SMTC 10-Q Quarter ended Aug. 1, 2010

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended August 1, 2010

or

For the transition period from to

Commission File Number 1-6395

SEMTECH CORPORATION

(Exact name of registrant as specified in its charter)

200 Flynn Road, Camarillo, California, 93012-8790

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (805) 498-2111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x No ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes ¨ No x

Number of shares of Common Stock, $0.01 par value per share, outstanding at September 1, 2010: 62,364,608

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SEMTECH CORPORATION

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED AUGUST 1, 2010

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SEMTECH CORPORATION AND SUBSIDIARIES

(in thousands, except per share data)

See accompanying notes. The accompanying notes are an integral part of these statements.

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SEMTECH CORPORATION AND SUBSIDIARIES

(in thousands, except share data)

See accompanying notes. The accompanying notes are an integral part of these statements.

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SEMTECH CORPORATION AND SUBSIDIARIES

(in thousands)

See accompanying notes. The accompanying notes are an integral part of these statements.

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SEMTECH CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The accompanying interim consolidated condensed financial statements of Semtech Corporation and its subsidiaries (the “Company”) have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company, these unaudited statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the financial position of Semtech Corporation and its subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading.

The Company reports on the basis of 52 and 53 week periods and ends its fiscal year on the last Sunday in January. The other quarters generally end on the last Sunday of April, July, and October. All quarters consist of 13 weeks except for one 14-week period in 53-week years. The second quarter of fiscal years 2011 and 2010 each consisted of 13 weeks. The first six months of fiscal years 2011 and 2010 each consisted of 26 weeks.

These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K. The results reported in these consolidated condensed financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year.

Certain amounts for prior periods have been reclassified to conform to the current presentation. These reclassifications were not significant and had no effect on previously reported consolidated operating income, income before taxes, net income, total assets or stockholder’s equity.

The components of comprehensive income, net of tax, were as follows:

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The computation of basic and diluted earnings per common share was as follows:

Basic earnings per common share is computed using the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share incorporates the incremental shares issuable, calculated using the treasury stock method, upon the assumed exercise of stock options and the vesting of restricted stock.

The Company recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Product design and engineering revenue is recognized during the period in which services are performed.

The Company defers revenue recognition on shipment of products to certain customers, principally distributors, under agreements which provide for limited pricing credits or return privileges, until these products are sold through to end-users or the return privileges lapse. For sales subject to certain pricing credits or return privileges, the amount of future pricing credits or inventory returns cannot be reasonably estimated given the relatively long period in which a particular product may be held by the customer. Therefore, the Company has concluded that sales to customers under these agreements are not fixed and determinable at the date of the sale and revenue recognition has been deferred.

The estimated deferred gross margins on these sales, where there are no outstanding receivables, are recorded on the consolidated condensed balance sheets under the heading of “Deferred revenue.” The Company records a provision for estimated sales returns in the same period as the related revenues are recorded. The Company bases these estimates on historical sales returns and other known factors. Actual returns could be different from Company estimates and current provisions for sales returns and allowances, resulting in future charges to earnings.

Stock-based Payment Arrangements . The Company has various equity award plans (the “Plans”) that provide for granting stock-based awards to employees and non-employee directors of the Company. The Plans provide for the granting of several available forms of stock-based compensation. As of August 1, 2010, the Company has granted stock options (“Options”) and restricted stock under the Plans and has also issued some stock-based compensation outside of the Plans, including Options and restricted stock issued as inducements to join the Company.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms . The Company uses the Black-Scholes pricing model to value Options. For awards classified as equity, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s or director’s requisite service period. For awards classified as liabilities, stock-based compensation cost is measured at fair value at each reporting date until the date of settlement, and is recognized as an expense over the employee or director’s requisite service period. Expected lives are determined using the mid-point between the last vest date and the award expiration date since current awards typically expire in six years, which represents a significantly shorter life than historical awards. The risk-free interest rate is derived by referencing the implied yields currently available from the U.S. Treasury’s zero-coupon yield curve with a remaining term equal to the expected term of the award. Expected volatilities are based on historical volatility using daily and monthly stock price observations. The Company has not historically paid dividends.

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Assumptions in Determining Fair Value of Options

A summary of the activity for stock option awards for the first six months of fiscal year 2011 is presented below:

The estimated fair value of restricted stock was calculated based on the market price of the Company’s common stock on the date of grant. Some of the restricted stock awarded in fiscal year 2010 and prior years are classified as liabilities rather than equity. For awards classified as liabilities, the value of these awards was re-measured on August 1, 2010.

A summary of the activity for restricted share awards is presented below:

Financial Statement Effects and Presentation . The following tables show total pre-tax, stock-based compensation expense included in the consolidated condensed statements of operations for the three and six month periods ended August 1, 2010 and July 26, 2009, respectively.

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Allocation of Stock-based Compensation

Adjustments to Expense During the Three and Six Months Ended August 1, 2010

Subsequent to the issuance of its May 2, 2010 unaudited consolidated financial statements, the Company implemented a new third-party stock-based compensation software package to replace the legacy software historically used. Upon implementation, the Company performed a comparison of historical results as computed under the legacy system with results from the new software package, noting differences.

The new software package enables the Company to refine its estimates of forfeitures. The Company accounted for this as a change in estimate. The Company discovered accounting errors in previously issued financial statements as the new software package was installed. The new software allocates stock-based compensation by award instead of grouping awards into a defined tranche resulting in higher levels of expense allocated to tax jurisdictions that record tax benefits for stock-based compensation. Consequently, the Company identified both a change in accounting estimate in the three months ended August 1, 2010 and a correction of errors in previously issued financial statements for the three months ended May 2, 2010 and the years ended January 31, 2010, January 25, 2009 and January 27, 2008.

The Company determined that correcting the accounting errors in previously issued financial statements would have generated additional tax benefits and a corresponding increase in net income of $196,000, $115,000, $120,000 and $142,000 for the three months ended May 2, 2010 and the years ended January 31, 2010, January 25, 2009 and January 27, 2008, respectively. Earnings per fully diluted share would not have changed in any of these periods. See Note 10 for additional discussion.

The Company has determined that the impact of these errors is not material to the previously issued annual and interim financial statements using the guidance of SEC Staff Accounting Bulletin (“SAB”) No. 99 (“SAB 99”) and SAB No. 108. Accordingly, the unaudited condensed consolidated financial statements for the three and six month periods ended August 1, 2010 include the adjustment to increase stock-based compensation expense for a change in accounting estimate by $328,000, net of tax effects and recognize the tax benefits and a corresponding increase to net income of $868,000 (or $0.01 of earnings per fully diluted share for both the three and six month periods ended August 1, 2010) to correct this error. The Company does not believe the correction of these accounting errors in previously issued financial statements is material to the consolidated financial statements for the three and six months ended August 1, 2010 and does not believe that it will be material to the annual consolidated financial statements for the fiscal year ending January 30, 2011.

Certain investments that mature within three months of the balance sheet date are accounted for as cash equivalents. This includes money market funds, time deposits and U.S. government obligations. Temporary and long-term investments consist of government, bank and corporate obligations. Temporary investments have maturities in excess of three months, but mature within twelve months of the balance sheet date. Long-term investments mature in excess of one year from the balance sheet date. The Company determines the cost of securities sold based on the specific identification method. Realized gains or losses are reported in “Interest and other income, net” on the consolidated condensed statements of operations.

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The Company classifies its investments as “available for sale” because it may sell some securities prior to maturity. The Company’s investments are subject to market risk, primarily interest rate and credit risks. The Company’s investments are managed by a limited number of outside professional managers that operate within investment guidelines set by the Company. These guidelines include specified permissible investments, minimum credit quality ratings and maximum average duration restrictions and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities.

The following table summarizes the Company’s investments as of August 1, 2010 and January 31, 2010:

Investments

The following table summarizes the maturities of the Company’s investments at August 1, 2010 and January 31, 2010:

Investment maturities

In the second quarter of fiscal years 2011 and 2010, the Company recognized $94,000 and $60,000, respectively, of unrealized gain (net of tax) on investments. These unrealized gains are the result of fluctuations in the market value of the Company’s investments and are included in “Accumulated other comprehensive income” on the consolidated condensed balance sheets. The tax associated with these comprehensive income items for the second quarter of fiscal years 2011 and 2010 was an increase to the deferred tax liability of $20,000 and $13,000, respectively.

In the first six months of fiscal years 2011 and 2010, the Company recognized an unrealized gain of $26,000 and an unrealized loss of $28,000 (net of tax), respectively, on investments. These unrealized gains and losses are the result of fluctuations in the market value of the Company’s investments and are included in “Accumulated other comprehensive income” on the consolidated condensed balance sheets. The tax associated with these comprehensive income items for the first six months of fiscal years 2011 and 2010 was a decrease to the deferred tax liability of $5,000 and an increase to the deferred tax liability of $10,000, respectively.

Investments and cash and cash equivalents generated interest income of $279,000 and $525,000 in the second quarter of fiscal years 2011 and 2010, respectively. For the first six months of fiscal years 2011 and 2010, investments and cash and cash equivalents generated interest income of $503,000 and $1.2 million, respectively.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The Company uses a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Three levels of inputs are used to measure fair value:

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

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

All items recorded or measured at fair value on a recurring basis in the accompanying consolidated condensed financial statements were based on the use of Level 1 inputs and consisted of the following items as of August 1, 2010:

Inventories, consisting of material, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out) or market and consisted of the following:

Inventories:

Goodwill —Goodwill is not amortized, but is tested for impairment using a two-step method on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit. The Company concluded that there were no indicators of impairment as of August 1, 2010.

There were no changes to goodwill during the first six months of fiscal year 2011.

Purchased Intangibles —Purchased intangibles are amortized on a straight-line basis over their estimated useful lives. In-process research and development is recorded at fair value as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Upon completion of development, acquired in-process research and development assets are transferred to finite-lived assets and amortized over their useful lives.

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Intangible assets consisted of the following:

Core technologies includes $59.9 million of definite lived intangible assets from the December 9, 2009 acquisition of Sierra Monolithics, Inc. (“SMI”). These developed technology intangibles include current optical products, wireless products and microwave products.

The Company concluded that the intangibles classified as core technologies were identifiable intangible assets, separate from goodwill, since they were capable of being separated from SMI and sold, transferred or licensed, regardless of whether the Company intended to do so.

The fair value of these core technologies was determined using the multi-period excess earnings method. Each product technology was valued separately since each was determined to have a different remaining useful life.

For the three month periods ended August 1, 2010 and July 26, 2009, amortization expense related to intangible assets was $2.4 million and $302,000, respectively. Amortization expense related to intangible assets for the six month periods ended August 1, 2010 and July 26, 2009 was $4.8 million and $605,000, respectively.

The effective tax rate differs from the 35 percent statutory corporate tax rate in part due to the impact of lower foreign tax rates.

In the second quarter of fiscal year 2011, the Company recorded an $868,000 increase to its deferred tax assets to reflect the impact of higher anticipated tax benefits from equity compensation expense. Specifically, a higher portion of historical stock-based compensation expense was determined to be associated with tax jurisdictions where the Company expects to realize a future tax benefit. See Note 5 for additional discussion regarding the tax impact from adjustments to stock-based compensation expense.

The gross unrecognized tax benefits (before federal impact of state items) were $13.8 million at August 1, 2010 and January 31, 2010, respectively. Included in the balances of unrecognized tax benefits at August 1, 2010 and January 31, 2010, are $12.1 million of net tax benefits (after federal impact of state items) that, if recognized, would impact the effective tax rate. The liability for uncertain tax positions was $12.1 million as of August 1, 2010 and January 31, 2010. This liability is reflected on the consolidated condensed balance sheets as “Accrued taxes.” The Company’s policy is to include net interest and penalties related to unrecognized tax benefits within the provision for taxes. The Company had approximately $243,000 and $193,000 of net interest and penalties accrued at August 1, 2010 and January 31, 2010, respectively.

Tax years prior to 2006 (fiscal year 2007) are generally not subject to examination by the Internal Revenue Service except for items with tax attributes that could impact open tax years.

In the second quarter of fiscal year 2011, the California Franchise Tax Board initiated a routine examination of the Company’s filings for tax years 1998 through 2004. For state returns, the Company is generally not subject to income tax examinations for years prior to 2005 (fiscal year 2006).

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The Company’s significant foreign tax presence is in Switzerland. The Company’s material Swiss tax filings have been examined through fiscal year 2009. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates.

As of August 1, 2010, it was reasonably possible that the total amounts of unrecognized tax benefits would decrease by up to $90,000 within twelve months due to the resolution of a foreign tax audit. Such resolution will result in tax payments by the Company if its positions are not sustained and will result in decreases in the liability for uncertain tax positions and a reduction to the tax provision if the Company’s positions are sustained.

Legal Matters

From time to time in the ordinary course of its business, the Company is involved in various claims, litigation, and other legal actions that are normal to the nature of its business, including with respect to intellectual property, contract, product liability, employment, and environmental matters.

The Company records any amounts recovered in these matters when collection is certain. Liabilities for claims against the Company are accrued when it is probable that a liability has been incurred and the amount can reasonably be estimated. Any amounts recorded are based on periodic reviews by outside counsel, in-house counsel and management and are adjusted as additional information becomes available or assessments change.

While some insurance coverage is maintained for such matters, there can be no assurance that the Company has a sufficient amount of insurance coverage, that asserted claims will be within the scope of coverage of the insurance, or that the Company will have sufficient resources to satisfy any amount due not covered by insurance.

The Company’s management is of the opinion that the ultimate resolution of such matters now pending will not, individually or in the aggregate, have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows. However, the outcome of legal proceedings cannot be predicted with any degree of certainty.

Refer to the discussion in Note 11 to the consolidated financial statements in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010 filed with the SEC on April 1, 2010 and Note 11 to the consolidated condensed financial statements in Part I, Item 1 of the Company’s Quarterly Report on Form 10-Q for the period ended May 2, 2010 filed with the SEC on June 11, 2010. Except as discussed below, all proceedings discussed in the Form 10-K remain outstanding.

Class Action Lawsuit . In Re: Semtech Corporation Securities Litigation, United States District Court, Central District of California, Case No. 2:07-CV-07114-CAS. In August 2007, a purported class action lawsuit was filed against the Company and certain current and former officers on behalf of persons who purchased or acquired Semtech securities from August 27, 2002 until July 19, 2006. The case alleges violations of Federal securities laws in connection with the Company’s past stock option practices. A very similar lawsuit, filed in October 2007 by another plaintiff, was not served. In February 2008, the Mississippi Public Employees’ Retirement System (“MPERS”) filed a motion in the US District Court for the Central District of California for consolidation of the cases described above, appointment of MPERS as lead plaintiff, and approval of selection of counsel. The MPERS motion was granted in late March 2008, and a Consolidated Amended Class Action Complaint was filed in May 2008, initiating the consolidated action with MPERS as the lead plaintiff. In December 2008, the Court granted motions to dismiss in favor of defendants Jason Carlson (former Chief Executive Officer of the Company) and Mohan Maheswaran (current Chief Executive Officer of the Company) regarding claims under Section 10(b) of the Securities Exchange Act of 1934. The Court denied all other motions of all defendants, including other motions to dismiss brought in relation to alternate allegations raised against Messrs. Carlson and Maheswaran, who remain pending as defendants in the matter. Following a May 2010 District Court ruling adverse to the Company on the discoverability and production of certain materials over which the Company asserts privileges and exclusions from production, the Company sought and has since been granted approval from the Ninth Circuit Court of Appeals to seek review of the District Court’s ruling and order. Appellate proceedings on the evidentiary issue are proceeding. Most recently, on August 23, 2010, the Court certified the plaintiff class (as proposed by plaintiffs) to be persons who purchased or acquired Semtech securities from August 27, 2002 until July 19, 2006. Discovery proceedings are ongoing at this time, subject to certain scheduling impacts relating to the appeal of the evidentiary matter now pending before the Ninth Circuit Court of Appeals. The Company is unable to predict the outcome of this litigation.

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The Company accrued $10.0 million related to the settlement offer that was extended to the plaintiffs in the class action lawsuit. This settlement offer, which reflects the Company’s best estimate of its probable loss, remains pending. The accrual for this liability is reflected in Accrued liabilities on the consolidated balance sheets for the periods ended August 1, 2010 and January 31, 2010.

Product Warranties

The Company’s general warranty policy provides for repair or replacement of defective parts. In some cases, a refund of the purchase price is offered. In certain instances the Company has agreed to other warranty terms, including some indemnification provisions. The table below summarizes changes in product warranty allowances in accrued liabilities.

Compensating balances

The Company has arranged for letters of credit totaling $1.5 million to meet contractual requirements related to payments due a vendor for the acquisition of equipment. The letters of credit are supported by the Company’s bank accounts which could result in cash, up to $1.5 million, being subject to certain restrictions.

The Company operates exclusively in the semiconductor industry and primarily within the analog and mixed-signal sector.

Net sales activity by geographic region is as follows:

Sales by Region

The Company generally attributes sales to a country based on the ship-to address. The table below summarizes sales activity to countries that represented greater than 10% of total sales:

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Income from continuing operations before income taxes is as follows:

Sales to the Company’s customers are generally made on open account, subject to credit limits the Company may impose, and the receivables are subject to the risk of being uncollectible.

Concentration of Net Sales - Significant Customers

Concentration of Accounts Receivable - Significant Customers

Outside Subcontractors and Suppliers

The Company relies on a limited number of outside subcontractors and suppliers for the production of silicon wafers, packaging and certain other tasks. Disruption or termination of supply sources or subcontractors, due to natural disasters or other causes, could delay shipments and could have a material adverse effect on the Company. Although there are generally alternate sources for these materials and services, qualification of the alternate sources could cause delays sufficient to have a material adverse effect on the Company. Several of the Company’s outside subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in foreign countries, including China, Taiwan, Singapore, Thailand, Malaysia, the Philippines, Germany, Israel and Canada. The Company’s largest source of silicon wafers is an outside foundry located in China and a significant amount of the Company’s assembly and test operations are conducted by third-party contractors in China, Malaysia, Thailand and the Philippines.

Since May 2006, the Company has incurred substantial expenses for legal, accounting, tax and other professional services in connection with matters associated with or stemming from its historical stock option practices. All activity related to these matters is charged to “Selling, general and administrative” on the consolidated condensed statements of operations.

In the second quarter of fiscal year 2011 the Company incurred expenses of $1.1 million in support of these matters. Expenses for the second quarter of fiscal year 2010 were offset by an insurance recovery of $1.3 million resulting in a net benefit of $340,000.

For the six month periods ended August 1, 2010 and July 26, 2009, the Company incurred expenses of $2.7 million and $69,000 (net of insurance recovery), respectively, in support of these matters.

The Company expects to continue to incur significant expense in connection with the class action litigation and on-going government inquires. These expenses include claims for advancement of legal expenses to current and former directors, officers and executives under pre-existing indemnification agreements and to other current and former employees under the California Labor Code and a resolution of the Board of Directors authorizing such advances.

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During fiscal years 2009 and 2010, the Company initiated restructuring plans to reorganize certain Company operations, consolidate research and development activities and reduce its workforce. The following table summarizes the restructuring charge and liability balance included in “Accrued liabilities” and “Other long-term liabilities” on the consolidated condensed balance sheet as of August 1, 2010.

Lease termination costs

The outstanding liability for restructuring costs is classified on the Company’s consolidated condensed balance sheet as of August 1, 2010 as follows:

In the first quarter of fiscal year 2009, the Company announced that its Board of Directors authorized the repurchase of up to $50 million of the Company’s common stock from time to time through negotiated or open market transactions (the “2008 Program”). The 2008 Program does not have an expiration date.

In addition to repurchase activity under the 2008 Program, the Company typically withholds shares from vested restricted stock to pay employee payroll and income tax withholding liabilities.

Summary of Repurchase and Withholding Activity

The Company currently intends to hold the repurchased and withheld shares as treasury stock. The Company typically reissues treasury shares to settle stock option exercises and restricted share grants.

FASB Accounting Standards Update (“ASU”) 2010-17 , “Revenue Recognition – Milestone Method of Revenue Recognition – a consensus of the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force” —In April 2010, the FASB issued new authoritative guidance on the milestone method of revenue recognition. The milestone method applies to research and development arrangements in which one or more payments are contingent upon achieving uncertain future events or circumstances. This guidance defines a milestone and provides criteria for determining whether the milestone method is appropriate. This standard is effective for milestones achieved in fiscal years beginning on or after June 15, 2010, on a prospective basis, with earlier application permitted. This standard is not expected to have a material impact on our financial statements.

FASB ASU 2010-06 , “Fair Value Measurements and Disclosures Topic 820 – Improving Disclosures about Fair Value Measurements”—In January 2010, the FASB issued guidance to improve the disclosures for Level 1, Level 2 and Level 3 fair value measurements. This standard requires new disclosures for significant transfers in and out of Level 1 and Level 2 fair value measurements, and separately report information about purchases, sales issuances and settlements of Level 3 fair value measurements. This standard is effective for interim and annual periods beginning with the Company’s fiscal quarter ended May 2, 2010. This statement will not impact the Company’s consolidated results, but could result in additional disclosures in future periods.