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Qorvo, Inc. (Form: 10-Q, Received: 08/03/2017 10:05:01)
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 July 1, 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
QORVOFORM8KIMAGEFINALA04.JPG
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 July 26, 2017 , there were 127,267,751 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)
 
 
July 1, 2017
 
April 1, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (Note 8)
$
512,631

 
$
545,463

Accounts receivable, less allowance of $60 and $58 as of July 1, 2017 and April 1, 2017, respectively
373,711

 
357,948

Inventories (Note 4)
470,880

 
430,454

Prepaid expenses
36,444

 
36,229

Other receivables
41,742

 
65,247

Other current assets
31,808

 
26,264

Total current assets
1,467,216

 
1,461,605

Property and equipment, net of accumulated depreciation of $1,020,744 at July 1, 2017 and $981,328 at April 1, 2017
1,440,105

 
1,391,932

Goodwill
2,173,889

 
2,173,914

Intangible assets, net (Note 5)
1,265,876

 
1,400,563

Long-term investments (Note 8)
36,248

 
35,494

Other non-current assets
59,362

 
58,815

Total assets
$
6,442,696

 
$
6,522,323

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
215,033

 
$
216,246

Accrued liabilities
130,839

 
170,584

Other current liabilities
16,046

 
31,998

Total current liabilities
361,918

 
418,828

Long-term debt (Note 6)
989,420

 
989,154

Deferred tax liabilities (Note 7)
89,279

 
131,511

Other long-term liabilities
89,398

 
86,108

Total liabilities
1,530,015

 
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; 127,225 and 126,464 shares issued and outstanding at July 1, 2017 and April 1, 2017, respectively
5,365,373

 
5,357,394

Accumulated other comprehensive loss, net of tax
(3,587
)
 
(4,306
)
Accumulated deficit
(449,105
)
 
(456,366
)
Total stockholders’ equity
4,912,681

 
4,896,722

Total liabilities and stockholders’ equity
$
6,442,696

 
$
6,522,323

See accompanying Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

 QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
 
July 1, 2017
 
July 2, 2016
Revenue
$
640,831

 
$
698,537

Cost of goods sold
404,454

 
422,062

Gross profit
236,377

 
276,475

Operating expenses:
 
 
 
Research and development
116,499

 
117,137

Selling, general and administrative
139,431

 
143,595

Other operating expense
8,276

 
10,002

Total operating expenses
264,206

 
270,734

(Loss) income from operations
(27,829
)
 
5,741

Interest expense (Note 6)
(12,271
)
 
(15,187
)
Interest income
766

 
278

Other expense
(934
)
 
(500
)
 
 
 
 
Loss before income taxes
(40,268
)
 
(9,668
)
 
 
 
 
Income tax benefit (Note 7)
9,644

 
3,993

Net loss
$
(30,624
)
 
$
(5,675
)
 
 
 
 
Net loss per share (Note 3):
 
 
 
Basic
$
(0.24
)
 
$
(0.04
)
Diluted
$
(0.24
)
 
$
(0.04
)
 
 
 
 
Weighted average shares of common stock outstanding (Note 3):
 
 
 
Basic
126,961

 
127,541

Diluted
126,961

 
127,541


See accompanying Notes to Condensed Consolidated Financial Statements.


4

Table of Contents

QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
Three Months Ended
 
July 1, 2017
 
July 2, 2016
Net loss
$
(30,624
)
 
$
(5,675
)
Other comprehensive income (loss):
 
 
 
Unrealized gain on marketable securities, net of tax
61

 
72

Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term-investment nature
616

 
(1,111
)
Reclassification adjustments, net of tax:
 
 
 
Amortization of pension actuarial loss
42

 
31

Other comprehensive income (loss)
719

 
(1,008
)
Total comprehensive loss
$
(29,905
)
 
$
(6,683
)
See accompanying Notes to Condensed Consolidated Financial Statements.



5

Table of Contents

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

 
Three Months Ended
 
July 1, 2017
 
July 2, 2016
Cash flows from operating activities:
 
 
 
Net loss
$
(30,624
)
 
$
(5,675
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation
42,827

 
46,352

Amortization and other non-cash items
134,390

 
119,735

Deferred income taxes
(4,728
)
 
2,509

Foreign currency adjustments
2,477

 
(1,645
)
(Gain) loss on investments and other assets, net
(763
)
 
168

Stock-based compensation expense
21,126

 
30,594

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(15,901
)
 
(79,501
)
Inventories
(40,036
)
 
(30,270
)
Prepaid expenses and other current and non-current assets
16,748

 
(28,578
)
Accounts payable and accrued liabilities
(7,363
)
 
23,010

Income tax (recoverable) / payable
(16,028
)
 
(17,459
)
Other liabilities
1,511

 
149

Net cash provided by operating activities
103,636

 
59,389

Investing activities:
 
 
 
Purchase of property and equipment
(124,428
)
 
(130,440
)
Purchase of a business, net of cash acquired

 
(117,498
)
Proceeds from maturities and sales of available-for-sale securities

 
172,920

Other investing activities
7,036

 
17

Net cash used in investing activities
(117,392
)
 
(75,001
)
Financing activities:
 
 
 
Proceeds from the issuance of common stock
20,526

 
25,962

Repurchase of common stock, including transaction costs
(31,925
)
 

Tax withholding paid on behalf of employees for restricted stock units
(8,404
)
 
(2,810
)
Other financing activities
(23
)
 
2

Net cash (used in) provided by financing activities
(19,826
)
 
23,154

 
 
 
 
Effect of exchange rate changes on cash
750

 
(389
)
Net (decrease) increase in cash and cash equivalents
(32,832
)
 
7,153

Cash and cash equivalents at the beginning of the period
545,463

 
425,881

Cash and cash equivalents at the end of the period
$
512,631

 
$
433,034

Non-cash investing information:
 
 
 
Capital expenditure adjustments included in accounts payable and accrued liabilities
$
47,206

 
$
29,885

See accompanying Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

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.

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 $14.2 million for the three months ended July 1, 2017 . This benefit increased income from operations by $2.2 million and decreased ending inventory by $12.0 million as of July 1, 2017 . Net income increased by $1.5 million and diluted earnings per share increased by $0.01 for the three months ended July 1, 2017 as a result of this change in accounting estimate.

7


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
 
July 1, 2017
 
July 2, 2016
Numerator:
 
 
 
Numerator for basic and diluted net loss per share — net loss available to common stockholders
$
(30,624
)
 
$
(5,675
)
Denominator:
 
 
 
Denominator for basic net loss per share — weighted average shares
126,961

 
127,541

Effect of dilutive securities:
 
 
 
Stock-based awards

 

Denominator for diluted net loss per share — adjusted weighted average shares and assumed conversions
126,961

 
127,541

Basic net loss per share
$
(0.24
)
 
$
(0.04
)
Diluted net loss per share
$
(0.24
)
 
$
(0.04
)

In the computation of diluted net loss per share for the three months ended July 1, 2017 , approximately 4.4 million outstanding shares 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 months ended July 2, 2016 , approximately 5.1 million outstanding shares 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 approximates actual average costs. The components of inventories, net of reserves, are as follows (in thousands):
 
 
July 1, 2017
 
April 1, 2017
Raw materials
$
111,640

 
$
92,282

Work in process
227,133

 
198,339

Finished goods
132,107

 
139,833

Total inventories
$
470,880

 
$
430,454


5. INTANGIBLE ASSETS
The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangibles assets (in thousands):
 
July 1, 2017
 
April 1, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Intangible Assets:
 
 
 
 
 
 
 
Customer relationships
$
1,272,725

 
$
726,560

 
$
1,272,725

 
$
656,688

Developed technology
1,246,335

 
543,484

 
1,209,335

 
481,441

Backlog
65,000

 
65,000

 
65,000

 
65,000

Trade names  
29,363

 
24,380

 
29,353

 
21,912

Wafer supply agreement
20,443

 
20,443

 
20,443

 
20,443

Technology licenses
13,369

 
11,919

 
13,346

 
11,711

Non-compete agreement
1,026

 
599

 
1,026

 
470

IPRD
10,000

 
N/A

 
47,000

 
N/A

Total
$
2,658,261

 
$
1,392,385

 
$
2,658,228

 
$
1,257,665


8


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


During the first quarter of fiscal 2018 , $37.0 million of in-process research and development assets were completed, transferred to finite-lived intangible assets and are being amortized over their useful lives of 4 years .

Total intangible assets amortization expense was $134.7 million and $119.4 million for the three months ended July 1, 2017 and July 2, 2016 , respectively.

6 . DEBT

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. 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.

Interest is payable 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. During the three months ended July 1, 2017 , the Company recognized $17.3 million of interest expense related to the Notes which was offset by $5.6 million of interest capitalized to property and equipment. During the three months ended July 2, 2016 , the Company recognized $17.5 million of interest expense related to the Notes, which was offset by $3.0 million of interest capitalized to property and equipment. Interest on both series of Notes is payable semi-annually on June 1 and December 1 of each year. Interest paid on the Notes during the three months ended July 1, 2017 and July 2, 2016 was $34.4 million and $36.7 million , respectively.
  
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.

The 2023 Notes and the 2025 Notes are traded over the counter and their fair values as of July 1, 2017 of $495.6 million and $625.6 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.

Credit Agreement
On April 7, 2015, the Company and certain of its material domestic subsidiaries (the "Guarantors") entered into a five-year unsecured senior credit facility 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 $300.0 million revolving credit facility, which 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 any time and from time to time, that the revolving credit facility be increased by an amount not to exceed $150.0 million . The revolving 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. During the three months ended July 1, 2017 , there were no borrowings under the revolving credit facility. The Company had no outstanding amounts under the Credit Agreement as of July 1, 2017 and April 1, 2017 .

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 financial covenants that the Company must maintain. On November 12, 2015, the Credit Agreement was amended to increase the size of certain of the negative covenant baskets and the threshold for certain negative covenant incurrence-based permissions and to raise the consolidated leverage ratio test from 2.50 to 1.00 to 3.00 to 1.00 as of the end of any fiscal quarter. The Company must also maintain a consolidated interest coverage ratio of not less than 3.00 to 1.00 as of the end of any fiscal quarter. As of July 1, 2017 , the Company was in compliance with all of these covenants.
  
The Credit Agreement also contains customary events of default, and the occurrence of an event of default will increase the applicable rate of interest by 2.00% and could result in the termination of commitments under the revolving credit facility, the declaration that all outstanding loans are due and payable in whole or in part and the requirement of cash collateral deposits in

9


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

respect of outstanding letters of credit. Outstanding amounts are due in full on the maturity date of April 7, 2020 (with amounts borrowed under the swing line option due in full no later than ten business days after such loan is made).
 
7. INCOME TAXES

Income Tax Expense
The Company’s provision for income taxes for the three months ended July 1, 2017 and July 2, 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) for the three months ended July 1, 2017 and July 2, 2016 .

The Company’s income tax benefit was $9.6 million and $4.0 million for the three months ended July 1, 2017 and July 2, 2016 , respectively. The Company’s effective tax rate was 23.9% for the three months ended July 1, 2017 and 41.3% for the three months ended July 2, 2016 . The Company's effective tax rate for the first quarter of fiscal 2018 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, 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" ) and a discrete tax expense associated with intra-entity transfers in accordance with the new guidance for the intra-entity transfer of assets other than inventory (ASU 2016-16, "Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory "). The Company's effective tax rate for the first quarter of fiscal 2017 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, state income taxes, domestic tax credits generated, and changes in unrecognized tax benefits.

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.

The Company has increased the deferred tax assets for both the domestic federal and state tax net operating loss (“NOLs”) carry-forwards by $36.7 million relating to the adoption of new accounting guidance for stock compensation (ASU 2016-09).

The Company has domestic federal and state tax NOLs carry-forwards that expire in fiscal years 2020 to 2036 if unused. 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 $94.3 million as of the end of the first quarter of fiscal 2018 , due to a $3.7 million increase related to tax positions taken with respect to the current fiscal year.


10


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

8. INVESTMENTS AND FAIR VALUE MEASUREMENTS

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

 
$

 
$
(335
)
 
$
1,815

Money market funds
24

 

 

 
24

 
$
2,174

 
$

 
$
(335
)
 
$
1,839

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 July 1, 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 debt securities is as follows (in thousands):
 
July 1, 2017
 
April 1, 2017
 
Cost
 
Estimated
Fair Value
 
Cost
 
Estimated
Fair Value
Due in less than one year
$
24

 
$
24

 
$
14

 
$
14

Due after ten years
2,150

 
1,815

 
2,150

 
1,721

Total investments in debt securities
$
2,174

 
$
1,839

 
$
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. As of July 1, 2017 , this investment is accounted for as a cost method investment and classified in "Long-term investments" in the Condensed Consolidated Balance Sheets. See Note 13 for subsequent event disclosure related to this investment.

Fair Value of Financial Instruments
Marketable securities are measured at fair value and recorded in "Cash and cash equivalents," "Short-term investments" 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.


11


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

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 July 1, 2017 and April 1, 2017 (in thousands):
 
 
 
 
 
Total
 
Quoted Prices In
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
July 1, 2017
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
$
24

 
$
24

 
$

 
 
Total cash and cash equivalents
24

 
24

 

 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
Auction rate securities ("ARS")  (1)
1,815

 

 
1,815

 
 
Total available-for-sale securities
1,815

 

 
1,815

 
 
Invested funds in deferred compensation plan (2)
11,582

 
11,582

 

 
 
 
 
Total assets measured at fair value
$
13,421

 
$
11,606

 
$
1,815

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (2)
$
11,582

 
$
11,582

 
$

 
 
 
 
Total liabilities measured at fair value
$
11,582

 
$
11,582

 
$

 
 
 
 
 
 
 
 
 
 
April 1, 2017
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
Money market funds
$
14

 
$
14

 
$

 
 
Total cash and cash equivalents
14

 
14

 

 
 
Available for-sale securities:
 
 
 
 
 
 
 
 
 
Auction rate securities (1)
1,721

 

 
1,721

 
 
Total available-for-sale securities
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 July 1, 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.


12


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

9 . 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 months ended July 1, 2017 , the Company repurchased approximately 0.4 million shares of its common stock for approximately $31.9 million . As of July 1, 2017 , $350.1 million remains available for repurchases under this share repurchase program.

10. 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 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 July 1, 2017 Condensed Consolidated Balance Sheet was not significant. For the three months ended July 1, 2017 , the Company recognized a discrete tax expense of $5.4 million related to intra-entity transfers of assets during the quarter.

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 corresponding increase to deferred tax assets for the Federal and state net operating losses attributable to excess tax benefits which 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 months ended  July 1, 2017 , the Company recognized a discrete tax benefit of  $3.8 million 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 new standard became effective for the Company in the first quarter of fiscal 2018 with no impact on its consolidated financial results. Application will be made on a prospective basis as transactions in scope of this new guidance occur.

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

13


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

reasonably predictable costs to completion, transportation, or disposal. The new standard became effective for the Company in the first quarter of fiscal 2018 with no significant impact on its consolidated financial statements.

11 . OPERATING SEGMENT INFORMATION

The Company's operating segments as of July 1, 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 (loss) and non-GAAP operating income (loss) as a percentage of revenue.

MP is a leading global supplier of cellular radio frequency ("RF") and Wi-Fi solutions into 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, primarily in the downlink, 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 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 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, network infrastructure 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 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 high power gallium arsenide and gallium nitride PAs, LNAs, switches, Complementary Metal Oxide Semiconductor 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, acquired inventory step-up and revaluation, restructuring and disposal costs, start-up costs, gain (loss) 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.


14


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

The following tables present details of the Company’s reportable segments and a reconciliation of the “All other” category (in thousands):  
 
Three Months Ended
 
July 1,
2017
 
July 2,
2016
Revenue:
 
 
 
MP
$
456,223

 
$
547,077

IDP
183,638

 
150,490

All other (1)
970

 
970

Total revenue
$
640,831

 
$
698,537

(Loss) income from operations:
 
 
 
MP
$
87,807

 
$
132,977

IDP
49,586

 
34,651

All other
(165,222
)
 
(161,887
)
(Loss) income from operations
(27,829
)
 
5,741

Interest expense
(12,271
)
 
(15,187
)
Interest income
766

 
278

Other expense
(934
)
 
(500
)
Loss before income taxes
$
(40,268
)
 
$
(9,668
)
 
(1) "All other" revenue relates to royalty income that is not allocated to MP or IDP.
 
Three Months Ended
 
July 1,
2017
 
July 2,
2016
Reconciliation of “All other” category:
 
 
 
Stock-based compensation expense
$
(21,126
)
 
$
(30,594
)
Amortization of intangible assets
(134,686
)
 
(119,345
)
Acquisition and integration related costs
(2,777
)
 
(6,760
)
Acquired inventory step-up and revaluation

 
(1,199
)
Restructuring and disposal costs
(531
)
 
(414
)
Start-up costs
(6,624
)
 
(2,076
)
Other income (expense) (including gain (loss) on assets and other miscellaneous corporate overhead)
522

 
(1,499
)
Loss from operations for “All other”
$
(165,222
)
 
$
(161,887
)

12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In accordance with the Indenture governing the Notes, the Guarantors have guaranteed the Company's obligations under the Notes. 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,

15


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

(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 has made certain immaterial corrections to the prior period Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income. An adjustment to income from operations and income in subsidiaries for the guarantor subsidiaries of $10.7 million and $17.7 million , respectively, has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three months ended July 2, 2016 , to properly reflect intercompany transactions between guarantor and non-guarantor subsidiaries and the 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 $(43.7) million has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three months ended July 2, 2016 , 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.


16


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


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

 
$
108,242

 
$
404,389

 
$

 
$
512,631

Accounts receivable, less allowance

 
56,137

 
317,574

 

 
373,711

Intercompany accounts and notes receivable

 
437,397

 
45,077

 
(482,474
)
 

Inventories

 
147,089

 
347,428

 
(23,637
)
 
470,880

Prepaid expenses

 
21,655

 
14,789

 

 
36,444

Other receivables

 
4,239

 
37,503

 

 
41,742

Other current assets

 
43,780

 
782

 
(12,754
)
 
31,808

Total current assets

 
818,539

 
1,167,542

 
(518,865
)
 
1,467,216

Property and equipment, net

 
1,124,452

 
317,285

 
(1,632
)
 
1,440,105

Goodwill

 
1,121,941

 
1,051,948

 

 
2,173,889

Intangible assets, net

 
548,739

 
717,137

 

 
1,265,876

Long-term investments

 
26,065

 
10,183

 

 
36,248

Long-term intercompany accounts and notes receivable

 
418,302

 
112,141

 
(530,443
)
 

Investment in subsidiaries
6,132,009

 
2,595,627

 

 
(8,727,636
)
 

Deferred tax assets
99,579

 

 

 
(99,579
)
 

Other non-current assets
752

 
33,046

 
25,564

 

 
59,362

Total assets
$
6,232,340

 
$
6,686,711

 
$
3,401,800

 
$
(9,878,155
)
 
$
6,442,696

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 

Accounts payable
$

 
$
88,808

 
$
126,225

 
$

 
$
215,033

Intercompany accounts and notes payable

 
45,077

 
437,397

 
(482,474
)
 

Accrued liabilities
5,745

 
88,586

 
36,508

 

 
130,839

Other current liabilities

 

 
28,800

 
(12,754
)
 
16,046

Total current liabilities
5,745

 
222,471

 
628,930

 
(495,228
)
 
361,918

Long-term debt
989,420

 

 

 

 
989,420

Deferred tax liabilities

 
159,933

 
28,925

 
(99,579
)
 
89,279

Long-term intercompany accounts and notes payable
324,494

 
112,141

 
93,808

 
(530,443
)
 

Other long-term liabilities

 
34,888

 
54,510

 

 
89,398

Total liabilities
1,319,659

 
529,433

 
806,173

 
(1,125,250
)
 
1,530,015

Total stockholders’ equity
4,912,681

 
6,157,278

 
2,595,627

 
(8,752,905
)
 
4,912,681

Total liabilities and stockholders’ equity
$
6,232,340

 
$
6,686,711

 
$
3,401,800

 
$
(9,878,155
)
 
$
6,442,696



17


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
)
 

Deferred tax assets
83,333

 

 

 
(83,333
)
 

Other non-current assets
820

 
33,249

 
24,746

 

 
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



18


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

 
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
 
Three Months Ended July 1, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Revenue
$

 
$
271,953

 
$
580,554

 
$
(211,676
)
 
$
640,831

Cost of goods sold

 
184,004

 
392,736

 
(172,286
)
 
404,454

Gross profit

 
87,949

 
187,818

 
(39,390
)
 
236,377

Operating expenses:
 
 
 
 
 
 
 
 

Research and development
6,796

 
16,738

 
97,284

 
(4,319
)
 
116,499

Selling, general and administrative
14,245

 
66,212

 
94,052

 
(35,078
)
 
139,431

Other operating expense
85

 
7,060

 
1,010

 
121

 
8,276

Total operating expenses
21,126

 
90,010

 
192,346

 
(39,276
)
 
264,206

(Loss) income from operations
(21,126
)
 
(2,061
)
 
(4,528
)
 
(114
)
 
(27,829
)
Interest expense
(11,924
)
 
(575
)
 
(334
)
 
562

 
(12,271
)
Interest income

 
494

 
834

 
(562
)
 
766

Other (expense) income

 
(214
)
 
1,998

 
(2,718
)
 
(934
)
Loss before income taxes
(33,050
)
 
(2,356
)
 
(2,030
)
 
(2,832
)
 
(40,268
)
Income tax benefit (expense)
16,246

 
(7,524
)
 
922

 

 
9,644

(Loss) income in subsidiaries
(13,820
)
 
(1,108
)
 

 
14,928

 

Net (loss) income
$
(30,624
)
 
$
(10,988
)
 
$
(1,108
)
 
$
12,096

 
$
(30,624
)
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(29,905
)
 
$
(10,927
)
 
$
(450
)
 
$
11,377

 
$
(29,905
)
 
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
 
Three Months Ended July 2, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Revenue
$

 
$
432,986

 
$
725,810

 
$
(460,259
)
 
$
698,537

Cost of goods sold

 
333,263

 
518,761

 
(429,962
)
 
422,062

Gross profit

 
99,723

 
207,049

 
(30,297
)
 
276,475

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
11,669

 
9,851

 
98,487

 
(2,870
)
 
117,137

Selling, general and administrative
18,925

 
56,654

 
103,883

 
(35,867
)
 
143,595

Other operating expense

 
3,646

 
5,874

 
482

 
10,002

Total operating expenses
30,594

 
70,151

 
208,244

 
(38,255
)
 
270,734

Income (loss) from operations
(30,594
)
 
29,572

 
(1,195
)
 
7,958

 
5,741

Interest expense
(14,768
)
 
(818
)
 
(919
)
 
1,318

 
(15,187
)
Interest income

 
1,482

 
(93
)
 
(1,111
)
 
278

Other (expense) income

 
(321
)
 
(944
)
 
765

 
(500
)
(Loss) income before income taxes
(45,362
)
 
29,915

 
(3,151
)
 
8,930

 
(9,668
)
Income tax benefit (expense)
14,483

 
(31,318
)
 
20,828

 

 
3,993

Income in subsidiaries
25,204

 
17,677

 

 
(42,881
)
 

Net (loss) income
$
(5,675
)
 
$
16,274

 
$
17,677

 
$
(33,951
)
 
$
(5,675
)
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(6,683
)
 
$
16,346

 
$
16,597

 
$
(32,943
)
 
$
(6,683
)


19


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

 
Condensed Consolidating Statement of Cash Flows
 
Three Months Ended July 1, 2017
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Net cash provided by (used in) operating activities
$
19,803

 
$
(21,261
)
 
$
105,094

 
$

 
$
103,636

Investing activities:
 
 
 
 
 
 
 
 
 
Purchase of property and equipment

 
(104,016
)
 
(20,412
)
 

 
(124,428
)
Other investing activities

 
7,011

 
25

 

 
7,036

Net cash used in investing activities

 
(97,005
)
 
(20,387
)
 

 
(117,392
)
Financing activities:
 
 
 
 
 
 
 
 

Proceeds from the issuance of common stock
20,526

 

 

 

 
20,526

Repurchase of common stock, including transaction costs
(31,925
)
 

 

 

 
(31,925
)
Tax withholding paid on behalf of employees for restricted stock units
(8,404
)
 

 

 

 
(8,404
)
Other financing activities

 
(23
)
 

 

 
(23
)
Net transactions with related parties

 
345

 
(345
)
 

 

Net cash (used in) provided by financing activities
(19,803
)
 
322

 
(345
)
 

 
(19,826
)
Effect of exchange rate changes on cash

 

 
750

 

 
750

Net (decrease) increase in cash and cash equivalents

 
(117,944
)
 
85,112

 

 
(32,832
)
Cash and cash equivalents at the beginning of the period

 
226,186

 
319,277

 

 
545,463

Cash and cash equivalents at the end of the period
$

 
$
108,242

 
$
404,389

 
$

 
$
512,631

 
 
 
 
 
 
 
 
 
 


20


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

 
Condensed Consolidating Statement of Cash Flows
 
Three Months Ended July 2, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Net cash provided by (used in) operating activities
$
(23,150
)
 
$
(137,694
)
 
$
220,233

 
$

 
$
59,389

Investing activities:
 
 
 
 
 
 
 
 
 
Purchase of property and equipment

 
(106,301
)
 
(24,139
)
 

 
(130,440
)
Purchase of a business, net of cash acquired

 

 
(117,498
)
 

 
(117,498
)
Proceeds from maturities and sales of available-for-sale securities

 
172,920

 

 

 
172,920

Other investing activities

 
17

 

 

 
17

Net cash (used in) provided by investing activities

 
66,636

 
(141,637
)
 

 
(75,001
)
Financing activities:
 
 
 
 
 
 
 
 

Proceeds from the issuance of common stock
25,962

 

 

 

 
25,962

Tax withholding paid on behalf of employees for restricted stock units
(2,810
)
 

 

 

 
(2,810
)
Other financing activities
(2
)
 
4

 

 

 
2

Net transactions with related parties

 
552

 
(552
)
 

 

Net cash provided by (used in) financing activities
23,150

 
556

 
(552
)
 

 
23,154

Effect of exchange rate changes on cash

 

 
(389
)
 

 
(389
)
Net increase in cash and cash equivalents

 
(70,502
)
 
77,655

 

 
7,153

Cash and cash equivalents at the beginning of the period

 
220,633

 
205,248

 

 
425,881

Cash and cash equivalents at the end of the period
$

 
$
150,131

 
$
282,903

 
$