues and accounts receivable in excess rate	10.00%

XML

Fair Value Measurements (Tables)

3 Months Ended

Sep. 27, 2014

Fair Value Measurements [Abstract]

Fair value measurement

	As of September 27, 2014
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments
Time deposits	$	30,745	$	—	$	30,745	$	—
Repurchase Agreements		9,679		—		9,679		—
National government and agency securities		5,008		—		5,008		—
State and municipal bond obligations		7,822		—		7,822		—
Corporate bonds and notes		40,972		—		40,972		—
Asset backed securities		7,229		—		7,229		—
Mortgage backed securities		4,459		—		4,459		—
Total	$	105,914	$	—	$	105,914	$	—

XML

Investment in Unconsolidated Affiliate (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Investment in Unconsolidated Affiliate (Textual)
Equity in net income of unconsolidated affiliate	$ 39	$ 43
Jiyuan Crystal Photoelectric Frequency Technology Ltd [Member]
Investment in Unconsolidated Affiliate (Textual)
Equity interest	49.00%

XML

Income Per Share (Tables)

3 Months Ended

Sep. 27, 2014

Income Per Share [Abstract]

Computation of basic and diluted income per share

	Three Months Ended
	September 27,		September 28,
(in thousands, except per share data)	2014		2013
Net income	$	2,495	$	374
Computation of common shares outstanding – basic earnings per share:
Weighted average shares of common stock		21,936		22,794
Basic earnings per share	$	0.11	$	0.02
Computation of common shares outstanding – diluted earnings per share:
Weighted average shares of common stock		21,936		22,794
Dilutive shares using the treasury stock method		326		157
Shares used in computing diluted earnings per share		22,262		22,951
Diluted earnings per share	$	0.11	$	0.02

XML

Shareholders' Equity and Share-Based Compensation (Details 2) (USD $)	3 Months Ended
	Sep. 27, 2014
Exercise price range one [Member]
Schedule of options outstanding and exercisable
Range of exercise price, lower range limit	$ 4.89
Range of exercise price, Upper range limit	$ 7.87
Exercise price range, Weighted Number of outstanding	387,085
Option Outstanding, Weighted Average Remaining Contractual Term (years)	6 years 10 months 6 days
Options Outstanding, Weighted Average Exercise Price	$ 7.49
Exercisable Options, Number Exercisable	201,593
Exercisable Options, Weighted Average Exercise Price	$ 7.42
Exercise price range two [Member]
Schedule of options outstanding and exercisable
Range of exercise price, lower range limit	$ 7.88
Range of exercise price, Upper range limit	$ 8.85
Exercise price range, Weighted Number of outstanding	457,845
Option Outstanding, Weighted Average Remaining Contractual Term (years)	4 years 15 days
Options Outstanding, Weighted Average Exercise Price	$ 8.44
Exercisable Options, Number Exercisable	395,731
Exercisable Options, Weighted Average Exercise Price	$ 8.39
Exercise price range three [Member]
Schedule of options outstanding and exercisable
Range of exercise price, lower range limit	$ 8.86
Range of exercise price, Upper range limit	$ 10.25
Exercise price range, Weighted Number of outstanding	379,050
Option Outstanding, Weighted Average Remaining Contractual Term (years)	4 years 2 months 27 days
Options Outstanding, Weighted Average Exercise Price	$ 9.87
Exercisable Options, Number Exercisable	365,550
Exercisable Options, Weighted Average Exercise Price	$ 9.90
Exercise price range four [Member]
Schedule of options outstanding and exercisable
Range of exercise price, lower range limit	$ 10.26
Range of exercise price, Upper range limit	$ 15.45
Exercise price range, Weighted Number of outstanding	453,007
Option Outstanding, Weighted Average Remaining Contractual Term (years)	3 years 8 months 27 days
Options Outstanding, Weighted Average Exercise Price	$ 12.76
Exercisable Options, Number Exercisable	453,007
Exercisable Options, Weighted Average Exercise Price	$ 12.76
Exercise price range five [Member]
Schedule of options outstanding and exercisable
Range of exercise price, lower range limit	$ 15.46
Range of exercise price, Upper range limit	$ 18.10
Exercise price range, Weighted Number of outstanding	191,500
Option Outstanding, Weighted Average Remaining Contractual Term (years)	3 years 1 month 17 days
Options Outstanding, Weighted Average Exercise Price	$ 16.32
Exercisable Options, Number Exercisable	191,500
Exercisable Options, Weighted Average Exercise Price	$ 16.32
Exercise price range six [Member]
Schedule of options outstanding and exercisable
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	1,868,487
Option Outstanding, Weighted Average Remaining Contractual Term (years)	4 years 6 months
Options Outstanding, Weighted Average Exercise Price	$ 10.39
Exercisable Options, Number Exercisable	1,607,381
Exercisable Options, Weighted Average Exercise Price	$ 10.79

XML

Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Schedule of accrued liabilities
Accrued compensation	$ 6,564	$ 6,892
Income taxes payable	1,726	1,140
Sales commissions	302	307
Other accrued expenses	1,528	1,595
Total accrued liabilities	$ 10,120	$ 9,934

XML

Intangible Assets (Details Textual) (USD $)	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Intangible Assets (Textual)
Amortization expense related to finite-lived purchased intangible assets	$ 725,000,000	$ 785,000,000
Impairment of intangible assets	$ 0
Customer Relationships [Member] | Minimum [Member]
Intangible Assets (Textual)
Finite lived intangible assets weighted average useful lives	1 year
Customer Relationships [Member] | Maximum [Member]
Intangible Assets (Textual)
Finite lived intangible assets weighted average useful lives	3 years

XML

Shareholders' Equity and Share-Based Compensation (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Summary of share based compensation expenses classified by consolidated statement of operations
Pre-tax share-based compensation expense	$ 709	$ 729
Income tax impact	230	238
Net share-based compensation expense	479	491
Cost of goods sold [Member]
Summary of share based compensation expenses classified by consolidated statement of operations
Pre-tax share-based compensation expense	33	36
Research and development [Member]
Summary of share based compensation expenses classified by consolidated statement of operations
Pre-tax share-based compensation expense	218	297
Selling, general and administrative [Member]
Summary of share based compensation expenses classified by consolidated statement of operations
Pre-tax share-based compensation expense	$ 458	$ 396

XML

Investments in Marketable Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 27, 2014	Jun. 28, 2014
Available-for-Sale Securities
Amortized Cost	$ 96,122	$ 85,804
Unrealized Gains	305	462
Unrealized Losses	(179)	(162)
Net Unrealized Gains (Losses)	126	300
Fair Value	96,248	86,104
Time deposits [Member]
Available-for-Sale Securities
Amortized Cost	30,257	17,693
Unrealized Gains
Unrealized Losses
Net Unrealized Gains (Losses)
Fair Value	30,257	17,693
Repurchase agreements [Member]
Available-for-Sale Securities
Amortized Cost	501	500
Unrealized Gains
Unrealized Losses
Net Unrealized Gains (Losses)
Fair Value	501	500
US Treasury securities [Member]
Available-for-Sale Securities
Amortized Cost		526
Unrealized Gains		1
Unrealized Losses
Net Unrealized Gains (Losses)		1
Fair Value		527
National government and agency securities [Member]
Available-for-Sale Securities
Amortized Cost	4,916	4,962
Unrealized Gains	96	95
Unrealized Losses	(4)	(2)
Net Unrealized Gains (Losses)	92	93
Fair Value	5,008	5,055
State and municipal bond obligations [Member]
Available-for-Sale Securities
Amortized Cost	7,801	7,090
Unrealized Gains	36	63
Unrealized Losses	(15)	(4)
Net Unrealized Gains (Losses)	21	59
Fair Value	7,822	7,149
Corporate bonds and notes [Member]
Available-for-Sale Securities
Amortized Cost	40,971	42,675
Unrealized Gains	138	249
Unrealized Losses	(137)	(143)
Net Unrealized Gains (Losses)	1	106
Fair Value	40,972	42,781
Asset backed securities [Member]
Available-for-Sale Securities
Amortized Cost	7,231	7,592
Unrealized Gains	12	28
Unrealized Losses	(14)	(6)
Net Unrealized Gains (Losses)	(2)	22
Fair Value	7,229	7,614
Mortgage backed securities [Member]
Available-for-Sale Securities
Amortized Cost	4,445	4,766
Unrealized Gains	23	26
Unrealized Losses	(9)	(7)
Net Unrealized Gains (Losses)	14	19
Fair Value	$ 4,459	$ 4,785

XML

Stock Repurchase Program (Details) (USD $)	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Apr. 24, 2014	Apr. 26, 2012
Stock Repurchase Program (Textual)
Common stock value authorized to repurchase under share repurchase program			$ 20,000,000	$ 25,000,000
Stock repurchased during period, Shares	250,547	106,645
Stock repurchased during period, Value	2,300,000	765,000
Remaining shares authorized to repurchase under the 2012 authority and 2014 share repurchase programs	$ 24,300,000

XML

Income Per Share

3 Months Ended

Sep. 27, 2014

Income Per Share [Abstract]

INCOME PER SHARE

 3.  INCOME PER SHARE

Basic income per share is based upon the weighted average number of common shares outstanding.  Diluted income per share reflects the additional potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Basic and diluted income per share for the three month periods ended September 27, 2014 and September 28, 2013 are computed as follows:

	Three Months Ended
	September 27,		September 28,
(in thousands, except per share data)	2014		2013
Net income	$	2,495	$	374
Computation of common shares outstanding – basic earnings per share:
Weighted average shares of common stock		21,936		22,794
Basic earnings per share	$	0.11	$	0.02
Computation of common shares outstanding – diluted earnings per share:
Weighted average shares of common stock		21,936		22,794
Dilutive shares using the treasury stock method		326		157
Shares used in computing diluted earnings per share		22,262		22,951
Diluted earnings per share	$	0.11	$	0.02

Options to purchase 1,256,000 and 2,366,000 shares of common stock, and restricted stock units of zero and 4,000 were outstanding during the three months ended September 27, 2014 and September 28, 2013 respectively, but are not included in the computation of diluted earnings per share because the options and units would be anti-dilutive under the treasury stock method.

XML

Investments in Marketable Securities (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 27, 2014	Jun. 28, 2014
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	$ 19,972	$ 6,161
Less Than 12 Months, Unrealized Losses	75	16
12 Months or Longer, Fair Value	7,407	8,286
12 Months or Longer, Unrealized Losses	104	146
Total, Fair Value	27,379	14,447
Total, Unrealized Losses	179	162
National government and agency securities [Member]
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	946	282
Less Than 12 Months, Unrealized Losses	3	1
12 Months or Longer, Fair Value	32	91
12 Months or Longer, Unrealized Losses	1	1
Total, Fair Value	978	373
Total, Unrealized Losses	4	2
State and municipal bond obligations [Member]
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	3,867
Less Than 12 Months, Unrealized Losses	11
12 Months or Longer, Fair Value	471	695
12 Months or Longer, Unrealized Losses	4	4
Total, Fair Value	4,338	695
Total, Unrealized Losses	15	4
Corporate bonds and notes [Member]
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	10,466	3,901
Less Than 12 Months, Unrealized Losses	44	11
12 Months or Longer, Fair Value	5,425	5,801
12 Months or Longer, Unrealized Losses	93	132
Total, Fair Value	15,891	9,702
Total, Unrealized Losses	137	143
Asset backed securities [Member]
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	2,760	895
Less Than 12 Months, Unrealized Losses	9	1
12 Months or Longer, Fair Value	1,080	1,195
12 Months or Longer, Unrealized Losses	5	5
Total, Fair Value	3,840	2,090
Total, Unrealized Losses	14	6
Mortgage backed securities [Member]
Gross unrealized losses and fair market values of the Company's investments
Less Than 12 months, Fair Value	1,933	1,083
Less Than 12 Months, Unrealized Losses	8	3
12 Months or Longer, Fair Value	399	504
12 Months or Longer, Unrealized Losses	1	4
Total, Fair Value	2,332	1,587
Total, Unrealized Losses	$ 9	$ 7

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014
Schedule of future minimum commitments
Less than 12 Months	$ 877
12-24 Months	113
24-36 Months	20
Over 36
Total	1,010
Operating lease payments [Member]
Schedule of future minimum commitments
Less than 12 Months	423
12-24 Months	48
24-36 Months	20
Over 36
Total	491
Capital equipment purchase commitments [Member]
Schedule of future minimum commitments
Less than 12 Months	216
12-24 Months
24-36 Months
Over 36
Total	216
Facility modification commitments [Member]
Schedule of future minimum commitments
Less than 12 Months	238
12-24 Months	65
24-36 Months
Over 36
Total	$ 303

XML

Industry and Segment Information (Tables)

3 Months Ended

Sep. 27, 2014

Industry and Segment Information [Abstract]

Summary of net revenues and accounts receivable in excess of 10 percent with any single customer

	Net Revenues
	Three Months Ended
	September 27,			September 28,
	2014			2013
Customer A		29	%		25	%
Customer B		12	%		10	%
All others		59	%		65	%
		100	%		100	%
		Accounts Receivable
		September 27,			June 28,
		2014			2014
Customer A		28	%		29	%
Customer B		7	%		8	%
All others		65	%		63	%
		100	%		100	%

Schedule of net revenues and net book value of long-lived assets by geographical segment

	Net Revenues
	Three Months Ended
	September 27,		September 28,
	2014		2013
China (including Hong Kong)	$	16,178	$	15,092
Taiwan		10,805		9,767
United States		1,462		1,814
Other (less than 10% each)		4,814		5,935
Total net revenues	$	33,259	$	32,608

Long-lived assets consist of all non-monetary assets, excluding financial assets, deferred taxes and intangible assets. The Company attributes long-lived assets to the country where they are located. The following table sets forth the Company’s long-lived assets by country of location as of September 27, 2014 and June 28, 2014:

	September 27,		June 28,
	2014		2014
China (including Hong Kong)	$	31,530	$	32,234
Taiwan		12,297		12,914
United States		13,056		12,154
Korea		1,023		1,067
Others (less than 10% each)		177		168
Total long-lived assets	$	58,083	$	58,537

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Commitments and Contingencies (Tables)

3 Months Ended

Sep. 27, 2014

Commitments and Contingencies [Abstract]

Schedule of future minimum commitments

	Months from September 27, 2014
(in thousands)	Less than  12 Months		12-24  Months		24-36  Months		Over 36  Months		Total
Operating lease payments	$	423	$	48	$	20	$	—	$	491
Capital equipment purchase commitments		216		—		—		—		216
Facility modification commitments		238		65		—		—		303
Total	$	877	$	113	$	20	$	—	$	1,010

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Investment in Unconsolidated Affiliate (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Investment in unconsolidated affiliate
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$ 2,495	$ 2,445

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Industry and Segment Information (Details)	3 Months Ended									12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended
	Sep. 27, 2014 Net Revenues [Member]	Sep. 28, 2013 Net Revenues [Member]	Sep. 27, 2014 Net Revenues [Member] Customer A [Member]	Sep. 28, 2013 Net Revenues [Member] Customer A [Member]	Sep. 27, 2014 Net Revenues [Member] Customer B [Member]	Sep. 28, 2013 Net Revenues [Member] Customer B [Member]	Sep. 27, 2014 Net Revenues [Member] All others [Member]	Sep. 28, 2013 Net Revenues [Member] All others [Member]	Sep. 27, 2014 Accounts Receivable [Member]	Jun. 28, 2014 Accounts Receivable [Member]	Sep. 27, 2014 Accounts Receivable [Member] Customer A [Member]	Jun. 28, 2014 Accounts Receivable [Member] Customer A [Member]	Sep. 27, 2014 Accounts Receivable [Member] Customer B [Member]	Jun. 28, 2014 Accounts Receivable [Member] Customer B [Member]	Sep. 27, 2014 Accounts Receivable [Member] All others [Member]	Jun. 28, 2014 Accounts Receivable [Member] All others [Member]
Summary of net revenues and accounts receivable in excess of 10 percent with any single customer [Abstract]
Net revenues and accounts receivable in excess of 10 percent with any single customer	100.00%	100.00%	29.00%	25.00%	12.00%	10.00%	59.00%	65.00%	100.00%	100.00%	28.00%	29.00%	7.00%	8.00%	65.00%	63.00%

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Shareholders' Equity and Share-Based Compensation (Tables)

3 Months Ended

Sep. 27, 2014

Shareholders' Equity and Share-Based Compensation [Abstract]

Shedule of weighted average assumptions of stock options granted under its stock incentive plans

	Three Months Ended
	September 28,
	2013
Expected Life		5.9 years
Risk-free interest rate		0.81	%
Volatility		54	%
Dividend Yield		—

Schedule of stock option activity

	Shares			Weighted Average Exercise		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)			Price		(years)		(in thousands)
Options outstanding at June 28, 2014		2,085		$	10.25		4.54	$	1,077
Granted		—			—
Exercised		(181	)		8.29
Cancelled or expired		(36	)		13.05
Options outstanding at September 27, 2014		1,868		$	10.39		4.50	$	1,700
Options vested and expected to vest at September 27, 2014		1,847		$	10.42		4.44	$	1,652
Options exercisable at September 27, 2014		1,607		$	10.79		3.82	$	1,171

Schedule of options outstanding and exercisable

					Options Outstanding						Exercisable Options
Range of Exercise Prices				Number Outstanding as of September 27, 2014		Weighted Average  Remaining  Contractual  Term (years)		Weighted  Average  Exercise  Price		Number  Exercisable as  of September 27,  2014		Weighted  Average  Exercise  Price
$	4.89	$	7.87		387,085		6.85	$	7.49		201,593	$	7.42
	7.88		8.85		457,845		4.04		8.44		395,731		8.39
	8.86		10.25		379,050		4.24		9.87		365,550		9.90
	10.26		15.45		453,007		3.74		12.76		453,007		12.76
	15.46		18.10		191,500		3.13		16.32		191,500		16.32
$	4.89	$	18.10		1,868,487		4.50	$	10.39		1,607,381	$	10.79

Summary of activity of restricted stock units (RSUs)

	Shares			Weighted Average  Award  Date Fair		Weighted  Average  Remaining  Contractual  Term		Aggregate  Intrinsic  Value
	(in thousands)			Value		(years)		(in thousands)
RSUs outstanding at June 28, 2014		649		$	8.23		1.58	$	5,901
Awarded		114			9.55
Released		(65	)		8.16
Forfeited		(8	)		8.34
RSUs and PSUs outstanding at September 27, 2014		690		$	8.45		1.39	$	6,864
RSUs and PSUs expected to vest after September 27, 2014		618		$	8.46		1.32	$	6,145

Summary of share based compensation expenses classified by consolidated statement of operations

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Cost of goods sold	$	33	$	36
Research and development		218		297
Selling, general and administrative		458		396
Pre-tax share-based compensation expense		709		729
Income tax impact		230		238
Net share-based compensation expense	$	479	$	491

Summary of share-based compensation by type of award

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Stock options	$	97	$	239
Restricted stock units		340		438
Performance stock units		217		—
Stock purchase plan		55		52
Total share-based compensation expense	$	709	$	729

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Investment in Unconsolidated Affiliate (Tables)

3 Months Ended

Sep. 27, 2014

Investments in Unconsolidated Affiliate [Abstract]

Investment in unconsolidated affiliate

	September 27,		June 28,
(in thousands)	2014		2014
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,495	$	2,445

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Intangible Assets

3 Months Ended

Sep. 27, 2014

Intangible Assets [Abstract]

INTANGIBLE ASSETS

2. INTANGIBLE ASSETS

The following table summarizes the components of intangible assets and related accumulated amortization balances for each of the period-ending dates shown, which were recorded as a result of business combinations:  

	September 27, 2014							June 28, 2014
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	6,068	$	(4,167	)	$	1,901	$	6,056	$	(3,913	)	$	2,143
Core developed technology		13,401		(9,412	)		3,989		13,402		(8,936	)		4,466
Total amortizable purchased intangible assets		19,469		(13,579	)		5,890		19,458		(12,849	)		6,609
SaRonix trade name		395		—			395		400		—			400
Total purchased intangible assets	$	19,864	$	(13,579	)	$	6,285	$	19,858	$	(12,849	)	$	7,009

Amortization expense related to finite-lived purchased intangible assets was approximately $725,000 and $785,000 for the three month periods ended September 27, 2014 and September 28, 2013, respectively.

The Company performs an impairment review of its intangible assets at least annually.  Based on the results of its most recent impairment review, the Company determined that no impairment of its intangible assets existed as of September 27, 2014. However, future impairment reviews could result in a charge to earnings.  

The finite-lived purchased intangible assets consist of customer relationships and existing and core technology, which have remaining useful lives from one to three years.  The Company expects future amortization expense associated with its intangible assets to be:

	Months from September 27, 2014
(in thousands)	Next 12  Months		13-24  Months		25-36  Months		Over 36  Months		Total
Customer relationships	$	992	$	909	$	—	$	—	$	1,901
Core developed technology		1,919		1,808		262		—		3,989
Total	$	2,911	$	2,717	$	262	$	—	$	5,890

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Investments in Marketable Securities (Tables)

3 Months Ended

Sep. 27, 2014

Investments In Marketable Securities [Abstract]

Summary of investments by major security type

		As of September 27, 2014
(in thousands)	Amortized Cost		Unrealized  Gains		Unrealized  Losses			Net  Unrealized  Gains  (Losses)			Fair Value
Available-for-Sale Securities
Time deposits	$	30,257	$	—	$	—		$	—		$	30,257
Repurchase agreements		501		—		—			—			501
National government and agency securities		4,916		96		(4	)		92			5,008
State and municipal bond obligations		7,801		36		(15	)		21			7,822
Corporate bonds and notes		40,971		138		(137	)		1			40,972
Asset backed securities		7,231		12		(14	)		(2	)		7,229
Mortgage backed securities		4,445		23		(9	)		14			4,459
Total	$	96,122	$	305	$	(179	)	$	126		$	96,248

At June 28, 2014 a summary of investments by major security type is as follows:

	As of June 28, 2014
(in thousands)	Amortized  Cost		Unrealized  Gains		Unrealized  Losses			Net  Unrealized  Gains  (Losses)		Fair Value
Available-for-Sale Securities
Time deposits	$	17,693	$	—	$	—		$	—	$	17,693
Repurchase agreements		500		—		—			—		500
US Treasury securities		526		1		—			1		527
National government and agency securities		4,962		95		(2	)		93		5,055
State and municipal bond obligations		7,090		63		(4	)		59		7,149
Corporate bonds and notes		42,675		249		(143	)		106		42,781
Asset backed securities		7,592		28		(6	)		22		7,614
Mortgage backed securities		4,766		26		(7	)		19		4,785
Total	$	85,804	$	462	$	(162	)	$	300	$	86,104

Gross unrealized losses and fair market values of the Company's investments

	Continuous Unrealized Losses at September 27, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair  Value		Unrealized  Losses		Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses
National government and agency securities	$	946	$	3	$	32	$	1	$	978	$	4
State and municipal bond obligations		3,867		11		471		4		4,338		15
Corporate bonds and notes		10,466		44		5,425		93		15,891		137
Asset backed securities		2,760		9		1,080		5		3,840		14
Mortgage backed securities		1,933		8		399		1		2,332		9
Total	$	19,972	$	75	$	7,407	$	104	$	27,379	$	179
	Continuous Unrealized Losses at June 28, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair  Value		Unrealized  Losses		Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses
National government and agency securities	$	282	$	1	$	91	$	1	$	373	$	2
State and municipal bond obligations		—		—		695		4		695		4
Corporate bonds and notes		3,901		11		5,801		132		9,702		143
Asset backed securities		895		1		1,195		5		2,090		6
Mortgage backed securities		1,083		3		504		4		1,587		7
Total	$	6,161	$	16	$	8,286	$	146	$	14,447	$	162

Fair market value of short and long-term investments

(in thousands)	September 27, 2014
Contractual Maturities
Less than 12 months	$	27,393
One to three years		32,947
Over three years		28,486
Multiple dates		7,422
Total	$	96,248

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Components of inventories
Raw materials	$ 5,433	$ 5,829
Work in process	2,843	2,468
Finished goods	3,642	3,991
Total inventories	$ 11,918	$ 12,288

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Shareholders' Equity and Share-Based Compensation (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Summary of share-based compensation by type of award
Stock options	$ 97	$ 239
Restricted stock units	340	438
Performance stock units	217
Stock purchase plan	55	52
Total share-based compensation expense	$ 709	$ 729

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Current assets:
Cash and cash equivalents	$ 27,587	$ 33,020
Short-term investments in marketable securities	96,248	86,104
Accounts receivable
Trade (net of reserves and allowances of $2,303 and $2,461)	24,863	24,036
Other receivables	2,882	2,878
Inventories	11,918	12,288
Prepaid expenses and other current assets	1,053	2,458
Deferred income taxes	795	726
Total current assets	165,346	161,510
Property, plant and equipment - net	58,083	58,537
Investments in unconsolidated affiliates	2,495	2,445
Deferred income taxes - non-current	2,576	2,460
Intangible assets (net of accumulated amortization of $13,579 and $12,849)	6,285	7,009
Other assets	8,062	8,118
Total assets	242,847	240,079
Current liabilities:
Accounts payable	9,697	8,927
Accrued liabilities	10,120	9,934
Total current liabilities	19,817	18,861
Industrial development subsidy	6,133	6,354
Deferred income taxes	5,577	5,460
Noncurrent tax liabilities	1,041	1,041
Other long-term liabilities	888	871
Total liabilities	33,456	32,587
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock and paid in capital - no par value, 60,000,000 shares authorized; shares issued and outstanding: September 27, 2014, 21,968,000; June 28, 2014, 21,974,000	113,039	113,118
Retained earnings	85,699	83,204
Accumulated other comprehensive income, net of tax	10,653	11,170
Total shareholders' equity	209,391	207,492
Total liabilities and shareholders' equity	$ 242,847	$ 240,079

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Industry and Segment Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Jun. 28, 2014
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Net revenues	$ 33,259	$ 32,608
Total long-lived assets	58,083		58,537
China (including Hong Kong) [Member]
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Net revenues	16,178	15,092
Total long-lived assets	31,530		32,234
Taiwan [Member]
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Net revenues	10,805	9,767
Total long-lived assets	12,297		12,914
US (Member)
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Net revenues	1,462	1,814
Total long-lived assets	13,056		12,154
Korea [Member]
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Total long-lived assets	1,023		1,067
Others (less than 10% each) [Member]
Schedule of net revenues and net book value of long-lived assets by geographical segment [Abstract]
Net revenues	4,814	5,935
Total long-lived assets	$ 177		$ 168

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 2,495	$ 374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,260	2,695
Share-based compensation	709	729
Tax benefit resulting from share-based transactions	293	109
Excess tax benefit resulting from share-based transactions	(29)
Loss on disposal of equipment	301	42
(Gain) loss on sale of investments	6	(44)
Equity in net income of unconsolidated affiliate	(39)	(43)
Deferred taxes	50	(103)
Changes in assets and liabilities:
Accounts receivable	(1,033)	(2,276)
Inventories	370	341
Prepaid expenses and other current assets	1,400	(212)
Other assets	11	144
Accounts payable	371	(2,227)
Accrued liabilities	(41)	501
Other long-term liabilities		17
Net cash provided by operating activities	7,124	47
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(1,136)	(1,243)
Purchase of available-for-sale investments	(25,719)	(20,624)
Maturities and sales of available-for-sale investments	15,292	16,538
Net cash used in investing activities	(11,563)	(5,329)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance under stock plans	1,498
Proceeds from short-term debt		514
Payments on short-term debt		(514)
Excess tax benefit resulting from stock option transactions	29
Repurchase of common stock	(2,302)	(765)
Net cash used in financing activities	(775)	(765)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(219)	166
NET DECREASE IN CASH AND CASH EQUIVALENTS	(5,433)	(5,881)
CASH AND CASH EQUIVALENTS:
Beginning of period	33,020	30,844
End of period	$ 27,587	$ 24,963

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Short-Term Debt (Details) (PSE-TW [Member]) In Millions, unless otherwise specified	3 Months Ended
	Sep. 27, 2014 Unsecured facility one [Member] USD ($)	Sep. 27, 2014 Unsecured facility one [Member] TWD	Sep. 27, 2014 Unsecured facility two [Member] USD ($)	Sep. 27, 2014 Unsecured facility two [Member] TWD
Short-Term Debt (Textual)
Unsecured debt	$ 3.3	100.0	$ 2.6	80.0
Maximum borrowing capacity	$ 2.3	70.0	$ 2.0	60.0
Unsecured facility term period	Loans under this facility are limited to $70 million NTD (U.S. $2.3 million), are for up to 180 days, and are based on the Taiwan Interbank Offered Rate ("TAIBOR") plus 1.25% and may be in NTD, USD, Japanese yen ("JPY") or other currencies.	Loans under this facility are limited to $70 million NTD (U.S. $2.3 million), are for up to 180 days, and are based on the Taiwan Interbank Offered Rate ("TAIBOR") plus 1.25% and may be in NTD, USD, Japanese yen ("JPY") or other currencies.	Loans under this facility are limited to $60 million NTD (U.S. $2.0 million), are for up to 180 days, with the interest rate determined on a case by case basis, and may be in NTD, USD, or JPY.	Loans under this facility are limited to $60 million NTD (U.S. $2.0 million), are for up to 180 days, with the interest rate determined on a case by case basis, and may be in NTD, USD, or JPY.
Taiwan Interbank Offered Rate	1.25%	1.25%

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Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Summary of components of other intangible assets and related accumulated amortization as part of business combinations
Finite lived intangible assets. Gross	$ 19,469	$ 19,458
Finite lived intangible assets, Accumulated Amortization	(13,579)	(12,849)
Total	5,890	6,609
Purchased intangible assets, Gross	19,864	19,858
Purchased intangible assets, Accumulated Amortization	(13,579)	(12,849)
Purchased intangible assets, Net	6,285	7,009
Customer relationships [Member]
Summary of components of other intangible assets and related accumulated amortization as part of business combinations
Finite lived intangible assets. Gross	6,068	6,056
Finite lived intangible assets, Accumulated Amortization	(4,167)	(3,913)
Total	1,901	2,143
Core developed technology [Member]
Summary of components of other intangible assets and related accumulated amortization as part of business combinations
Finite lived intangible assets. Gross	13,401	13,402
Finite lived intangible assets, Accumulated Amortization	(9,412)	(8,936)
Total	3,989	4,466
SaRonix trade name [Member]
Summary of components of other intangible assets and related accumulated amortization as part of business combinations
Indefinite lived intangible assets, Gross	395	400
Indefinite lived intangible assets, Accumulated Amortization
Indefinite lived intangible assets, Net	$ 395	$ 400

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014
Level 1 [Member]
Fair value measurement
Total
Level 1 [Member] | Time deposits [Member]
Fair value measurement
Total
Level 1 [Member] | Repurchase Agreements [Member]
Fair value measurement
Total
Level 1 [Member] | National government and agency securities [Member]
Fair value measurement
Total
Level 1 [Member] | State and municipal bond obligations [Member]
Fair value measurement
Total
Level 1 [Member] | Corporate bonds and notes [Member]
Fair value measurement
Total
Level 1 [Member] | Asset backed securities [Member]
Fair value measurement
Total
Level 1 [Member] | Mortgage backed securities [Member]
Fair value measurement
Total
Level 2 [Member]
Fair value measurement
Total	105,914
Level 2 [Member] | Time deposits [Member]
Fair value measurement
Total	30,745
Level 2 [Member] | Repurchase Agreements [Member]
Fair value measurement
Total	9,679
Level 2 [Member] | National government and agency securities [Member]
Fair value measurement
Total	5,008
Level 2 [Member] | State and municipal bond obligations [Member]
Fair value measurement
Total	7,822
Level 2 [Member] | Corporate bonds and notes [Member]
Fair value measurement
Total	40,972
Level 2 [Member] | Asset backed securities [Member]
Fair value measurement
Total	7,229
Level 2 [Member] | Mortgage backed securities [Member]
Fair value measurement
Total	4,459
Level 3 [Member]
Fair value measurement
Total
Level 3 [Member] | Time deposits [Member]
Fair value measurement
Total
Level 3 [Member] | Repurchase Agreements [Member]
Fair value measurement
Total
Level 3 [Member] | National government and agency securities [Member]
Fair value measurement
Total
Level 3 [Member] | State and municipal bond obligations [Member]
Fair value measurement
Total
Level 3 [Member] | Corporate bonds and notes [Member]
Fair value measurement
Total
Level 3 [Member] | Asset backed securities [Member]
Fair value measurement
Total
Level 3 [Member] | Mortgage backed securities [Member]
Fair value measurement
Total
Fair Value [Member]
Fair value measurement
Total	105,914
Fair Value [Member] | Time deposits [Member]
Fair value measurement
Total	30,745
Fair Value [Member] | Repurchase Agreements [Member]
Fair value measurement
Total	9,679
Fair Value [Member] | National government and agency securities [Member]
Fair value measurement
Total	5,008
Fair Value [Member] | State and municipal bond obligations [Member]
Fair value measurement
Total	7,822
Fair Value [Member] | Corporate bonds and notes [Member]
Fair value measurement
Total	40,972
Fair Value [Member] | Asset backed securities [Member]
Fair value measurement
Total	7,229
Fair Value [Member] | Mortgage backed securities [Member]
Fair value measurement
Total	$ 4,459

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Fair Value Measurements

3 Months Ended

Sep. 27, 2014

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

16. 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 standard describes a fair value hierarchy 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 the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis.  All of the investments are classified as Level 2 at September 27, 2014. 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.

	As of September 27, 2014
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments
Time deposits	$	30,745	$	—	$	30,745	$	—
Repurchase Agreements		9,679		—		9,679		—
National government and agency securities		5,008		—		5,008		—
State and municipal bond obligations		7,822		—		7,822		—
Corporate bonds and notes		40,972		—		40,972		—
Asset backed securities		7,229		—		7,229		—
Mortgage backed securities		4,459		—		4,459		—
Total	$	105,914	$	—	$	105,914	$	—

(1) $488,000 of the time deposits and $9,178,000 of the repurchase agreements are included in cash and cash equivalents; the balance of the investments are included in short-term investments in marketable securities on our consolidated balance sheet.

The Company had no transfers into or out of Level 2 during the three months ended September 27, 2014.

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 September 27, 2014 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 September 27, 2014.

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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Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Summary of future amortization expense associated with intangible assets
Next 12 Months	$ 2,911
13-24 Months	2,717
25-36 Months	262
Over 36 Months
Total	5,890	6,609
Customer relationships [Member]
Summary of future amortization expense associated with intangible assets
Next 12 Months	992
13-24 Months	909
25-36 Months
Over 36 Months
Total	1,901	2,143
Core developed technology [Member]
Summary of future amortization expense associated with intangible assets
Next 12 Months	1,919
13-24 Months	1,808
25-36 Months	262
Over 36 Months
Total	$ 3,989	$ 4,466

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Intangible Assets (Tables)

3 Months Ended

Sep. 27, 2014

Intangible Assets [Abstract]

Summary of components intangible assets and related accumulated amortization as result of business combinations

	September 27, 2014							June 28, 2014
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	6,068	$	(4,167	)	$	1,901	$	6,056	$	(3,913	)	$	2,143
Core developed technology		13,401		(9,412	)		3,989		13,402		(8,936	)		4,466
Total amortizable purchased intangible assets		19,469		(13,579	)		5,890		19,458		(12,849	)		6,609
SaRonix trade name		395		—			395		400		—			400
Total purchased intangible assets	$	19,864	$	(13,579	)	$	6,285	$	19,858	$	(12,849	)	$	7,009

Summary of future amortization expense associated with intangible assets

	Months from September 27, 2014
(in thousands)	Next 12  Months		13-24  Months		25-36  Months		Over 36  Months		Total
Customer relationships	$	992	$	909	$	—	$	—	$	1,901
Core developed technology		1,919		1,808		262		—		3,989
Total	$	2,911	$	2,717	$	262	$	—	$	5,890

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Basis of Presentation

3 Months Ended

Sep. 27, 2014

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

1.  BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared by Pericom Semiconductor Corporation (“Pericom” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission.  In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the Company’s financial position as of September 27, 2014, the results of operations for the three months ended September 27, 2014 and September 28, 2013 and cash flows for the three months ended September 27, 2014 and September 28, 2013.  This unaudited quarterly information should be read in conjunction with the audited consolidated financial statements of Pericom and the notes thereto included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on August 29, 2014.

The preparation of the interim condensed consolidated 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 and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the period.  Actual amounts could differ from these estimates.  The results of operations for the three months ended September 27, 2014 are not necessarily indicative of the results to be expected for the entire year.  The three month periods ended September 27, 2014 and September 28, 2013 each had 13 week periods.

The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position or results of operations:  advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; changes in the overall demand for products offered by the Company; changes in customer relationships; acquisitions and the subsequent integration of the acquired entity with the Company; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; risks associated with changes in domestic and international economic and/or political conditions or regulations and environmental laws; availability of necessary components; interruptions at wafer suppliers and subcontractors; fluctuations in currencies given the Company’s sales and operations being heavily weighted and paid in foreign currencies; and the Company’s ability to attract and retain employees necessary to support its growth.  

These interim condensed consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Global Limited (“PGL”), PSE Technology Corporation (“PSE-TW”), and Pericom Asia Limited (“PAL”). PGL has two wholly-owned subsidiaries, Pericom International Limited (“PIL”) and Pericom Semiconductor (HK) Limited (“P­HK”). In addition, PAL has three 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”). The Company eliminates all intercompany balances and transactions in consolidation.

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 June 28, 2014 is referred to as fiscal year 2014 or fiscal 2014, whereas the current fiscal year 2015 or fiscal 2015 will end on June 27, 2015.  Both fiscal 2014 and fiscal 2015 contain 52 weeks or 364 days. Periodically, the Company adds a 53^rd week to a year in order to end that year on the Saturday closest to the end of June.

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 return material authorizations (“RMA”s) 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The Company adopted the provisions of ASU 2013-11 this quarter. Since ASU 2013-11 only impacts financial statement disclosure requirements for unrecognized tax benefits, its adoption has had no impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a single comprehensive model for accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for annual and interim reporting periods beginning after December 15, 2016. The impact on the Company’s financial condition, results of operations and cash flows as a result of the adoption of ASU 2014-09 has not yet been determined.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 27, 2014	Jun. 28, 2014
Balance Sheets [Abstract]
Allowances for accounts receivable	$ 2,303	$ 2,461
Accumulated amortization on intangible assets	$ 13,579	$ 12,849
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	21,968,000	21,974,000
Common stock and paid in capital, shares outstanding	21,968,000	21,974,000

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Investment in Unconsolidated Affiliate

3 Months Ended

Sep. 27, 2014

Investments in Unconsolidated Affiliate [Abstract]

INVESTMENT IN UNCONSOLIDATED AFFILIATE

11. INVESTMENT IN UNCONSOLIDATED AFFILIATE   

The Company’s investment in an unconsolidated affiliate is as follows:

	September 27,		June 28,
(in thousands)	2014		2014
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,495	$	2,445

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 and supplies PSE-TW with blanks for its surface mount device (“SMD”) production lines. For the first three months of fiscal 2015 and 2014, the Company’s allocated portion of JCP’s results was income of $39,000 and $43,000, respectively.

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Document and Entity Information	3 Months Ended
	Sep. 27, 2014	Oct. 27, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	PERICOM SEMICONDUCTOR CORP
Entity Central Index Key	0001001426
Document Type	10-Q
Document Period End Date	Sep. 27, 2014
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--06-28
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,843,000

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Equity and Comprehensive Income

3 Months Ended

Sep. 27, 2014

Equity and Comprehensive Income [Abstract]

EQUITY AND COMPREHENSIVE INCOME

12. EQUITY AND COMPREHENSIVE INCOME

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

As of September 27, 2014, accumulated other comprehensive income of $10.7 million consists of $10.6 million of accumulated currency translation gains and $126,000 of net unrealized gains on available-for-sale investments, which was recorded net of a $53,000 tax provision. As of September 28, 2013, accumulated other comprehensive income of $11.3 million was made up of $11.6 million of accumulated currency translation gains partially offset by $318,000 of net unrealized losses on available-for-sale investments, which was recorded net of a $73,000 tax benefit.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Statements Of Operations [Abstract]
Net revenues	$ 33,259	$ 32,608
Cost of revenues	19,179	19,800
Gross profit	14,080	12,808
Operating expenses:
Research and development	4,588	5,045
Selling, general and administrative	7,300	7,687
Total operating expenses	11,888	12,732
Income from operations	2,192	76
Interest and other income, net	1,274	486
Income before income taxes	3,466	562
Income tax expense	1,010	231
Net income from consolidated companies	2,456	331
Equity in net income of unconsolidated affiliate	39	43
Net income	$ 2,495	$ 374
Basic income per share	$ 0.11	$ 0.02
Diluted income per share	$ 0.11	$ 0.02
Shares used in computing basic income per share	21,936	22,794
Shares used in computing diluted income per share	22,262	22,951

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Commitments and Contingencies

3 Months Ended

Sep. 27, 2014

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

6.  COMMITMENTS AND CONTINGENCIES

The Company’s future minimum commitments at September 27, 2014 are as follows:

	Months from September 27, 2014
(in thousands)	Less than  12 Months		12-24  Months		24-36  Months		Over 36  Months		Total
Operating lease payments	$	423	$	48	$	20	$	—	$	491
Capital equipment purchase commitments		216		—		—		—		216
Facility modification commitments		238		65		—		—		303
Total	$	877	$	113	$	20	$	—	$	1,010

The operating lease commitments are primarily facility leases at the Company’s various Asian subsidiaries.

The facility modification commitments have been made at the Company’s Shandong, China manufacturing operation for a general contractor and architecture firm to develop feasibility studies, plans and cost estimates for potential additional development of the plant site. The Company has no other purchase obligations beyond routine purchase orders as of September 27, 2014.

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Accrued Liabilities

3 Months Ended

Sep. 27, 2014

Accrued Liabilities [Abstract]

ACCRUED LIABILITIES

5.  ACCRUED LIABILITIES

Accrued liabilities consist of:

	September 27,		June 28,
(in thousands)	2014		2014
Accrued compensation	$	6,564	$	6,892
Income taxes payable		1,726		1,140
Sales commissions		302		307
Other accrued expenses		1,528		1,595
Total accrued liabilities	$	10,120	$	9,934

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Basis of Presentation (Policies)

3 Months Ended

Sep. 27, 2014

Basis of Presentation [Abstract]

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 June 28, 2014 is referred to as fiscal year 2014 or fiscal 2014, whereas the current fiscal year 2015 or fiscal 2015 will end on June 27, 2015.  Both fiscal 2014 and fiscal 2015 contain 52 weeks or 364 days. Periodically, the Company adds a 53^rd week to a year in order to end that year on the Saturday closest to the end of June.

WARRANTY

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 return material authorizations (“RMA”s) 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The Company adopted the provisions of ASU 2013-11 this quarter. Since ASU 2013-11 only impacts financial statement disclosure requirements for unrecognized tax benefits, its adoption has had no impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a single comprehensive model for accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for annual and interim reporting periods beginning after December 15, 2016. The impact on the Company’s financial condition, results of operations and cash flows as a result of the adoption of ASU 2014-09 has not yet been determined.

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Short-Term Debt

3 Months Ended

Sep. 27, 2014

Short-Term Debt [Abstract]

SHORT-TERM DEBT

13.  SHORT-TERM DEBT

As of September 27, 2014 and June 28, 2014, the Company has no outstanding debt. However, the Company’s subsidiary PSE-TW has two loan and credit facilities in place for equipment purchases or inventory financing via short term loans, letters of credit, and trade financing. The first is an unsecured facility for $100 million New Taiwan Dollars (“NTD”), approximately U.S. $3.3 million. Loans under this facility are limited to $70 million NTD (U.S. $2.3 million), are for up to 180 days, and are based on the Taiwan Interbank Offered Rate (“TAIBOR”) plus 1.25% and may be in NTD, USD, Japanese yen (“JPY”) or other currencies. The second is an unsecured facility for $80 million NTD (U.S. $2.6 million). Loans under this facility are limited to $60 million NTD (U.S. $2.0 million), are for up to 180 days, with the interest rate determined on a case by case basis, and may be in NTD, USD, or JPY.

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Shareholders' Equity and Share-Based Compensation

3 Months Ended

Sep. 27, 2014

Shareholders' Equity and Share-Based Compensation [Abstract]

SHAREHOLDERS' EQUITY AND SHARE-BASED COMPENSATION

9. 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 September 27, 2014, the Company has issued no shares of preferred stock.

STOCK OPTION PLANS

At September 27, 2014 the Company had two stock incentive plans and an employee stock purchase plan, consisting of the 2001 Stock Option Plan, 2004 Stock Incentive Plan and the 2010 Employee Stock Purchase Plan.  

Under the 2004 and 2001 stock incentive plans, the Company has reserved an aggregate of 4.2 million shares of common stock as of September 27, 2014 for issuance to employees, officers, directors, independent contractors and consultants of the Company in the form of incentive or nonqualified stock options, or grants of restricted stock.

The Company may grant stock options at the fair value on the 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 stock 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 for periods within the contractual life of the option on the U.S. Treasury yield corresponding to the expected life of the underlying option.

The Company’s did not grant any stock options under its stock incentive plans during the three months ended September 27, 2014.

The value of the Company’s stock options granted under its stock incentive plans during the three months ended September 28, 2013 was estimated at the date of grant using the following weighted average assumptions:

	Three Months Ended
	September 28,
	2013
Expected Life		5.9 years
Risk-free interest rate		0.81	%
Volatility		54	%
Dividend Yield		—

The weighted average fair value of options granted during the three months ended September 28, 2013 was $3.81.

The following table summarizes the Company’s stock option activity for the three months ended September 27, 2014:

	Shares			Weighted Average Exercise		Weighted Average Remaining Contractual Term			Aggregate Intrinsic Value
	(in thousands)			Price		(years)			(in thousands)
Options outstanding at June 28, 2014		2,085		$	10.25		4.54		$	1,077
Granted		—			—
Exercised		(181	)		8.29
Cancelled or expired		(36	)		13.05
Options outstanding at September 27, 2014		1,868		$	10.39		4.50		$	1,700
Options vested and expected to vest at September 27, 2014		1,847		$	10.42		4.44		$	1,652
Options exercisable at September 27, 2014		1,607		$	10.79		3.82	$	1,171

At September 27, 2014, 916,000 shares were available for future grants under the incentive plans. The aggregate intrinsic value of options exercised during the three months ended September 27, 2014 was $190,000.  

At September 27, 2014, expected future compensation expense relating to options outstanding is $843,000, which will be amortized to expense over a weighted average period of 2.5 years.

Additional information regarding options outstanding and exercisable as of September 27, 2014 is as follows:

					Options Outstanding						Exercisable Options
Range of Exercise Prices				Number Outstanding as of September 27, 2014		Weighted Average  Remaining  Contractual  Term (years)		Weighted  Average  Exercise  Price		Number  Exercisable as  of September 27,  2014		Weighted  Average  Exercise  Price
$	4.89	$	7.87		387,085		6.85	$	7.49		201,593	$	7.42
	7.88		8.85		457,845		4.04		8.44		395,731		8.39
	8.86		10.25		379,050		4.24		9.87		365,550		9.90
	10.26		15.45		453,007		3.74		12.76		453,007		12.76
	15.46		18.10		191,500		3.13		16.32		191,500		16.32
$	4.89	$	18.10		1,868,487		4.50	$	10.39		1,607,381	$	10.79

Restricted Stock Units and Performance Stock Units

Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs and PSUs 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.  PSUs are granted to executives of the Company and will vest in approximately 12 months subject to the achievement of each participant’s performance goals established at the beginning of the fiscal year. The fair value of RSUs and PSUs 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 the common stock. A summary of activity of RSUs and PSUs for the three months ended September 27, 2014 is presented below:

Forfeited  (8)  8.34         

	Shares			Weighted Average  Award  Date Fair		Weighted  Average  Remaining  Contractual  Term		Aggregate  Intrinsic  Value
	(in thousands)			Value		(years)		(in thousands)
RSUs outstanding at June 28, 2014		649		$	8.23		1.58	$	5,901
Awarded		114			9.55
Released		(65	)		8.16
RSUs and PSUs outstanding at September 27, 2014		690		$	8.45		1.39	$	6,864
RSUs and PSUs expected to vest after September 27, 2014		618		$	8.46		1.32	$	6,145

Of the 114,000 shares awarded during the three months ended September 27, 2014, 500 shares were RSUs while the remaining shares awarded were PSUs. At September 27, 2014, expected future compensation expense relating to RSUs and PSUs is $3.8 million, which will be amortized to expense over a weighted average remaining recognition period of 2.3 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 this Plan, of which 1.6 million remain available at September 27, 2014. 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. Thus there were no purchases under the Stock Purchase Plan for the three months ended September 27, 2014 and September 28, 2013. 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 offering period.  The maximum number of shares of Common Stock that any employee may purchase during any offering period under the plan is 1,500 shares, and an employee may not accrue more than $15,000 for share purchases in any offering period.

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 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 offering period.  The expected term is determined by the time from enrollment until purchase, and the Company uses the U.S. Treasury yield for the risk-free interest rate for the offering period.

At September 27, 2014, the Company had $20,000 in unamortized share-based compensation related to its employee stock purchase plan which will be amortized and recognized in the consolidated statement of operations over the next month.

SHARE-BASED COMPENSATION

The following table shows total share-based compensation expense classified by Consolidated Statements of Operations reporting caption for the three months ended September 27, 2014 and September 28, 2013 generated from the plans described above:

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Cost of goods sold	$	33	$	36
Research and development		218		297
Selling, general and administrative		458		396
Pre-tax share-based compensation expense		709		729
Income tax impact		230		238
Net share-based compensation expense	$	479	$	491

Share-based compensation by type of award is as follows:

	Three Months Ended
	September 27,		September 28,
(in thousands)	2014		2013
Stock options	$	97	$	239
Restricted stock units		340		438
Performance stock units		217		—
Stock purchase plan		55		52
Total share-based compensation expense	$	709	$	729

The amount of share-based compensation expense capitalized in inventory at September 27, 2014 and June 28, 2014 is immaterial.

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Industrial Development Subsidy (Details) (USD $)

3 Months Ended

Sep. 27, 2014

Sep. 28, 2013

Jun. 28, 2014

Industrial Development Subsidy (Textual)

Subsidy recieved

$ 12,800,000

Remaining subsidy

6,100,000

843,000

Period over which remaining subsidy to be recognized

Five to seven years

Subsidy used in reduction in cost of goods sold

188,000

188,000

Subsidy used in reduction in cost of operating expenses

$ 47,000

$ 46,000

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Industry and Segment Information

3 Months Ended

Sep. 27, 2014

Industry and Segment Information [Abstract]

INDUSTRY AND SEGMENT INFORMATION

7.  INDUSTRY AND 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 following table indicates the percentage of the Company’s net revenues and accounts receivable in excess of 10 percent with any single customer:

100

	Net Revenues
	Three Months Ended
	September 27,			September 28,
	2014			2013
Customer A		29	%		25	%
Customer B		12	%		10	%
All others		59	%		65	%
		%		100	%
		Accounts Receivable
		September 27,			June 28,
		2014			2014
Customer A		28	%		29	%
Customer B		7	%		8	%
All others		65	%		63	%
		100	%		100	%

For geographical reporting, the Company attributes net revenues 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 Cuba, countries located in referenced regions identified as state sponsors of terrorism by the U.S. Department of State and subject to U.S. economic sanctions and export controls. The following table sets forth net revenues by country for the three month periods ended September 27, 2014 and September 28, 2013:

	Net Revenues
	Three Months Ended
	September 27,		September 28,
	2014		2013
China (including Hong Kong)	$	16,178	$	15,092
Taiwan		10,805		9,767
United States		1,462		1,814
Other (less than 10% each)		4,814		5,935
Total net revenues	$	33,259	$	32,608

Long-lived assets consist of all non-monetary assets, excluding financial assets, deferred taxes and intangible assets. The Company attributes long-lived assets to the country where they are located. The following table sets forth the Company’s long-lived assets by country of location as of September 27, 2014 and June 28, 2014:

	September 27,		June 28,
	2014		2014
China (including Hong Kong)	$	31,530	$	32,234
Taiwan		12,297		12,914
United States		13,056		12,154
Korea		1,023		1,067
Others (less than 10% each)		177		168
Total long-lived assets	$	58,083	$	58,537

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Stock Repurchase Program

3 Months Ended

Sep. 27, 2014

Stock Repurchase Program [Abstract]

STOCK REPURCHASE PROGRAM

8.  STOCK REPURCHASE PROGRAM

On April 26, 2012, the Board authorized a share repurchase program for $25 million of common stock, and on April 24, 2014 the Board authorized an additional $20 million for the share repurchase program. The Company may repurchase the shares from time to time in open market or private transactions, at the discretion of the Company’s management.

During the three month period ended September 27, 2014, the Company repurchased 250,547 shares for an aggregate cost of approximately $2.3 million. During the three month period ended September 28, 2013, the Company repurchased 106,645 shares for an aggregate cost of approximately $765,000. Current cash balances and the proceeds from stock option exercises and purchases in the employee stock purchase plan have funded stock repurchases in the past, and the Company expects to fund future stock repurchases from these same sources. As of September 27, 2014, the Company had approximately $24.3 million of repurchase authority remaining under the 2012 and 2014 share repurchase programs.

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Income Taxes

3 Months Ended

Sep. 27, 2014

Income Taxes [Abstract]

INCOME TAXES

10. INCOME TAXES

Income Tax Expense

Income tax expense for the three months ended September 27, 2014 and September 28, 2013 was $1.0 million and $231,000, respectively, and was comprised of domestic federal and state income tax and foreign income tax. The effective tax rate for the three months ended September 27, 2014 was 29%, which resulted from the allocation of earnings between different tax jurisdictions and the inability to utilize losses in certain non-includable entities. The effective tax rate for the three months ended September 28, 2013 was 41%. As of September 27, 2014 and June 28, 2014, the Company has recorded a valuation allowance of $5.1 million against its deferred tax assets.

The Company’s effective tax rate may differ from the federal statutory rate primarily due to the permanent differences related to the benefit of foreign rate differentials, the benefit of generating federal research and development tax credits, income inclusions under Subpart F tax rules, and non-deductible share-based compensation from equity grants.

Accounting for Uncertainty in Income Taxes

The Company’s total amount of unrecognized tax benefits as of September 27, 2014 was $1,846,000.  Of this amount, $719,000 would affect the Company’s effective tax rate if recognized. In addition, as of September 27, 2014 the Company had accrued $229,000 for any interest and penalties related to unrecognized tax benefits.

The Company is subject to examination by federal, foreign, and various state jurisdictions for the years 2008 through 2014.

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Investments in Marketable Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Investments in Marketable Securities (Textual)
Proceeds from maturities and sales of available-for-sale investments	$ 15,292	$ 16,538
(Gain) loss on sale of investments	$ (6)	$ 44

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Fair Value Measurements (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014
Fair Value Measurements (Textual)
Fair value of assets transfers into or out of Level 2	$ 0
Time deposits [Member]
Fair Value Measurements (Textual)
Cash and cash equivalents	488,000
Repurchase Agreements [Member]
Fair Value Measurements (Textual)
Cash and cash equivalents	$ 9,178,000

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Investments in Marketable Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014
Fair market value of short and long-term investments
Less than 12 months	$ 27,393
One to three years	32,947
Over three years	28,486
Multiple dates	7,422
Total	$ 96,248

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Basis of Presentation (Details)	3 Months Ended
	Sep. 27, 2014
Basis of Presentation [Textual]
Period of warranty	1 year

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Shareholders' Equity and Share-Based Compensation (Details 3) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Sep. 27, 2014
Restricted Stock Units (RSUs) [Member]
Summary of activity of restricted stock units (RSUs)
RUS's outstanding, Awarded	500
Restricted Stock Units and Performance Stock Units [Member]
Summary of activity of restricted stock units (RSUs)
RSUs outstanding , Beginning balance	649,000
RUS's outstanding, Awarded	114,000
RUS's outstanding, Released	(65,000)
RUS's outstanding, Forfeited	(8,000)
RSUs and PSUs outstanding, Ending Balance	690,000
RSU's and PSUs expected to vest, Number of Shares	618,000
RSUs outstanding, Weighted average grant date fair value, Beginning balance	$ 8.23
RUS's awarded, Weighted average grant date fair value	$ 9.55
RUS's realeased, Weighted average grant date fair value	$ 8.16
RUS's forfeited, Weighted average grant date fair value	$ 8.34
RSUs outstanding, Weighted average grant date fair value, Ending Balance	$ 8.45
RSU's vested and expected to vested, Weighted average grant date fair value	$ 8.46
RSUs outstanding, Weighted average remaining contractual term, Beginning balance	1 year 6 months 29 days
RSUs outstanding, Weighted average remaining contractual term, Ending balance	1 year 4 months 21 days
RSU's vested and expected to vested, Weighted average remaing contractual term	1 year 3 months 26 days
RSUs outstanding, Aggregate intrinsic value, Beginning balance	$ 5,901
RSUs outstanding, Aggregate intrinsic value, Ending balance	6,864
RSU's vested and expected to vested, Aggregate intrinsic value	$ 6,145

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Investments in Marketable Securities

3 Months Ended

Sep. 27, 2014

Investments In Marketable Securities [Abstract]

INVESTMENTS IN MARKETABLE SECURITIES

15.  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. At September 27, 2014, a summary of investments by major security type is as follows:

		As of September 27, 2014
(in thousands)	Amortized Cost		Unrealized  Gains		Unrealized  Losses			Net  Unrealized  Gains  (Losses)			Fair Value
Available-for-Sale Securities
Time deposits	$	30,257	$	—	$	—		$	—		$	30,257
Repurchase agreements		501		—		—			—			501
National government and agency securities		4,916		96		(4	)		92			5,008
State and municipal bond obligations		7,801		36		(15	)		21			7,822
Corporate bonds and notes		40,971		138		(137	)		1			40,972
Asset backed securities		7,231		12		(14	)		(2	)		7,229
Mortgage backed securities		4,445		23		(9	)		14			4,459
Total	$	96,122	$	305	$	(179	)	$	126		$	96,248

At June 28, 2014 a summary of investments by major security type is as follows:

	As of June 28, 2014
(in thousands)	Amortized  Cost		Unrealized  Gains		Unrealized  Losses			Net  Unrealized  Gains  (Losses)		Fair Value
Available-for-Sale Securities
Time deposits	$	17,693	$	—	$	—		$	—	$	17,693
Repurchase agreements		500		—		—			—		500
US Treasury securities		526		1		—			1		527
National government and agency securities		4,962		95		(2	)		93		5,055
State and municipal bond obligations		7,090		63		(4	)		59		7,149
Corporate bonds and notes		42,675		249		(143	)		106		42,781
Asset backed securities		7,592		28		(6	)		22		7,614
Mortgage backed securities		4,766		26		(7	)		19		4,785
Total	$	85,804	$	462	$	(162	)	$	300	$	86,104

The above investments are included in short-term investments in marketable securities on the Company’s condensed consolidated balance sheets.

The following tables show the unrealized losses and fair market 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, at September 27, 2014 and June 28, 2014:

	Continuous Unrealized Losses at September 27, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair  Value		Unrealized  Losses		Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses
National government and agency securities	$	946	$	3	$	32	$	1	$	978	$	4
State and municipal bond obligations		3,867		11		471		4		4,338		15
Corporate bonds and notes		10,466		44		5,425		93		15,891		137
Asset backed securities		2,760		9		1,080		5		3,840		14
Mortgage backed securities		1,933		8		399		1		2,332		9
Total	$	19,972	$	75	$	7,407	$	104	$	27,379	$	179
	Continuous Unrealized Losses at June 28, 2014
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair  Value		Unrealized  Losses		Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses
National government and agency securities	$	282	$	1	$	91	$	1	$	373	$	2
State and municipal bond obligations		—		—		695		4		695		4
Corporate bonds and notes		3,901		11		5,801		132		9,702		143
Asset backed securities		895		1		1,195		5		2,090		6
Mortgage backed securities		1,083		3		504		4		1,587		7
Total	$	6,161	$	16	$	8,286	$	146	$	14,447	$	162

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 in shareholders’ equity.

The Company records gains or losses realized on sales of available-for-sale securities in interest and other income, net on its condensed consolidated statements of operations. The cost of securities sold is based on the specific identification of the security and its amortized cost. For the three months ended September 27, 2014 and September 28, 2013, proceeds from sales and maturities of available-for-sale securities were $15.3 million and $16.5 million, respectively, and realized gains (losses) were $(6,000) and $44,000, respectively.

The following table lists the fair market value of the Company’s short-term investments by length of time to maturity as of September 27, 2014. Securities with maturities over multiple dates are mortgage-backed (“MBS”) or asset-backed securities (“ABS”) featuring periodic principle paydowns through 2052.

(in thousands)	September 27, 2014
Contractual Maturities
Less than 12 months	$	27,393
One to three years		32,947
Over three years		28,486
Multiple dates		7,422
Total	$	96,248

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Inventories (Tables)

3 Months Ended

Sep. 27, 2014

Inventories [Abstract]

Inventories

	September 27,		June 28,
(in thousands)	2014		2014
Raw materials	$	5,433	$	5,829
Work in process		2,843		2,468
Finished goods		3,642		3,991
Total inventories	$	11,918	$	12,288

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Shareholders' Equity and Share-Based Compensation (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 27, 2014
Schedule of stock option plan activity
Beginning Balance, Options Outstanding	2,085
Options Outstanding, granted
Option Outstanding, exercised	(181)
Option Outstanding, forfeited or expired	(36)
Ending balance, Option Outstanding	1,868
Option Outstanding, Options vested and expected to vest	1,847
Option Outstanding, Options exercisable	1,607
Beginning Balance, Weighted Average Exercise Price	$ 10.25
Weighted Average Exercise Price, granted
Weighted Average Exercise Price, Exercised	$ 8.29
Weighted Average Exercise Price, forfeited or expired	$ 13.05
Ending Balance, Weighted Average Exercise Price	$ 10.39
Weighted Average Exercise Price, Options vested and expected to vest	$ 10.42
Weighted Average Exercise Price, Options exercisable	$ 10.79
Weighted Average Remaining Contractual Term, Options outstanding, Beginning balance	4 years 6 months 15 days
Weighted Average Remaining Contractual Term, Options outstanding, Ending balance	4 years 6 months
Options vested and expected to vest at September 27, 2014, Weighted Average Remaining Contractual Term	4 years 5 months 9 days
Weighted Average Remaining Contractual Term, Options exercisable	3 years 9 months 26 days
Beginning balance, Aggregate Intrinsic Value	$ 1,077
Ending balance, Aggregate Intrinsic Value	1,700
Aggregate intrinsic value, Options vested and expected to vest	1,652
Aggregate intrinsic value, Options exercisable	$ 1,171

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Inventories (Details Textual) (USD $)
In Millions, unless otherwise specified

3 Months Ended

Sep. 27, 2014

Jun. 28, 2014

Inventories (Textual)

Raw material inventory reserves, Description

The Company considers raw material inventory obsolete and reserves it if the raw material has not been placed into production within 365 days.

Description of inventory assembled devices

The Company reviews its assembled devices for excess and records a reserve if the quantity of assembled devices in inventory is in excess of the greater of the quantity shipped in the previous twelve months, the quantity in backlog or the quantity forecasted to be shipped in the following twelve months.  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 the last twelve months’ sales levels will not continue and reserves inventory in line with the quantity forecasted.

Inventory reserved

$ 3.1

$ 3.2

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Statements Of Comprehensive Income [Abstract]
Net income	$ 2,495	$ 374
Other comprehensive income:
Change in unrealized gain or loss on securities available for sale, net	(174)	307
Foreign currency translation adjustment	(458)	945
Tax benefit (provision) related to other comprehensive income	115	(128)
Other comprehensive income, net of tax	(517)	1,124
Comprehensive income	$ 1,978	$ 1,498

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Inventories

3 Months Ended

Sep. 27, 2014

Inventories [Abstract]

INVENTORIES

4.  INVENTORIES

Inventories consist of:

	September 27,		June 28,
(in thousands)	2014		2014
Raw materials	$	5,433	$	5,829
Work in process		2,843		2,468
Finished goods		3,642		3,991
Total inventories	$	11,918	$	12,288

The Company considers raw material inventory obsolete and reserves it if the raw material has not been placed into production within 365 days.  The Company reviews its assembled devices for excess and records a reserve if the quantity of assembled devices in inventory is in excess of the greater of the quantity shipped in the previous twelve months, the quantity in backlog or the quantity forecasted to be shipped in the following twelve months.  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 the last twelve months’ sales levels will not continue and reserves inventory in line with the quantity forecasted. As of September 27, 2014 and June 28, 2014, the Company had reserved for $3.1 million and $3.2 million of inventory, respectively.

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Equity and Comprehensive Income (Details) (USD $)	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Jun. 28, 2014
Equity and Comprehensive Income (Textual)
Accumulated other comprehensive income	$ 10,653,000	$ 11,300,000	$ 11,170,000
Accumulated currency translation gains included in accumulated other comprehensive income	10,600,000	11,600,000
Net unrealized gains on available-for-sale investments	126,000	318,000
Tax provision/benefit	$ 53,000	$ 73,000

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Accrued Liabilities (Tables)

3 Months Ended

Sep. 27, 2014

Accrued Liabilities [Abstract]

Schedule of accrued liabilities

	September 27,		June 28,
(in thousands)	2014		2014
Accrued compensation	$	6,564	$	6,892
Income taxes payable		1,726		1,140
Sales commissions		302		307
Other accrued expenses		1,528		1,595
Total accrued liabilities	$	10,120	$	9,934

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Income Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Computation of basic and diluted income per share
Net income	$ 2,495	$ 374
Computation of common shares outstanding - basic earnings per share:
Weighted average shares of common stock	21,936	22,794
Basic earnings per share	$ 0.11	$ 0.02
Computation of common shares outstanding - diluted earnings per share:
Weighted average shares of common stock	21,936	22,794
Dilutive shares using the treasury stock method	326	157
Shares used in computing diluted earnings per share	22,262	22,951
Diluted earnings per share	$ 0.11	$ 0.02

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Industrial Development Subsidy

3 Months Ended

Sep. 27, 2014

Industrial Development Subsidy [Abstract]

INDUSTRIAL DEVELOPMENT SUBSIDY

14.  INDUSTRIAL DEVELOPMENT SUBSIDY

As of September 27, 2014, industrial development subsidies in the amount of $12.8 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 September 27, 2014 was $6.1 million, which is expected to be recognized over the next five to seven years.

A portion of the $12.8 million in subsidies was previously recorded as a receivable. As of June 28, 2014, the Company concluded that the remaining $843,000 of receivables will not be paid and accordingly the balance was written off.

The Company recognized $188,000 and $188,000 of industrial development subsidy as a reduction of cost of goods sold and $47,000 and $46,000 of industrial development subsidy as a reduction of operating expenses in the consolidated statements of operations for the three month periods ended September 27, 2014 and September 28, 2013, respectively.