Commitments and Contingencies

12 Months Ended

Jun. 24, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

The Company has operating leases for the use of certain real estate and equipment.  Substantially all operating leases are non-cancelable or cancelable only by the payment of penalties.  All lease payments are based on the lapse of time but include, in some cases, payments for insurance, maintenance and property taxes.  There are no purchase options on operating leases at favorable terms, but most real estate leases have one or more renewal options.  Certain leases on real estate are subject to annual escalations for increases in utilities and property taxes.

The Company has entered into several operating lease agreements, some of which contain provisions for future rent increases, rent free periods, or periods in which rent payments are reduced (abated).  The total amount of rental payments due over the lease term is being charged to rent expense on a straight-line method over the term of the lease.  The difference between rent expense recorded and the amount paid is credited or charged to "accrued rent expense," which is included in "Other current liabilities" in the accompanying consolidate balance sheet.

Total rental expense on all operating leases totaled $11.2 million, $9.8 million and $10.2 million for the fiscal years ended June 24, 2012, June 26, 2011, and June 27, 2010, respectively. The Company had outstanding purchase commitments for capital expenditures of approximately $12.6 million at June 24, 2012.  The Company had no capital lease obligations as of June 24, 2012.

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INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. Commitments and Contingencies (Continued)

As of June 24, 2012, minimum fixed rentals required for the next five years and thereafter under operating leases are as follows (in thousands):

Fiscal Year	Minimum Fixed Rentals
2013	$	9,923
2014		7,882
2015		7,567
2016		6,167
2017		4,217
Thereafter		8,197
Total	$	43,953

During fiscal year 2011, the Company entered into an agreement with a vendor to secure external wafer fabrication capacity.  Under this agreement the Company advanced approximately $4.8 million on account of future purchases.  This advance was recorded in prepaid expenses and other receivables and other assets and will be credited against future purchases from the vendor to the extent the Company continues to purchase certain minimum quantities of wafers each quarter during the original two year term of the agreement.  The $4.8 million advance is subject to provisions that require the forfeiture of the portion of the vendor prepayment applicable to a given fiscal quarter if the Company does not purchase the minimum required amounts for that quarter.  During the fourth quarter of fiscal year 2012, the Company amended the vendor agreement to extend the commitment term for two additional quarters from the original two year term.  As of June 24, 2012, the Company believes the remaining vendor advance of $3.8 million will be recovered through future purchases under the agreement.  The Company will continue to assess the recoverability of the advanced payments on a quarterly basis.

During fiscal year 2011, the Company entered into an agreement with one external foundry to secure wafer fabrication capacity.  As of June 24, 2012, the Company believes the remaining foundry advances of $0.7 million will be recovered through future purchases under the agreement.

During fiscal year 2012 the Company entered into an amended foundry services agreement with one of its contract manufacturers for wafer fabrication, under which the Company is entitled to purchase silicon wafers through December 31, 2017.  Under the terms of the agreement, the Company will be required to advance funds of $1.5 million against future processing charges.  The advance payment is recoverable in the form of a fixed amount per wafer purchased.  Any portion of the advance not recovered as of December 31, 2017 will be forfeited.  As of June 24, 2012, the Company had no advances outstanding to the contract manufacturer.

In connection with the divestiture of the Company's Power Control Systems business in fiscal year 2007, the Company recorded a provision of $18.6 million for certain tax obligations with respect to divested entities. The balance of the divested entities tax obligations have decreased over time due to settlement of tax audits, lapsing of applicable statutes of limitations, and the decrease in foreign currency translation on the underlying obligation.  As of June 24, 2012, the balance of the divested entities tax obligations was $1.9 million.

On February 3, 2011, the Company completed the Technology Acquisition.  The transaction agreement related to the Technology Acquisition includes contingent consideration payable upon the achievement of certain financial operating results.  During the fiscal year ended June 24, 2012, the Company reversed the $0.4 million of acquisition-related contingent consideration liability as it determined the acquired assets and personnel would probably not achieve the minimum level of financial operating results in order to receive any such consideration. (See Note 2, "Business Acquisitions").