Document
false--03-28Q12020000160477800000000001218507000127178500040000320000.00010.000140500000040500000011906300011794300011906300011794300000000.00010.00015000000500000000000000150000001001000000 0001604778 2019-03-31 2019-06-29 0001604778 2019-07-26 0001604778 2019-06-29 0001604778 2019-03-30 0001604778 2018-04-01 2018-06-30 0001604778 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001604778 2018-03-31 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 2019-06-29 0001604778 us-gaap:CommonStockMember 2019-03-31 2019-06-29 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-30 0001604778 us-gaap:CommonStockMember 2019-03-30 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001604778 us-gaap:RetainedEarningsMember 2019-03-31 2019-06-29 0001604778 us-gaap:RetainedEarningsMember 2018-03-31 0001604778 us-gaap:CommonStockMember 2018-03-31 0001604778 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001604778 us-gaap:RetainedEarningsMember 2018-06-30 0001604778 2018-06-30 0001604778 us-gaap:CommonStockMember 2019-06-29 0001604778 us-gaap:RetainedEarningsMember 2019-03-30 0001604778 us-gaap:RetainedEarningsMember 2019-06-29 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001604778 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-29 0001604778 us-gaap:CommonStockMember 2018-06-30 0001604778 us-gaap:AccountingStandardsUpdate201602Member us-gaap:RetainedEarningsMember 2019-03-31 2019-06-29 0001604778 rfmd:InfrastructureandDefenseProductsMember 2019-03-31 2019-06-29 0001604778 rfmd:MobileProductsMember 2019-03-30 0001604778 rfmd:MobileProductsMember 2019-06-29 0001604778 rfmd:MobileProductsMember 2019-03-31 2019-06-29 0001604778 rfmd:InfrastructureandDefenseProductsMember 2019-03-30 0001604778 rfmd:InfrastructureandDefenseProductsMember 2019-06-29 0001604778 us-gaap:LicensingAgreementsMember 2019-06-29 0001604778 us-gaap:LicensingAgreementsMember 2019-03-30 0001604778 us-gaap:DevelopedTechnologyRightsMember 2019-03-30 0001604778 us-gaap:TradeNamesMember 2019-06-29 0001604778 us-gaap:InProcessResearchAndDevelopmentMember 2019-03-30 0001604778 us-gaap:DevelopedTechnologyRightsMember 2019-06-29 0001604778 us-gaap:CustomerRelationshipsMember 2019-03-30 0001604778 us-gaap:CustomerRelationshipsMember 2019-06-29 0001604778 us-gaap:TradeNamesMember 2019-03-30 0001604778 us-gaap:NoncompeteAgreementsMember 2019-03-30 0001604778 us-gaap:NoncompeteAgreementsMember 2019-06-29 0001604778 us-gaap:InProcessResearchAndDevelopmentMember 2019-06-29 0001604778 rfmd:ActiveSemiMember 2019-05-06 0001604778 rfmd:ActiveSemiMember 2019-03-31 2019-06-29 0001604778 srt:MinimumMember rfmd:ActiveSemiMember us-gaap:DevelopedTechnologyRightsMember 2019-05-06 2019-05-06 0001604778 rfmd:ActiveSemiMember 2019-05-06 2019-05-06 0001604778 rfmd:ActiveSemiMember us-gaap:CustomerRelationshipsMember 2019-05-06 2019-05-06 0001604778 srt:MaximumMember rfmd:ActiveSemiMember us-gaap:DevelopedTechnologyRightsMember 2019-05-06 2019-05-06 0001604778 rfmd:ActiveSemiMember us-gaap:DevelopedTechnologyRightsMember 2019-05-06 2019-05-06 0001604778 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-29 0001604778 us-gaap:FairValueMeasurementsRecurringMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2019-03-30 0001604778 us-gaap:FairValueMeasurementsRecurringMember 2019-06-29 0001604778 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-06-29 0001604778 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-29 0001604778 us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2019-03-30 0001604778 us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-06-29 0001604778 us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-03-30 0001604778 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2019-03-30 0001604778 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2019-06-29 0001604778 rfmd:A7.00SeniorNotesdue2025Member 2019-06-29 0001604778 rfmd:A5.5SeniorNotesdue2026Member 2019-03-30 0001604778 rfmd:TermLoanMember 2019-06-29 0001604778 rfmd:FinanceleasesMember 2019-03-30 0001604778 rfmd:TermLoanMember 2019-03-30 0001604778 rfmd:FinanceleasesMember 2019-06-29 0001604778 rfmd:A5.5SeniorNotesdue2026Member 2019-06-29 0001604778 rfmd:A7.00SeniorNotesdue2025Member 2019-03-30 0001604778 us-gaap:RevolvingCreditFacilityMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2017-12-05 0001604778 rfmd:A7.00SeniorNotesdue2025Member 2018-04-01 2019-03-30 0001604778 rfmd:A5.5SeniorNotesdue2026Member 2018-07-16 0001604778 us-gaap:SeniorNotesMember 2019-03-31 2019-06-29 0001604778 rfmd:A7.00SeniorNotesdue2025Member 2015-11-19 0001604778 rfmd:SeniorDelayedDrawTermLoanMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2017-12-05 2017-12-05 0001604778 rfmd:A6.75SeniorNotesdue2023Member 2019-06-29 0001604778 us-gaap:OtherExpenseMember rfmd:A6.75SeniorNotesdue2023Member 2018-04-01 2018-06-30 0001604778 us-gaap:RevolvingCreditFacilityMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2019-03-31 2019-06-29 0001604778 us-gaap:BridgeLoanMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2017-12-05 0001604778 rfmd:SeniorDelayedDrawTermLoanMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2019-06-17 0001604778 us-gaap:SeniorNotesMember 2018-04-01 2018-06-30 0001604778 us-gaap:StandbyLettersOfCreditMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2017-12-05 0001604778 rfmd:A6.75SeniorNotesdue2023Member 2015-11-19 0001604778 rfmd:A5.5SeniorNotesdue2026Member 2018-08-28 0001604778 rfmd:SeniorDelayedDrawTermLoanMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2019-06-17 2019-06-17 0001604778 rfmd:A5.5SeniorNotesdue2026Member 2019-03-05 0001604778 rfmd:SeniorDelayedDrawTermLoanMember rfmd:BankofAmericaSyndicateMember rfmd:CreditAgreementMember 2017-12-05 0001604778 rfmd:May2018ProgramMember 2019-03-31 2019-06-29 0001604778 rfmd:November2016ProgramMember 2018-05-23 0001604778 rfmd:May2018ProgramMember 2018-05-23 0001604778 rfmd:November2016ProgramMember 2019-03-31 2019-06-29 0001604778 rfmd:May2018ProgramMember 2019-06-29 0001604778 rfmd:November2016ProgramMember 2018-04-01 2018-06-30 0001604778 country:CN 2019-03-31 2019-06-29 0001604778 country:US 2018-04-01 2018-06-30 0001604778 country:TW 2018-04-01 2018-06-30 0001604778 country:US 2019-03-31 2019-06-29 0001604778 country:CN 2018-04-01 2018-06-30 0001604778 srt:EuropeMember 2018-04-01 2018-06-30 0001604778 rfmd:OtherAsiaMember 2019-03-31 2019-06-29 0001604778 srt:EuropeMember 2019-03-31 2019-06-29 0001604778 country:TW 2019-03-31 2019-06-29 0001604778 rfmd:OtherAsiaMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember us-gaap:OneTimeTerminationBenefitsMember 2019-03-31 2019-06-29 0001604778 us-gaap:ContractTerminationMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember us-gaap:ContractTerminationMember 2018-04-01 2018-06-30 0001604778 us-gaap:CostOfSalesMember us-gaap:OneTimeTerminationBenefitsMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember rfmd:AcceleratedDepreciationMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember rfmd:AcceleratedDepreciationMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember rfmd:AcceleratedDepreciationMember 2019-03-31 2019-06-29 0001604778 rfmd:AcceleratedDepreciationMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember us-gaap:OneTimeTerminationBenefitsMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember us-gaap:OneTimeTerminationBenefitsMember 2018-04-01 2018-06-30 0001604778 us-gaap:OtherOperatingIncomeExpenseMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember rfmd:AcceleratedDepreciationMember 2018-04-01 2018-06-30 0001604778 us-gaap:ContractTerminationMember 2019-03-31 2019-06-29 0001604778 us-gaap:OtherOperatingIncomeExpenseMember us-gaap:ContractTerminationMember 2019-03-31 2019-06-29 0001604778 us-gaap:OneTimeTerminationBenefitsMember 2018-04-01 2018-06-30 0001604778 us-gaap:CostOfSalesMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember us-gaap:ContractTerminationMember 2019-03-31 2019-06-29 0001604778 us-gaap:CostOfSalesMember us-gaap:ContractTerminationMember 2018-04-01 2018-06-30 0001604778 rfmd:AcceleratedDepreciationMember 2018-04-01 2018-06-30 0001604778 us-gaap:OneTimeTerminationBenefitsMember 2019-03-31 2019-06-29 0001604778 us-gaap:OneTimeTerminationBenefitsMember 2019-06-29 0001604778 us-gaap:ContractTerminationMember 2019-03-30 0001604778 us-gaap:OneTimeTerminationBenefitsMember 2019-03-30 0001604778 us-gaap:ContractTerminationMember 2019-06-29 0001604778 rfmd:AcceleratedDepreciationMember 2019-03-30 0001604778 rfmd:AcceleratedDepreciationMember 2019-06-29 0001604778 rfmd:FiscalYear2019Member 2019-06-29 0001604778 rfmd:ImpairmentchargesMember rfmd:FiscalYear2018Member 2019-03-31 2019-06-29 0001604778 rfmd:ImpairmentchargesMember 2019-06-29 0001604778 us-gaap:OneTimeTerminationBenefitsMember rfmd:FiscalYear2019Member 2019-03-31 2019-06-29 0001604778 rfmd:ImpairmentchargesMember rfmd:FiscalYear2019Member 2019-03-31 2019-06-29 0001604778 us-gaap:OtherRestructuringMember 2019-06-29 0001604778 us-gaap:OtherRestructuringMember rfmd:FiscalYear2019Member 2019-03-31 2019-06-29 0001604778 us-gaap:OneTimeTerminationBenefitsMember rfmd:FiscalYear2018Member 2019-03-31 2019-06-29 0001604778 rfmd:AcceleratedDepreciationMember rfmd:FiscalYear2019Member 2019-03-31 2019-06-29 0001604778 us-gaap:OperatingSegmentsMember rfmd:MobileProductsMember 2018-04-01 2018-06-30 0001604778 us-gaap:CorporateNonSegmentMember 2019-03-31 2019-06-29 0001604778 us-gaap:OperatingSegmentsMember rfmd:InfrastructureandDefenseProductsMember 2019-03-31 2019-06-29 0001604778 us-gaap:OperatingSegmentsMember rfmd:InfrastructureandDefenseProductsMember 2018-04-01 2018-06-30 0001604778 us-gaap:OperatingSegmentsMember rfmd:MobileProductsMember 2019-03-31 2019-06-29 0001604778 us-gaap:CorporateNonSegmentMember 2018-04-01 2018-06-30 0001604778 srt:ConsolidationEliminationsMember 2018-04-01 2018-06-30 0001604778 srt:ParentCompanyMember 2018-04-01 2018-06-30 0001604778 srt:GuarantorSubsidiariesMember 2018-04-01 2018-06-30 0001604778 srt:NonGuarantorSubsidiariesMember 2018-04-01 2018-06-30 0001604778 srt:ConsolidationEliminationsMember 2018-03-31 0001604778 srt:GuarantorSubsidiariesMember 2018-06-30 0001604778 srt:ParentCompanyMember 2018-06-30 0001604778 srt:GuarantorSubsidiariesMember 2018-03-31 0001604778 srt:NonGuarantorSubsidiariesMember 2018-03-31 0001604778 srt:ConsolidationEliminationsMember 2018-06-30 0001604778 srt:NonGuarantorSubsidiariesMember 2018-06-30 0001604778 srt:ParentCompanyMember 2018-03-31 0001604778 srt:GuarantorSubsidiariesMember 2019-03-31 2019-06-29 0001604778 srt:NonGuarantorSubsidiariesMember 2019-03-31 2019-06-29 0001604778 srt:ConsolidationEliminationsMember 2019-03-31 2019-06-29 0001604778 srt:ParentCompanyMember 2019-03-31 2019-06-29 0001604778 srt:GuarantorSubsidiariesMember 2019-06-29 0001604778 srt:ConsolidationEliminationsMember 2019-06-29 0001604778 srt:ParentCompanyMember 2019-06-29 0001604778 srt:NonGuarantorSubsidiariesMember 2019-06-29 0001604778 srt:NonGuarantorSubsidiariesMember 2019-03-30 0001604778 srt:ConsolidationEliminationsMember 2019-03-30 0001604778 srt:GuarantorSubsidiariesMember 2019-03-30 0001604778 srt:ParentCompanyMember 2019-03-30 iso4217:USD xbrli:shares xbrli:pure iso4217:USD xbrli:shares
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 29, 2019
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=13043421&doc=11
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 office)
 
(Zip code)
(336) 664-1233
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered

Common Stock, $0.0001 par value
 
QRVO
 
The Nasdaq Stock Market LLC
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 every Interactive Data File required to be submitted 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 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.


Table of Contents

Large accelerated filer
þ
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 

 
Emerging growth 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

As of July 26, 2019, there were 117,784,657 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, except per share data)
(Unaudited)
 
 
June 29, 2019
 
March 30, 2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
629,599

 
$
711,035

Accounts receivable, less allowance of $32 and $40 as of June 29, 2019 and March 30, 2019, respectively
326,714

 
378,172

Inventories (Note 3)
517,755

 
511,793

Prepaid expenses
31,894

 
25,766

Other receivables
16,506

 
21,934

Other current assets
34,365

 
36,141

Total current assets
1,556,833

 
1,684,841

Property and equipment, net of accumulated depreciation of $1,271,785 at June 29, 2019 and $1,218,507 at March 30, 2019
1,309,471

 
1,366,513

Goodwill (Note 4)
2,300,912

 
2,173,889

Intangible assets, net (Note 4)
508,159

 
408,210

Long-term investments (Note 5)
97,990

 
97,786

Other non-current assets (Note 6)
153,016

 
76,785

Total assets
$
5,926,381

 
$
5,808,024

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
224,735

 
$
233,307

Accrued liabilities
168,643

 
160,516

Current portion of long-term debt (Note 7)
1,732

 
80

Other current liabilities (Note 6)
57,036

 
41,711

Total current liabilities
452,146

 
435,614

Long-term debt (Note 7)
1,018,614

 
920,935

Other long-term liabilities (Note 6)
118,278

 
91,796

Total liabilities
1,589,038

 
1,448,345

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; 117,943 and 119,063 shares issued and outstanding at June 29, 2019 and March 30, 2019, respectively
4,625,566

 
4,687,455

Accumulated other comprehensive loss, net of tax
(6,681
)
 
(6,624
)
Accumulated deficit
(281,542
)
 
(321,152
)
Total stockholders’ equity
4,337,343

 
4,359,679

Total liabilities and stockholders’ equity
$
5,926,381

 
$
5,808,024

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
 
June 29, 2019
 
June 30, 2018
Revenue
$
775,598

 
$
692,670

Cost of goods sold
481,309

 
455,937

Gross profit
294,289

 
236,733

Operating expenses:
 
 
 
Research and development
118,920

 
110,903

Selling, general and administrative
88,979

 
135,930

Other operating expense (Notes 4 and 10)
31,164

 
9,115

Total operating expenses
239,063

 
255,948

Operating income (loss)
55,226

 
(19,215
)
Interest expense (Note 7)
(11,864
)
 
(14,353
)
Interest income
2,946

 
3,394

Other expense (Note 7)
(1,111
)
 
(31,955
)
 
 
 
 
Income (loss) before income taxes
45,197

 
(62,129
)
 
 
 
 
Income tax (expense) benefit (Note 12)
(5,656
)
 
32,136

Net income (loss)
$
39,541

 
$
(29,993
)
 
 
 
 
Net income (loss) per share (Note 13):
 
 
 
Basic
$
0.33

 
$
(0.24
)
Diluted
$
0.33

 
$
(0.24
)
 
 
 
 
Weighted average shares of common stock outstanding (Note 13):
 
 
 
Basic
118,756

 
126,198

Diluted
121,123

 
126,198


See accompanying Notes to Condensed Consolidated Financial Statements.


4

Table of Contents

QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
 
June 29, 2019
 
June 30, 2018
Net income (loss)
 
$
39,541

 
$
(29,993
)
Other comprehensive loss:
 
 
 
 
Unrealized gain on marketable securities, net of tax
 

 
5

Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term investment nature
 
(213
)
 
(2,213
)
Reclassification adjustments, net of tax:
 
 
 
 
Foreign currency loss included in net income (loss)
 
122

 

Amortization of pension actuarial loss
 
34

 
24

Other comprehensive loss
 
(57
)
 
(2,184
)
Total comprehensive income (loss)
 
$
39,484

 
$
(32,177
)
See accompanying Notes to Condensed Consolidated Financial Statements.



5

Table of Contents

QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)



 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
 
 
Common Stock
 
 
 
 
 
Shares
 
Amount
 
 
 
Total
Balance, March 30, 2019
119,063

 
$
4,687,455

 
$
(6,624
)
 
$
(321,152
)
 
$
4,359,679

Net income

 

 

 
39,541

 
39,541

Other comprehensive loss

 

 
(57
)
 

 
(57
)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
185

 
(3,576
)
 

 

 
(3,576
)
Issuance of common stock in connection with employee stock purchase plan
239

 
14,948

 

 

 
14,948

Cumulative-effect adoption of ASU 2016-02

 

 

 
69

 
69

Repurchase of common stock, including transaction costs
(1,544
)
 
(100,073
)
 

 

 
(100,073
)
Stock-based compensation

 
26,812

 

 

 
26,812

Balance, June 29, 2019
117,943

 
$
4,625,566

 
$
(6,681
)
 
$
(281,542
)
 
$
4,337,343

 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2018
126,322

 
$
5,237,085

 
$
(2,752
)
 
$
(458,769
)
 
$
4,775,564

Net loss

 

 

 
(29,993
)
 
(29,993
)
Other comprehensive loss

 

 
(2,184
)
 

 
(2,184
)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
266

 
(4,575
)
 

 

 
(4,575
)
Issuance of common stock in connection with employee stock purchase plan
249

 
14,282

 

 

 
14,282

Cumulative-effect adoption of ASU 2014-09


 

 

 
4,492

 
4,492

Repurchase of common stock, including transaction costs
(1,239
)
 
(100,004
)
 

 

 
(100,004
)
Stock-based compensation

 
20,523

 

 

 
20,523

Balance, June 30, 2018
125,598

 
$
5,167,311

 
$
(4,936
)
 
$
(484,270
)
 
$
4,678,105



6

Table of Contents

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

 
Three Months Ended

June 29, 2019
 
June 30, 2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
39,541

 
$
(29,993
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation
63,904

 
43,451

Intangible assets amortization (Note 4)
58,366

 
133,321

Loss on debt extinguishment (Note 7)

 
33,373

Deferred income taxes
(11,015
)
 
(26,684
)
Stock-based compensation expense
24,953

 
19,345

Other, net
4,400

 
(2,796
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
57,298

 
(14,849
)
Inventories
6,371

 
(29,587
)
Prepaid expenses and other current and non-current assets
581

 
(11,503
)
Accounts payable and accrued liabilities
7,564

 
(20,625
)
Income tax payable and receivable
1,868

 
(16,571
)
Other liabilities
3,287

 
(1,623
)
Net cash provided by operating activities
257,118

 
75,259

Investing activities:
 
 
 
Purchase of property and equipment
(50,295
)
 
(43,564
)
Purchase of available-for-sale debt securities

 
(132,729
)
Purchase of a business, net of cash acquired (Note 4)
(291,551
)
 

Proceeds from sales of available-for-sale debt securities
1,950

 
75,000

Other investing activities
(2,236
)
 
(8,667
)
Net cash used in investing activities
(342,132
)
 
(109,960
)
Financing activities:
 
 
 
Repurchase of debt (Note 7)

 
(458,172
)
Proceeds from borrowings (Note 7)
100,000

 

Repurchase of common stock, including transaction costs (Note 8)
(100,073
)
 
(100,004
)
Proceeds from the issuance of common stock
9,379

 
9,889

Tax withholding paid on behalf of employees for restricted stock units
(4,806
)
 
(6,802
)
Other financing activities
(634
)
 
(214
)
Net cash provided by (used in) financing activities
3,866

 
(555,303
)
 
 
 
 
Effect of exchange rate changes on cash
(284
)
 
(2,014
)
Net decrease in cash, cash equivalents and restricted cash
(81,432
)
 
(592,018
)
Cash, cash equivalents and restricted cash at the beginning of the period
711,382

 
926,402

Cash, cash equivalents and restricted cash at the end of the period
$
629,950

 
$
334,384

Non-cash investing information:
 
 
 
Capital expenditure adjustments included in accounts payable and accrued liabilities
$
25,270

 
$
35,394

 
 
 
 
Reconciliation of cash, cash equivalents and restricted cash
 
 
 
Cash and cash equivalents
$
629,599

 
$
334,039

Restricted cash included in "Other non-current assets"
351

 
345

Total cash, cash equivalents and restricted cash
629,950

 
334,384

See accompanying Notes to Condensed Consolidated Financial Statements.

7

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 ("U.S. GAAP"). 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 U.S. GAAP 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 March 30, 2019.

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 2019 financial statements have been reclassified to conform with the fiscal 2020 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 2020 and 2019 are 52-week years.

2. 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 March 30, 2019.

In February 2016, the FASB issued Accounting Standards Update 2016-02, "Leases (Topic 842)," with multiple amendments subsequently issued. The new guidance requires that lease arrangements be presented on the lessee's balance sheet by recording a right-of-use asset and a lease liability equal to the present value of the related future minimum lease payments. The Company adopted the standard in the first quarter of fiscal 2020, using the modified retrospective approach which permits lessees to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. Upon adoption, the Company recorded a right-of-use asset of $70.7 million and a lease liability of $75.0 million.  The difference between the right-of-use asset and lease liability is primarily attributed to a deferred rent liability which existed under Accounting Standards Codification ("ASC") 840, "Leases.

The Company elected the transition package of practical expedients, under which the Company does not have to reassess (1) whether any expired or existing contracts are leases, or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. Further, the Company elected the practical expedient not to separate lease and non-lease components for substantially all of its classes of leases and to account for the combined lease and non-lease components as a single lease component. In addition, the Company made an accounting policy election to exclude leases with an initial term of 12 months or less from the balance sheet.

The adoption of this standard resulted in a cumulative-effect adjustment to accumulated deficit of less than $0.1 million. This standard did not have a material impact on the Condensed Consolidated Statement of Operations or Condensed Consolidated Statement of Cash Flows. See Note 6 for further disclosures resulting from the adoption of this new standard.


8

Table of Contents

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


3. INVENTORIES
The components of inventories, net of reserves, are as follows (in thousands):
 
June 29, 2019
 
March 30, 2019
Raw materials
$
109,603

 
$
118,608

Work in process
265,794

 
272,469

Finished goods
142,358

 
120,716

Total inventories
$
517,755

 
$
511,793



4. BUSINESS ACQUISITION

On May 6, 2019, the Company completed its acquisition of Active-Semi International, Inc. ("Active-Semi"), a private fabless supplier of programmable analog power solutions. The acquisition expanded the Company's product offerings for existing customers and new customers in power management markets. The purchase price of $309.4 million was allocated to Active-Semi's net tangible assets (approximately $24.1 million) and intangible assets (approximately $158.3 million) based on their estimated fair values as of May 6, 2019. The excess of the purchase price over the value of the net tangible assets and intangible assets resulted in goodwill of approximately $127.0 million. The more significant intangible assets acquired included developed technology of $76.6 million (being amortized over 5 to 9 years), customer relationships of $40.9 million (being amortized over 5 years) and in-process research and development ("IPRD") of $40.6 million. The purchase price allocation is based on the estimated fair value of assets acquired and liabilities assumed. The Company will continue to evaluate certain assets, liabilities and tax estimates that are subject to change within the measurement period (up to one year from the acquisition date).

During the three months ended June 29, 2019, total cash payments associated with this acquisition were $291.6 million.

At the acquisition date, the Company recognized approximately $15.0 million in postcombination compensation expense.

The change in the carrying amount of goodwill for the three months ended June 29, 2019, is as follows (in thousands):
 
Mobile Products
 
Infrastructure and Defense Products
 
Total
Balance as of March 30, 2019
$
1,751,503

 
$
422,386

 
$
2,173,889

Goodwill resulting from Active-Semi acquisition

 
127,023

 
127,023

Balance at June 29, 2019
$
1,751,503

 
$
549,409

 
$
2,300,912



9

Table of Contents

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


The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangible assets (in thousands):
 
June 29, 2019
 
March 30, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Intangible assets:
 
 
 
 
 
 
 
Developed technology
$
840,772

 
$
519,348

 
$
1,246,335

 
$
960,793

Customer relationships
426,522

 
291,985

 
1,272,725

 
1,161,735

Trade names 
200

 
67

 
29,391

 
29,391

Technology licenses
3,219

 
1,754

 
14,704

 
13,026

Non-compete agreement

 

 
1,026

 
1,026

IPRD
50,600

 
N/A

 
10,000

 
N/A

Total
$
1,321,313

 
$
813,154

 
$
2,574,181

 
$
2,165,971


In the first quarter of each fiscal year, the Company removes the fully amortized balances from the gross asset and accumulated amortization amounts of those intangible assets that were fully amortized as of the prior fiscal year end.

Total intangible assets amortization expense was $58.4 million for the three months ended June 29, 2019 and $133.3 million for the three months ended June 30, 2018.


10

Table of Contents

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


5. INVESTMENTS AND FAIR VALUE MEASUREMENTS

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 June 29, 2019 and March 30, 2019 (in thousands):
 
 
 
 
 
Total
 
Quoted Prices In
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
June 29, 2019
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Marketable equity securities
$
625

 
$
625

 
$

 
 
Invested funds in deferred compensation plan (1)

20,101

 
20,101

 

 
 
 
 
Total assets measured at fair value
$
20,726

 
$
20,726

 
$

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (1)
$
20,101

 
$
20,101

 
$

 
 
 
 
Total liabilities measured at fair value
$
20,101

 
$
20,101

 
$

 
 
 
 
 
 
 
 
 
 
March 30, 2019
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Money market funds
$
13

 
$
13

 
$

 
 
Marketable equity securities
901

 
901

 

 
 
Auction rate securities (2)

1,950

 

 
1,950

 
 
Invested funds in deferred compensation plan (1)

18,737

 
18,737

 

 
 
 
 
Total assets measured at fair value
$
21,601

 
$
19,651

 
$
1,950

 
Liabilities
 
 
 
 
 
 
 
Deferred compensation plan obligation (1)
$
18,737

 
$
18,737

 
$

 
 
 
 
Total liabilities measured at fair value
$
18,737

 
$
18,737

 
$

 
(1) 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.
(2) The Company's Level 2 auction rate securities were debt instruments with interest rates that reset through periodic short-term auctions and were valued based on quoted prices for identical or similar instruments in markets that were not active. During the first quarter of fiscal 2020, the Company sold its auction rate securities at par value.
 
As of June 29, 2019 and March 30, 2019, the Company did not have any Level 3 assets or liabilities.

Equity Investment Without a Readily Determinable Fair Value
As of June 29, 2019, the Company has invested $60.0 million to acquire preferred shares of a private limited company. This investment was determined to be an equity investment without a readily determinable fair value and is accounted for using the measurement alternative in accordance with ASC 321, "Investments - Equity Securities." As of June 29, 2019, there was no impairment or observable price change for this investment. 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," "Other current assets" 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 (debt securities) and "Other income (expense)" in the Condensed Consolidated Statements of Operations (equity securities).

11

Table of Contents

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



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 7 for further disclosures related to the fair value of the Company's long-term debt.

6. LEASES
The Company leases certain of its corporate, manufacturing and other facilities from multiple third-party real estate developers. The Company also leases various machinery and office equipment. These operating leases expire at various dates through 2036, and some of these leases have renewal options, with the longest ranging up to two, ten-year periods.

In fiscal 2018, the Company entered into a finance lease which is expected to commence in fiscal 2021 and is not recorded in the Condensed Consolidated Balance Sheet as of June 29, 2019. The Company’s other finance lease is immaterial.

The Company determines that a contract contains a lease at lease inception if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In evaluating whether the right to control an identified asset exists, the Company assesses whether it has the right to direct the use of the identified asset and obtain substantially all of the economic benefit from the use of the identified asset.

Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options. To the extent that the Company's agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time.

The components of lease expense for operating leases for the three months ended June 29, 2019, are as follows:
 
Three Months Ended
 
June 29, 2019
Operating lease expense
$
3,454

Short-term lease expense
1,965

Variable lease expense
414

Total lease expense
$
5,833



Supplemental cash information and non-cash activities related to operating leases are as follows (in thousands):  
 
Three Months Ended
 
June 29, 2019
Cash paid for amounts included in measurement of lease liabilities:
 
Operating cash flows from operating leases
$
4,492

 
 
Non-cash activities:
 
Operating lease assets obtained in exchange for new lease liabilities
$
1,870



12

Table of Contents

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


Supplemental balance sheet information related to operating leases is as follows (in thousands):  
 
  
 Classification on the Condensed Consolidated Balance Sheet
 
June 29, 2019
Assets
  
 
 
 
Operating lease assets
 
Other non-current assets
 
$
66,232

 
  
 
 
 
Liabilities
  
 
 
 
Operating lease current liabilities
  
Other current liabilities
 
$
13,055

Operating lease non-current liabilities
  
Other long-term liabilities
 
$
60,061


Weighted-average remaining lease term and discount rate related to operating leases are as follows:  
 
June 29, 2019
Weighted-average remaining lease term (years) - operating leases
8.78

Weighted-average discount rate - operating leases
4.21
%

Maturities of lease liabilities under operating leases by fiscal year as of June 29, 2019 are as follows (in thousands):  
 
June 29, 2019
2020
$
11,558

2021
15,008

2022
11,777

2023
9,099

2024
7,723

Thereafter
32,166

Total lease payments
87,331

Less imputed interest
(14,215
)
Present value of lease liabilities
$
73,116



7. DEBT

Long-term debt as of June 29, 2019 and March 30, 2019 is as follows (in thousands):
 
June 29, 2019
 
March 30, 2019
Term loan
$
100,000

 
$

7.00% senior notes due 2025
23,404

 
23,404

5.50% senior notes due 2026
900,000

 
900,000

Finance leases
2,334

 
1,745

Less unamortized premium and issuance costs
(5,392
)
 
(4,134
)
Less current portion of long-term debt
(1,732
)
 
(80
)
Total long-term debt
$
1,018,614

 
$
920,935



Senior Notes due 2023 and 2025
On November 19, 2015, the Company issued $450.0 million aggregate principal amount 6.75% senior notes due December 1, 2023 (the "2023 Notes") and $550.0 million aggregate principal amount 7.00% senior notes due December 1, 2025 (the "2025 Notes"). The 2023 Notes were, and the 2025 Notes are, senior unsecured obligations of the Company and guaranteed, jointly and severally, by the Company and certain of its U.S. subsidiaries (the "Guarantors"). The 2023 Notes and the 2025 Notes were issued pursuant to an indenture dated as of November 19, 2015 (the "2015 Indenture"), by and among the Company, the Guarantors and MUFG Union Bank, N.A., as trustee. The 2015 Indenture contains customary events of default, including payment default, failure to provide certain notices and certain provisions related to bankruptcy events.

In fiscal years 2018 and 2019, the Company retired all of the issued and outstanding 2023 Notes. In connection with certain purchases of the 2023 Notes, the Company recognized a loss on debt extinguishment of $33.4 million as "Other expense" in the Condensed Consolidated Statement of Operations during the three months ended June 30, 2018.

In fiscal years 2018 and 2019, the Company retired $526.6 million of the 2025 Notes. As of June 29, 2019, an aggregate principal amount of $23.4 million of the 2025 Notes remained outstanding.
  
With respect to the 2023 Notes, interest was payable on June 1 and December 1 of each year at a rate of 6.75% per annum, and with respect to the 2025 Notes, interest is payable on June 1 and December 1 of each year at a rate of 7.00% per annum. Interest paid on the 2025 Notes during the three months ended June 29, 2019 was $0.8 million. Interest paid on the 2023 Notes and the 2025 Notes during the three months ended June 30, 2018 was $34.2 million.
  
Senior Notes due 2026
On July 16, 2018, the Company issued $500.0 million aggregate principal amount 5.50% senior notes due 2026 (the “Initial 2026 Notes”). On August 28, 2018 and March 5, 2019, the Company issued an additional $130.0 million and $270.0 million, respectively, aggregate principal amount of such notes (together, the "Additional 2026 Notes" and together with the Initial 2026 Notes, the "2026 Notes"). The 2026 Notes will mature on July 15, 2026, unless earlier redeemed in accordance with their terms. The 2026 Notes are senior unsecured obligations of the Company and are initially guaranteed, jointly and severally, by the Guarantors.

The Initial 2026 Notes were issued pursuant to an indenture, dated as of July 16, 2018 by and among the Company, the Guarantors and MUFG Union Bank, N.A., as trustee, and the Additional 2026 Notes were issued pursuant to supplemental indentures, dated as of August 28, 2018 and March 5, 2019, respectively (such indenture and supplemental indentures, collectively, the "2018 Indenture"). The 2018 Indenture contains customary events of default, including payment default, exchange default, failure to provide certain notices thereunder and certain provisions related to bankruptcy events and also contains customary negative covenants.

In connection with the offerings of the 2026 Notes, the Company agreed to provide the holders of the 2026 Notes with an opportunity to exchange the 2026 Notes for registered notes having terms substantially identical to the 2026 Notes. On June 25, 2019, the Company completed the exchange offer, in which all of the privately placed 2026 Notes were exchanged for new notes that have been registered under the Securities Act of 1933, as amended (the "Securities Act").

Interest is payable on January 15 and July 15 of each year at a rate of 5.50% per annum. As of June 29, 2019, interest payable on the 2026 Notes was $22.7 million.

Credit Agreement
On December 5, 2017, the Company and the Guarantors entered into a five-year unsecured senior credit facility pursuant to a credit agreement with Bank of America, N.A., as administrative agent (in such capacity, the “Administrative Agent”), swing line lender and L/C issuer, and a syndicate of lenders (the "Credit Agreement"). The Credit Agreement includes a senior delayed draw term loan of up to $400.0 million (the "Term Loan") and a $300.0 million senior revolving line of credit (the "Revolving Facility", together with the Term Loan, the "Credit Facility"). On the closing date, $100.0 million of the Term Loan was funded (and subsequently repaid in March 2018). On June 17, 2019, the Company drew $100.0 million of the Term Loan, with the remaining $200.0 million available, at the discretion of the Company, in a final draw. Subsequent amendments to the Credit Agreement have, among other things, extended the delayed draw availability period to December 31, 2019. The Revolving Facility includes a $25.0 million sublimit for the issuance of standby letters of credit and a $10.0 million sublimit for swing line loans. The Company may request that the Credit Facility be increased by up to $300.0 million, subject to securing additional funding commitments from the existing or new lenders. The Credit Facility is available to finance working capital, capital expenditures and other corporate purposes. Outstanding amounts are due in full on the maturity date of December 5, 2022 (with amounts borrowed under the swingline option due in full no later than ten business days after such loan is made), subject to scheduled amortization of the Term Loan principal as set forth in the Credit Agreement prior to the maturity date. During the three months ended June 29, 2019, there were no borrowings under the Revolving Facility.


13

Table of Contents

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


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. As of June 29, 2019, the Company was in compliance with these covenants.

Fair Value of Long-Term Debt
The Company's long-term debt is carried at amortized cost and is measured at fair value quarterly for disclosure purposes. The estimated fair value of the 2025 Notes and the 2026 Notes as of June 29, 2019 was $25.5 million and $947.3 million, respectively (compared to a carrying value of $23.4 million and $900.0 million, respectively). The estimated fair value of the 2025 Notes and the 2026 Notes as of March 30, 2019 was $25.8 million and $929.3 million, respectively. The Company considers its long-term debt to be Level 2 in the fair value hierarchy. Fair values are estimated based on quoted market prices for identical or similar instruments. The 2025 Notes and 2026 Notes trade over the counter, and their fair values were estimated based upon the value of their last trade at the end of the period.

The Company had no outstanding amounts under the Revolving Facility as of June 29, 2019. The Term Loan carries a variable interest rate set at current market rates, and as such, the fair value of the Term Loan approximated book value as of June 29, 2019.

Interest Expense
During the three months ended June 29, 2019, the Company recognized $12.9 million of interest expense related to the 2025 Notes, the 2026 Notes and the Term Loan, which was partially offset by $1.7 million of interest capitalized to property and equipment. During the three months ended June 30, 2018, the Company recognized $17.1 million of interest expense related to the 2023 Notes and the 2025 Notes, which was partially offset by $3.5 million of interest capitalized to property and equipment.

8. STOCK REPURCHASES

On May 23, 2018, the Company announced that its Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of the Company's outstanding stock, which included approximately $126.3 million authorized under the prior program which was terminated concurrent with the new authorization. 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, does not have a fixed term, and may be modified, suspended or terminated at any time without prior notice.

During the three months ended June 29, 2019, the Company repurchased approximately 1.5 million shares of its common stock for approximately $100.1 million under the current program. As of June 29, 2019, $297.8 million remains available for repurchases under the current share repurchase program.

During the three months ended June 30, 2018, the Company repurchased approximately 1.2 million shares of its common stock for approximately $100.0 million (which included 0.4 million shares of its common stock for approximately $35.9 million under the prior share repurchase program).


14

Table of Contents

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


9. REVENUE

The following table presents the Company's revenue disaggregated by geography, based on the location of the customers' headquarters (in thousands):
 
Three Months Ended
 
 
June 29, 2019
 
June 30, 2018
 
Revenue:
 
 
 
 
  China
$
361,143

 
$
284,158

 
  United States
267,496

 
269,454

 
  Other Asia
70,009

 
53,492

 
  Taiwan
40,989

 
52,696

 
  Europe
35,961

 
32,870

 
Total Revenue
$
775,598

 
$
692,670

 

During the first quarter of fiscal 2020, the Company changed its presentation of net revenue based on the "sold to" address of the customer to the above presentation of net revenue based on the location of the customers' headquarters. The June 30, 2018 information above has been reclassified to reflect this change. The Company believes that the disaggregation of revenue based on the location of the customers' headquarters is more representative of how its revenue and cash flows are impacted by geographically-sensitive changes in economic factors.

The Company also disaggregates revenue by operating segments (see Note 11).

10. RESTRUCTURING

In the third quarter of fiscal 2019, the Company initiated restructuring actions to reduce operating expenses and improve its manufacturing cost structure, including the phased closure of a wafer fabrication facility in Florida and idling production at a wafer fabrication facility in Texas. As a result of these actions, the Company expects to record total restructuring charges of approximately $99.0 million, including accelerated depreciation of $52.0 million (to reflect changes in estimated useful lives of certain property and equipment), impairment charges of $16.0 million (to adjust the carrying value of certain property and equipment to reflect its fair value), employee termination benefits of $16.0 million, and other exit costs of $15.0 million. As of the end of the first quarter of fiscal 2020, the Company has recorded cumulative expenses of approximately $37.3 million, $16.0 million, $10.9 million and $4.6 million for accelerated depreciation, impairment charges, employee termination benefits and other exit costs, respectively, as a result of this restructuring action (which is expected to be substantially completed by the end of fiscal 2020).

During fiscal 2018, the Company initiated restructuring actions to improve operating efficiencies. As a result of these actions, the Company has recorded cumulative expenses of $46.3 million and $23.4 million for impairment charges and employee termination benefits, respectively. The Company believes these amounts approximate the total costs to be recognized as this restructuring action is substantially complete.

In addition, the Company recorded immaterial restructuring expenses in the three months ended June 29, 2019 and June 30, 2018, related to employee termination benefits and exited leased facilities associated with restructuring events initiated prior to fiscal 2018.

The Company does not allocate restructuring costs to its reportable segments.



15

Table of Contents

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


The following table summarizes the restructuring activity primarily resulting from these restructuring events:
 
Three months ended June 29, 2019
 
Three months ended June 30, 2018
 
Cost of Goods Sold
 
Other Operating Expense
 
Total
 
Cost of Goods Sold
 
Other Operating Expense
 
Total
One-time employee termination benefits
$

 
$
3,395

 
$
3,395

 
$

 
$
2,638

 
$
2,638

Lease and other contract termination costs
1,835

 
2,801

 
4,636

 

 
164

 
164

Accelerated depreciation
15,938

 

 
15,938

 

 

 

Total
$
17,773

 
$
6,196

 
$
23,969

 
$

 
$
2,802

 
$
2,802


The following table presents a roll-forward of the Company's restructuring liabilities for the three months ended June 29, 2019:
 
One-Time Employee Termination Benefits
 
Accelerated Depreciation
 
Lease and Other Contract Terminations
 
Total
Accrued restructuring balance as of March 30, 2019
$
6,988

 
$

 
$
1,626

 
$
8,614

Costs incurred and charged to expense
3,395

 
15,938

 
4,636

 
23,969

Transfer to right-of-use asset

 

 
(1,248
)
 
(1,248
)
Cash payments
(2,720
)
 

 
(2,519
)
 
(5,239
)
Non-cash activity

 
(15,938
)
 
(1,835
)
 
(17,773
)
Accrued restructuring balance as of June 29, 2019
$
7,663

 
$

 
$
660

 
$
8,323



11. OPERATING SEGMENT INFORMATION

The Company's operating segments as of June 29, 2019 and June 30, 2018 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.

MP is a global supplier of cellular radio frequency ("RF") and Wi-Fi solutions for a variety of mobile devices, including smartphones, wearables, laptops, tablets and cellular-based applications for the Internet of Things ("IoT").

IDP is a global supplier of RF, system-on-a-chip and power management solutions for cellular base station, smart home, IoT and other wireless communications, defense, automotive and multiple analog power management applications.

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


16

Table of Contents

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
 
June 29,
2019
 
June 30,
2018
Revenue:
 
 
 
MP
$
556,253

 
$
486,079

IDP
219,345

 
206,591

Total revenue
$
775,598

 
$
692,670

Operating income (loss):
 
 
 
MP
$
139,935

 
$
89,171

IDP
50,124

 
55,204

All other
(134,833
)
 
(163,590
)
Operating income (loss)
55,226

 
(19,215
)
Interest expense
(11,864
)
 
(14,353
)
Interest income
2,946

 
3,394

Other expense (Note 7)
(1,111
)
 
(31,955
)
Income (loss) before income taxes
$
45,197

 
$
(62,129
)

 
 
Three Months Ended
 
June 29,
2019
 
June 30,
2018
Reconciliation of “All other” category:
 
 
 
Stock-based compensation expense
$
(24,953
)
 
$
(19,345
)
Amortization of intangible assets
(58,182
)
 
(133,175
)
Acquisition and integration related costs
(23,130
)
 
(1,082
)
Restructuring costs
(8,031
)
 
(2,802
)
Accelerated depreciation
(15,938
)
 

Other (including (loss) gain on assets, start-up costs and other miscellaneous corporate overhead)
(4,599
)
 
(7,186
)
Loss from operations for “All other”
$
(134,833
)
 
$
(163,590
)


12. INCOME TAXES

Income Tax Expense
The Company’s provision for income taxes for the three months ended June 29, 2019 and June 30, 2018 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 June 29, 2019 and June 30, 2018.

The Company’s income tax expense and income tax benefit were $5.7 million and $32.1 million, respectively, for the three months ended June 29, 2019 and June 30, 2018, respectively. The Company’s effective tax rate was 12.5% for the three months ended June 29, 2019 and 51.7% for the three months ended June 30, 2018. The Company's effective tax rate for the first quarter of fiscal 2020 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, global intangible low tax income (“GILTI”), domestic tax credits generated, foreign permanent differences and the discrete treatment of postcombination compensation related expenses due to the Active-Semi acquisition. The Company's effective tax rate for the first quarter of fiscal 2019 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, foreign permanent differences, state income taxes, domestic tax credits generated, changes in unrecognized tax benefits, GILTI, and a discrete tax benefit for changes in provisional estimates related to the one-time transition tax on certain unrepatriated earnings of foreign subsidiaries enacted in the Tax Cuts and Jobs Act.

17

Table of Contents

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



Uncertain Tax Positions
The Company’s gross unrecognized tax benefits increased from $103.2 million as of the end of fiscal 2019 to $106.7 million as of the end of the first quarter of fiscal 2020, due primarily to an increase related to tax positions taken with respect to the current fiscal year and positions provisionally recognized as part of Active-Semi purchase accounting.

13. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):
 
Three Months Ended
 
June 29, 2019
 
June 30, 2018
Numerator:
 
 
 
Numerator for basic and diluted net income (loss) per share — net income (loss) available to common stockholders
$
39,541

 
$
(29,993
)
Denominator:
 
 
 
Denominator for basic net income (loss) per share — weighted average shares
118,756

 
126,198

Effect of dilutive securities:
 
 
 
Stock-based awards
2,367

 

Denominator for diluted net income (loss) per share — adjusted weighted average shares and assumed conversions
121,123

 
126,198

Basic net income (loss) per share
$
0.33

 
$
(0.24
)
Diluted net income (loss) per share
$
0.33

 
$
(0.24
)


In the computation of diluted net income (loss) per share for the three months ended June 29, 2019 and June 30, 2018, less than 0.1 million and approximately 3.3 million outstanding shares, respectively, were excluded because the effect of their inclusion would have been anti-dilutive.

14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In accordance with the applicable indentures governing the 2023 Notes, the 2025 Notes and the 2026 Notes, the Guarantors guaranteed the Company's obligations under the 2023 Notes, the 2025 Notes and the 2026 Notes. The 2023 Notes were, and the 2025 Notes and the 2026 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 2015 Indenture and the 2018 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 Guarantors 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 income (loss), and cash flows, had the Parent Company, Guarantors or non-guarantor subsidiaries operated as independent entities.
 

18

Table of Contents

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




 
Condensed Consolidating Balance Sheet
 
June 29, 2019
(in thousands)
Parent Company
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations and Reclassifications
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
229,039

 
$
400,560

 
$

 
$
629,599

Accounts receivable, less allowance

 
39,175

 
287,539

 

 
326,714

Intercompany accounts and notes receivable

 
411,655

 
54,939

 
(466,594
)
 

Inventories

 
153,792

 
385,298

 
(21,335
)
 
517,755

Prepaid expenses

 
22,658

 
9,236

 

 
31,894

Other receivables

 
3,161

 
13,345

 

 
16,506

Other current assets

 
31,823

 
2,542

 

 
34,365

Total current assets

 
891,303

 
1,153,459

 
(487,929
)
 
1,556,833

Property and equipment, net

 
1,074,569

 
233,328

 
1,574

 
1,309,471

Goodwill

 
1,122,629

 
1,178,283

 

 
2,300,912

Intangible assets, net

 
183,647

 
324,512

 

 
508,159

Long-term investments

 
5,535

 
92,455

 

 
97,990

Long-term intercompany accounts and notes receivable

 
1,191,496

 
116,187

 
(1,307,683
)
 

Investment in subsidiaries
6,608,062

 
2,452,986

 

 
(9,061,048
)
 

Other non-current assets
12,001

 
107,252

 
44,890

 
(11,127
)
 
153,016

Total assets
$
6,620,063

 
$
7,029,417

 
$
3,143,114

 
$
(10,866,213
)
 
$
5,926,381

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 

Accounts payable
$

 
$
75,829