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 September 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=11870181&doc=13
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 October 24, 2017, there were 127,148,094 shares of the registrant’s common stock outstanding.
 
 
 
 
 


Table of Contents

QORVO, INC. AND SUBSIDIARIES
INDEX
 
 
Page    
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents

PART I — FINANCIAL INFORMATION
ITEM 1.
QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
September 30, 2017
 
April 1, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (Note 8)
$
574,873

 
$
545,463

Accounts receivable, less allowance of $157 and $58 as of September 30, 2017 and April 1, 2017, respectively
459,761

 
357,948

Inventories (Note 4)
461,005

 
430,454

Prepaid expenses
33,381

 
36,229

Other receivables
50,476

 
65,247

Other current assets
28,712

 
26,264

Total current assets
1,608,208

 
1,461,605

Property and equipment, net of accumulated depreciation of $1,061,360 at September 30, 2017 and $981,328 at April 1, 2017
1,443,392

 
1,391,932

Goodwill
2,173,889

 
2,173,914

Intangible assets, net (Note 5)
1,130,036

 
1,400,563

Long-term investments (Note 8)
66,085

 
35,494

Other non-current assets
56,470

 
58,815

Total assets
$
6,478,080

 
$
6,522,323

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
212,750

 
$
216,246

Accrued liabilities
184,185

 
170,584

Other current liabilities
26,067

 
31,998

Total current liabilities
423,002

 
418,828

Long-term debt (Note 6)
989,692

 
989,154

Deferred tax liabilities (Note 7)
74,168

 
131,511

Other long-term liabilities
86,642

 
86,108

Total liabilities
1,573,504

 
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; 127,137 and 126,464 shares issued and outstanding at September 30, 2017 and April 1, 2017, respectively
5,321,741

 
5,357,394

Accumulated other comprehensive loss, net of tax
(3,979
)
 
(4,306
)
Accumulated deficit
(413,186
)
 
(456,366
)
Total stockholders’ equity
4,904,576

 
4,896,722

Total liabilities and stockholders’ equity
$
6,478,080

 
$
6,522,323

See accompanying Notes to Condensed Consolidated Financial Statements.

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Table of Contents

 QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
Revenue
$
821,583

 
$
864,698

 
$
1,462,414

 
$
1,563,235

Cost of goods sold
500,561

 
547,899

 
905,015

 
969,961

Gross profit
321,022

 
316,799

 
557,399

 
593,274

Operating expenses:
 
 
 
 
 
 
 
Research and development
111,398

 
126,078

 
227,897

 
243,215

Selling, general and administrative
138,867

 
138,583

 
278,298

 
282,178

Other operating expense
21,193

 
6,745

 
29,469

 
16,747

Total operating expenses
271,458

 
271,406

 
535,664

 
542,140

Income from operations
49,564

 
45,393

 
21,735

 
51,134

Interest expense (Note 6)
(14,778
)
 
(15,554
)
 
(27,049
)
 
(30,741
)
Interest income
1,058

 
192

 
1,824

 
470

Other expense
(192
)
 
(311
)
 
(1,126
)
 
(811
)
 
 
 
 
 
 
 
 
Income (loss) before income taxes
35,652

 
29,720

 
(4,616
)
 
20,052

 
 
 
 
 
 
 
 
Income tax benefit (expense) (Note 7)
267

 
(17,873
)
 
9,911

 
(13,880
)
Net income
$
35,919

 
$
11,847

 
$
5,295

 
$
6,172

 
 
 
 
 
 
 
 
Net income per share (Note 3):
 
 
 
 
 
 
 
Basic
$
0.28

 
$
0.09

 
$
0.04

 
$
0.05

Diluted
$
0.27

 
$
0.09

 
$
0.04

 
$
0.05

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding (Note 3):
 
 
 
 
 
 
 
Basic
127,257

 
127,546

 
127,109

 
127,543

Diluted
130,778

 
132,329

 
131,062

 
132,461


See accompanying Notes to Condensed Consolidated Financial Statements.


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QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
Net income
$
35,919

 
$
11,847

 
$
5,295

 
$
6,172

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Unrealized gain on marketable securities, net of tax
38

 
1

 
99

 
73

Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term-investment nature
106

 
353

 
722

 
(758
)
Reclassification adjustments, net of tax:
 
 
 
 
 
 
 
Foreign currency gain included in net income
(581
)
 

 
(581
)
 

Amortization of pension actuarial loss
45

 
57

 
87

 
88

Other comprehensive (loss) income
(392
)
 
411

 
327

 
(597
)
Other comprehensive income
$
35,527

 
$
12,258

 
$
5,622

 
$
5,575

See accompanying Notes to Condensed Consolidated Financial Statements.



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Table of Contents

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

 
Six Months Ended

September 30, 2017
 
October 1, 2016
Cash flows from operating activities:
 
 
 
Net income
$
5,295

 
$
6,172

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
86,267

 
97,177

Amortization and other non-cash items
271,010

 
243,397

Excess tax benefit from exercises of stock options

 
(56
)
Deferred income taxes
(17,290
)
 
(13,310
)
Foreign currency adjustments
1,553

 
1,128

Loss (gain) on investments and other assets, net
3,573

 
(165
)
Stock-based compensation expense
44,584

 
56,636

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(102,219
)
 
(170,920
)
Inventories
(29,786
)
 
(11,689
)
Prepaid expenses and other current and non-current assets
12,157

 
(23,617
)
Accounts payable and accrued liabilities
55,620

 
136,832

Income tax (recoverable) / payable
(4,261
)
 
(13,205
)
Other liabilities
(3,009
)
 
1,007

Net cash provided by operating activities
323,494

 
309,387

Investing activities:
 
 
 
Purchase of property and equipment
(192,219
)
 
(250,419
)
Purchase of a business, net of cash acquired

 
(118,020
)
Proceeds from maturities and sales of available-for-sale securities

 
186,793

Other investing activities
(23,028
)
 
(5,179
)
Net cash used in investing activities
(215,247
)
 
(186,825
)
Financing activities:
 
 
 
Repurchase of common stock, including transaction costs
(88,925
)
 
(91,400
)
Proceeds from the issuance of common stock
32,867

 
27,077

Tax withholding paid on behalf of employees for restricted stock units
(24,005
)
 
(14,763
)
Excess tax benefit from exercises of stock options

 
56

Other financing activities

 
(2
)
Net cash used in financing activities
(80,063
)
 
(79,032
)
 
 
 
 
Effect of exchange rate changes on cash
1,260

 
(38
)
Net increase in cash, cash equivalents and restricted cash
29,444

 
43,492

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
$
575,223

 
$
469,554

Non-cash investing information:
 
 
 
Capital expenditure adjustments included in accounts payable and accrued liabilities
$
30,272

 
$
43,602


See accompanying Notes to Condensed Consolidated Financial Statements.

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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.

As of September 30, 2017 and April 1, 2017, restricted cash of $0.3 million was included in 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 $29.8 million for the three and six months ended September 30, 2017, respectively. This decrease in depreciation expense for the three and six months ended September 30, 2017, resulted in the following: (1) an increase to income from operations of $15.1 million and $17.3 million, respectively; (2) an increase to net income of $14.1 million and $15.6 million, respectively; (3) an increase to diluted earnings per share of $0.10 and $0.12, respectively; and (4) a reduction to inventory of $0.5 million and $12.5 million, respectively.



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

3. NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
 
Three Months Ended
 
Six Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
Numerator:
 
 
 
 
 
 
 
Numerator for basic and diluted net income per share — net income available to common stockholders
$
35,919

 
$
11,847

 
$
5,295

 
$
6,172

Denominator:
 
 
 
 
 
 
 
Denominator for basic net income per share — weighted average shares
127,257

 
127,546

 
127,109

 
127,543

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock-based awards
3,521

 
4,783

 
3,953

 
4,918

Denominator for diluted net income per share — adjusted weighted average shares and assumed conversions
130,778

 
132,329

 
131,062

 
132,461

Basic net income per share
$
0.28

 
$
0.09

 
$
0.04

 
$
0.05

Diluted net income per share
$
0.27

 
$
0.09

 
$
0.04

 
$
0.05


In the computation of diluted net income per share for the three and six months ended September 30, 2017 and October 1, 2016, outstanding options to purchase less than 0.1 million shares were excluded because the exercise price of the options was greater than the average market price of the underlying common stock and 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):
 
 
September 30, 2017
 
April 1, 2017
Raw materials
$
108,026

 
$
92,282

Work in process
220,935

 
198,339

Finished goods
132,044

 
139,833

Total inventories
$
461,005

 
$
430,454



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Table of Contents

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

5. INTANGIBLE ASSETS
The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangibles assets (in thousands):
 
September 30, 2017
 
April 1, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Intangible Assets:
 
 
 
 
 
 
 
Customer relationships
$
1,272,725

 
$
796,431

 
$
1,272,725

 
$
656,688

Developed technology
1,246,335

 
606,683

 
1,209,335

 
481,441

Backlog
65,000

 
65,000

 
65,000

 
65,000

Trade names 
29,375

 
26,852

 
29,353

 
21,912

Wafer supply agreement
20,443

 
20,443

 
20,443

 
20,443

Technology licenses
13,369

 
12,101

 
13,346

 
11,711

Non-compete agreement
1,026

 
727

 
1,026

 
470

In-process research and development (IPRD)
10,000

 
N/A

 
47,000

 
N/A

Total
$
2,658,273

 
$
1,528,237

 
$
2,658,228

 
$
1,257,665


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 $135.8 million and $270.5 million for the three and six months ended September 30, 2017, respectively, and $119.8 million and $239.2 million for the three and six months ended and October 1, 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 and six months ended September 30, 2017, the Company recognized $17.3 million and $34.6 million, respectively, of interest expense related to the Notes which was partially offset by $3.2 million and $8.8 million, respectively, of interest capitalized to property and equipment. During the three and six months ended October 1, 2016, the Company recognized $17.3 million and $34.8 million, respectively, of interest expense related to the Notes, which was partially offset by $2.4 million and $5.4 million, respectively, 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 six months ended September 30, 2017 and October 1, 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 September 30, 2017 of $491.1 million and $629.8 million, respectively (compared to carrying values of $450.0 million and $550.0 million, respectively) were

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

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 six months ended September 30, 2017, there were no borrowings under the revolving credit facility. The Company had no outstanding amounts under the Credit Agreement as of September 30, 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. As of September 30, 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 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 and six months ended September 30, 2017 and October 1, 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 six months ended September 30, 2017 and October 1, 2016.

The Company’s income tax benefit was $0.3 million and $9.9 million for the three and six months ended September 30, 2017, respectively, and the Company's income tax expense was $17.9 million and $13.9 million for the three and six months ended October 1, 2016, respectively. The Company’s effective tax rate was (0.7)% and 214.7% for the three and six months ended September 30, 2017, respectively, and 60.1% and 69.2% for the three and six months ended October 1, 2016, respectively. The Company's effective tax rate for the three and six months ended September 30, 2017 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 (Accounting Standards Update ("ASU") 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting") and a discrete tax expense, for the six months only, 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 three and six months ended October 1, 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.

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 (“NOLs”) 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.

The Company has domestic federal and state tax NOLs 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 $98.9 million as of the end of the second quarter of fiscal 2018, due to a $8.3 million increase primarily related 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 September 30, 2017 and April 1, 2017 (in thousands): 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair  
Value
September 30, 2017
 
 
 
 
 
 
 
Auction rate securities
$
2,150

 
$

 
$
(276
)
 
$
1,874

Money market funds
41

 

 

 
41

 
$
2,191

 
$

 
$
(276
)
 
$
1,915

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 September 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):
 
September 30, 2017
 
April 1, 2017
 
Cost
 
Estimated
Fair Value
 
Cost
 
Estimated
Fair Value
Due in less than one year
$
41

 
$
41

 
$
14

 
$
14

Due after ten years
2,150

 
1,874

 
2,150

 
1,721

Total cash equivalents and available-for-sale securities
$
2,191

 
$
1,915

 
$
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 September 30, 2017, this investment is classified in "Long-term investments" in the Condensed Consolidated Balance Sheets.

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.

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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 September 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)
September 30, 2017
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
$
41

 
$
41

 
$

 
 
Total cash and cash equivalents
41

 
41

 

 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
Auction rate securities ("ARS")  (1)
1,874

 

 
1,874

 
 
Total available-for-sale securities
1,874

 

 
1,874

 
 
Invested funds in deferred compensation plan (2)
12,516

 
12,516

 

 
 
 
 
Total assets measured at fair value
$
14,431

 
$
12,557

 
$
1,874

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (2)
$
12,516

 
$
12,516

 
$

 
 
 
 
Total liabilities measured at fair value
$
12,516

 
$
12,516

 
$

 
 
 
 
 
 
 
 
 
 
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 September 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. 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 six months ended September 30, 2017, the Company repurchased approximately 0.8 million and 1.2 million shares of its common stock for approximately $57.0 million and $88.9 million, respectively. As of September 30, 2017, $293.1 million remains available for repurchases under this share repurchase program.

During the second quarter of fiscal 2017, the Company repurchased approximately 1.6 million shares of its common stock for approximately $91.4 million under prior share repurchase programs.

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 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 September 30, 2017 Condensed Consolidated Balance Sheet was approximately $1.3 million. For the three and six months ended September 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 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 six months ended September 30, 2017, the Company recognized a discrete tax benefit of $5.5 million and $9.3 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.


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

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 certain circumstances, such as direct or indirect sales to government customers, 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 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.

11. OPERATING SEGMENT INFORMATION

The Company's operating segments as of September 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.

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 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

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

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 ("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, acquired inventory step-up and revaluation, restructuring charges, intellectual property rights (IPR) litigation settlement, start-up costs, and 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.

The following tables present details of the Company’s reportable segments and a reconciliation of the “All other” category (in thousands): 
 
Three Months Ended
 
Six Months Ended
 
September 30,
2017
 
October 1,
2016
 
September 30,
2017
 
October 1,
2016
Revenue:
 
 
 
 
 
 
 
MP
$
630,397

 
$
706,138

 
$
1,086,620

 
$
1,253,215

IDP
190,216

 
157,590

 
373,854

 
308,080

All other (1)
970

 
970

 
1,940

 
1,940

Total revenue
$
821,583

 
$
864,698

 
$
1,462,414

 
$
1,563,235

Income from operations:
 
 
 
 
 
 
 
MP
$
172,892

 
$
164,397

 
$
260,699

 
$
297,374

IDP
57,649

 
32,416

 
107,235

 
67,067

All other
(180,977
)
 
(151,420
)
 
(346,199
)
 
(313,307
)
Income from operations
49,564

 
45,393

 
21,735

 
51,134

Interest expense
(14,778
)
 
(15,554
)
 
(27,049
)
 
(30,741
)
Interest income
1,058

 
192

 
1,824

 
470

Other expense
(192
)
 
(311
)
 
(1,126
)
 
(811
)
Income (loss) before income taxes
$
35,652

 
$
29,720

 
$
(4,616
)
 
$
20,052

 
(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
 
Six Months Ended
 
September 30,
2017
 
October 1,
2016
 
September 30,
2017
 
October 1,
2016
Reconciliation of “All other” category:
 
 
 
 
 
 
 
Stock-based compensation expense
$
(23,458
)
 
$
(26,042
)
 
$
(44,584
)
 
$
(56,636
)
Amortization of intangible assets
(135,639
)
 
(119,646
)
 
(270,325
)
 
(238,991
)
Acquisition and integration related costs
(2,613
)
 
(8,962
)
 
(5,390
)
 
(15,722
)
Acquired inventory step-up and revaluation

 
(318
)
 

 
(1,517
)
Restructuring charges
(7,453
)
 
(468
)
 
(7,984
)
 
(882
)
IPR litigation settlement

 
5,100

 

 
4,944

Start-up costs
(7,129
)
 
(2,012
)
 
(13,753
)
 
(4,088
)
Other (expense) income (including (loss) gain on assets and other miscellaneous corporate overhead)
(4,685
)
 
928

 
(4,163
)
 
(415
)
Loss from operations for “All other”
$
(180,977
)
 
$
(151,420
)
 
$
(346,199
)
 
$
(313,307
)

12. 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 Income (Loss) for the three and six months ended October 1, 2016. An adjustment to income from operations and income in subsidiaries for the Guarantor subsidiaries of $16.0 million and $76.3 million, respectively, has been presented in the Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the three months ended October 1, 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. A corresponding adjustment to income from operations and income in subsidiaries for the Guarantor subsidiaries of $26.7 million and $94.0 million, respectively, has been presented in the Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the six months ended October 1, 2016. An adjustment to income from operations for the non-guarantor subsidiaries of $(26.3) million and $(70.0) million has been presented in the Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income for the three and six months ended October 1, 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.

16

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


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

 
$
96,548

 
$
478,325

 
$

 
$
574,873

Accounts receivable, less allowance

 
58,886

 
400,875

 

 
459,761

Intercompany accounts and notes receivable

 
434,122

 
61,556

 
(495,678
)
 

Inventories

 
168,987

 
315,236

 
(23,218
)
 
461,005

Prepaid expenses

 
20,841

 
12,540

 

 
33,381

Other receivables

 
7,186

 
43,290

 

 
50,476

Other current assets

 
31,642

 
4,602

 
(7,532
)
 
28,712

Total current assets

 
818,212

 
1,316,424

 
(526,428
)
 
1,608,208

Property and equipment, net

 
1,135,318

 
308,481

 
(407
)
 
1,443,392

Goodwill

 
1,121,942

 
1,051,947

 

 
2,173,889

Intangible assets, net

 
497,413

 
632,623

 

 
1,130,036

Long-term investments

 
1,878

 
64,207

 

 
66,085

Long-term intercompany accounts and notes receivable

 
482,581

 
112,481

 
(595,062
)
 

Investment in subsidiaries
6,186,247

 
2,688,863

 

 
(8,875,110
)
 

Other non-current assets
119,790

 
32,457

 
23,329

 
(119,106
)
 
56,470

Total assets
$
6,306,037

 
$
6,778,664

 
$
3,509,492

 
$
(10,116,113
)
 
$
6,478,080

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 

Accounts payable
$

 
$
72,432

 
$
140,318

 
$

 
$
212,750

Intercompany accounts and notes payable

 
61,556

 
434,122

 
(495,678
)
 

Accrued liabilities
22,959

 
120,239

 
42,690

 
(1,703
)
 
184,185

Other current liabilities

 
(206
)
 
33,805

 
(7,532
)
 
26,067

Total current liabilities
22,959

 
254,021

 
650,935

 
(504,913
)
 
423,002

Long-term debt
989,692

 

 

 

 
989,692

Deferred tax liabilities

 
169,839

 
23,435

 
(119,106
)
 
74,168

Long-term intercompany accounts and notes payable
388,810

 
112,481

 
93,771

 
(595,062
)
 

Other long-term liabilities

 
34,154

 
52,488

 

 
86,642

Total liabilities
1,401,461

 
570,495

 
820,629

 
(1,219,081
)
 
1,573,504

Total stockholders’ equity
4,904,576

 
6,208,169

 
2,688,863

 
(8,897,032
)
 
4,904,576

Total liabilities and stockholders’ equity
$
6,306,037

 
$
6,778,664

 
$
3,509,492

 
$
(10,116,113
)
 
$
6,478,080



17

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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



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

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

 
$
256,595

 
$
775,682

 
$
(210,694
)
 
$
821,583

Cost of goods sold

 
196,350

 
480,439

 
(176,228
)
 
500,561

Gross profit

 
60,245

 
295,243

 
(34,466
)
 
321,022

Operating expenses:
 
 
 
 
 
 
 
 

Research and development
6,703

 
11,148

 
97,800

 
(4,253
)
 
111,398

Selling, general and administrative
16,626

 
66,958

 
86,004

 
(30,721
)
 
138,867

Other operating expense
129

 
16,800

 
4,288

 
(24
)
 
21,193

Total operating expenses
23,458

 
94,906

 
188,092

 
(34,998
)
 
271,458

Income (loss) from operations
(23,458
)
 
(34,661
)
 
107,151

 
532

 
49,564

Interest expense
(14,442
)
 
(557
)
 
(434
)
 
655

 
(14,778
)
Interest income

 
331

 
1,382

 
(655
)
 
1,058

Other (expense) income

 
970

 
(3,880
)
 
2,718

 
(192
)
Income (loss) before income taxes
(37,900
)
 
(33,917
)
 
104,219

 
3,250

 
35,652

Income tax benefit (expense)
19,527

 
(8,651
)
 
(10,609
)
 

 
267

Income in subsidiaries
54,292

 
93,610

 

 
(147,902
)
 

Net income
$
35,919

 
$
51,042

 
$
93,610

 
$
(144,652
)
 
$
35,919

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
35,527

 
$
51,080

 
$
90,666

 
$
(141,746
)
 
$
35,527

 
Condensed Consolidating Statement of Income and Comprehensive Income
 
Three Months Ended October 1, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
Revenue
$

 
$
299,557

 
$
826,576

 
$
(261,435
)
 
$
864,698

Cost of goods sold

 
224,835

 
542,764

 
(219,700
)
 
547,899

Gross profit

 
74,722

 
283,812

 
(41,735
)
 
316,799

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
6,248

 
12,427

 
115,044

 
(7,641
)
 
126,078

Selling, general and administrative
19,794

 
74,673

 
89,971

 
(45,855
)
 
138,583

Other operating expense

 
93

 
1,013

 
5,639

 
6,745

Total operating expenses
26,042

 
87,193

 
206,028

 
(47,857
)
 
271,406

Income (loss) from operations
(26,042
)
 
(12,471
)
 
77,784

 
6,122

 
45,393

Interest expense
(15,167
)
 
(589
)
 
(979
)
 
1,181

 
(15,554
)
Interest income

 
1,509

 
(136
)
 
(1,181
)
 
192

Other (expense) income

 
189

 
1,780

 
(2,280
)
 
(311
)
Income (loss) before income taxes
(41,209
)
 
(11,362
)
 
78,449

 
3,842

 
29,720

Income tax (expense) benefit
13,136

 
(28,833
)
 
(2,176
)
 

 
(17,873
)
Income in subsidiaries
39,920

 
76,273

 

 
(116,193
)
 

Net income
$
11,847

 
$
36,078

 
$
76,273

 
$
(112,351
)
 
$
11,847

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
12,258

 
$
36,079

 
$
76,683

 
$
(112,762
)
 
$
12,258


19

Table of Contents

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

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

 
$
528,548

 
$
1,356,236

 
$
(422,370
)
 
$
1,462,414

Cost of goods sold

 
380,354

 
873,175

 
(348,514
)
 
905,015

Gross profit

 
148,194

 
483,061

 
(73,856
)
 
557,399

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
13,499

 
27,886

 
195,084

 
(8,572
)
 
227,897

Selling, general and administrative
30,871

 
133,170

 
180,056

 
(65,799
)
 
278,298

Other operating expense
214

 
23,860

 
5,298

 
97

 
29,469

Total operating expenses
44,584

 
184,916

 
380,438

 
(74,274
)
 
535,664

Income (loss) from operations
(44,584
)
 
(36,722
)
 
102,623

 
418

 
21,735

Interest expense
(26,366
)
 
(1,132
)
 
(768
)
 
1,217

 
(27,049
)
Interest income

 
825

 
2,216

 
(1,217
)
 
1,824

Other (expense) income

 
756

 
(1,882
)
 

 
(1,126
)
(Loss) income before income taxes
(70,950
)
 
(36,273
)
 
102,189

 
418

 
(4,616
)
Income tax benefit (expense)
35,773

 
(16,175
)
 
(9,687
)
 

 
9,911

Income in subsidiaries
40,472

 
92,502

 

 
(132,974
)
 

Net income
$
5,295

 
$
40,054

 
$
92,502

 
$
(132,556
)
 
$
5,295

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
5,622

 
$
40,153

 
$
90,216

 
$
(130,369
)
 
$
5,622

 
Condensed Consolidating Statement of Income and Comprehensive Income
 
Six Months Ended October 1, 2016
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$
732,543

 
$
1,552,386

 
$
(721,694
)
 
$
1,563,235

Cost of goods sold

 
558,098

 
1,061,525

 
(649,662
)
 
969,961

Gross profit

 
174,445

 
490,861