Document
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended December 30, 2017
or
¨

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 001-36801
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12018427&doc=12
Qorvo, Inc.
(Exact name of registrant as specified in its charter) 
Delaware
 
46-5288992
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
7628 Thorndike Road, Greensboro, North Carolina 27409-9421
(Address of principal executive offices)
(Zip Code)
 
 
 
(336) 664-1233
(Registrant'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 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 þ 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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ 
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 þ


Table of Contents

As of January 24, 2018, there were 126,493,599 shares of the registrant’s common stock outstanding.
 
 
 
 
 


Table of Contents

QORVO, INC. AND SUBSIDIARIES
INDEX
 
 
Page    
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents

PART I — FINANCIAL INFORMATION
ITEM 1.
QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
December 30, 2017
 
April 1, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (Note 8)
$
841,326

 
$
545,463

Accounts receivable, less allowance of $231 and $58 as of December 30, 2017 and April 1, 2017, respectively
448,848

 
357,948

Inventories (Note 4)
422,907

 
430,454

Prepaid expenses
28,008

 
36,229

Other receivables
44,021

 
65,247

Other current assets
29,056

 
26,264

Total current assets
1,814,166

 
1,461,605

Property and equipment, net of accumulated depreciation of $875,942 at December 30, 2017 and $981,328 at April 1, 2017
1,417,141

 
1,391,932

Goodwill
2,173,889

 
2,173,914

Intangible assets, net of accumulated amortization of $1,663,549 at December 30, 2017 and $1,257,665 at April 1, 2017 (Note 5)
993,629

 
1,400,563

Long-term investments (Note 8)
62,756

 
35,494

Other non-current assets
65,066

 
58,815

Total assets
$
6,526,647

 
$
6,522,323

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
192,046

 
$
216,246

Accrued liabilities
140,395

 
170,584

Other current liabilities
52,077

 
31,998

Total current liabilities
384,518

 
418,828

Long-term debt (Note 6)
1,088,730

 
989,154

Deferred tax liabilities (Note 7)
58,879

 
131,511

Other long-term liabilities (Note 7)
173,442

 
86,108

Total liabilities
1,705,569

 
1,625,601

Stockholders’ equity:
 
 
 
Preferred stock, $.0001 par value; 5,000 shares authorized; no shares issued and outstanding

 

Common stock and additional paid-in capital, $.0001 par value; 405,000 shares authorized; 126,473 and 126,464 shares issued and outstanding at December 30, 2017 and April 1, 2017, respectively
5,270,428

 
5,357,394

Accumulated other comprehensive loss, net of tax
(3,082
)
 
(4,306
)
Accumulated deficit
(446,268
)
 
(456,366
)
Total stockholders’ equity
4,821,078

 
4,896,722

Total liabilities and stockholders’ equity
$
6,526,647

 
$
6,522,323

See accompanying Notes to Condensed Consolidated Financial Statements.

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 QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
December 30, 2017
 
December 31, 2016
 
December 30, 2017
 
December 31, 2016
Revenue
$
845,739

 
$
826,347

 
$
2,308,153

 
$
2,389,582

Cost of goods sold
508,812

 
515,705

 
1,413,827

 
1,485,666

Gross profit
336,927

 
310,642

 
894,326

 
903,916

Operating expenses:
 
 
 
 
 
 
 
Research and development
106,411

 
111,951

 
334,308

 
355,166

Selling, general and administrative
126,555

 
130,672

 
404,853

 
412,850

Other operating expense (Note 9)
23,641

 
6,638

 
53,110

 
23,385

Total operating expenses
256,607

 
249,261

 
792,271

 
791,401

Income from operations
80,320

 
61,381

 
102,055

 
112,515

Interest expense (Note 6)
(16,338
)
 
(14,464
)
 
(43,387
)
 
(45,205
)
Interest income
2,215

 
233

 
4,039

 
703

Other expense
(757
)
 
(2,609
)
 
(1,883
)
 
(3,420
)
 
 
 
 
 
 
 
 
Income before income taxes
65,440

 
44,541

 
60,824

 
64,593

 
 
 
 
 
 
 
 
Income tax expense (Note 7)
(98,522
)
 
(123,179
)
 
(88,611
)
 
(137,059
)
Net loss
$
(33,082
)
 
$
(78,638
)
 
$
(27,787
)
 
$
(72,466
)
 
 
 
 
 
 
 
 
Net loss per share (Note 3):
 
 
 
 
 
 
 
Basic
$
(0.26
)
 
$
(0.62
)
 
$
(0.22
)
 
$
(0.57
)
Diluted
$
(0.26
)
 
$
(0.62
)
 
$
(0.22
)
 
$
(0.57
)
 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding (Note 3):
 
 
 
 
 
 
 
Basic
127,034

 
126,852

 
127,084

 
127,313

Diluted
127,034

 
126,852

 
127,084

 
127,313


See accompanying Notes to Condensed Consolidated Financial Statements.


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QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
December 30, 2017
 
December 31, 2016
 
December 30, 2017
 
December 31, 2016
Net loss
$
(33,082
)
 
$
(78,638
)
 
$
(27,787
)
 
$
(72,466
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
57

 
(28
)
 
156

 
45

Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term investment nature
795

 
162

 
1,517

 
(596
)
Reclassification adjustments, net of tax:
 
 
 
 
 
 
 
Foreign currency gain included in net loss

 

 
(581
)
 

Amortization of pension actuarial loss
45

 
42

 
132

 
130

Other comprehensive income (loss)
897

 
176

 
1,224

 
(421
)
Total comprehensive loss
$
(32,185
)
 
$
(78,462
)
 
$
(26,563
)
 
$
(72,887
)
See accompanying Notes to Condensed Consolidated Financial Statements.



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QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months Ended

December 30, 2017
 
December 31, 2016
Cash flows from operating activities:
 
 
 
Net loss
$
(27,787
)
 
$
(72,466
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation
132,879

 
153,286

Amortization and other non-cash items
408,040

 
365,932

Excess tax benefit from exercises of stock options

 
(12
)
Deferred income taxes
(36,657
)
 
(19,382
)
Foreign currency adjustments
3,244

 
3,267

Loss on investments and other assets, net
10,611

 
444

Stock-based compensation expense
58,299

 
73,291

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(91,051
)
 
(100,374
)
Inventories
6,974

 
19,151

Prepaid expenses and other current and non-current assets
26,130

 
(2,145
)
Accounts payable and accrued liabilities
(338
)
 
16,742

Income tax (recoverable) / payable
94,566

 
86,873

Other liabilities
8,652

 
5,142

Net cash provided by operating activities
593,562

 
529,749

Investing activities:
 
 
 
Purchase of property and equipment
(237,658
)
 
(386,955
)
Purchase of a business, net of cash acquired

 
(118,002
)
Proceeds from maturities and sales of available-for-sale securities

 
186,793

Other investing activities
(8,713
)
 
(5,090
)
Net cash used in investing activities
(246,371
)
 
(323,254
)
Financing activities:
 
 
 
Proceeds from debt issuances
100,000

 

       Issuance costs
(1,903
)
 

Repurchase of common stock, including transaction costs
(168,935
)
 
(158,491
)
Proceeds from the issuance of common stock
42,121

 
38,417

Tax withholding paid on behalf of employees for restricted stock units
(24,343
)
 
(15,034
)
Excess tax benefit from exercises of stock options

 
12

Other financing activities

 
20

Net cash used in financing activities
(53,060
)
 
(135,076
)
 
 
 
 
Effect of exchange rate changes on cash
1,771

 
(1,358
)
Net increase in cash, cash equivalents and restricted cash
295,902

 
70,061

Cash, cash equivalents and restricted cash at the beginning of the period
545,779

 
426,062

Cash, cash equivalents and restricted cash at the end of the period
$
841,681

 
$
496,123

Non-cash investing information:
 
 
 
Capital expenditure adjustments included in accounts payable and accrued liabilities
$
26,743

 
$
59,491


See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements of Qorvo, Inc. and Subsidiaries (together, the "Company" or "Qorvo") have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions, which could differ materially from actual results. In addition, certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial statements include all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in Qorvo’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain items in the fiscal 2017 financial statements have been reclassified to conform with the fiscal 2018 presentation.

The Company uses a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. The first fiscal quarter of each year ends on the Saturday closest to June 30, the second fiscal quarter of each year ends on the Saturday closest to September 30 and the third fiscal quarter of each year ends on the Saturday closest to December 31. Fiscal years 2018 and 2017 are 52-week years.

As of December 30, 2017 and April 1, 2017, restricted cash of $0.4 million and $0.3 million, respectively, was included in "Other current assets" and "Other non-current assets" in the Condensed Consolidated Balance Sheets.

2.    CHANGE IN ESTIMATE

During the first quarter of fiscal 2018, the Company changed its accounting estimate for the expected useful lives of certain machinery and equipment. The Company evaluated its current asset base and reassessed the estimated useful lives of certain machinery and equipment in connection with its implementation of several capital projects, including the migration of certain surface acoustic wave ("SAW") processes from 4-inch to 6-inch toolsets and certain bulk acoustic wave ("BAW") processes from 6-inch to 8-inch toolsets. Based on its ability to re-use equipment across generations of process technologies and historical usage trends, the Company determined that the expected useful lives for certain machinery and equipment should be increased by up to three years to reflect more closely the estimated economic lives of those assets. This change in estimate was applied prospectively effective for the first quarter of fiscal 2018 and resulted in a decrease in depreciation expense of $15.6 million and $45.4 million for the three and nine months ended December 30, 2017, respectively. This decrease in depreciation expense for the three and nine months ended December 30, 2017, resulted in the following: (1) an increase to income from operations of $15.4 million and $32.7 million, respectively; (2) an increase to net income of $14.9 million and $30.5 million, respectively; (3) an improvement to earnings per share of $0.12 and $0.24, respectively; and (4) a reduction to inventory of $0.2 million and $12.7 million, respectively.

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

3. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):
 
Three Months Ended
 
Nine Months Ended
 
December 30, 2017
 
December 31, 2016
 
December 30, 2017
 
December 31, 2016
Numerator:
 
 
 
 
 
 
 
Numerator for basic and diluted net loss per share — net loss available to common stockholders
$
(33,082
)
 
$
(78,638
)
 
$
(27,787
)
 
$
(72,466
)
Denominator:
 
 
 
 
 
 
 
Denominator for basic net loss per share — weighted average shares
127,034

 
126,852

 
127,084

 
127,313

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock-based awards

 

 

 

Denominator for diluted net loss per share — adjusted weighted average shares and assumed conversions
127,034

 
126,852

 
127,084

 
127,313

Basic net loss per share
$
(0.26
)
 
$
(0.62
)
 
$
(0.22
)
 
$
(0.57
)
Diluted net loss per share
$
(0.26
)
 
$
(0.62
)
 
$
(0.22
)
 
$
(0.57
)

In the computation of diluted net loss per share for the three and nine months ended December 30, 2017, outstanding options to purchase 3.4 million shares and 3.8 million shares, respectively, were excluded because the effect of their inclusion would have been anti-dilutive. In the computation of diluted net loss per share for the three and nine months ended December 31, 2016, outstanding options to purchase 4.6 million shares and 4.9 million shares, respectively, were excluded because the effect of their inclusion would have been anti-dilutive.

4. INVENTORIES
Inventories are stated at the lower of cost or net realizable value based on standard costs, which approximate actual average costs. The components of inventories, net of reserves, are as follows (in thousands):
 
 
December 30, 2017
 
April 1, 2017
Raw materials
$
94,975

 
$
92,282

Work in process
204,634

 
198,339

Finished goods
123,298

 
139,833

Total inventories
$
422,907

 
$
430,454


5. INTANGIBLE ASSETS
Total intangible assets decreased to $993.6 million as of December 30, 2017, compared to $1,400.6 million as of April 1, 2017. This decrease was largely due to amortization expense of $406.4 million for the nine months ended December 30, 2017, primarily related to developed technology and customer relationships (which had net book values of $576.5 million and $406.4 million respectively, as of December 30, 2017).

6. DEBT

Credit Agreement
On December 5, 2017, the Company and certain of its material domestic subsidiaries (the "Guarantors") entered into a five-year unsecured senior credit facility pursuant to a credit agreement with Bank of America, N.A., as administrative agent (in such capacity, the “Administrative Agent”), swing line lender and L/C issuer, and a syndicate of lenders (the “Credit Agreement”). The Credit Agreement includes a senior delayed draw term loan of up to $400.0 million (the "Term Loan") and a $300.0 million senior revolving line of credit (the "Revolving Facility", together with the Term Loan, the "Credit Facility"). On the closing

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

date, $100.0 million of the Term Loan was funded, with the remainder available, at the discretion of the Company, in up to two draws within six months following the closing date. The Revolving Facility includes a $25.0 million sublimit for the issuance of standby letters of credit and a $10.0 million sublimit for swing line loans. The Company may request, at its option and at any time, that the Credit Facility be increased by an amount not to exceed $300.0 million, subject to securing additional funding commitments from the existing or new lenders. The Credit Facility is available to finance working capital, capital expenditures and other corporate purposes. The Company’s obligations under the Credit Agreement are jointly and severally guaranteed by the Guarantors. Upon execution of the Credit Agreement, the Company terminated its prior credit agreement, dated as of April 7, 2015, as amended, with Bank of America, N.A., thus terminating and releasing the Company’s obligations and guarantees of certain of its subsidiaries under that agreement.

The Company had no outstanding amounts under the Revolving Facility as of December 30, 2017. The Term Loan carries a variable interest rate set at current market rates, and as such, the fair value of the Term Loan approximated book value as of December 30, 2017.

At the Company’s option, loans under the Credit Agreement bear interest at (i) the Applicable Rate (as defined in the Credit Agreement) plus the Eurodollar Rate (as defined in the Credit Agreement) or (ii) the Applicable Rate plus a rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of the Administrative Agent, or (c) the Eurodollar Base Rate plus 1.0% (the “Base Rate”). All swingline loans will bear interest at a rate equal to the Applicable Rate plus the Base Rate. The Eurodollar Rate is the rate per annum equal to the reserve adjusted London Interbank Offered Rate (or a comparable or successor rate), for dollar deposits for interest periods of one, two, three, six or twelve months, as selected by the Company. The Applicable Rate for Eurodollar Rate loans ranges from 1.125% per annum to 1.375% per annum. The Applicable Rate for Base Rate loans ranges from 0.125% per annum to 0.375% per annum. Interest for Eurodollar Rate loans will be payable at the end of each applicable interest period or at three-month intervals, if such interest period exceeds three months. Interest for Base Rate loans will be payable quarterly in arrears. The Company will pay a letter of credit fee equal to the Applicable Rate multiplied by the daily amount available to be drawn under any letter of credit, a fronting fee, and any customary documentary and processing charges for any letter of credit issued under the Credit Agreement.

The Credit Agreement contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including the following financial covenants that the Company must maintain (i) a consolidated leverage ratio not to exceed 3.0 to 1.0 as of the end of any fiscal quarter of the Company, provided that in connection with a permitted acquisition in excess of $300.0 million, the Company's maximum consolidated leverage ratio may increase on two occasions during the term of the Credit Facility to 3.5 to 1.0 for four consecutive fiscal quarters, beginning with the fiscal quarter in which such acquisition occurs and (ii) an interest coverage ratio not to be less than 3.0 to 1.0 as of the end of any fiscal quarter of the Company. As of December 30, 2017, the Company was in compliance with these covenants.
  
The Credit Agreement also contains customary events of default. The occurrence of an event of default can result in the exercise of remedies including an increase in the applicable rate of interest by 2.00%, termination of undrawn commitments under the Credit Facility, declaration that all outstanding loans are due and payable and requiring cash collateral deposits in respect of outstanding letters of credit. Outstanding amounts are due in full on the maturity date of December 5, 2022 (with amounts borrowed under the swingline option due in full no later than ten business days after such loan is made), subject to scheduled amortization of the Term Loan principal as set forth in the Credit Agreement prior to the maturity date.

Senior Notes
On November 19, 2015, the Company completed an offering of $450.0 million aggregate principal amount of its 6.75% senior notes due December 1, 2023 (the “2023 Notes”) and $550.0 million aggregate principal amount of its 7.00% senior notes due December 1, 2025 (the “2025 Notes” and, together with the 2023 Notes, the “Notes”). The Notes were sold in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States pursuant to Regulation S under the Securities Act. The Notes were issued pursuant to an indenture dated as of November 19, 2015 (the "Indenture") containing customary events of default, including payment default, failure to provide certain notices and certain provisions related to bankruptcy events. The Indenture also contains customary negative covenants.


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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

On September 19, 2016, the Company completed an exchange offer, in which all of the 2023 Notes and substantially all of the 2025 Notes were exchanged for new notes that have been registered under the Securities Act.

At any time prior to December 1, 2018, the Company may redeem all or part of the 2023 Notes, at a redemption price equal to their principal amount, plus a “make whole” premium as of the redemption date, and accrued and unpaid interest. In addition, at any time prior to December 1, 2018, the Company may redeem up to 35% of the original aggregate principal amount of the 2023 Notes with the proceeds of one or more equity offerings, at a redemption price equal to 106.75%, plus accrued and unpaid interest. Furthermore, at any time on or after December 1, 2018, the Company may redeem the 2023 Notes, in whole or in part, at once or over time, at the specified redemption prices set forth in the Indenture plus accrued and unpaid interest thereon to the redemption date (subject to the rights of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

At any time prior to December 1, 2020, the Company may redeem all or part of the 2025 Notes, at a redemption price equal to their principal amount, plus a “make whole” premium as of the redemption date, and accrued and unpaid interest. In addition, at any time prior to December 1, 2018, the Company may redeem up to 35% of the original aggregate principal amount of the 2025 Notes with the proceeds of one or more equity offerings, at a redemption price equal to 107.00%, plus accrued and unpaid interest. Furthermore, at any time on or after December 1, 2020, the Company may redeem the 2025 Notes, in whole or in part, at once or over time, at the specified redemption prices set forth in the Indenture plus accrued and unpaid interest thereon to the redemption date (subject to the rights of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Interest is payable on June 1 and December 1 of each year on the 2023 Notes at a rate of 6.75% per annum and on the 2025 Notes at a rate of 7.00% per annum. Interest paid on the Notes during the three and nine months ended December 30, 2017 was $34.5 million and $68.9 million, respectively. Interest paid on the Notes during the three and nine months ended December 31, 2016 was $34.5 million and $71.2 million, respectively.
  
The 2023 Notes and the 2025 Notes are traded over the counter and their fair values as of December 30, 2017 of $484.9 million and $613.9 million, respectively (compared to carrying values of $450.0 million and $550.0 million, respectively), were estimated based upon the values of their last trade at the end of the period. The fair values of the 2023 Notes and the 2025 Notes were $489.4 million and $607.8 million, respectively, as of April 1, 2017, based upon the values of their last trade at the end of the period.

Interest Expense
During the three and nine months ended December 30, 2017, the Company recognized $17.7 million and $52.3 million, respectively, of interest expense related to the Notes and the Term Loan which was partially offset by $2.0 million and $10.8 million, respectively, of interest capitalized to property and equipment. During the three and nine months ended December 31, 2016, the Company recognized $17.4 million and $52.2 million, respectively, of interest expense related to the Notes, which was partially offset by $3.6 million and $9.0 million, respectively, of interest capitalized to property and equipment.

7. INCOME TAXES

Income Tax Expense
The Company’s provision for income taxes for the three and nine months ended December 30, 2017 and December 31, 2016 has been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) to year-to-date income (loss) to determine the amounts for the three and nine months ended December 30, 2017 and December 31, 2016.

The Company’s income tax expense was $98.5 million and $88.6 million for the three and nine months ended December 30, 2017, respectively, and the Company's income tax expense was $123.2 million and $137.1 million for the three and nine months ended December 31, 2016, respectively. The Company’s effective tax rate was 150.6% and 145.7% for the three and nine months ended December 30, 2017, respectively, and 276.6% and 212.2% for the three and nine months ended December 31, 2016, respectively. The Company's effective tax rate for the three and nine months ended December 30, 2017 differed from the statutory rate primarily due to a net discrete provisional tax expense of $95.9 million resulting from the enactment of the Tax Cuts and Jobs Act (the "Tax Act"), changes in unrecognized tax benefits, a discrete tax expense, for the nine months only, associated with intra-entity transfers in accordance with the new guidance for the intra-entity transfer of assets other than

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

inventory (Accounting Standards Update ("ASU") 2016-16, "Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory") offset by tax rate differences in foreign jurisdictions, state income taxes, domestic tax credits generated and a discrete tax benefit for excess stock compensation deductions in accordance with the new guidance for accounting for employee share-based payments (ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting"). The Company's effective tax rate for the three and nine months ended December 31, 2016 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, state income taxes, domestic tax credits generated, changes in unrecognized tax benefits and the timing of when income and loss is recognized in the various tax jurisdictions.

U.S. Tax Reform
On December 22, 2017, the Tax Act was signed into law in the U.S. The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates, providing 100% bonus depreciation through December 31, 2022 and implementing a territorial tax system. Due to the timing of the Company's fiscal year, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 31.5% for our fiscal year ending March 31, 2018, and 21% for subsequent fiscal years. However, the Tax Act implements a territorial tax system, which eliminates the ability to credit certain foreign taxes that existed prior to enactment of the Tax Act. For the quarter ended December 30, 2017, the impact of these changes, along with the transitional deemed repatriation of the historical earnings of foreign subsidiaries, resulted in a discrete provisional tax expense of approximately $95.9 million. This is comprised of a provisional repatriation tax expense of $139.5 million, offset by a provisional deferred tax benefit of $43.6 million from the remeasurement of U.S. deferred tax assets and liabilities. Both the tax charge and the tax benefit represent provisional amounts and the Company’s current best estimates.

Because of the complexity of the new Global Intangible Low-Taxed Income (GILTI) tax rules, the Company continues to evaluate this provision of the Tax Act and the application of Accounting Standards Codification ("ASC") 740, Income Taxes. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either: (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company's measurement of its deferred taxes (the “deferred method”). The Company is currently still in the process of analyzing the impact of the GILTI tax rules and, as a result, the Company has not made any provisional adjustments related to potential GILTI tax in its financial statements and has not made a policy decision regarding whether to record deferred tax on GILTI.

The Tax Act allows the tax liability arising from the transitional deemed repatriation of the historical earnings of foreign subsidiaries to be paid on an installment basis over eight years, resulting in an increase in the long-term tax liability account included in "Other long-term liabilities" in the Condensed Consolidated Balance Sheets.

The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimates, possibly materially, due to, among other things, evolving technical interpretations of the Tax Act, legislative action to address questions that arise because of the Tax Act, clarification on the application of accounting standards for income taxes or related interpretations in response to the Tax Act, or updates or changes to provisional amounts the Company has utilized to calculate the transition impacts, including impacts from changes to current year earnings and tax liabilities, deferred tax assets and liabilities, earnings and profits at foreign subsidiaries, tax pools at foreign subsidiaries, foreign tax credits and foreign exchange rates. SEC Staff Accounting Bulletin (“SAB”) No. 118 issued December 22, 2017, allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company will finalize and record any resulting adjustments within this one-year measurement period.

The Company had $841.3 million of total cash and cash equivalents as of December 30, 2017, including $476.8 million held by Qorvo International Pte. Ltd. in Singapore. As a result of the deemed repatriation of the historical earnings, the impact of GILTI on future earnings, and Singapore not imposing a withholding tax on dividends, the Company no longer takes the position that earnings are permanently reinvested for this operating subsidiary in Singapore.

Deferred Taxes
A valuation allowance remained against certain domestic and foreign net deferred tax assets as it is more likely than not that the related deferred tax assets will not be realized.


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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The Company increased the deferred tax assets for both the domestic federal and state tax net operating loss (“NOL”) carry-forwards by $36.7 million due to the adoption of new accounting guidance for stock compensation (ASU 2016-09) in the first quarter of fiscal 2018.

In the third quarter of fiscal 2018, the Company provisionally decreased the net U.S. deferred tax liability by $43.6 million to account for the reduction in the U.S. federal corporate income tax rate from 35% to 21% with the enactment of the Tax Act.

The Company has domestic federal and state tax NOL carry-forwards that, if unused, will expire in fiscal years 2020 to 2036 and 2018 to 2036, respectively. The use of the NOLs that were acquired in prior year acquisitions is subject to certain annual limitations under Internal Revenue Code Section 382 and similar state income tax provisions.

Uncertain Tax Positions
The Company’s gross unrecognized tax benefits increased from $90.6 million as of the end of fiscal 2017 to $102.3 million as of the end of the third quarter of fiscal 2018, primarily due to tax positions taken with respect to the current fiscal year.

8. INVESTMENTS AND FAIR VALUE MEASUREMENTS

Investments
The following is a summary of cash equivalents and available-for-sale securities as of December 30, 2017 and April 1, 2017 (in thousands): 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair  
Value
December 30, 2017
 
 
 
 
 
 
 
Auction rate securities
$
2,150

 
$

 
$
(155
)
 
$
1,995

Money market funds
60

 

 

 
60

 
$
2,210

 
$

 
$
(155
)
 
$
2,055

April 1, 2017
 
 
 
 
 
 
 
Auction rate securities
$
2,150

 
$

 
$
(429
)
 
$
1,721

Money market funds
14

 

 

 
14

 
$
2,164

 
$

 
$
(429
)
 
$
1,735

 
The estimated fair value of available-for-sale securities was based on the prevailing market values on December 30, 2017 and April 1, 2017. The Company determines the cost of an investment sold based on the specific identification method.

The expected maturity distribution of cash equivalents and available-for-sale securities is as follows (in thousands):
 
December 30, 2017
 
April 1, 2017
 
Cost
 
Estimated
Fair Value
 
Cost
 
Estimated
Fair Value
Due in less than one year
$
260

 
$
249

 
$
14

 
$
14

Due after ten years
1,950

 
1,806

 
2,150

 
1,721

Total cash equivalents and available-for-sale securities
$
2,210

 
$
2,055

 
$
2,164

 
$
1,735


Other Investments
On August 4, 2015, the Company invested $25.0 million to acquire shares of Series F Preferred Stock of Cavendish Kinetics Limited (Cavendish), a private limited company incorporated in England and Wales. On July 31, 2017, the Company invested an additional $20.0 million in Cavendish Series F Preferred Stock. The Company began accounting for this investment under the equity method (on a one quarter lag basis) on July 31, 2017. As of December 30, 2017, this investment is classified in "Long-term investments" in the Condensed Consolidated Balance Sheets.


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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Fair Value of Financial Instruments
Marketable securities are measured at fair value and recorded in "Cash and cash equivalents" and "Long-term investments" in the Condensed Consolidated Balance Sheets, and the related unrealized gains and losses are included in "Accumulated other comprehensive loss," a component of stockholders’ equity, net of tax.

Recurring Fair Value Measurements
The fair value of the financial assets measured at fair value on a recurring basis was determined using the following levels of inputs as of December 30, 2017 and April 1, 2017 (in thousands):
 
 
 
 
 
Total
 
Quoted Prices In
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
December 30, 2017
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Money market funds
$
60

 
$
60

 
$

 
 
Auction rate securities ("ARS")  (1)
1,995

 

 
1,995

 
 
Invested funds in deferred compensation plan (2)
13,900

 
13,900

 

 
 
 
 
Total assets measured at fair value
$
15,955

 
$
13,960

 
$
1,995

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (2)
$
13,900

 
$
13,900

 
$

 
 
 
 
Total liabilities measured at fair value
$
13,900

 
$
13,900

 
$

 
 
 
 
 
 
 
 
 
 
April 1, 2017
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Money market funds
$
14

 
$
14

 
$

 
 
Auction rate securities (1)
1,721

 

 
1,721

 
 
Invested funds in deferred compensation plan (2)
10,237

 
10,237

 

 
 
 
 
Total assets measured at fair value
$
11,972

 
$
10,251

 
$
1,721

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (2)
$
10,237

 
$
10,237

 
$

 
 
 
 
Total liabilities measured at fair value
$
10,237

 
$
10,237

 
$

 
(1) ARS are debt instruments with interest rates that reset through periodic short-term auctions. The Company’s Level 2 ARS are valued based on quoted prices for identical or similar instruments in markets that are not active.
(2) The Company's non-qualified deferred compensation plan provides eligible employees and members of the Board of Directors with the opportunity to defer a specified percentage of their cash compensation. The Company includes the assets deferred by the participants in the “Other current assets” and “Other non-current assets” line items of its Condensed Consolidated Balance Sheets and the Company's obligation to deliver the deferred compensation in the "Other current liabilities" and “Other long-term liabilities” line items of its Condensed Consolidated Balance Sheets.
 
As of December 30, 2017 and April 1, 2017, the Company did not have any Level 3 assets or liabilities.

Other Fair Value Disclosures
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair values because of the relatively short-term maturities of these instruments. See Note 6 for the fair value of the Company's long-term debt.


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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

9. RESTRUCTURING

In the second quarter of fiscal 2018, the Company initiated restructuring actions to improve operating efficiencies. As a result of these actions, restructuring charges of approximately $8.2 million and $15.0 million, respectively (primarily related to employee termination benefits), and a loss on asset disposal of approximately $6.7 million and $9.7 million, respectively, were recorded in "Other operating expense" in the Condensed Consolidated Statement of Operations, for the three and nine months ended December 30, 2017. The Company expects to record approximately $1.8 million of additional restructuring charges primarily associated with employee termination benefits.

As of December 30, 2017, restructuring obligations relating to employee termination benefits totaled $7.6 million and are included in “Accrued liabilities” in the Consolidated Balance Sheets.

10. STOCK REPURCHASES

On November 3, 2016, the Company announced that its Board of Directors authorized a share repurchase program to repurchase up to $500.0 million of the Company's outstanding stock. Under this program, share repurchases are made in accordance with applicable securities laws on the open market or in privately negotiated transactions. The extent to which the Company repurchases its shares, the number of shares and the timing of any repurchases depends on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The program does not require the Company to repurchase a minimum number of shares and does not have a fixed term, and may be modified, suspended or terminated at any time without prior notice. During the three and nine months ended December 30, 2017, the Company repurchased approximately 1.1 million shares and 2.3 million shares of its common stock for approximately $80.0 million and $168.9 million, respectively. As of December 30, 2017, $213.1 million remains available for repurchases under this share repurchase program.

During the three and nine months ended December 31, 2016, the Company repurchased approximately 1.3 million shares and 2.9 million shares of its common stock for approximately $67.1 million and $158.5 million, respectively.

11. RECENT ACCOUNTING PRONOUNCEMENTS

The Company assesses recently issued accounting standards by the Financial Accounting Standards Board ("FASB") to determine the expected impacts on the Company's financial statements. The summary below describes impacts from newly issued standards as well as material updates to our previous assessments, if any, from Qorvo’s Annual Report on Form 10-K for the fiscal year ended April 1, 2017.

In May 2017, the FASB issued ASU 2017-09, "Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting." The new guidance clarifies when modification accounting in Topic 718 should be applied to changes to the terms or conditions of a share-based payment award. The Company elected to early-adopt the standard in the first quarter of fiscal 2018 with no impact on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." This standard requires that restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company adopted the provisions of ASU 2016-18 in the second quarter of fiscal 2018 using the retrospective transition method. The adjustment to reclassify restricted cash for each period presented was less than $1.0 million.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory." The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company elected to adopt the standard early in the first quarter of fiscal 2018 using the modified retrospective method, which requires a cumulative adjustment to retained earnings as of the beginning of the period of adoption. The cumulative adjustment to the December 30, 2017 Condensed Consolidated Balance Sheet was approximately $1.3 million. For the three and nine months ended December 30, 2017, the Company recognized a discrete tax expense of less than $0.1 million and $5.4 million, respectively, related to intra-entity transfers of assets.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." The new guidance simplifies certain aspects of accounting for share-based payment transactions, including income tax consequences, forfeitures, classification of awards on the balance sheet and presentation on the statement of cash flows, and became effective for the Company in the first quarter of fiscal 2018. As a result of adoption, the Company recognized a cumulative-effect adjustment to reduce the Company's accumulated deficit by $36.7 million with a

14

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

corresponding increase to deferred tax assets for the Federal and state net operating losses attributable to excess tax benefits that had not been previously recognized. All excess tax benefits and deficiencies in the current and future periods will be recognized as income tax expense in the Company’s Condensed Consolidated Statement of Operations in the reporting period in which they occur. This will result in increased volatility in the Company’s effective tax rate. For the three and nine months ended December 30, 2017, the Company recognized a discrete tax benefit of $0.6 million and $9.9 million, respectively, related to the excess tax benefits from stock-based compensation. The Company plans to continue its existing practice of estimating expected forfeitures in determining compensation cost.

In March 2016, the FASB issued ASU 2016-07, "Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting." The new guidance eliminates the requirement to retrospectively apply the equity method of accounting when an investment previously accounted for under the cost basis qualifies for the equity method of accounting. The Company adopted ASU 2016-07 in the first quarter of fiscal 2018 with no significant impact on its consolidated financial results.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." The new guidance changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as the estimated selling price in the ordinary course of business less reasonably predictable costs to completion, transportation, or disposal. The Company adopted ASU 2015-11 in the first quarter of fiscal 2018 with no significant impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," with several amendments subsequently issued.  This new standard provides an updated framework for revenue recognition, resulting in a single revenue model to be applied by reporting companies under U.S. GAAP.  Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  Additional disclosures will be required regarding the nature, amount, timing and uncertainty of cash flows.  The new guidance will become effective for the Company in the first quarter of fiscal 2019 and permits the use of either a retrospective approach or a modified retrospective approach, under which the cumulative effect of adoption is recognized at the date of initial application. The Company has established a cross-functional team to assess the potential impact of the new revenue standard and this assessment will be completed during fiscal 2018.  The Company's assessment process consists of reviewing its current accounting policies and practices and its customer contracts to identify potential differences that may result from applying the requirements of the new standard to its contracts and identifying appropriate changes to its business processes, systems and controls to support revenue recognition and disclosure requirements under the new standard. The Company's revenue is generated principally from sales of semiconductor products. The Company currently expects that under the new standard, a substantial majority of its revenue will continue to be recognized at a "point in time" as products are shipped to, or received by, customers. In limited circumstances the products sold are highly customized and have no alternative use, and the Company has an enforceable right to payment (with a reasonable margin) for performance completed to date. For the contracts related to these products, the Company expects that it will recognize revenue "over time" as performance obligations are satisfied. This will accelerate revenue recognition because revenue for these products currently is recognized as the products are shipped to, or received by, customers. While the Company has made substantial progress in identifying the likely impacts of the new standard, it has not yet quantified the potential impact. The Company expects that it will have additional disclosure related to revenue recognition, including judgments made, under the new standard. The Company will continue to evaluate the impact of the new standard, including any necessary changes to internal controls, and prepare for adoption in the first quarter of fiscal 2019. The Company will adopt the standard using the modified retrospective approach.

12. OPERATING SEGMENT INFORMATION

The Company's operating segments as of December 30, 2017 are Mobile Products (MP) and Infrastructure and Defense Products (IDP) based on the organizational structure and information reviewed by the Company's Chief Executive Officer, who is the Company's chief operating decision maker ("CODM"), and these segments are managed separately based on the end markets and applications they support. The CODM allocates resources and assesses the performance of each operating segment primarily based on non-GAAP operating income and non-GAAP operating income as a percentage of revenue.


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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

MP is a leading global supplier of cellular radio frequency ("RF") and Wi-Fi solutions for a variety of mobile devices, including smartphones, notebook computers, wearables, tablets, and cellular-based applications for the Internet of Things ("IoT"). Mobile device manufacturers and mobile network operators are adopting new technologies to address the growing demand for data-intensive, increasingly cloud-based distributed applications and for mobile devices with smaller form factors, improved signal quality, less heat and longer talk and standby times. New wireless communications standards are being deployed to utilize available spectrum more efficiently. Carrier aggregation is being implemented to support wider bandwidths, increase data rates and improve network performance. These trends increase the complexity of smartphones, require more RF content and place a premium on performance, integration, systems-level expertise, and product and technology portfolio breadth, all of which are MP strengths. MP offers a comprehensive product portfolio of BAW and surface acoustic wave ("SAW") filters, power amplifiers ("PAs"), low noise amplifiers ("LNAs"), switches, multimode multi-band PAs and transmit modules, RF power management integrated circuits, diversity receive modules, antenna switch modules, antenna tuning and control solutions, modules incorporating PAs and duplexers ("PADs") and modules incorporating switches, PAs and duplexers.

IDP is a leading global supplier of RF solutions with a diverse portfolio of solutions that "connect and protect," spanning communications and defense applications. These applications include high performance defense systems such as radar, electronic warfare and communication systems, Wi-Fi customer premises equipment for home and work, high speed connectivity in Long-Term Evolution ("LTE") and 5G base stations, cloud connectivity via data center communications and telecom transport, automotive connectivity and other IoT, including smart home solutions. IDP products include gallium arsenide and gallium nitride PAs, LNAs, switches, Complementary Metal Oxide Semiconductor ("CMOS") system-on-a-chip solutions, premium BAW and SAW filter solutions and various multi-chip and hybrid assemblies.  

The “All other” category includes operating expenses such as stock-based compensation, amortization of intangible assets, acquisition and integration related costs, restructuring charges, intellectual property rights litigation settlement, start-up costs, and (loss) gain on assets and other miscellaneous corporate overhead expenses that the Company does not allocate to its reportable segments because these expenses are not included in the segment operating performance measures evaluated by the Company’s CODM. The CODM does not evaluate operating segments using discrete asset information. The Company’s operating segments do not record intercompany revenue. The Company does not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Except as discussed above regarding the “All other” category, the Company’s accounting policies for segment reporting are the same as for the Company as a whole.

The following tables present details of the Company’s reportable segments and a reconciliation of the “All other” category (in thousands): 
 
Three Months Ended
 
Nine Months Ended
 
December 30,
2017
 
December 31,
2016
 
December 30,
2017
 
December 31,
2016
Revenue:
 
 
 
 
 
 
 
MP
$
642,089

 
$
656,788

 
$
1,728,709

 
$
1,910,003

IDP
202,680

 
168,589

 
576,534

 
476,669

All other (1)
970

 
970

 
2,910

 
2,910

Total revenue
$
845,739

 
$
826,347

 
$
2,308,153

 
$
2,389,582

Income from operations:
 
 
 
 
 
 
 
MP
$
190,990

 
$
163,401

 
$
451,689

 
$
460,775

IDP
63,281

 
45,278

 
170,516

 
112,345

All other
(173,951
)
 
(147,298
)
 
(520,150
)
 
(460,605
)
Income from operations
80,320

 
61,381

 
102,055

 
112,515

Interest expense
(16,338
)
 
(14,464
)
 
(43,387
)
 
(45,205
)
Interest income
2,215

 
233

 
4,039

 
703

Other expense
(757
)
 
(2,609
)
 
(1,883
)
 
(3,420
)
Income before income taxes
$
65,440

 
$
44,541

 
$
60,824

 
$
64,593

 
(1) "All other" revenue relates to royalty income that is not allocated to MP or IDP.

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
December 30,
2017
 
December 31,
2016
 
December 30,
2017
 
December 31,
2016
Reconciliation of “All other” category:
 
 
 
 
 
 
 
Stock-based compensation expense
$
(13,715
)
 
$
(16,655
)
 
$
(58,299
)
 
$
(73,291
)
Amortization of intangible assets
(135,743
)
 
(121,969
)
 
(406,068
)
 
(360,960
)
Acquisition and integration related costs
(2,723
)
 
(5,426
)
 
(8,113
)
 
(21,148
)
Restructuring charges
(8,958
)
 
(437
)
 
(16,942
)
 
(1,319
)
Start-up costs
(5,415
)
 
(2,207
)
 
(19,168
)
 
(6,295
)
Other (expense) income (including (loss) gain on assets and other miscellaneous corporate overhead)
(7,397
)
 
(604
)
 
(11,560
)
 
2,408

Loss from operations for “All other”
$
(173,951
)
 
$
(147,298
)
 
$
(520,150
)
 
$
(460,605
)

13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In accordance with the Indenture governing the Notes, the Company's obligations under the Notes are fully and unconditionally guaranteed on a joint and several basis by each Guarantor, each of which is 100% owned, directly or indirectly, by Qorvo, Inc. (the "Parent Company"). A Guarantor can be released in certain customary circumstances.

The following presents the condensed consolidating financial information separately for:
(i)
Parent Company, the issuer of the guaranteed obligations;
(ii)
Guarantor subsidiaries, on a combined basis, as specified in the Indenture;
(iii)
Non-guarantor subsidiaries, on a combined basis;
(iv)
Consolidating entries, eliminations and reclassifications representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the Guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate intercompany profit in inventory, (c) eliminate the investments in the Company’s subsidiaries and (d) record consolidating entries; and
(v)
The Company, on a consolidated basis.

Each entity in the condensed consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and Guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries that are eliminated upon consolidation. The financial information may not necessarily be indicative of the financial position, results of operations, comprehensive (loss) income, and cash flows, had the Parent Company, Guarantor or non-guarantor subsidiaries operated as independent entities.
 
The Company made certain immaterial corrections to the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three and nine months ended December 31, 2016. An adjustment to income in subsidiaries for the Guarantor subsidiaries of $(92.1) million has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three months ended December 31, 2016 to properly reflect equity method accounting for the Guarantor subsidiaries’ ownership interests in non-guarantor subsidiaries. An adjustment to income from operations and income in subsidiaries for the Guarantor subsidiaries of $26.7 million and $1.8 million, respectively, has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the nine months ended December 31, 2016, to properly reflect intercompany transactions between Guarantor and non-guarantor subsidiaries and equity method accounting for the Guarantor subsidiaries’ ownership interests in non-guarantor subsidiaries. An adjustment to income from operations for the non-guarantor subsidiaries of $228.9 million and $158.9 million has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three and nine months ended December 31, 2016, respectively, to properly reflect intercompany transactions between Guarantor and non-guarantor subsidiaries. These immaterial corrections relate solely to presentation between the Company and its subsidiaries and only impact the financial statements included in this footnote.  These corrections do not affect the Company’s consolidated financial statements.

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QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


 
Condensed Consolidating Balance Sheet
 
December 30, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
249,637

 
$
591,689

 
$

 
$
841,326

Accounts receivable, less allowance

 
65,678

 
383,170

 

 
448,848

Intercompany accounts and notes receivable

 
295,369

 
30,113

 
(325,482
)
 

Inventories

 
173,678

 
272,536

 
(23,307
)
 
422,907

Prepaid expenses

 
19,375

 
8,633

 

 
28,008

Other receivables

 
7,621

 
36,400

 

 
44,021

Other current assets
38,990

 
28,067

 
989

 
(38,990
)
 
29,056

Total current assets
38,990

 
839,425

 
1,323,530

 
(387,779
)
 
1,814,166

Property and equipment, net

 
1,123,650

 
293,878

 
(387
)
 
1,417,141

Goodwill

 
1,121,941

 
1,051,948

 

 
2,173,889

Intangible assets, net

 
445,525

 
548,104

 

 
993,629

Long-term investments

 
2,032

 
60,724

 

 
62,756

Long-term intercompany accounts and notes receivable

 
429,900

 
116,122

 
(546,022
)
 

Investment in subsidiaries
6,173,284

 
2,771,958

 

 
(8,945,242
)
 

Other non-current assets
51,262

 
32,087

 
31,717

 
(50,000
)
 
65,066

Total assets
$
6,263,536

 
$
6,766,518

 
$
3,426,023

 
$
(9,929,430
)
 
$
6,526,647

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 

Accounts payable
$

 
$
69,986

 
$
122,060

 
$

 
$
192,046

Intercompany accounts and notes payable

 
30,113

 
295,369

 
(325,482
)
 

Accrued liabilities
5,824

 
92,481

 
41,856

 
234

 
140,395

Other current liabilities

 
12,790

 
39,287

 

 
52,077

Total current liabilities
5,824

 
205,370

 
498,572

 
(325,248
)
 
384,518

Long-term debt
1,088,730

 

 

 

 
1,088,730

Deferred tax liabilities

 
89,127

 
19,753

 
(50,001
)
 
58,879

Long-term intercompany accounts and notes payable
347,904

 
116,122

 
81,996

 
(546,022
)
 

Other long-term liabilities

 
119,698

 
53,744

 

 
173,442

Total liabilities
1,442,458

 
530,317

 
654,065

 
(921,271
)
 
1,705,569

Total stockholders’ equity
4,821,078

 
6,236,201

 
2,771,958

 
(9,008,159
)
 
4,821,078

Total liabilities and stockholders’ equity
$
6,263,536

 
$
6,766,518

 
$
3,426,023

 
$
(9,929,430
)
 
$
6,526,647



18

Table of Contents

QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

 
Condensed Consolidating Balance Sheet
 
April 1, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
226,186

 
$
319,277

 
$

 
$
545,463

Accounts receivable, less allowance

 
57,874

 
300,074

 

 
357,948

Intercompany accounts and notes receivable

 
392,075

 
36,603

 
(428,678
)
 

Inventories

 
131,225

 
322,559

 
(23,330
)
 
430,454

Prepaid expenses

 
29,032

 
7,197

 

 
36,229

Other receivables

 
7,239

 
58,008

 

 
65,247

Other current assets

 
25,534

 
730

 

 
26,264

Total current assets

 
869,165

 
1,044,448

 
(452,008
)
 
1,461,605

Property and equipment, net

 
1,078,761

 
314,910

 
(1,739
)
 
1,391,932

Goodwill

 
1,121,941

 
1,051,973

 

 
2,173,914

Intangible assets, net

 
599,618

 
800,945

 

 
1,400,563

Long-term investments

 
25,971

 
9,523

 

 
35,494

Long-term intercompany accounts and notes receivable

 
447,613

 
138,398

 
(586,011
)
 

Investment in subsidiaries
6,142,568

 
2,596,172

 

 
(8,738,740
)
 

Other non-current assets
84,153

 
33,249

 
24,746

 
(83,333
)
 
58,815

Total assets
$
6,226,721

 
$
6,772,490

 
$
3,384,943

 
$
(9,861,831
)
 
$
6,522,323

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 

Accounts payable
$

 
$
111,799

 
$
104,447

 
$

 
$
216,246

Intercompany accounts and notes payable

 
36,603

 
392,075

 
(428,678
)
 

Accrued liabilities
23,150

 
111,700

 
35,734

 

 
170,584

Other current liabilities

 
55

 
31,943

 

 
31,998

Total current liabilities
23,150

 
260,157

 
564,199

 
(428,678
)
 
418,828

Long-term debt
989,154

 

 

 

 
989,154

Deferred tax liabilities

 
171,284

 
43,560

 
(83,333
)
 
131,511

Long-term intercompany accounts and notes payable
317,695

 
138,398

 
129,918

 
(586,011
)
 

Other long-term liabilities

 
35,014

 
51,094

 

 
86,108

Total liabilities
1,329,999

 
604,853

 
788,771

 
(1,098,022
)
 
1,625,601

Total stockholders’ equity
4,896,722

 
6,167,637

 
2,596,172

 
(8,763,809
)
 
4,896,722

Total liabilities and stockholders’ equity
$
6,226,721

 
$
6,772,490

 
$
3,384,943

 
$
(9,861,831
)
 
$
6,522,323



19

Table of Contents

QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

 
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
 
Three Months Ended December 30, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Revenue
$

 
$
301,077

 
$
751,995

 
$
(207,333
)
 
$
845,739

Cost of goods sold

 
212,574

 
473,330

 
(177,092
)
 
508,812

Gross profit

 
88,503

 
278,665

 
(30,241
)
 
336,927

Operating expenses:
 
 
 
 
 
 
 
 

Research and development
7,101

 
6,842

 
97,842

 
(5,374
)
 
106,411

Selling, general and administrative
6,381

 
57,166

 
88,016

 
(25,008
)
 
126,555

Other operating expense
234

 
15,799

 
7,466

 
142

 
23,641

Total operating expenses
13,716

 
79,807

 
193,324

 
(30,240
)
 
256,607

Income (loss) from operations
(13,716
)
 
8,696

 
85,341

 
(1
)
 
80,320

Interest expense
(16,001
)
 
(557
)
 
(393
)
 
613

 
(16,338
)
Interest income

 
614

 
2,214

 
(613
)
 
2,215

Other expense

 
(549
)
 
(208
)
 

 
(757
)
Income (loss) before income taxes
(29,717
)
 
8,204

 
86,954

 
(1
)
 
65,440

Income tax expense
(30,116
)
 
(59,974
)
 
(8,432
)
 

 
(98,522
)
Income in subsidiaries
26,751

 
78,522

 

 
(105,273
)
 

Net (loss) income
$
(33,082
)
 
$
26,752

 
$
78,522

 
$
(105,274
)
 
$
(33,082
)
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(32,185
)
 
$
28,630

 
$
82,312

 
$
(110,942
)
 
$
(32,185
)
 
Condensed Consolidating Statement of Operations and Comprehensive Loss
 
Three Months Ended December 31, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Revenue
$

 
$
298,334

 
$
777,326

 
$
(249,313
)
 
$
826,347

Cost of goods sold

 
227,556

 
548,314

 
(260,165
)
 
515,705

Gross profit

 
70,778

 
229,012

 
10,852

 
310,642

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
9,115

 
1,961

 
106,749

 
(5,874
)
 
111,951

Selling, general and administrative
7,540

 
61,606

 
88,590

 
(27,064
)
 
130,672

Other operating expense

 
6,088

 
539

 
11

 
6,638

Total operating expenses
16,655

 
69,655

 
195,878

 
(32,927
)
 
249,261

Income (loss) from operations
(16,655
)
 
1,123

 
33,134

 
43,779

 
61,381

Interest expense
(14,090
)
 
(594
)
 
(895
)
 
1,115

 
(14,464
)
Interest income

 
915

 
433

 
(1,115
)
 
233

Other expense

 
(1,295
)
 
(1,314
)
 

 
(2,609
)
Income (loss) before income taxes
(30,745
)
 
149

 
31,358

 
43,779

 
44,541

Income tax (expense) benefit
9,420

 
(9,101
)
 
(123,498
)
 

 
(123,179
)
Income in subsidiaries
(57,313
)
 
(92,140
)
 

 
149,453

 

Net loss
$
(78,638
)
 
$
(101,092
)
 
$
(92,140
)
 
$
193,232

 
$
(78,638
)
 
 
 
 
 
 
 
 
 
 
Comprehensive loss
$
(78,462
)
 
$
(101,120
)
 
$
(91,936
)
 
$
193,056

 
$
(78,462
)

20

Table of Contents

QORVO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

 
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
 
Nine Months Ended December 30, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$
829,625

 
$
2,108,231

 
$
(629,703
)
 
$
2,308,153

Cost of goods sold

 
592,928

 
1,346,505

 
(525,606
)
 
1,413,827

Gross profit

 
236,697

 
761,726

 
(104,097
)
 
894,326

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
20,600

 
34,728

 
292,926

 
(13,946
)
 
334,308

Selling, general and administrative
37,252

 
190,336

 
268,072

 
(90,807
)
 
404,853

Other operating expense
448

 
39,659

 
12,764

 
239

 
53,110

Total operating expenses
58,300

 
264,723

 
573,762

 
(104,514
)
 
792,271

Income (loss) from operations
(58,300
)
 
(28,026
)
 
187,964

 
417

 
102,055

Interest expense
(42,367
)
 
(1,689
)
 
(1,161
)
 
1,830

 
(43,387
)
Interest income

 
1,439

 
4,430

 
(1,830
)
 
4,039

Other (expense) income

 
207

 
(2,090
)
 

 
(1,883
)
Income (loss) before income taxes
(100,667
)
 
(28,069
)
 
189,143

 
417

 
60,824

Income tax (expense) benefit
5,657

 
(76,149
)
 
(18,119
)
 

 
(88,611
)
Income in subsidiaries
67,223

 
171,024

 

 
(238,247
)
 

Net (loss) income
$
(27,787
)
 
$
66,806

 
$
171,024

 
$
(237,830
)
 
$
(27,787
)
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(26,563
)
 
$
68,783

 
$
172,528

 
$
(241,311
)
 
$
(26,563
)
 
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
 
Nine Months Ended December 31, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$
1,030,877

 
$
2,329,712

 
$
(971,007
)
 
$
2,389,582

Cost of goods sold

 
785,654

 
1,609,839

 
(909,827
)
 
1,485,666

Gross profit

 
245,223

 
719,873

 
(61,180
)
 
903,916

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
27,032

 
24,239

 
320,280

 
(16,385
)
 
355,166

Selling, general and administrative
46,259

 
192,933

 
282,444

 
(108,786
)
 
412,850

Other operating expense

 
9,827

 
7,426

 
6,132

 
23,385

Total operating expenses
73,291

 
226,999

 
610,150

 
(119,039
)
 
791,401

Income (loss) from operations
(73,291
)
 
18,224

 
109,723

 
57,859

 
112,515

Interest expense
(44,025
)
 
(2,001
)
 
(2,793
)
 
3,614

 
(45,205
)
Interest income

 
3,906

 
204

 
(3,407
)
 
703

Other expense

 
(1,427
)
 
(478
)
 
(1,515
)
 
(3,420
)
Income (loss) before income taxes
(117,316
)
 
18,702