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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
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☑
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the
fiscal year ended
March 28, 2020
or
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☐
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the
transition period from _____to _____
Commission
File Number 001-36801
Qorvo,
Inc.
(Exact name of
registrant as specified in its charter)
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Delaware
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46-5288992
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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7628
Thorndike Road
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Greensboro,
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North
Carolina
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27409-9421
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(Address
of principal executive office)
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(Zip Code)
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(336)
664-1233
Registrant's
telephone number, including area code
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Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.0001
par value
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QRVO
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The Nasdaq Stock Market
LLC
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Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
¨
No þ
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.
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Large accelerated
filer
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þ
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting company
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☐
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Emerging growth
company
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☐
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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 has filed a report on and attestation to its
management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
þ
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ☐
No
þ
The aggregate
market value of the registrant's common stock held by
non-affiliates of the registrant was approximately
$8,484,359,696
as of
September 28,
2019. For
purposes of such calculation, shares of common stock held by
persons who held more than 10% of the outstanding shares of common
stock and shares held by directors and officers of the registrant
and their immediate family members have been excluded because such
persons may be deemed to be affiliates. This determination is not
necessarily conclusive.
As of
May 12,
2020, there
were 114,734,210
shares of the
registrant’s common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
The registrant has
incorporated by reference into Part III of this report certain
portions of its proxy statement for its 2020 annual meeting of
stockholders, which is expected to be filed pursuant to Regulation
14A within 120 days after the end of the registrant’s fiscal year
ended March 28,
2020.
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QORVO,
INC.
FORM
10-K
FOR THE
FISCAL YEAR ENDED MARCH 28, 2020
INDEX
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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Form 10-K Summary.
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Forward-Looking
Information
This report
includes "forward-looking statements" within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995, including, but not limited to, certain disclosures
contained in Item 1, "Business," Item 1A, "Risk Factors" and Item
7, "Management’s Discussion and Analysis of Financial Condition and
Results of Operations." These forward-looking statements include,
but are not limited to, statements about our plans, objectives,
representations and contentions, and are not historical facts and
typically are identified by the use of terms such as "may," "will,"
"should," "could," "expect," "plan," "anticipate," "believe,"
"estimate," "forecast," "predict," "potential," "continue" and
similar words, although some forward-looking statements are
expressed differently. You should be aware that the forward-looking
statements included herein represent management's current judgment
and expectations, but our actual results, events and performance
could differ materially from those expressed or implied by
forward-looking statements, including due to the numerous risks and
uncertainties summarized in Item 1A, "Risk Factors" in this report.
We do not intend to update any of these forward-looking statements
or publicly announce the results of any revisions to these
forward-looking statements, other than as is required under the
federal securities laws.
The following
discussion should be read in conjunction with, and is qualified in
its entirety by reference to, our audited consolidated financial
statements included in this report, including the notes
thereto.
PART
I
ITEM 1.
BUSINESS.
Company Overview
Qorvo® is a
leader in the development and commercialization of technologies and
products for wireless and wired connectivity. We combine a broad
portfolio of innovative radio frequency ("RF") solutions, highly
differentiated semiconductor technologies, systems-level expertise
and global manufacturing scale to supply a diverse set of customers
a broad range of products that enable a more connected
world.
Our design
expertise and manufacturing capabilities span multiple
semiconductor process technologies. Our primary wafer fabrication
facilities are in North Carolina, Oregon and Texas, and our primary
assembly and test facilities are in China, Costa Rica, Germany and
Texas. We also source multiple products and materials through
external suppliers. We operate design, sales and other
manufacturing facilities throughout Asia, Europe and North
America.
We have two
reportable segments: Mobile Products ("MP") and Infrastructure and
Defense Products ("IDP"). MP is a global supplier of cellular,
ultra-wide band ("UWB") and Wi-Fi solutions for a variety of
high-volume markets, including smartphones, wearables, laptops,
tablets and Internet of Things ("IoT") applications. IDP is a
global supplier of RF, system-on-a-chip ("SoC") and power
management solutions for wireless infrastructure, defense, smart
home, automotive and other IoT applications. Our MP segment
supplies consumer products with a shorter life cycle, to a small
set of large global customers. Our IDP segment supplies a diverse
portfolio of products, that generally have longer life cycles, to a
broad base of customers.
During fiscal
2020, we made the following strategic acquisitions to expand our
product offerings and design capabilities and to extend our reach
into new markets:
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•
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Active-Semi
International, Inc. ("Active-Semi"), a fabless supplier of
programmable power management solutions;
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•
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Cavendish
Kinetics Limited ("Cavendish"), a supplier of high-performance RF
microelectromechanical system ("MEMS") technology for RF switching
applications;
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•
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Custom MMIC
Design Services, Inc. ("Custom MMIC"), a fabless provider of
gallium arsenide ("GaAs") and gallium nitride ("GaN") monolithic
microwave integrated circuits ("MMICs") for defense and aerospace
applications; and,
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•
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Decawave Limited
("Decawave"), a leader in UWB technology and provider of UWB
solutions for mobile, automotive and IoT applications.
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Qorvo was
incorporated in Delaware in 2013. Our principal executive office is
located at 7628 Thorndike Road, Greensboro, North Carolina
27409-9421 and our telephone number is (336) 664-1233.
Industry Trends
There is growing
global demand for ubiquitous, always-on connectivity. Total mobile
data traffic continues to grow as smartphones, laptops, and other
mobile devices are used increasingly to access the internet, stream
videos, interact on social media and access other services. 5G is
expected to enhance how we connect, communicate and transact
business. 5G will improve network capacity, increase data
throughput, reduce signal latency and enable machine-to-machine
connectivity on a massive scale. Existing applications will be
transformed, and new applications will be developed.
With each
application, demand is increasing for RF solutions that improve
performance, reduce product footprint, enhance network efficiency
and ensure data security. In mobile devices, the deployment of 5G,
the addition of Multiple-Input/Multiple-Output ("MIMO")
architectures and new carrier aggregation ("CA") band combinations
increase device complexity. To address this, Qorvo is integrating a
broad portfolio of technologies and advancing the state-of-the-art
in functional integration. In consumer IoT, the increasing demand
for secure and accurate location and data communication services is
driving demand for our UWB technology, which enables real-time,
highly accurate and reliable local area precision-location
services. In infrastructure, the deployment of 5G networks is
driving demand for Qorvo’s high performance communications
infrastructure solutions, including our GaN high power amplifiers
and GaAs front-end modules ("FEMs"). In defense and aerospace, the
trend toward phased array radar, the shift to higher frequencies
and the sharing of existing frequency bands with cellular
communications are expanding the demand for Qorvo’s
capabilities.
Markets
Our business is
diversified primarily across the following end markets: mobile
devices; cellular base stations; defense and aerospace; Wi-Fi
customer premises equipment; smart home; automotive connectivity;
and various power management applications.
Mobile
Devices
Our largest
market, mobile devices, includes smartphones, wearables, laptops,
tablets and other devices. This market is characterized by
increasing demand for data throughput, the transition to 5G
cellular technology and the proliferation of new communication and
location-based services.
The transition to
5G involves advanced RF modulation across a wide range of frequency
bands, including sub-6 GHz and millimeter wave. This introduces new
challenges related to wider bandwidth, signal integrity, efficiency
and overall system complexity.
To enable secure
precision-location services, mobile devices are adopting UWB
technology, given its superior location accuracy, security,
throughput, and latency versus other short-range
technologies.
Mobile device
customers increasingly need compact RF solutions that improve
signal quality, extend battery life and enhance the end-user
experience. By leveraging our technology leadership, systems-level
expertise and advanced packaging capabilities, we deliver
high-performance discrete and highly integrated RF solutions to our
customers.
Cellular
Base Stations
We support
top-tier global cellular base station original equipment
manufacturers ("OEMs") with a broad portfolio of RF solutions
across frequency bands. Requirements for higher throughput and
broader coverage are fueling the expansion of the global base
station network, including the migration to 5G networks. OEMs are
deploying 5G frequency bands (referred to as sub-6 GHz and
millimeter wave) that have wider channel bandwidths, and they are
architecting radios that utilize massive MIMO active antenna array
technology, increasing the number of RF transmit and receive
channels by factors of 16 times, up to 256 times. These 5G networks
require highly efficient RF solutions that increase capacity and
expand coverage in a compact form factor.
Defense and
Aerospace
Within the
defense and aerospace markets, we focus primarily on high-power
phased array radar, electronic warfare (EW) and communications
systems. We engage directly with the U.S. government to develop
next-generation semi-conductor and packaging technologies. We are a
leading supplier of RF products and compound semiconductor foundry
services to defense primes and other global defense and aerospace
customers.
Wi-Fi
Customer Premises Equipment
Wi-Fi customer
premises equipment ("CPE") includes routers, gateways and
enterprise infrastructure. In this market, consumer and enterprise
customers want broader coverage and faster and more reliable
connectivity enabling video streaming, augmented/virtual reality
and other services, often in high density user environments. The
Wi-Fi industry is migrating from 802.11ac to 802.11ax, also known
as Wi-Fi 6. Wi-Fi is adopting higher order MIMO architectures, up
to 8x8, to maximize range and capacity. With each new standard and
architecture, there is a corresponding increase in the requirements
for more complex RF front end solutions.
Smart
Home
Smart home
systems can be connected wirelessly allowing remote access and
control of various household functions, enhancing convenience,
entertainment, security and comfort. Smart home devices can be
controlled through a computer, smartphone or through a direct
peer-to-peer connection such as a voice-enabled remote control.
They use industry-standard technologies, such as Bluetooth® Low
Energy, Zigbee, Thread and Connected Home over IP, or CHIP, to link
to a central gateway that accesses the internet via Wi-Fi. Smart
home customers prefer standards-agnostic, multi-protocol products
that extend battery life and enable coexistence of multiple radios
in a compact form factor.
Automotive
Next-generation
wireless technologies are enabling new use cases in automotive
wireless connectivity, including vehicle-to-vehicle communications
and autonomous driving. These new use cases require complex RF
solutions spanning multiple protocols, including GPS, satellite
radio, Long-Term Evolution ("LTE"), Wi-Fi, 5G (sub-6 GHz and
millimeter wave) and UWB. In automotive applications, UWB enables
more secure access than current technologies.
Power
Management
Power efficiency
is a core requirement in electronics. To enhance efficiency, extend
battery life and protect the environment, power tools are moving
from gasoline and brushed DC motors to battery powered brushless
motors. Also, data storage is transitioning from hard drives to
solid state drives. Power management solutions provide customers
digital control of analog power, whether controlling brushless DC
motors or managing power delivery for end equipment.
Other
Markets
Qorvo competes in
several smaller markets, including broadband cable, point-to-point
radio and Very Small Aperture Terminal ("VSAT") applications. In
broadband cable, we increase the bandwidth to the home by
supporting DOCSIS 3.1 and the evolving DOCSIS 4.0 standard. Qorvo’s
UWB technology offers secure precision-location services, enabling
association, navigation and location for a range of IoT
applications across markets.
Products
Qorvo’s products
improve performance, reduce complexity, shrink form factors and
solve our customers' most critical RF challenges.
Mobile
Devices
Our products
include highly integrated modules incorporating switches, power
amplifiers ("PAs"), filters and duplexers ("S-PADs"), antenna
tuners, RF power management integrated circuits,
multimode/multi-band PAs and transmit modules, antenna-plexers,
discrete filters and duplexers, discrete switches and UWB system
solutions.
Our most highly
integrated products utilize sophisticated packaging capabilities to
integrate high-performance components, including bulk acoustic wave
("BAW") filters, temperature-compensated surface acoustic wave
("TC-SAW") filters, silicon on insulator ("SOI") switches and low
noise amplifiers ("LNAs"), and advanced GaAs PAs.
We also offer
envelope tracking power management solutions, antenna control
solutions and UWB system solutions supporting secure, low power,
location and communication services.
Cellular
Base Stations
Our integrated
solutions for massive MIMO systems include switch-LNA modules,
variable gain amplifiers and integrated PA Doherty modules. Our
GaAs and SOI solutions offer differentiated low noise performance,
while our GaN PAs target higher frequency bands and combine high
linearity and efficiency with low power consumption.
Defense and
Aerospace
Our products for
defense radar applications bring new capabilities to detect and
neutralize threats against infantry, aircrew and shipboard forces.
Our PAs power phased array radars and our premium filters enable
interference-free connections and optimize frequency spectrum to
expand network capacity and extend coverage. Our Spatium® line of
solid-state, high-power products provide highly reliable, efficient
broadband solutions for complex EW applications across a broad
frequency spectrum. Our recent acquisition of Custom MMIC combines
their portfolio of low noise amplifiers, mixers, phase shifters,
switches, multipliers and attenuators with our product
offerings.
Wi-Fi
Customer Premises Equipment
In Wi-Fi, we
offer PAs, switches, LNAs and BAW filters. We integrate
combinations of these into RF front end modules.
Smart
Home
Qorvo offers
multi-standard SOCs (Zigbee, Bluetooth® Low Energy, Thread)
consisting of SoC hardware, firmware and application
software. To augment the SoC, we also offer various
configurations of advanced filtering and amplification as well as
Wi-Fi 6 FEMs.
Automotive
We provide a
variety of automotive RF connectivity products, including BAW
filters, LNAs, switches, PAs and LTE front end solutions. We also
supply complementary metal oxide semiconductor ("CMOS")-based UWB
chip and module system solutions. Our products meet or exceed
automotive AEC-Q100 quality and reliability standards, and we
supply the leading automotive OEMs, tier-1 suppliers and chipset
vendors.
Power
Management
We supply Power
Application Controllers (PACs®) and programmable analog power ICs
that significantly reduce solution size and cost, improve system
reliability, and shorten system development time. Our products
manage voltages from 1.8V to 600V and power up to 4,000
Watts.
Research and Development
We invest in
research and development ("R&D") to develop advanced
technologies and products necessary to serve our markets. Our
R&D activities focus primarily on large, competitive design win
opportunities for major programs at key customers, which typically
requires us to improve the functional density, performance, size
and cost of our products. We also have R&D resources associated
with the development of new products for broader market
applications. Our R&D efforts require us to focus on both
continuous improvement in our processes for design and manufacture
as well as new innovation in fundamental areas like materials,
software and firmware, semiconductor process technologies,
simulation and modeling, systems architecture, circuit design,
device packaging, module integration and test.
We have developed
several generations of GaAs, GaN, BAW and surface acoustic wave
("SAW") process technologies that we manufacture internally. We
invest in these technologies to improve device performance, reduce
die size and reduce manufacturing costs. We also help develop and
qualify technologies in cooperation with key suppliers, including
SOI for switches and tuners, silicon germanium (SiGe) for
amplifiers, and CMOS for power management devices and SoC
solutions. We combine these technologies with our proprietary
design methods, intellectual property ("IP") and other expertise to
improve performance, increase integration and reduce the size and
cost of our products.
We develop and
qualify advanced packaging technologies to reduce component size,
improve performance and reduce package costs. We are also investing
in large scale module assembly and test capabilities to bring these
technologies to market in very high volumes.
Raw Materials
We purchase
numerous raw materials, passive components and substrates for our
products and manufacturing processes. The industry has experienced
isolated shortages for various components in the past 12 months,
including capacitors. These shortages are being addressed by
suppliers adding additional capacity as we build in flexibility to
our supply chain by adding suppliers and by designing in alternate
capacitors to use in our products.
For our GaAs and
GaN manufacturing operations, we use several raw materials,
including GaAs and GaN on silicon carbide wafers. For our acoustic
filter manufacturing operations, we use several raw materials,
including wafers made from silicon, lithium niobate or lithium
tantalate.
For our
silicon-based products, we use third-party foundries. High demand
for silicon wafers and wafer starting materials has led to supply
constraints from time-to-time, and we have attempted to address
this by qualifying multiple silicon foundries and by obtaining
supply commitments, in some cases in exchange for purchase or
capital commitments by us.
Our manufacturing
strategy includes a balance of internal and external sites
(primarily for assembly and test operations), which helps reduce
costs, provides flexibility of supply, and minimizes the risk of
supply disruption. We routinely qualify multiple sources of supply
and manufacturing sites to reduce the risk of supply interruptions
or price increases and closely monitor suppliers’ key performance
indicators. Our suppliers' and our manufacturing sites are
geographically diversified (with our largest volume sources
distributed throughout Southern and Eastern Asia). We believe we
have adequate sources for the supply of raw materials, passive
components and substrates for our products and manufacturing
needs.
Qorvo is
currently experiencing isolated supply-chain issues caused by the
recent novel coronavirus (COVID-19) outbreak. While this is a
dynamic situation impacting the entire industry, we have a broadly
diversified supply base and our operations are not currently
materially impacted.
Manufacturing
We are a
manufacturer of BAW, GaN, GaAs, SAW, TC-SAW and silicon products.
The majority of our products are multi-chip modules utilizing
multiple semiconductor and acoustic material processing
technologies. These products have varying degrees of complexity and
contain semiconductors and other components that are manufactured
internally or outsourced.
We operate wafer
fabrication facilities for the production of BAW, GaN, GaAs, SAW
and TC-SAW wafers in Greensboro, North Carolina; Hillsboro, Oregon;
and Richardson, Texas. We also use multiple silicon-based process
technologies, including SOI, SiGe and CMOS, which are principally
sourced from leading silicon foundries located throughout the
world. We have a global supply chain and ship millions of units per
day.
We have our own
flip chip, wire bond and wafer-level packaging ("WLP")
technologies. Additionally, we use external suppliers for these and
other packaging technologies.
At the end of the
semiconductor manufacturing process, we regularly conduct wafer
level tests to verify individual circuit performance. These tests
could include electrical validation, RF testing through designed
frequency bands, as well as visual defect inspection. The wafers
are then separated into individual components called die. For
module products, the next step is assembly, during which the die
and other components are placed on high-density interconnect
substrates to provide connectivity between the die and the
components. This populated substrate is formed into a module. Next,
the products are tested for RF performance and prepared for
shipment through a tape and reel process. We primarily use internal
assembly facilities in China, Costa Rica, Germany, and the U.S.,
and we also utilize external suppliers. We also manufacture large
volumes of WLP die and discrete filters that our customers directly
assemble into their products.
Manufacturing
yields can vary significantly between products, based on a number
of factors, including product complexity, performance requirements
and the maturity of our manufacturing processes. To maximize wafer
yields and quality, we test products multiple times, maintain
continuous reliability monitoring and conduct numerous quality
control inspections throughout the production flow.
Our internal
manufacturing facilities require a high level of fixed costs,
consisting primarily of occupancy costs, maintenance, repair,
equipment depreciation, and fixed labor costs related to
manufacturing and process engineering.
Integrated
circuits and filter products are highly complex and sensitive to
contaminants, and semiconductor fabrication requires highly
controlled, clean environments. Wafers can be rejected or die on a
wafer can be found to be nonfunctional as a result of minute
impurities, variances in the fabrication process or defects in the
masks used to transfer circuit patterns onto the
wafers.
Our manufacturing
facilities worldwide are certified to the ISO 9001 quality
standard, and select locations are certified to additional
automotive (IATF 16949), aerospace (AS 9100) and environmental (ISO
14001) standards. These stringent standards are audited and
certified by third-party auditors in addition to our continuous
internal self-audits. The ISO 9001 standard is based on a number of
quality management principles including a strong customer focus,
the motivation of top management, the process approach and
continual improvement. IATF 16949 is the highest international
quality standard for the global automotive industry and
incorporates specific additional requirements for the automotive
industry. AS 9100 is the standardized quality management system for
the aerospace industry. ISO 14001 is an internationally agreed upon
standard for an environmental management system. We require that
all of our key vendors and suppliers be compliant with select
standards, as applicable.
Customers
We design,
develop, manufacture and market products for leading U.S. and
international OEMs and original design manufacturers ("ODMs"). We
also collaborate with leading reference design
partners.
We provide our
products to our largest end customer, Apple Inc. ("Apple"), through
sales to multiple contract manufacturers, which in the aggregate
accounted for 33%, 32%, and 36% of total revenue in fiscal
years 2020, 2019 and 2018, respectively. Huawei
Technologies Co., Ltd. and affiliates ("Huawei") accounted
for 10%, 15% and 8% of our total revenue in
fiscal years 2020, 2019 and 2018, respectively. These
customers primarily purchase RF solutions for a variety of mobile
devices.
Some of our sales
to overseas customers are subject to export licenses or other
restrictions imposed by the U.S. Department of Commerce (see Risk
Factors in Part I, Item 1A set forth in this report).
Sales and Marketing
We sell our
products worldwide directly to customers as well as through a
network of U.S. and foreign sales representative firms and
distributors. We select our domestic and foreign sales
representatives based on technical skills and sales experience, the
presence of complementary product lines and the customer base
served. We provide ongoing training to our internal and external
sales representatives and distributors to keep them educated about
our products. We maintain an internal sales and marketing
organization that is responsible for key account management,
application engineering support for customers, sales and
advertising literature, and technical presentations for industry
conferences. Our sales and customer support centers are located
near our customers throughout the world.
Our website
contains extensive product information and includes an online store
where customers can learn about our products, download product
catalogs, order product samples and request evaluation boards. Our
global team of application engineers interacts with customers
during all stages of design and production, maintains regular
contact with customer engineers, provides product application notes
and engineering data, and assists in the resolution of technical
problems. We maintain close relationships with our customers and
platform providers and provide them strong technical support to
help anticipate future product needs and enhance their customer
experience.
Backlog and Seasonality
Our sales are the
result of standard purchase orders or specific agreements with
customers. Because industry practice allows customers to cancel
orders with limited advance notice prior to shipment, and with
little or no penalty, we believe that backlog as of any particular
date may not be a reliable indicator of our future revenue
levels.
Historically, we
have experienced seasonal fluctuations in the sale of mobile
products, with revenue typically strongest in our second and third
fiscal quarters.
Competition
We operate in a
competitive industry characterized by rapid advances in technology
and new product introductions. Our customers’ product life cycles
are often short, and our competitiveness depends on our ability to
improve our products and processes faster than our competitors,
anticipate changing customer requirements and successfully develop
and launch new products while reducing our costs. Our
competitiveness is also affected by the quality of our customer
service and technical support and our ability to design customized
products that address each customer’s particular requirements
within their cost limitations. The selection process for our
products to be included in our customers’ products is highly
competitive, and our customers provide no guarantees that our
products will be included in the next-generation of products
introduced.
MP competes
primarily with Broadcom Limited; Murata Manufacturing Co., Ltd.;
Qualcomm Technologies, Inc.; and Skyworks Solutions, Inc. IDP
competes primarily with Analog Devices, Inc.; Cree, Inc.; M/A-COM
Technology Solutions, Inc.; NXP Semiconductors N.V.; Silicon
Laboratories, Inc.; STMicroelectronics N.V.; Skyworks Solutions,
Inc.; and Sumitomo Electric Device Innovations.
Many of our
current and potential competitors have entrenched market positions
and customer relationships, established patents and other IP and
substantial technological capabilities. In some cases, our
competitors are also our customers or suppliers. Additionally, many
of our competitors may have significantly greater financial,
technical, manufacturing and marketing resources than we do, which
may allow them to implement new technologies and develop new
products more quickly than we can.
Intellectual Property
We believe our
IP, including patents, copyrights, trademarks and trade secrets, is
important to our business, and we actively seek opportunities to
leverage our IP portfolio to promote our business interests. We
also actively seek to monitor and protect our global IP rights and
to deter unauthorized use of our IP and other assets. Such efforts
can be difficult because of the absence of consistent international
standards and laws. Moreover, we respect the IP rights of others
and have implemented policies and procedures to mitigate the risk
of infringing or misappropriating third-party IP.
Patent
applications are filed within the U.S. and in other countries where
we have a market presence. On occasion, some applications do not
mature into patents for various reasons, including rejections based
on prior art. In addition, the laws of some foreign countries do
not protect IP rights to the same extent as U.S. laws. We have
approximately 1,973 patents that expire from 2020 to 2040. We also
continue to acquire patents through acquisitions or direct
prosecution efforts and engage in licensing transactions to secure
the right to use third-parties’ patents. In view of our rapid
innovation and product development and the comparative pace of
governments’ patenting processes, there is no guarantee that our
products will not be obsolete before the related patents expire or
are granted. However, we believe the duration and scope of our most
relevant patents are sufficient to support our business, which as a
whole is not significantly dependent on any particular patent or
other IP right. As we expand our products and offerings, we also
seek to expand our patent prosecution efforts to cover such
products.
We periodically
register federal trademarks, service marks and trade names that
distinguish our product brand names in the market. We also monitor
these marks for their proper and intended use. Additionally, we
rely on non-disclosure and confidentiality agreements to protect
our interest in confidential and proprietary information that gives
us a competitive advantage, including business strategies,
unpatented inventions, designs and process technology. Such
information is closely monitored and made available only to those
employees whose responsibilities require access to the
information.
Employees
On
March 28,
2020, we
had more than 7,900 employees. We believe that our future prospects
will depend, in part, on our ability to continue to attract and
retain skilled employees. Competition for skilled personnel is
intense, and the number of persons with relevant experience,
particularly in RF engineering, product design and technical
marketing, is limited. None of our U.S. employees are represented
by a labor union. Some of our employees in
Germany and the
Netherlands are represented by internal works councils and some of
our employees in China are represented by a labor union. As
of March 28,
2020,
approximately 12% of our global workforce was represented by a
works council or labor union. We have never experienced any
work stoppage, and we believe that our current employee relations
are good.
Environmental Matters
By virtue of
operating our wafer fabrication facilities, we are subject to a
variety of extensive and changing domestic and international
federal, state and local governmental laws, regulations and
ordinances related to the use, storage, discharge and disposal of
toxic, volatile or otherwise hazardous chemicals used in the
manufacturing process. We pretreat and dispose of our wastewater
from our manufacturing facilities to meet or exceed regulatory
requirements. Our hazardous waste is sent to only licensed and
permitted disposal facilities. State agencies require us to report
storage and emissions of environmentally hazardous materials, and
we have retained appropriate personnel to help ensure compliance
with all applicable environmental regulations. We believe that
costs arising from existing environmental laws will not have a
material adverse effect on our financial position or results of
operations.
We are an ISO
14001:2015 certified manufacturer with a comprehensive
Environmental Management System ("EMS") in place to help ensure
control of the environmental aspects of the manufacturing process.
Our EMS mandates compliance and establishes appropriate checks and
balances to minimize the potential for non-compliance with
environmental laws and regulations.
We actively
monitor the hazardous materials that are used in the manufacture,
assembly and test of our products, particularly materials that are
retained in the final product. We have developed specific
restrictions on the content of certain hazardous materials in our
products, as well as those of our suppliers and outsourced
manufacturers and subcontractors. This helps to ensure that our
products are compliant with the requirements of the markets into
which the products will be sold and with our customers’
requirements. For example, our products are compliant with the
European Union RoHS Directive (2011/65/EU on the Restriction of Use
of Hazardous Substances), which prohibits the sale in the European
Union market of new electrical and electronic equipment containing
certain families of substances above a specified
threshold.
Historically, the
costs to comply with applicable environmental regulations have not
been material, and we currently do not expect the costs of
complying with existing environmental regulations to have a
material adverse effect on our liquidity, capital resources or
financial condition in fiscal 2021.
Access to Public Information
We make
available, free of charge through our website
(http://www.qorvo.com), our annual and quarterly reports on Forms
10-K and 10-Q (including related filings in iXBRL format) and
current reports on Form 8-K and amendments to these reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") as soon as
reasonably practicable after we electronically file these reports
with, or furnish them to, the United States Securities and Exchange
Commission ("SEC"). The public may also request a copy of our forms
filed with the SEC, without charge upon written request, directed
to:
Investor
Relations Department
Qorvo, Inc., 7628
Thorndike Road, Greensboro, NC 27409-9421
The information
contained on, or that can be accessed through, our website is not
incorporated by reference into this Annual Report on Form 10-K. We
have included our website address as a factual reference and do not
intend it as an active link to our website.
In addition, the
SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC at
http://www.sec.gov.
ITEM 1A.
RISK FACTORS.
You should
carefully consider the risks described below in addition to the
other information contained in this report before making an
investment decision with respect to any of our securities. Our
business, financial condition or results of operations could be
materially impacted by any of these risks. The risks and
uncertainties described below are not the only ones we face.
Additional risks not currently known to us, or other factors not
perceived by us to present significant risks to our business at
this time, may impair our business operations, financial condition,
or results of operations.
Our operating results fluctuate.
Our revenue,
earnings, margins and other operating results have fluctuated
significantly in the past and may fluctuate significantly in the
future. If demand for our products fluctuates as a result of
economic conditions or for other reasons, our revenue and
profitability could be impacted. Our future operating results will
depend on many factors, including the following:
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business,
political and macroeconomic changes, including trade disputes and
recession or slowing growth in the semiconductor industry and the
overall global economy;
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changes in
consumer confidence caused by many factors, including changes in
interest rates, credit markets, expectations for inflation,
unemployment levels, and energy or other commodity
prices;
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fluctuations in
demand for our customers’ products;
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our ability to
forecast our customers' demand for our products
accurately;
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the ability of
third-party foundries and other third-party suppliers to
manufacture, assemble and test our products in a timely and
cost-effective manner;
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our customers’
and distributors’ ability to manage the inventory that they hold
and to forecast accurately their demand for our
products;
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our ability to
achieve cost savings and improve yields and margins on our new and
existing products;
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our ability to
successfully integrate into our business, and realize the expected
benefits of, our recent and any future acquisitions and strategic
investments; and
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our ability to
utilize our capacity efficiently or to acquire additional capacity
in response to customer demand.
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It is likely that
our future operating results could be adversely affected by one or
more of the factors set forth above or other similar factors. If
our future operating results are below the expectations of stock
market analysts or our investors, our stock price may
decline.
Our operating results are substantially dependent on development of
new products and achieving design wins as our industry’s product
life cycles are short and our customers' requirements change
rapidly.
Our largest
markets are characterized by short product life cycles and the
frequent introduction of new products in response to evolving
product requirements, driven by end user demand for more
functionality, improved performance, lower costs and a variety of
form factors. Our largest MP customers typically refresh some or
all of their product portfolios by releasing new models each year.
In some cases, product designs we pursue represent either
opportunities to substantially increase our revenue by winning a
new design or a risk of a substantial revenue loss by losing an
incumbent product in a customer's device.
Our success is
dependent on our ability to develop and introduce new products in a
timely and cost-effective manner and secure production orders from
our customers. The development of new products is a highly complex
process, and we have experienced delays in completing the
development and introduction of new products at times in the past.
Our successful product development depends on a number of factors,
including the following:
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our ability to
predict market requirements and define and design new products that
address those requirements;
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our ability to
design products that meet our customers’ cost, size and performance
requirements;
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our ability to
introduce new products that are competitive and can be manufactured
at lower costs or that command higher prices based on superior
performance;
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acceptance of our
new product designs;
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the availability
of qualified product design engineers;
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our timely
completion of product designs and ramp up of new products according
to our customers’ needs with acceptable manufacturing yields;
and
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market acceptance
of our customers’ products and the duration of the life cycle of
such products.
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We may not be
able to design and introduce new products in a timely or
cost-efficient manner, and our new products may fail to meet market
or customer requirements. Most major product design opportunities
that we pursue involve multiple competitors, and we could lose a
new product design opportunity to a competitor that offers a lower
cost or equal or superior performing product. If we are
unsuccessful in achieving design wins, our revenue and operating
results will be adversely affected. Even when a design win is
achieved, our success is not assured. Design wins may require
significant expenditures by us and typically precede volume revenue
by six to nine months or more. Many customers seek a second source
for all major components in their devices, which can significantly
reduce the revenue obtained from a design win. In many cases, the
average selling prices of our products decline over the products’
lives, and we must achieve yield improvements, cost reductions and
other productivity enhancements in order to maintain profitability.
The actual value of a design win to us will ultimately depend on
the commercial success of our customers’ products.
We depend on a few large customers for a substantial portion of our
revenue.
A substantial
portion of our MP revenue comes from large purchases by a small
number of customers. Our future operating results depend on both
the success of our largest customers and on our success in
diversifying our products and customer base. Collectively,
our two largest end customers
accounted for an aggregate of approximately 43%, 47% and 44% of our revenue for fiscal
years 2020, 2019 and 2018, respectively.
The concentration
of our revenue with a relatively small number of customers makes us
particularly dependent on factors, both positive and negative,
affecting those customers. If demand for their products increases,
our results are favorably impacted, while if demand for their
products decreases, they may reduce their purchases of, or stop
purchasing, our products and our operating results would suffer.
Even if we achieve a design win, our customers can delay or cancel
the release of a new handset for any reason. Most of our customers
can cease incorporating our products into their devices with little
notice to us and with little or no penalty. The loss of a large
customer and failure to add new customers to replace lost revenue
would have a material adverse effect on our business, financial
condition and results of operations.
We face risks of a loss of revenue if contracts with the United
States government or defense and aerospace contractors are canceled
or delayed or if defense spending is reduced.
We receive a
portion of our revenue from the United States government and from
prime contractors on United States government-sponsored programs,
principally for defense and aerospace applications. These programs
are subject to delays or cancellation. Further, spending on defense
and aerospace programs can vary significantly depending on funding
from the United States government. We believe our government and
defense and aerospace business has been negatively affected in the
past by external factors such as sequestration and political
pressure to reduce federal defense spending. Reductions in defense
and aerospace funding or the loss of a significant defense and
aerospace program or contract would have a material adverse effect
on our operating results.
The COVID-19 outbreak could materially adversely affect our
financial condition and results of operations.
COVID-19 has
spread globally and has resulted in authorities implementing
numerous measures to try to contain the virus, such as travel bans
and restrictions, quarantines, shelter in place orders, and
shutdowns. These measures have impacted and may further impact our
workforce and operations, the operations of our customers, and
those of our respective vendors and suppliers. We have significant
manufacturing operations in the U.S. and China and both of these
countries have been affected by the outbreak and have taken
measures to try to contain it. There is considerable uncertainty
regarding such measures and potential future measures, and
restrictions on our access to our manufacturing facilities or on
our support operations or workforce, or similar limitations for our
vendors and suppliers, and restrictions or disruptions of
transportation, such as reduced availability of air transport, port
closures, and increased border controls or closures, could limit
our capacity to meet customer demand and have a material adverse
effect on our financial condition and results of
operations.
The outbreak has
significantly increased economic and demand uncertainty. The
outbreak and continued spread of COVID-19 will cause an
economic slowdown, and it is possible that the global economy
worsens further. The spread of COVID-19 has caused us to
modify our business practices (including employee travel, employee
work locations, and cancellation of events and conferences), and we
may take further actions as may be required by government
authorities or that we determine are in the best interests of our
employees, customers, partners, and suppliers. There is no
certainty that such measures will be sufficient to mitigate the
risks posed by the virus, and our ability to perform critical
functions could be harmed.
The degree to
which COVID-19 impacts our results will depend on future
developments, which are highly uncertain and cannot be predicted,
including, but not limited to, the duration and spread of the
outbreak, its severity, the actions to contain the virus or treat
its impact, and how quickly and to what extent normal economic and
operating conditions can resume.
We depend heavily on third parties.
We purchase
numerous component parts, substrates and silicon-based products
from external suppliers. We also utilize third-party suppliers for
numerous services, including die processing, wafer bumping, test
and tape and reel. The use of external suppliers involves a number
of risks, including the possibility of material disruptions in the
supply of key components and the lack of control over delivery
schedules, capacity constraints, manufacturing yields, product
quality and fabrication costs. Furthermore, the COVID-19 outbreak
has created heightened risk that external suppliers may be unable
to perform their obligations to us or suffer financial distress due
to the economic impact of the outbreak and the regulatory measures
that have been enacted by governments to contain the
virus.
Although our key
suppliers commit to us to be compliant with applicable ISO 9001
and/or TS-16949 quality standards, we have experienced quality and
reliability issues with suppliers in the past. Quality or
reliability issues in our supply chain could negatively affect our
products, our reputation and our results of
operations.
We face risks related to sales through distributors.
We sell a
significant portion of our products through third-party
distributors. We depend on these distributors to help us create end
customer demand, provide technical support and other value-added
services to customers, fill customer orders, and stock our
products. We may rely on one or more key distributors for a
product, and a material change in our relationship with one or more
of these distributors or their failure to perform as expected could
reduce our revenue. Our ability to add or replace distributors for
some of our products may be limited because our end customers may
be hesitant to accept the addition or replacement of a distributor
due to advantages in the incumbent distributors’ technical support
and favorable business terms related to payments, discounts and
stocking of acceptable inventory levels. Using third parties
for distribution exposes us to many risks, including competitive
pressure, concentration, credit risk, and compliance risks. Other
third parties may use one of our distributors to sell products that
compete with our products, and we may need to provide financial and
other incentives to the distributors to focus them on the sale of
our products. Our distributors may face financial difficulties,
including bankruptcy, which could harm our collection of accounts
receivable and financial results. Violations of the Foreign Corrupt
Practices Act or similar laws by our distributors or other
third-party intermediaries could have a material impact on our
business. Failure to manage risks related to our use of
distributors may reduce sales, increase expenses, and weaken our
competitive position.
We face risks associated with the operation of our manufacturing
facilities.
We operate wafer
fabrication facilities in North Carolina, Oregon and Texas. We
currently use several international and domestic assembly
suppliers, as well as internal assembly facilities in China, Costa
Rica, Germany and the U.S., to assemble and test our products. We
currently have our own test and tape and reel facilities located in
China, Costa Rica and the U.S., and we also utilize contract
suppliers and partners in Asia to test our products.
A number of
factors related to our facilities will affect our business and
financial results, including the following:
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our ability to
adjust production capacity in a timely fashion in response to
changes in demand for our products;
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the significant
fixed costs of operating the facilities;
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factory
utilization rates;
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our ability to
qualify our facilities for new products and new technologies in a
timely manner;
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the availability
of raw materials, the impact of the volatility of commodity pricing
and tariffs imposed on raw materials, including substrates, gold,
platinum and high purity source materials such as gallium,
aluminum, arsenic, indium, silicon, phosphorous and
palladium;
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our manufacturing
cycle times;
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our manufacturing
yields;
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the political,
regulatory and economic risks associated with our international
manufacturing operations;
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potential
violations by our international employees or
third-party agents of international or U.S. laws relevant to
foreign operations;
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our ability to
hire, train and manage qualified production personnel;
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our compliance
with applicable environmental and other laws and regulations;
and
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our ability to
avoid prolonged periods of down-time in our facilities for any
reason.
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Business disruptions could harm our business, lead to a decline in
revenues and increase our costs.
Our worldwide
operations and business could be disrupted by natural disasters,
industrial accidents, cybersecurity incidents, telecommunications
failures, power or water shortages, extreme weather conditions,
public health issues (including the COVID-19 outbreak), military
actions, acts of terrorism, political or regulatory issues and
other man-made disasters or catastrophic events. Global climate
change could result in certain natural disasters occurring more
frequently or with greater intensity, such as drought, wildfires,
storms and flooding. We carry commercial property damage and
business interruption insurance against various risks, with limits
we deem adequate, for reimbursement for damage to our fixed assets
and resulting disruption of our operations. However, the occurrence
of any of these business disruptions could harm our business and
result in significant losses, a decline in revenue and an increase
in our costs and expenses. Any disruptions from these events could
require substantial expenditures and recovery time in order to
fully resume operations and could also have a material adverse
effect on our operations and financial results to the extent that
losses are uninsured or exceed insurance recoveries and to the
extent that such disruptions adversely impact our relationships
with our customers. Furthermore, even if our own operations are
unaffected or recover quickly, if our customers cannot timely
resume their own operations due to a business disruption, natural
disaster or catastrophic event, they may reduce or cancel their
orders, which may adversely affect our results of
operations.
If we experience poor manufacturing yields, our operating results
may suffer.
Our products have
unique designs and are fabricated using multiple semiconductor
process technologies that are highly complex. In many cases, our
products are assembled in customized packages. Many of our products
consist of multiple components in a single module and feature
enhanced levels of integration and complexity. Our customers insist
that our products be designed to meet their exact specifications
for quality, performance and reliability. Our manufacturing yield
is a combination of yields across the entire supply chain,
including wafer fabrication, assembly and test yields. Defects in a
single component in an assembled module product can impact the
yield for the entire module, which means the adverse economic
impacts of an individual defect can be multiplied many times over
if we fail to discover the defect before the module is assembled.
Due to the complexity of our products, we periodically experience
difficulties in achieving acceptable yields and other quality
issues, particularly with respect to new products.
Our customers
test our products once they have been assembled into their
products. The number of usable products that result from our
production process can fluctuate as a result of many factors,
including:
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defects in
photomasks (which are used to print circuits on a
wafer);
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minute impurities
and variations in materials used;
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contamination of
the manufacturing environment;
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equipment failure
or variations in the manufacturing processes;
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losses from
broken wafers or other human error; and
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defects in
substrates and packaging.
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We constantly
seek to improve our manufacturing yields. Typically, for a given
level of sales, when our yields improve, our gross margins improve,
and when our yields decrease, our unit costs are higher, our
margins are lower, and our operating results are adversely
affected.
Costs of product
defects and deviations from required specifications include the
following:
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scrapping
products that cannot be fixed;
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accepting returns
of products that have been shipped;
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providing product
replacements at no charge;
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reimbursement of
direct and indirect costs incurred by our customers in recalling or
reworking their products due to defects in our
products;
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travel and
personnel costs to investigate potential product quality issues and
to identify or confirm the failure mechanism or root cause of
product defects; and
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defending against
litigation.
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These costs could
be significant and could reduce our gross margins. Our reputation
with customers also could be damaged as a result of product defects
and quality issues, and product demand could be reduced, which
could harm our business and financial results.
We are subject to inventory risks and costs because we build our
products based on forecasts provided by customers before receiving
purchase orders for the products.
In order to
ensure availability of our products for some of our largest end
customers, we start manufacturing certain products in advance of
receiving purchase orders based on forecasts provided by these
customers. However, these forecasts do not represent binding
purchase commitments and we do not recognize sales for these
products until they are shipped to or consumed by the customer. As
a result, we incur significant inventory and manufacturing costs in
advance of anticipated sales. Because demand for our products may
not materialize, or may be lower than expected, manufacturing based
on forecasts subjects us to heightened risks of higher inventory
carrying costs, increased obsolescence and higher operating costs.
These inventory risks are exacerbated when our customers purchase
indirectly through contract manufacturers or hold component
inventory levels greater than their consumption rate because this
reduces our visibility regarding the customers’ accumulated levels
of inventory. If product demand decreases or we fail to forecast
demand accurately, we could be required to write off inventory,
which would have a negative impact on our gross margin and other
operating results.
We sell certain of our products based on reference designs of
platform providers, and our inability to effectively manage or
maintain our evolving relationships with these companies may have
an adverse effect on our business.
Platform
providers are typically large companies that provide system
reference designs for OEMs and ODMs that include the platform
provider’s baseband and other complementary products. A platform
provider may own or control IP that gives it a strong market
position for its baseband products for certain air interface
standards, which provides it with significant influence and control
over sales of RF products for these standards. Platform providers
historically looked to us and our competitors to provide RF
products to their customers as part of the overall system design,
and we competed with other RF companies to have our products
included in the platform provider’s system reference design. This
market dynamic has evolved as platform providers have worked to
develop more fully integrated solutions that include their own RF
technologies and components.
Platform
providers may be in a different business from ours or we may be
their customer or direct competitor. Accordingly, we must balance
our interest in obtaining new business with competitive and other
factors. Because platform providers control the overall system
reference design, if they offer competitive RF technologies or
their own RF solutions as a part of their reference design and
exclude our products from the design, we are at a distinct
competitive disadvantage with OEMs and ODMs that are seeking a
turn-key design solution, even if our products offer superior
performance. This requires us to work more closely with OEMs and
ODMs to secure the design of our products in their handsets and
other devices.
Our relationships
with platform providers are complex and evolving, and the inability
to effectively manage or maintain these relationships could have an
adverse effect on our business, financial condition and results of
operations.
We are subject to risks from international sales and
operations.
We operate
globally with sales offices and R&D activities as well as
manufacturing, assembly and test facilities in multiple countries,
and some of our business activities are concentrated in Asia. As a
result, we are subject to regulatory, geopolitical and other risks
associated with doing business outside the U.S.,
including:
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global and local
economic, social and political conditions and
uncertainty;
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currency controls
and fluctuations;
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formal or
informal imposition of export, import or doing-business
regulations, including trade sanctions, tariffs and other related
restrictions;
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labor market
conditions and workers’ rights affecting our manufacturing
operations or those of our customers or suppliers;
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disruptions in
capital and securities and commodities trading
markets;
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occurrences of
geopolitical crises such as terrorist activity, armed conflict,
civil or military unrest or political instability, which may
disrupt manufacturing, assembly, logistics, security and
communications and result in reduced demand for our
products;
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compliance with laws and
regulations that differ among jurisdictions, including those
covering taxes, intellectual property ownership and infringement,
imports and exports, anti-corruption and anti-bribery, antitrust
and competition, data privacy, and environment, health, and safety;
and
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pandemics and similar major
health concerns, including the COVID-19 outbreak, which could
adversely affect our business and our customer order
patterns.
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Sales to
customers located outside the U.S. accounted for
approximately 55% of our revenue in
fiscal 2020, of which
approximately 34% and 5% were attributable to sales to
customers located in China and Taiwan, respectively. We expect that
revenue from international sales to China and other markets will
continue to be a significant part of our total revenue. Any
weakness in the Chinese economy could result in a decrease in
demand for consumer products that contain our products, which could
materially and adversely affect our business. The imposition by the
U.S. of tariffs on goods imported from China, countermeasures
imposed by China in response, U.S. export restrictions on sales of
products to China and other government actions that restrict or
otherwise adversely affect our ability to sell our products to
Chinese customers, could increase our manufacturing costs and
reduce our product sales in China and other markets.
As a global
company, our results are affected by movements in currency exchange
rates. Our exposure may increase or decrease over time as our
foreign business levels fluctuate in the countries where we have
operations, and these changes could have a material impact on our
financial results. The functional currency for most of our
international operations is the U.S. dollar. We have foreign
operations in Asia, Europe and Central America, and a substantial
portion of our revenue is derived from sales to customers outside
the U.S. Our international revenue is primarily denominated in U.S.
dollars. Operating expenses and certain working capital items
related to our foreign-based operations are, in some instances,
denominated in the local foreign currencies and therefore are
affected by changes in the U.S. dollar exchange rate in relation to
foreign currencies, such as the Costa Rican Colon, Euro, Pound
Sterling, Renminbi and Singapore Dollar. If the U.S. dollar weakens
compared to these and other currencies, our operating expenses for
foreign operations will be higher when remeasured back into U.S.
dollars.
Economic regulation in China could adversely impact our business
and results of operations.
We have a
significant portion of our assembly and testing capacity in China.
For many years, the Chinese economy has experienced periods of
rapid growth and wide fluctuations in the rate of inflation. In
response to these factors, the Chinese government has, from time to
time, adopted measures to regulate growth and to contain inflation,
including currency controls and measures designed to restrict
credit, control prices or set currency exchange rates. Such actions
in the future, as well as other changes in Chinese laws and
regulations, including actions in furtherance of China’s stated
policy of reducing its dependence on foreign semiconductor
manufacturers, could increase the cost of doing business in China,
foster the emergence of Chinese-based competitors, decrease the
demand for our products in China, or reduce the supply of critical
materials for our products, which could have a material adverse
effect on our business and results of operations.
Changes in government trade policies, including the imposition of
tariffs and export restrictions, could limit our ability to sell
our products to certain customers, which may materially adversely
affect our sales and results of operations.
The U.S. or
foreign governments may take administrative, legislative or
regulatory action that could materially interfere with our ability
to sell products in certain countries, particularly in China. For
example, between July 2018 and June 2019, the Office of the United
States Trade Representative imposed 25% tariffs on specified
product lists, including certain electronic components and
equipment, totaling approximately $250 billion in Chinese imports.
In response, China imposed or proposed new or higher tariffs on
U.S. products. The U.S. government also imposed 15% tariffs on an
additional $120 billion of Chinese imports, with China imposing
retaliatory tariffs. While the imposition of these tariffs did not
have a direct, material adverse impact on our business during
fiscal year 2020, the direct and indirect effects of tariffs and
other restrictive trade policies are difficult to measure and are
only one part of a larger U.S./China economic and trade policy
disagreement. For example, imposition of tariffs on our customers’
products that are imported from China to the U.S. could harm sales
of such products, which would harm
our business. We
cannot predict what further actions may ultimately be taken with
respect to tariffs or trade relations between the U.S. and China or
other countries, what products may be subject to such actions, or
what actions may be taken by the other countries in
retaliation.
Furthermore, we
have experienced restrictions on our ability to sell products to
certain foreign customers where sales of products require export
licenses or are prohibited by government action. The U.S.
government has in the past issued export restrictions that
effectively banned American companies from selling products to ZTE
Corporation, one of our customers, and in May 2019, the Bureau of
Industry (BIS) and Security of the U.S. Department of Commerce
added Huawei Technologies Co., Ltd. and over 100 of its affiliates
to the “Entity List” maintained by the Department. Huawei accounted
for 10%, 15% and 8% of our total revenue during
fiscal years 2020, 2019 and 2018, respectively. While we
subsequently restarted shipments to Huawei of certain products from
outside the U.S. that are not subject to the Export Administration
Regulations (EAR), and while we have also applied for a license to
ship other products that are subject to the EAR, as required by the
rules governing the Entity List, our sales to Huawei will continue
to be impacted by trade restrictions.
As of the date of
this report, we are unable to predict the scope and duration of the
export restrictions imposed on Huawei and the corresponding future
effects on our business. Even if such restrictions are lifted, any
financial or other penalties or continuing export restrictions
imposed on Huawei could have a continuing negative impact on our
future revenue and results of operations. In addition, Huawei or
other foreign customers affected by future U.S. government
sanctions or threats of sanctions may respond by developing their
own solutions to replace our products or by adopting our foreign
competitors’ solutions.
Moreover, U.S.
government actions targeting exports of certain technologies to
China are becoming more pervasive. For example, in 2018, the U.S.
adopted new laws designed to address concerns about the export of
emerging and foundational technologies to China. In addition, in
May 2019, an executive order was issued that invoked national
emergency economic powers to implement a framework to regulate the
acquisition or transfer of information communications technology in
transactions that imposed undue national security risks. These
actions could lead to additional restrictions on the export of
products that include or enable certain technologies, including
products we provide to China-based customers.
The loss or
temporary loss of Huawei or other foreign customers or the
imposition of restrictions on our ability to sell products to such
customers as a result of tariffs, export restrictions or other U.S.
regulatory actions could materially adversely affect our sales,
business and results of operations.
We operate in a very competitive industry and must continue to
implement innovative technologies.
We compete with
several companies primarily engaged in the business of designing,
manufacturing and selling RF solutions, as well as suppliers of
discrete integrated circuits and modules. In addition to our direct
competitors, some of our largest end customers and leading platform
partners also compete with us to some extent by designing and
manufacturing their own products. Increased competition from any
source could adversely affect our operating results through lower
prices for our products, reduced demand for our products, losses of
existing design slots with key customers and a corresponding
reduction in our ability to recover development, engineering and
manufacturing costs.
Many of our
existing and potential competitors have entrenched market
positions, historical affiliations with OEMs, considerable internal
manufacturing capacity, established IP rights and substantial
technological capabilities. The semiconductor industry has
experienced increased industry consolidation over the last several
years, a trend we expect to continue. Many of our existing and
potential competitors may have greater financial, technical,
manufacturing or marketing resources than we do. We cannot be sure
that we will be able to compete successfully with our
competitors.
Industry overcapacity could cause us to underutilize our
manufacturing facilities and have a material adverse effect on our
financial performance.
It is difficult
to predict future demand for our products, which makes it difficult
to estimate future requirements for production capacity and avoid
periods of overcapacity. Fluctuations in the growth rate of
industry capacity relative to the growth rate in demand for our
products also can lead to overcapacity and contribute to
cyclicality in the semiconductor market.
Capacity
expansion projects have long lead times and require capital
commitments based on forecasted product trends and demand well in
advance of production orders from customers. In recent years, we
have made significant capital investments to expand our premium
filter capacity to address forecasted future demand patterns. In
certain cases, these capacity additions exceeded the near-term
demand requirements, leading to overcapacity situations and
underutilization of our manufacturing facilities.
As many of our
manufacturing costs are fixed, these costs cannot be reduced in
proportion to the reduced revenues experienced during periods of
underutilization. Underutilization of our manufacturing facilities
can adversely affect our gross margin and other operating results.
If demand for our products experiences a prolonged decrease, we may
be required to close or idle facilities and write down our
long-lived assets or shorten the useful lives of underutilized
assets and accelerate depreciation, which would increase our
expenses. For example, to address manufacturing overcapacity, in
the third quarter of fiscal 2019 we commenced a phased closure of a
SAW filter manufacturing facility in Florida and a transfer of
production to our North Carolina facility, which was completed in
fiscal 2020. Also, in the fourth quarter of fiscal 2019, we
announced the temporary idling of a BAW manufacturing facility in
Texas. These actions resulted in impairment charges, accelerated
depreciation and other restructuring related charges and
expenses.
We may not be able to borrow funds under our credit facility or
secure future financing.
On December 5,
2017, we entered into a five-year unsecured senior credit facility
pursuant to a credit agreement with Bank of America, N.A., as
administrative agent, swing line lender and L/C issuer, and a
syndicate of lenders (as amended, the "Credit Agreement"). The
Credit Agreement includes a $300.0 million
revolving credit
facility, which is available for working capital, capital
expenditures and other corporate purposes. The Credit Agreement
contains various conditions, covenants and representations with
which we must be in compliance in order to borrow funds. We cannot
assure that we will be in compliance with these conditions,
covenants and representations in the future when we may need to
borrow funds under this facility.
We may not be able to generate sufficient cash to service all of
our debt, including our Notes, or to fund capital expenditures and
may be forced to take other actions to satisfy our debt obligations
and financing requirements, which may not be successful or on terms
favorable to us.
The Credit
Agreement includes a $400.0 million senior delayed draw term loan
(the "Term Loan"), of which $100.0 million was funded at closing
and then subsequently repaid during March 2018. On June 17, 2019,
the Company drew $100.0 million of the Term Loan. The delayed draw
availability period for the
remaining $200.0 million of the Term Loan expired on
December 31, 2019. We may request one or more additional tranches
of term loans or increases in the revolving credit facility, up to
an aggregate of $300.0 million and subject to securing additional
funding commitments from the existing or new lenders.
In November 2015,
we issued $550.0 million
aggregate
principal amount of 7.00% Senior Notes due 2025 (the
"2025 Notes") pursuant to an indenture dated as of November 19,
2015 (as supplemented, the "2015 Indenture"). We subsequently
completed the repurchase of all but $23.4 million
of the 2025
Notes. Additionally, in July 2018, August 2018 and March
2019, we issued $500.0
million, $130.0 million
and
$270.0
million,
respectively, aggregate principal amount of 5.50% Senior Notes due 2026 (the
"2026 Notes") pursuant to an indenture dated as of July 16, 2018
(as supplemented, the “2018 Indenture”). In September 2019
and December 2019, we issued $350.0 million
and
$200.0
million,
respectively, aggregate principal amount of 4.375% Senior Notes due 2029 (the
“2029 Notes” and together with the 2025 Notes and the 2026 Notes,
the “Notes”) pursuant to an indenture dated as of September 30,
2019 (as supplemented, the “2019 Indenture” and together with the
2015 Indenture and the 2018 Indenture, the
“Indentures”).
Our ability to
make scheduled payments on or to refinance our debt obligations,
including the Term Loan and the Notes, and to fund working capital,
planned capital expenditures and expansion efforts and any
strategic alliances or acquisitions we may make in the future
depends on our ability to generate cash in the future and on our
financial condition and operating performance, which are subject to
prevailing economic and competitive conditions and to certain
financial, business and other factors beyond our control. We cannot
be sure that we will maintain a level of cash flows from operating
activities sufficient to permit us to pay our debt, including the
Term Loan and the Notes. If our cash flows and capital resources
are insufficient to fund our debt service obligations, we may face
liquidity issues and be forced to reduce or delay investments and
capital expenditures, or to sell assets, seek additional
capital
or restructure or
refinance our debt. These alternative measures may not be
successful and may not permit us to meet our scheduled debt service
and other obligations. Additionally, the Credit Agreement and the
Indentures limit the use of the proceeds from any disposition; as a
result, we may not be allowed under these documents to use proceeds
from such dispositions to satisfy our debt service obligations.
Further, we may need to refinance all or a portion of our debt at
or before maturity, and we cannot be sure that we will be able to
refinance any of our debt on commercially reasonable terms or at
all.
The agreements and instruments governing our debt impose
restrictions that may limit our operating and financial
flexibility.
The Credit
Agreement governing our revolving credit facility and the Term Loan
and the Indentures governing the Notes contain a number of
significant restrictions and covenants that limit our ability
to:
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pay dividends,
make other distributions or repurchase or redeem our capital
stock;
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prepay, redeem or
repurchase certain debt;
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make loans and
investments;
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sell, transfer or
otherwise dispose of assets;
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incur or permit
to exist certain liens;
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enter into
certain types of transactions with affiliates;
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enter into
agreements restricting our subsidiaries’ ability to pay dividends;
and
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consolidate,
amalgamate, merge or sell all or substantially all of our
assets.
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These covenants
could have the effect of limiting our flexibility in planning for
or reacting to changes in our business and the markets in which we
compete. In addition, the Credit Agreement requires us to comply
with certain financial maintenance covenants. Operating results
below current levels or other adverse factors, including a
significant increase in interest rates, could result in our being
unable to comply with the financial covenants contained in our
revolving credit facility. If we violate covenants under the Credit
Agreement and are unable to obtain a waiver from our lenders, our
debt under our revolving credit facility would be in default and
could be accelerated by our lenders. Because of cross-default
provisions in the agreements and instruments governing our debt, a
default under one agreement or instrument could result in a default
under, and the acceleration of, our other debt. If our debt is
accelerated, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if we are able to obtain new
financing, it may not be on commercially reasonable terms, or terms
that are acceptable to us. If our debt is in default for any
reason, our business, financial condition and results of operations
could be materially and adversely affected. In addition, complying
with these covenants may also cause us to take actions that are not
favorable to holders of the notes and may make it more difficult
for us to successfully execute our business strategy and compete
against companies that are not subject to such
restrictions.
The price of our common stock has recently been and may in the
future be volatile.
The price of our
common stock, which is traded on the Nasdaq Global Select Market,
has been and may continue to be volatile and subject to wide
fluctuations. In addition, the trading volume of our common stock
may fluctuate and cause significant price variations to occur. Some
of the factors that could cause fluctuations in the stock price or
trading volume of our common stock include:
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general market
and economic and political conditions, including market conditions
in the semiconductor industry;
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actual or
expected variations in quarterly operating results;
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pandemics and
similar major health concerns, including the COVID-19
outbreak;
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differences
between actual operating results and those expected by investors
and analysts;
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changes in
recommendations by securities analysts;
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operations and
stock performance of competitors and major customers;
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accounting
charges, including charges relating to the impairment of goodwill
and restructuring;
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significant
acquisitions, strategic alliances, capital commitments, or new
products announced by us or by our competitors;
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sales of our
common stock, including sales by our directors and officers or
significant investors;
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repurchases of
our common stock;
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recruitment or
departure of key personnel; and
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We cannot assure
that the price of our common stock will not fluctuate or decline
significantly in the future. In addition, the stock market in
general can experience considerable price and volume fluctuations
that are unrelated to our performance.
Damage to our reputation or brand could negatively impact our
business, financial condition and results of
operations.
Our reputation is
a critical factor in our relationships with customers, employees,
governments, suppliers and other stakeholders. If we fail to
address issues that give rise to reputational risk, including those
described throughout this “Risk Factors” section, we could
significantly harm our reputation and our brand. Our reputation may
also be damaged by how we respond to corporate crises. Corporate
crises can arise from catastrophic events as well as from incidents
involving product quality, security, or safety issues; allegations
of unethical behavior or misconduct or legal noncompliance;
internal control failures; corporate governance issues; data or
privacy breaches; workplace safety incidents; environmental
incidents; the use of our products for illegal or objectionable
applications; media statements; the conduct of our suppliers or
representatives; and other issues or incidents that, whether actual
or perceived, result in adverse publicity. If we fail to respond
quickly and effectively to address such crises, the ensuing
negative public reaction could significantly harm our reputation
and our brands and could lead to litigation or subject us to
regulatory actions or restrictions. Damage to our reputation could
harm customer relations, reduce demand for our products, reduce
investor confidence in us, adversely affect our stock price, and
may also limit our ability to be seen as an employer of choice when
competing for highly skilled employees. Moreover, repairing our
reputation and brands may be difficult, time-consuming and
expensive.
We may have fluctuations in the amount and frequency of our stock
repurchases.
We are not obligated to make
repurchases under our stock repurchase program and the program may
be modified, suspended or terminated at any time without notice.
The amount and timing of our stock repurchases may vary based on a
number of factors, including our priorities regarding the use of
our cash such as capital investments and acquisitions, restrictions
under securities laws and existing debt agreements, the
availability of attractive financing sources and the optimization
of our capital structure, as well as changes in our cash flows, tax
laws and the market price of our common stock.
Our recent and future acquisitions and other strategic investments,
could fail to achieve our financial or strategic objectives,
disrupt our ongoing business, and adversely impact our results of
operations.
As part of our
business strategy and as demonstrated in our recent acquisitions,
we expect to continue to review potential acquisitions and
strategic investments that could complement our current product
offerings, augment our market coverage or enhance our technical
capabilities, or that may otherwise offer growth or margin
improvement
opportunities. In
the event of future acquisitions of businesses, products or
technologies, we could issue equity securities that would dilute
our current stockholders’ ownership, incur substantial debt or
other financial obligations or assume contingent liabilities. Such
actions could harm our results of operations or the price of our
common stock. Acquisitions and strategic investments also entail
numerous other risks that could adversely affect our business,
results of operations and financial condition,
including:
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failure to
complete a transaction in a timely manner, if at all, due to our
inability to obtain required government or other approvals, IP
disputes or other litigation, difficulty in obtaining financing on
terms acceptable to us, or other unforeseen factors;
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controls,
processes, and procedures of an acquired business may not
adequately ensure compliance with laws and regulations, and we may
fail to identify compliance issues or liabilities;
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unanticipated
costs, capital expenditures or working capital
requirements;
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acquisition-related charges
and amortization of acquired technology and other
intangibles;
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the potential
loss of key employees from a company we acquire or in which we
invest;
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diversion of
management’s attention from our business;
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disruption of our
ongoing operations;
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dissynergies or
other harm to existing business relationships with suppliers and
customers;
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losses or
impairment of investments from unsuccessful research and
development by companies in which we invest;
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failure to
successfully integrate acquired businesses, operations, products,
technologies and personnel; and
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unrealized
expected synergies.
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Moreover, our
resources are limited and our decision to pursue a transaction has
opportunity costs; accordingly, if we pursue a particular
transaction, we may need to forgo the prospect of entering into
other transactions that could help us achieve our financial or
strategic objectives. Any of these risks could have a material
adverse effect on our business, results of operations, financial
condition, or cash flows, particularly in the case of a large
acquisition.
In order to compete, we must attract, retain, and motivate key
employees, and our failure to do so could harm our business and our
results of operations.
In order to
compete effectively, we must:
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hire and retain
qualified employees;
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continue to
develop leaders for key business units and functions;
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expand our
presence in international locations and adapt to cultural norms of
foreign locations; and
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train and
motivate our employee base.
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Our future
operating results and success depend on keeping key technical
personnel and management and expanding our sales and marketing,
R&D and administrative support. We do not have employment
agreements with the vast majority of our employees. We must also
continue to attract qualified personnel. The competition for
qualified personnel is intense, and the number of people with
experience, particularly in RF engineering, integrated circuit and
filter design, and technical marketing and support, is limited. In
addition, existing or new immigration laws, policies or regulations
in the U.S. may limit the pool of available talent. Travel bans,
difficulties obtaining visas and other restrictions on
international travel could make it more difficult to effectively
manage our international operations, operate as a global company or
service our international customer base. Changes in the
interpretation and
application of
employment-related laws to our workforce practices may also result
in increased operating costs and less flexibility in how we meet
our changing workforce needs. We cannot be sure that we will be
able to attract and retain skilled personnel in the future, which
could harm our business and our results of operations.
We rely on our intellectual property portfolio and may not be able
to successfully protect against the use of our intellectual
property by third parties.
We rely on a
combination of patents, trademarks, trade secret laws,
confidentiality procedures and licensing arrangements to protect
our intellectual property rights. We cannot be certain that patents
will be issued from any of our pending applications or that patents
will be issued in all countries where our products can be sold.
Further, we cannot be certain that any claims allowed from pending
applications will be of sufficient scope or strength to provide
meaningful protection against our competitors. Our competitors may
also be able to design around our patents.
The laws of some
countries in which our products are developed, manufactured or sold
may not protect our products or intellectual property rights to the
same extent as U.S. laws. This increases the possibility of
misappropriation or infringement of our technology and products.
Although we intend to vigorously defend our intellectual property
rights, we may not be able to prevent misappropriation of our
technology. Additionally, our competitors may be able to
independently develop non-infringing technologies that are
substantially equivalent or superior to ours.
We may need to
engage in legal actions to enforce or defend our intellectual
property rights. Generally, intellectual property litigation is
both expensive and unpredictable. Our involvement in intellectual
property litigation could divert the attention of our management
and technical personnel and have a material, adverse effect on our
business.
We may be subject to claims of infringement of third-party
intellectual property rights.
Our operating
results may be adversely affected if third parties were to assert
claims that our products infringed their patent, copyright or other
intellectual property rights. Such assertions could lead to
expensive and unpredictable litigation, diverting the attention of
management and technical personnel. An unsuccessful result in any
such litigation could have adverse effects on our business, which
may include injunctions, exclusion orders and royalty payments to
third parties. In addition, if one of our customers or another
supplier to one of our customers were found to be infringing on
third-party intellectual property rights, such finding could
adversely affect the demand for our products.
Security breaches and other disruptions could compromise our
proprietary information and expose us to liability, which would
cause our business and reputation to suffer.
We rely on trade
secrets, technical know-how and other unpatented proprietary
information relating to our product development and manufacturing
activities to provide us with competitive advantages. We protect
this information by entering into confidentiality agreements with
our employees, consultants, strategic partners and other third
parties. We also design our computer networks and implement various
procedures to restrict unauthorized access to dissemination of our
proprietary information.
We face internal
and external data security threats. Current, departing or former
employees or third parties could attempt to improperly use or
access our computer systems and networks to copy, obtain or
misappropriate our proprietary information or otherwise interrupt
our business. Like others, we are also subject to significant
system or network disruptions from numerous causes, including
computer viruses and other cyber-attacks, facility access issues,
new system implementations and energy blackouts.
Security
breaches, computer malware, phishing, spoofing, and other
cyber-attacks have become more prevalent and sophisticated in
recent years. While we defend against these threats on a daily
basis, we do not believe that such attacks to date have caused us
any material damage. Because the techniques used by computer
hackers and others to access or sabotage networks constantly evolve
and generally are not recognized until launched against a target,
we may be unable to anticipate, counter or ameliorate all of these
techniques. As a result, our and our customers' proprietary
information may be misappropriated and the impact of any future
incident cannot be predicted. Any loss of such information could
harm our competitive position, result in a loss of customer
confidence in the adequacy of our threat mitigation and detection
processes and procedures, cause us to incur significant costs to
remedy the damages caused by the incident, and divert management
and other resources. We routinely implement
improvements to
our network security safeguards and we are devoting increasing
resources to the security of our information technology systems. We
cannot, however, assure that such system improvements will be
sufficient to prevent or limit the damage from any future
cyber-attack or network disruptions.
The costs related
to cyber-attacks or other security threats or computer systems
disruptions typically would not be fully insured or indemnified by
others. Occurrence of any of the events described above could
result in loss of competitive advantages derived from our R&D
efforts or our IP. Moreover, these events may result in the early
obsolescence of our products, product development delays, or
diversion of the attention of management and key information
technology and other resources, or otherwise adversely affect our
internal operations and reputation or degrade our financial results
and stock price.
We may be subject to theft, loss, or misuse of personal data by or
about our employees, customers or other third parties, which could
increase our expenses, damage our reputation, or result in legal or
regulatory proceedings.
In the ordinary
course of our business, we have access to sensitive, confidential
or personal data or information regarding our employees and others
that is subject to privacy and security laws and regulations. The
theft, loss, or misuse of personal data collected, used, stored, or
transferred by us to run our business, or by our third-party
service providers, including business process software applications
providers and other vendors that have access to sensitive data,
could result in damage to our reputation, disruption of our
business activities, significantly increased business and security
costs or costs related to defending legal claims.
Global privacy
legislation, enforcement, and policy activity in this area are
rapidly expanding and creating a complex regulatory compliance
environment. For example, the European Union has adopted the
General Data Protection Regulation ("GDPR"), which requires
companies to comply with rules regarding the handling of personal
data, including its use, protection and the ability of persons
whose data is stored to correct or delete such data about
themselves. Failure to meet GDPR requirements could result in
penalties of up to 4% of worldwide revenue. In addition, the
interpretation and application of consumer and data protection laws
in the U.S., Europe and elsewhere are often uncertain and fluid,
and may be interpreted and applied in a manner that is inconsistent
with our data practices. Complying with these changing laws has
caused, and could continue to cause, us to incur substantial costs,
which could have an adverse effect on our business and results of
operations. Further, failure to comply with existing or new rules
may result in significant penalties or orders to stop the alleged
non-compliant activity. Finally, even our inadvertent failure to
comply with federal, state, or international privacy-related or
data protection laws and regulations could result in audits,
regulatory inquiries or proceedings against us by governmental
entities or others.
We are subject to warranty claims, product recalls and product
liability.
From time to
time, we may be subject to warranty or product liability claims
that could lead to significant expense. We may also be exposed to
such claims as a result of any acquisition we may undertake in the
future. Although we maintain reserves for reasonably estimable
liabilities and purchase product liability insurance, we may elect
to self-insure with respect to certain matters and our reserves may
be inadequate to cover the uninsured portion of such
claims.
Product liability
insurance is subject to significant deductibles, and such insurance
may be unavailable or inadequate to protect against all claims. If
one of our customers recalls a product containing one of our
devices, we may incur significant costs and expenses, including
replacement costs, direct and indirect product recall-related
costs, diversion of technical and other resources and reputational
harm. Our customer contracts typically contain warranty and
indemnification provisions, and in certain cases may also contain
liquidated damages provisions, relating to product quality issues.
The potential liabilities associated with such provisions are
significant, and in some cases, including in agreements with some
of our largest end customers, are potentially unlimited. Any such
liabilities may greatly exceed any revenue we receive from sale of
the relevant products. Costs, payments or damages incurred or paid
by us in connection with warranty and product liability claims and
product recalls could materially and adversely affect our financial
condition and results of operations.
We are subject to risks associated with environmental, health and
safety regulations and climate change.
We are subject to
a broad array of U.S. and foreign environmental, health and safety
laws and regulations. These laws and regulations include those
related to the use, transportation, storage, handling, emission,
discharge and
recycling or
disposal of hazardous materials used in our manufacturing, assembly
and testing processes. Our failure to comply with any of these
existing or future laws or regulations could result
in:
|
|
•
|
regulatory
penalties and fines;
|
|
|
•
|
legal
liabilities, including financial responsibility for remedial
measures if our properties are contaminated;
|
|
|
•
|
expenses to
secure required permits and governmental approvals;
|
|
|
•
|
suspension or
curtailment of our manufacturing, assembly and test processes;
and
|
|
|
•
|
increased costs
to acquire pollution abatement or remediation equipment or to
modify our equipment, facilities or manufacturing processes to
bring them into compliance with applicable laws and
regulations.
|
Existing and
future environmental laws and regulations could also impact our
product designs and limit or restrict the materials or components
that are included in our products. In addition, many of our largest
end customers require us to comply with corporate social
responsibility policies, which often include employment, health,
safety, environmental and other requirements that exceed applicable
legal requirements. Compliance with these policies increases our
operating expenses, and non-compliance can adversely affect
customer relationships and harm our business.
New climate
change laws and regulations could require us to change our
manufacturing processes or procure substitute raw materials that
may cost more or be more difficult to procure. In addition, new
restrictions on emissions of carbon dioxide or other greenhouse
gases could result in increased costs for us and our suppliers.
Various jurisdictions are developing other climate change-based
regulations that also may increase our expenses and adversely
affect our operating results. We expect increased worldwide
regulatory activity relating to climate change in the future.
Future compliance with these laws and regulations may adversely
affect our business and results of operations.
Compliance with regulations regarding the use of “conflict
minerals” could limit the supply and increase the cost of
certain metals used in manufacturing our products.
Regulations in
the U.S. currently require that we determine whether certain
materials used in our products, referred to as conflict minerals,
originated in the Democratic Republic of the Congo or adjoining
countries, or were from recycled or scrap sources. We may face
challenges with government regulators and our customers and
suppliers if we are unable to sufficiently make any required
determination that the metals used in our products are conflict
free.
Our certificate of incorporation and bylaws and the General
Corporation Law of the State of Delaware may discourage takeovers
and business combinations that our stockholders might consider to
be in their best interests.
Certain
provisions in our amended and restated certificate of incorporation
and amended and restated bylaws may have the effect of delaying,
deterring, preventing or rendering more difficult, a change in
control of Qorvo that our stockholders might consider to be in
their best interests. These provisions include:
|
|
•
|
granting to the
board of directors sole power to set the number of directors and
fill any vacancy on the board of directors, whether such vacancy
occurs as a result of an increase in the number of directors or
otherwise;
|
|
|
•
|
the ability of
the board of directors to designate and issue one or more series of
preferred stock without stockholder approval, the terms of which
may be determined at the sole discretion of the board of
directors;
|
|
|
•
|
the inability of
stockholders to call special meetings of stockholders;
|
|
|
•
|
establishment of
advance notice requirements for stockholder proposals and
nominations for election to the board of directors at stockholder
meetings; and
|
|
|
•
|
the inability of
stockholders to act by written consent.
|
In addition, the
General Corporation Law of the State of Delaware contains
provisions that regulate “business combinations” between
corporations and interested stockholders who own 15% or more of the
corporation’s voting stock, except under certain circumstances.
These provisions could also discourage potential acquisition
proposals and delay or prevent a change in control.
These provisions
may prevent our stockholders from receiving the benefit of any
premium to the market price of our common stock offered by a bidder
in a takeover context and may also make it more difficult for a
third party to replace directors on our board of directors.
Further, the existence of these provisions may adversely affect the
prevailing market price of our common stock if they are viewed as
discouraging takeover attempts in the future.
Our operating results could vary as a result of the methods,
estimates and judgments we use in applying our accounting
policies.
The methods,
estimates and judgments we use in applying our accounting policies
have a significant impact on our results of operations (see
"Critical Accounting Policies and Estimates" in Part II, Item 7 of
this report). Such methods, estimates and judgments are, by their
nature, subject to substantial risks, uncertainties and
assumptions, and factors may arise over time that lead us to change
our methods, estimates and judgments that could significantly
affect our results of operations.
Decisions we make about the scope of our future operations could
affect our future financial results.
From time to
time, changes in the business environment have led us to change the
scope of our operations or business, which has resulted in
restructuring and asset impairment charges, and this could occur in
the future. The amount and timing of such charges can be difficult
to predict. Factors that contribute to the amount and timing of
such charges include:
|
|
•
|
the timing and
execution of plans and programs that are subject to local labor law
requirements, including consultation with appropriate work
councils;
|
|
|
•
|
changes in
assumptions related to severance and post-retirement
costs;
|
|
|
•
|
the timing of
future divestitures and the amount and type of proceeds realized
from such divestitures; and
|
|
|
•
|
changes in the
fair value of certain long-lived assets and goodwill.
|
Changes in our effective tax rate may adversely impact our results
of operations.
We are subject to
taxation in China, Germany, Singapore, the U.S. and numerous other
foreign taxing jurisdictions. Our effective tax rate is subject to
fluctuations as it is impacted by a number of factors, including
the following:
|
|
•
|
changes in our
overall profitability and the amount of profit determined to be
earned and taxed in jurisdictions with differing statutory tax
rates;
|
|
|
•
|
the resolution of
issues arising from tax audits with various tax authorities,
including those described in Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report;
|
|
|
•
|
changes in the
valuation of either our gross deferred tax assets or gross deferred
tax liabilities;
|
|
|
•
|
adjustments to
income taxes upon finalization of various tax returns;
|
|
|
•
|
changes in
expenses not deductible for tax purposes;
|
|
|
•
|
changes in
available tax credits; and
|
|
|
•
|
changes in tax
laws, domestic and foreign, or the interpretation of such tax laws,
and changes in generally accepted accounting
principles.
|
Any significant
increase in our future effective tax rates could reduce net income
for future periods.
Changes in the favorable tax status of our subsidiaries in
Singapore and Costa Rica would have an adverse impact on our
operating results.
Our subsidiaries
in Singapore and Costa Rica have been granted tax holidays that
effectively minimize our tax expense and that are expected to be
effective through December 2021 and December 2027, respectively. In
their efforts to deal with budget deficits, governments around the
world are focusing on increasing tax revenues through increased
audits and, potentially, increased tax rates for corporations. As
part of this effort, governments continue to review their policies
on granting tax holidays. In February 2017, Singapore enacted
legislation that will exclude from our existing Development and
Expansion Incentive grant the benefit of the reduced tax rate for
intellectual property income earned after June 30, 2021. Future
changes in the status of either tax holiday could have a negative
effect on our net income in future years.
The enactment of international or domestic tax legislation, or
changes in regulatory guidance, may adversely impact our results of
operations.
Corporate tax
reform, base-erosion efforts, and increased tax transparency
continue to be high priorities in many tax jurisdictions in which
we have business operations. In 2017, the U.S. enacted
comprehensive tax legislation, commonly referred to as the Tax Cuts
and Jobs Act (the “Tax Act”), which included a number of changes to
U.S. tax laws that impacted us, including the one-time transition
tax on certain unrepatriated earnings of foreign subsidiaries (the
“Transitional Repatriation Tax”) and the Global Intangible
Low-Taxed Income (“GILTI”) provisions. In addition, other countries
are beginning to implement legislation and other guidance to align
their international tax rules with the Organisation for Economic
Co-operation and Development’s Base Erosion and Profit Shifting
recommendations and action plan, which aim to standardize and
modernize global corporate tax policy, including changes to
cross-border tax, transfer pricing documentations rules, and
nexus-based tax incentive practices. Legislative changes,
interpretations and guidance, and changes in prior tax rulings and
decisions by tax authorities regarding treatments and positions of
corporate income taxes resulting from these initiatives, could
increase our effective tax rate and result in taxes we previously
paid being subject to change, which may adversely impact our
financial position and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.
PROPERTIES.
Our corporate headquarters
(leased) and our MP headquarters (owned) are in Greensboro, North
Carolina, and our IDP headquarters (owned) is in Richardson, Texas.
In the U.S., we have the following production facilities: (1) a
wafer fabrication facility (owned) in Greensboro, North Carolina,
(2) a wafer fabrication facility (leased) in Bend, Oregon, (3) a
wafer fabrication facility (owned) in Hillsboro, Oregon, and (4) a
facility (owned) in Richardson, Texas for wafer fabrication,
assembly and test. During fiscal 2020, our wafer fabrication
facility (owned) in Farmers Branch, Texas, was idled and the wafer
fabrication operations in our Apopka, Florida facility (owned) were
consolidated into our Greensboro, North Carolina facility.
The Apopka, Florida facility has been repurposed solely as a
research and development center.
Outside of the U.S., we have
the following primary production facilities: (1) a module assembly
and test facility (the building is owned and we hold a land-use
right for the land), in Beijing, China, (2) a module assembly and
test facility (the building is leased and we hold a land-use right
for the land) in Dezhou, China, (3) a filter assembly and test
facility (owned) in Heredia, Costa Rica, and (4) a packaging and
test facility (leased) in Nuremberg, Germany.
In the fourth quarter of
fiscal 2018, we signed a definitive lease for an assembly and test
facility in Beijing, China, which we expect to start utilizing in
fiscal 2021. This lease will allow us to
consolidate several leased facilities in Beijing,
China.
We believe our properties
have been well-maintained, are in sound operating condition and
contain all equipment and facilities necessary to operate at
present levels. While we believe all our facilities are suitable
and adequate for
our present purposes, we
continually evaluate our business and facilities and may decide to
expand, add or dispose of facilities in the future. The majority of
our production facilities are shared by our operating
segments.
ITEM 3.
LEGAL PROCEEDINGS.
See the
information under the heading "Legal Matters" in Note
11
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report.
ITEM 4. MINE
SAFETY DISCLOSURES.
Not
Applicable.
PART
II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock
is traded on the Nasdaq Global Select Market under the symbol
"QRVO." As of May 12,
2020,
there were 685 holders of record of our
common stock.
PERFORMANCE
GRAPH
|
|
|
|
|
|
|
|
|
March 28,
2015
|
April 2,
2016
|
April 1,
2017
|
March 31,
2018
|
March 30,
2019
|
March 28,
2020
|
Total Return
Index for:
|
|
|
|
|
|
|
Qorvo, Inc.
|
100.00
|
64.10
|
86.48
|
88.86
|
90.48
|
101.78
|
Nasdaq Composite
|
100.00
|
100.55
|
123.56
|
149.21
|
165.07
|
166.22
|
S&P 500
|
100.00
|
101.78
|
119.26
|
135.95
|
148.86
|
138.47
|
Nasdaq Electronic
Components
|
100.00
|
97.64
|
139.98
|
191.49
|
191.98
|
201.16
|
Notes:
A. The index
level for all series assumes that $100.00 was invested in our
common stock and each index on March 28, 2015.
|
|
B.
|
The lines
represent monthly index levels derived from compounded daily
returns, assuming reinvestment of all dividends.
|
|
|
C.
|
The indexes are
reweighted daily using the market capitalization on the previous
trading day.
|
|
|
D.
|
If the month end
is not a trading day, the preceding trading day is
used.
|
|
|
E.
|
Qorvo, Inc. was
added to the S&P 500 Index on June 12, 2015.
|
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total number
of shares purchased (in
thousands)
|
|
Average price
paid per share
|
|
Total number
of shares purchased as part of publicly announced plans or
programs (in
thousands)
|
|
Approximate
dollar value of shares that may yet be purchased under the plans or
programs
|
December 29, 2019 to January
25, 2020
|
|
101
|
|
|
$
|
114.61
|
|
|
101
|
|
|
$879.3 million
|
January 26, 2020 to February
22, 2020
|
|
112
|
|
|
$
|
109.21
|
|
|
112
|
|
|
$867.0 million
|
February 23, 2020 to March 28,
2020
|
|
1,124
|
|
|
$
|
90.04
|
|
|
1,124
|
|
|
$765.9 million
|
Total
|
|
1,337
|
|
|
$
|
93.51
|
|
|
1,337
|
|
|
$765.9 million
|
|
|
|
|
|
|
|
|
|
On October 31, 2019, the
Company announced that its Board of Directors authorized a new
share repurchase program to repurchase up to $1.0 billion
of the Company's
outstanding common stock, which included approximately
$117.0
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. See Note 16 of the Notes to the
Consolidated Financial Statements set forth in Part II,
Item 8 of this report for a further discussion of our share
repurchase program.
ITEM 6.
SELECTED FINANCIAL DATA.
The selected
financial data set forth below for the fiscal years indicated were
derived from our audited consolidated financial statements. The
information should be read in conjunction with our consolidated
financial statements and with "Management’s Discussion and Analysis
of Financial Condition and Results of Operations" appearing in Item
7 of this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
(In thousands, except per
share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
3,239,141
|
|
|
$
|
3,090,325
|
|
|
$
|
2,973,536
|
|
|
$
|
3,032,574
|
|
|
$
|
2,610,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
1,917,378
|
|
|
1,895,142
|
|
|
1,826,570
|
|
|
1,897,062
|
|
|
1,561,173
|
|
|
Research and
development
|
484,414
|
|
|
450,482
|
|
|
445,103
|
|
|
470,836
|
|
|
448,763
|
|
|
Selling, general
and administrative
|
343,569
|
|
|
476,074
|
|
|
527,751
|
|
|
545,588
|
|
|
534,099
|
|
|
Other operating
expense
|
70,564
|
|
(16)
|
52,161
|
|
(11)
|
103,830
|
|
(8)
|
31,029
|
|
(5)
|
54,723
|
|
(1)
|
Total operating costs and
expenses
|
2,815,925
|
|
|
2,873,859
|
|
|
2,903,254
|
|
|
2,944,515
|
|
|
2,598,758
|
|
|
Operating income
|
423,216
|
|
|
216,466
|
|
|
70,282
|
|
|
88,059
|
|
|
11,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(60,392
|
)
|
(17)
|
(43,963
|
)
|
(12)
|
(59,548
|
)
|
(9)
|
(58,879
|
)
|
(6)
|
(23,316
|
)
|
(2)
|
Interest income
|
12,066
|
|
|
10,971
|
|
|
7,017
|
|
|
1,212
|
|
|
2,068
|
|
|
Other income
(expense)
|
20,199
|
|
(18)
|
(91,682
|
)
|
(13)
|
(606
|
)
|
|
(3,087
|
)
|
|
6,418
|
|
|
Income (loss) before income
taxes
|
395,089
|
|
|
91,792
|
|
|
17,145
|
|
|
27,305
|
|
|
(2,862
|
)
|
|
Income tax (expense)
benefit
|
(60,764
|
)
|
(19)
|
41,333
|
|
(14)
|
(57,433
|
)
|
(10)
|
(43,863
|
)
|
(7)
|
(25,983
|
)
|
(3)
|
Net income
(loss)
|
$
|
334,325
|
|
|
$
|
133,125
|
|
|
$
|
(40,288
|
)
|
|
$
|
(16,558
|
)
|
|
$
|
(28,845
|
)
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.86
|
|
|
$
|
1.07
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.20
|
)
|
|
Diluted
|
$
|
2.80
|
|
|
$
|
1.05
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.20
|
)
|
|
Weighted average
shares of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
Basic
|
117,007
|
|
|
124,534
|
|
|
126,946
|
|
|
127,121
|
|
|
141,937
|
|
|
Diluted
|
119,293
|
|
|
127,356
|
|
|
126,946
|
|
|
127,121
|
|
|
141,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Fiscal
Year End
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Cash and cash
equivalents
|
$
|
714,939
|
|
|
$
|
711,035
|
|
|
$
|
926,037
|
|
|
$
|
545,463
|
|
|
$
|
425,881
|
|
|
Short-term
investments
|
459
|
|
|
901
|
|
|
—
|
|
|
—
|
|
|
186,808
|
|
|
Working capital
|
1,151,499
|
|
|
1,249,227
|
|
|
1,402,526
|
|
|
1,042,777
|
|
|
1,135,409
|
|
(4)
|
Total assets
|
6,560,682
|
|
|
5,808,024
|
|
|
6,381,519
|
|
|
6,522,323
|
|
|
6,596,819
|
|
|
Long-term debt
and finance lease obligations, less current portion
|
1,567,231
|
|
(20)
|
920,935
|
|
(15)
|
983,290
|
|
|
989,154
|
|
|
988,130
|
|
(2)
|
Stockholders'
equity
|
4,292,665
|
|
|
4,359,679
|
|
|
4,775,564
|
|
|
4,896,722
|
|
|
4,999,672
|
|
|
1 Other operating
expense for fiscal 2016 includes integration related expenses of
$26.5 million and restructuring related charges of $10.2
million.
2 During fiscal
2016, we issued $450.0 million aggregate principal amount of 6.75%
Senior Notes due 2023 (the "2023 Notes") and the 2025 Notes. We
recorded $28.5 million of interest expense primarily related to the
2023 Notes and the 2025 Notes, which was partially offset by $5.2
million of capitalized interest.
3 Income tax
expense for fiscal 2016 includes the effects of the income tax
expense generated by the increase in the valuation allowance
against domestic state deferred tax assets.
4 Accounting
Standards Update 2015-17, "Income Taxes (Topic 740): Balance Sheet
Classification of Deferred Taxes," was adopted in fiscal 2016 which
required deferred tax assets and deferred tax liabilities to be
presented as non-current in a classified balance
sheet.
5 Other operating
expense for fiscal 2017 includes integration related expenses of
$16.9 million and restructuring related charges of $2.1
million.
6 During fiscal
2017, we recorded $72.5 million of interest expense primarily
related to the 2023 Notes and the 2025 Notes, which was partially
offset by $13.6 million of capitalized interest.
7 Income tax
expense for fiscal 2017 includes the effects of the increase in our
unrecognized tax benefits.
8 Other operating
expense for fiscal 2018 includes integration related expenses of
$6.2 million and restructuring related charges of $67.7 million
(see Note 12 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
9 During fiscal
2018, we recorded $73.2 million
of interest
expense primarily related to the 2023 Notes and the 2025 Notes,
which was partially offset by $13.6 million of capitalized interest
(see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
10 Income tax
expense for fiscal 2018 includes the effects from the enactment of
the Tax Act, including the one-time Transitional Repatriation Tax,
which was partially offset by the benefit from remeasuring deferred
taxes for the decrease in the U.S. corporate tax rate from 35% to
21% (see Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
11 Other operating
expense for fiscal 2019 includes restructuring related charges
of $29.4
million (see Note 12 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
12 During fiscal
2019, we issued the 2026 Notes and recorded $52.8 million
of interest
expense primarily related to the 2023 Notes, the 2025 Notes and the
2026 Notes, which was partially offset by $8.8 million of
capitalized interest (see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
13 During fiscal
2019, we recorded a loss on debt extinguishment of $90.2 million
related to the repurchases of the 2023 Notes and the 2025 Notes
(see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
14 Income tax
benefit for fiscal 2019 includes the effects of the Tax Act
measurement period adjustments, including revisions to the
provisional one-time Transitional Repatriation Tax and the
remeasurement of deferred tax assets, tax benefits associated with
finalization of federal and international tax returns, and the
recognition of previously unrecognized tax benefits (see
Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
15 During fiscal
2019, we repurchased $444.5 million of the 2023 Notes and $525.1
million of the 2025 Notes and issued a total of $900.0 million
aggregate principal amount of the 2026 Notes (see Note
9
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report).
16 Other operating
expense for fiscal 2020 includes acquisition and integration
related expenses of $50.9 million
and restructuring
related charges of $13.4 million
(see Note
5
and Note
12
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report).
17 During
fiscal 2020, we recorded
$66.0
million of
interest expense primarily related to the 2026 Notes and the 2029
Notes, which was partially offset by $5.6 million
of capitalized
interest (see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
18 During
fiscal 2020, we recorded a gain of
$43.0
million related to the remeasurement
of our previously held equity interest in Cavendish in connection
with our purchase of the remaining issued and outstanding capital
of the entity (see Note 5 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report). During fiscal 2020, we recorded an impairment of
$18.3 million on an equity investment without a readily
determinable fair value (see Note 7 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
19 Income tax
expense for fiscal 2020 includes the effects
associated with the release of our permanent reinvestment assertion
on certain unrepatriated foreign earnings previously subject to
U.S. federal taxation (see Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
20 During
fiscal 2020, we issued
$550.0
million aggregate principal amount of
the 2029 Notes and drew $100.0 million
of the Term Loan
(see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following
discussion should be read in conjunction with, and is qualified in
its entirety by reference to, our audited consolidated financial
statements, including the notes thereto, set forth in Part II, Item
8 of this report.
OVERVIEW
Company
Qorvo®
is a leader in
the development and commercialization of technologies and products
for wireless and wired connectivity. We combine a broad portfolio
of innovative RF solutions, highly differentiated semiconductor
technologies, systems-level expertise and global manufacturing
scale to supply a diverse set of customers a broad range of
products that enable a more connected world.
During the fourth
quarter of fiscal 2020, our customer demand, supply chain and
global operations were modestly impacted by the COVID-19
outbreak. However, the potential duration and future impact
of the outbreak on the global economy and on our business are
difficult to predict and cannot be estimated with any degree of
certainty; the outbreak has resulted in significant disruption of
global financial markets, increases in levels of unemployment, and
economic uncertainty, which may adversely affect our business, and
may lead to significant negative impacts on customer spending,
demand for our products, the ability of our customers to pay, our
financial condition and the financial condition of our suppliers,
and our access to external sources of financing to fund our
operations and capital expenditures.
We remain
committed to protecting the health and safety of our employees in
all locations, and we are working to ensure our compliance with
government-imposed restrictions while also maintaining business
continuity. Qorvo has implemented multiple protocols in its
facilities worldwide, including increased cleaning and sanitation
procedures, pre-shift temperature screenings, and enhanced use of
personal protective equipment. In addition, Qorvo has taken
steps to effectively implement social distancing, including
rotating shifts and remote-work options whenever
possible.
Business Segments
We design,
develop, manufacture and market our products to U.S. and
international OEMs and ODMs in two operating segments, which are
also our reportable segments: Mobile Products ("MP") and
Infrastructure and Defense Products ("IDP").
MP is a global
supplier of cellular, UWB and Wi-Fi solutions for a variety of
high-volume markets, including smartphones, wearables, laptops,
tablets and IoT applications.
IDP is a global
supplier of RF, SoC and power management solutions for wireless
infrastructure, defense, smart home, automotive and other IoT
applications.
These business
segments are based on the organizational structure and information
reviewed by our Chief Executive Officer, who is our chief operating
decision maker ("CODM") and are managed separately based on the end
markets and applications they support. The CODM allocates resources
and evaluates the performance of each reportable segment primarily
based on non-GAAP operating income. For financial information about
the results of our reportable operating segments for each of the
last three fiscal years, see Note 17 of the Notes to the
Consolidated Financial Statements set forth in Part II,
Item 8 of this report.
Fiscal
2020
Management Summary
|
|
•
|
Revenue
increased
4.8%
in fiscal
2020
to
$3,239.1
million,
compared to $3,090.3 million
in fiscal
2019, primarily due to higher
demand for our mobile products in support of customers based in
China, a Korea-based customer and our largest end customer,
partially offset by lower demand for our base station products as a
result of trade restrictions.
|
|
|
•
|
Gross margin for
fiscal 2020 was 40.8%, compared to
38.7%
in fiscal
2019. This increase was primarily due to favorable
changes in product mix, lower intangible amortization expense and
lower manufacturing costs, partially offset by average selling
price erosion and lower factory utilization.
|
|
|
•
|
Operating income
was $423.2
million in
fiscal 2020, compared to
$216.5
million in
fiscal 2019. This increase was primarily
due to lower intangible amortization expense, higher gross margin
and higher revenue, partially offset by higher acquisition and
integration costs.
|
|
|
•
|
Net income per
diluted share was $2.80 for fiscal
2020,
compared to net income per diluted share of $1.05 for fiscal
2019.
|
|
|
•
|
Cash flow from
operations was $945.6 million
for fiscal
2020, compared to
$810.4
million for fiscal
2019.
This year-over-year increase was primarily due to favorable changes
in working capital driven by improvements in days sales outstanding
and improved inventory management in fiscal 2020.
|
|
|
•
|
Capital
expenditures were $164.1 million
in fiscal
2020, compared to
$220.9
million in
fiscal 2019. Our capital expenditures in
fiscal 2020 included strategic investments in premium filter
capacity and GaN technology capabilities.
|
|
|
•
|
We completed the
acquisitions of Active-Semi, Cavendish, Custom MMIC and Decawave
for a total of $946.0
million,
net of cash acquired, and incurred acquisition and integration
related charges of $55.1 million
(primarily
post-combination compensation expense and third-party fees). Upon
our acquisition of Cavendish, our previously held equity interest
was remeasured, which resulted in the recognition of a gain
of $43.0
million.
|
|
|
•
|
We recognized an
impairment of $18.3 million on an equity investment without a
readily determinable fair value.
|
|
|
•
|
We issued
$550.0
million aggregate principal amount of
the 2029 Notes and drew $100.0 million
of the Term
Loan.
|
|
|
•
|
We repurchased
approximately 6.4 million
shares of our
common stock for approximately $515.1
million.
|
RESULTS OF
OPERATIONS
Consolidated
The table below
presents a summary of our results of operations for fiscal
years 2020 and 2019. See Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" of our Annual Report on Form 10-K for the
fiscal year ended March 30,
2019,
filed with the SEC on May 17, 2019, for a summary of our results of
operations for the fiscal year ended March 31,
2018,
which is incorporated by reference herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Increase
(Decrease)
|
(In thousands, except
percentages)
|
Dollars
|
|
% of
Revenue
|
|
Dollars
|
|
% of
Revenue
|
|
Dollars
|
|
Percentage
Change
|
Revenue
|
$
|
3,239,141
|
|
|
100.0
|
%
|
|
$
|
3,090,325
|
|
|
100.0
|
%
|
|
$
|
148,816
|
|
|
4.8
|
%
|
Cost of goods
sold
|
1,917,378
|
|
|
59.2
|
|
|
1,895,142
|
|
|
61.3
|
|
|
22,236
|
|
|
1.2
|
|
Gross profit
|
1,321,763
|
|
|
40.8
|
|
|
1,195,183
|
|
|
38.7
|
|
|
126,580
|
|
|
10.6
|
|
Research and
development
|
484,414
|
|
|
14.9
|
|
|
450,482
|
|
|
14.6
|
|
|
33,932
|
|
|
7.5
|
|
Selling, general and
administrative
|
343,569
|
|
|
10.6
|
|
|
476,074
|
|
|
15.4
|
|
|
(132,505
|
)
|
|
(27.8
|
)
|
Other operating
expense
|
70,564
|
|
|
2.2
|
|
|
52,161
|
|
|
1.7
|
|
|
18,403
|
|
|
35.3
|
|
Operating income
|
$
|
423,216
|
|
|
13.1
|
%
|
|
$
|
216,466
|
|
|
7.0
|
%
|
|
$
|
206,750
|
|
|
95.5
|
%
|
Revenue
Revenue
increased
primarily due to
higher demand for our mobile products in support of customers based
in China, a Korea-based customer and our largest end customer,
partially offset by lower demand for our base station products as a
result of trade restrictions.
We provided our
products to our largest end customer (Apple) through sales to
multiple contract manufacturers, which in the aggregate accounted
for 33% and 32% of total revenue in fiscal
years 2020 and 2019, respectively. Huawei
accounted for approximately 10% and 15% of total revenue in fiscal
years 2020 and 2019, respectively. These
customers primarily purchase RF solutions for a variety of mobile
devices.
Our sales to
Huawei have been and will continue to be impacted by trade
restrictions (see Note 2 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
International
shipments amounted to $1,770.8 million
in fiscal
2020
(approximately
55%
of revenue)
compared to $1,710.8 million
in fiscal
2019
(approximately
55%
of revenue).
Shipments to Asia totaled $1,616.4 million
in fiscal
2020
(approximately
50%
of revenue)
compared to $1,554.6 million
in fiscal
2019
(approximately
50%
of
revenue).
Gross Margin
Gross
margin increased primarily due to favorable
changes in product mix, lower intangible amortization expense and
lower manufacturing costs, partially offset by average selling
price erosion and lower factory utilization.
Operating Expenses
Research
and Development
R&D
spending increased primarily due to higher
personnel related costs.
Selling,
General and Administrative
Selling, general
and administrative expense decreased primarily due to lower
intangible amortization expense.
Other
Operating Expense
In fiscal
2020, we recognized
$50.9
million of
expense related to the acquisitions of Active-Semi, Cavendish,
Custom MMIC and Decawave (see Note 5 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report for information on business acquisitions). In
fiscal 2020, we also recorded
restructuring related charges of $13.4 million
related to
employee termination benefits and other exit costs as a result of
restructuring actions (see Note 12 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report for information on restructuring actions).
In fiscal
2019, we recognized
$15.9
million of
asset impairment charges (to adjust the carrying value of certain
property and equipment to reflect fair value) and
$13.5
million of
restructuring related charges (primarily employee termination
benefits) as a result of restructuring actions (see Note
12
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report for information on restructuring actions). In fiscal
2019, we also recorded $18.0 million
of start-up costs
related to new processes and operations in existing
facilities.
Segment Product Revenue, Operating Income and Operating Income as a
Percentage of Revenue
Mobile Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
Increase
|
(In thousands, except
percentages)
|
|
2020
|
|
2019
|
|
Dollars
|
|
Percentage
Change
|
Revenue
|
|
$
|
2,397,740
|
|
|
$
|
2,197,660
|
|
|
$
|
200,080
|
|
|
9.1
|
%
|
Operating income
|
|
715,514
|
|
|
558,990
|
|
|
156,524
|
|
|
28.0
|
|
Operating income as a % of
revenue
|
|
29.8
|
%
|
|
25.4
|
%
|
|
|
|
|
MP revenue
increased
primarily due to
higher demand for our mobile products in support of customers based
in China, a Korea-based customer and our largest end customer,
partially offset by lower shipments to Huawei.
MP operating
income increased primarily due to higher
revenue and higher gross margin. Gross margin was positively
impacted by favorable changes in product mix and lower
manufacturing costs, partially offset by average selling price
erosion and lower factory utilization.
Infrastructure and Defense Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
Decrease
|
(In thousands, except
percentages)
|
|
2020
|
|
2019
|
|
Dollars
|
|
Percentage
Change
|
Revenue
|
|
$
|
841,401
|
|
|
$
|
892,665
|
|
|
$
|
(51,264
|
)
|
|
(5.7
|
)%
|
Operating income
|
|
145,295
|
|
|
267,304
|
|
|
(122,009
|
)
|
|
(45.6
|
)
|
Operating income as a % of
revenue
|
|
17.3
|
%
|
|
29.9
|
%
|
|
|
|
|
IDP
revenue decreased primarily due to lower demand
for our base station products as a result of trade restrictions and
lower demand for our Wi-Fi products, partially offset by sales of
our programmable power management products as a result of the
acquisition of Active-Semi.
IDP operating
income decreased primarily due to higher
operating expenses, lower gross margin and lower revenue. The
increase in operating expenses was primarily due to higher
personnel costs and the addition of Active-Semi expenses. Gross
margin was negatively impacted by lower factory utilization,
inventory charges and average selling price erosion.
See Note
17
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report for a reconciliation of segment operating income to
the consolidated operating income for fiscal years
2020, 2019 and 2018.
OTHER
(EXPENSE) INCOME AND INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
(In thousands)
|
|
2020
|
|
2019
|
Interest expense
|
|
$
|
(60,392
|
)
|
|
$
|
(43,963
|
)
|
Interest income
|
|
12,066
|
|
|
10,971
|
|
Other income
(expense)
|
|
20,199
|
|
|
(91,682
|
)
|
Income tax (expense)
benefit
|
|
(60,764
|
)
|
|
41,333
|
|
Interest expense
We
recognized $66.0 million
of interest
expense in fiscal 2020 primarily related to the 2026
Notes and the 2029 Notes. We recognized $52.8 million
of interest
expense in fiscal 2019 primarily related to the 2023
Notes, the 2025 Notes and the 2026 Notes. Interest expense in the
preceding table for fiscal years 2020 and 2019 is net of capitalized
interest of $5.6 million
and
$8.8
million,
respectively.
Other income (expense)
During
fiscal 2020 we recorded a gain of
$43.0
million related to the remeasurement
of our previously held equity interest in Cavendish in connection
with our purchase of the remaining issued and outstanding capital
of the entity (see Note 5 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 for
additional information regarding the Cavendish acquisition). During
fiscal 2020 we recorded an impairment
of $18.3
million on
an equity investment without a readily determinable fair value (see
Note 7 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 for
additional information regarding our investments).
During
fiscal 2019 we recorded a loss on debt
extinguishment of $90.2 million
(see Note
9
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
for additional information regarding our debt extinguishment
activity).
Income tax (expense) benefit
Income tax
expense
for fiscal
2020
was
$60.8
million.
This was primarily comprised of tax expense related to
international operations generating pre-tax book income, the impact
of the Tax Act's GILTI provisions, the reversal of the permanent
reinvestment assertion with regards to certain unrepatriated
foreign earnings, and an increase in gross unrecognized tax
benefits, offset by a tax benefit related to domestic and
international operations generating pre-tax book losses and
domestic tax credits. For fiscal 2020, this resulted in an annual
effective tax rate of 15.4%.
Income tax
benefit for fiscal 2019 was $41.3
million.
This was primarily comprised of tax benefits related to domestic
and international operations generating pre-tax book losses, tax
credits, adjustments related to provisional estimates for the
impact of the Tax Act, and a decrease in gross unrecognized tax
benefits, offset by tax expenses related to international
operations generating pre-tax book income and tax expense related
to the GILTI inclusions. For fiscal 2019, this resulted in an annual
effective tax rate of (45.0)%.
A valuation
allowance has been established against deferred tax assets in the
taxing jurisdictions where, based upon the positive and negative
evidence available, it is more likely than not that the related
deferred tax assets will not be realized. Realization is dependent
upon generating future income in the taxing jurisdictions in which
the operating loss carryovers, credit carryovers, depreciable tax
basis, and other deferred tax assets exist. Management reevaluates
the ability to realize the benefit of these deferred tax assets on
a quarterly basis. As of the end of fiscal years
2020
and
2019, the valuation allowance
against domestic and foreign deferred tax assets was
$35.3
million and $40.4
million,
respectively.
See Note
13
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report for additional information regarding income
taxes.
STOCK-BASED
COMPENSATION
Under Financial
Accounting Standards Board Accounting Standards Codification
("ASC") 718, "Compensation
– Stock Compensation," stock-based compensation cost
is measured at the grant date, based on the estimated fair value of
the award using an option pricing model for stock options
(Black-Scholes) and market price for restricted stock units, and is
recognized as expense over the employee's requisite service
period.
As of
March 28,
2020,
total remaining unearned compensation cost related to unvested
restricted stock units was $87.4
million,
which will be amortized over the weighted-average remaining service
period of approximately 1.3 years.
LIQUIDITY
AND CAPITAL RESOURCES
Cash generated by
operations is our primary source of liquidity. As of
March 28,
2020, we
had working capital of approximately $1,151.5
million,
including $714.9 million
in cash and cash
equivalents, compared to working capital of $1,249.2
million,
including $711.0 million
in cash and cash
equivalents, as of March 30,
2019.
Our
$714.9
million of
total cash and cash equivalents as of March 28,
2020,
includes approximately $345.3 million
held by our
foreign subsidiaries, of which $266.4 million
is held by Qorvo
International Pte. Ltd. in Singapore. If the undistributed earnings
of our foreign subsidiaries are needed in the U.S., we may be
required to pay state income and/or foreign local withholding taxes
to repatriate these earnings.
At this time, we
are not able to estimate the long-term impact of the COVID-19
outbreak on our business, financial condition, results of
operations, and/or cash flow. We believe we have sufficient
liquidity available from operating cash flow, cash on hand, and
availability under our revolving credit facility. However, as the
situation evolves, we will continue to assess our liquidity needs,
evaluate available alternatives and take appropriate
actions.
Credit Agreement
On December 5,
2017, we and certain of our material domestic subsidiaries (the
"Guarantors") entered into the Credit Agreement with Bank of
America, N.A., as administrative agent (in such capacity, the
"Administrative Agent"). The Credit Agreement included the Term
Loan and a $300.0 million
senior revolving
line of credit (the "Revolving Facility"). In addition, we may
request one or more additional tranches of term loans or increases
in the Revolving Facility, up to an aggregate of
$300.0
million and subject to securing
additional funding commitments from the existing or new lenders
(the "Incremental Facility", and collectively with the Term Loan
and the Revolving Facility, the "Credit Facility"). On the closing
date, $100.0 million
of the Term Loan
was funded (and was subsequently repaid in March 2018). On June 17,
2019, we drew $100.0 million
of the Term Loan.
The delayed draw availability period for the remaining
$200.0
million of
the Term Loan expired on 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 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 fiscal 2020, there were no borrowings
under the Revolving Facility.
See Note
9
of the Notes to
the Consolidated Financial Statements set forth in Part II, Item 8
of this report for further information about the Credit Agreement,
including applicable interest rates and financial covenants. As
of March 28,
2020, we
were in compliance with all the financial covenants under the
Credit Agreement.
Stock Repurchases
On October 31, 2019, we
announced that our Board of Directors authorized a new share
repurchase program to repurchase up to $1.0 billion
of our
outstanding common stock, which included approximately
$117.0
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 we repurchase our
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 us 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.
We
repurchased 6.4 million
shares,
9.1
million shares and
2.9
million shares of our common stock
during fiscal years 2020, 2019 and 2018, respectively, at an
aggregate cost of $515.1
million, $638.1 million
and
$219.9
million,
respectively, in accordance with the current and prior share
repurchase programs. As of March 28,
2020, $765.9 million
remains available
for future repurchases under our current share repurchase
program.
Cash Flows from Operating Activities
Operating
activities in fiscal 2020 provided cash of
$945.6
million,
compared to $810.4 million
in fiscal
2019. This year-over-year
increase was primarily due to favorable changes in working capital
driven by improvements in days sales outstanding and improved
inventory management in fiscal 2020.
Cash Flows from Investing Activities
Net cash used in
investing activities in fiscal 2020 was $1,105.7
million,
compared to $247.6 million
in fiscal
2019. This year-over-year
increase was primarily due to the acquisitions of Active-Semi,
Cavendish, Custom MMIC and Decawave in fiscal 2020.
Cash Flows from Financing Activities
Net cash provided
by financing activities in fiscal 2020 was $165.6
million,
compared to net cash used in financing activities of
$776.7
million in
fiscal 2019. In fiscal 2019, cash
disbursed in connection with the retirement of all of the 2023
Notes and a majority of the 2025 Notes was partially offset by cash
proceeds received from the issuance of the 2026 Notes. During
fiscal 2020, we received cash proceeds of $559.0 million
from the issuance
of the 2029 Notes and $100.0 million
from the draw on
the Term Loan.
Our future
capital requirements may differ materially from those currently
anticipated and will depend on many factors, including market
acceptance of and demand for our products, acquisition
opportunities, technological advances and our relationships with
suppliers and customers. Based on current and projected levels of
cash flow from operations, coupled with our existing cash and cash
equivalents and our Credit Facility, we believe that we have
sufficient liquidity to meet both our short-term and long-term cash
requirements. However, if there is a significant decrease in demand
for our products, or if our revenue grows faster than we
anticipate, operating cash flows may be insufficient to meet our
needs. If existing resources and cash from operations are not
sufficient to meet our future requirements or if we perceive
conditions to be favorable, we may seek additional debt or equity
financing. Additional equity or debt financing could be dilutive to
holders of our common stock. Further, we cannot be sure that
additional equity or debt financing, if required, will be available
on favorable terms, if at all.
IMPACT OF
INFLATION
We do not believe
that the effects of inflation had a significant impact on our
revenue or operating income during fiscal years 2020 and 2019. However, there can be no
assurance that our business will not be affected by inflation in
the future.
OFF-BALANCE
SHEET ARRANGEMENTS
As of
March 28,
2020, we
had no off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of SEC Regulation S-K.
CONTRACTUAL
OBLIGATIONS
The following
table summarizes our significant contractual obligations and
commitments (in thousands) as of March 28,
2020, and
the effect such obligations are expected to have on our liquidity
and cash flows in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
By Period
|
|
Total
Payments
|
|
Fiscal
2021
|
|
Fiscal
2022-2023
|
|
Fiscal
2024-2025
|
|
Fiscal 2026
and thereafter
|
Capital commitments
(1)
|
$
|
53,357
|
|
|
$
|
53,052
|
|
|
$
|
305
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-term debt
obligations (2)
|
2,152,023
|
|
|
84,610
|
|
|
247,269
|
|
|
150,402
|
|
|
1,669,742
|
|
Finance leases
(3)
|
59,877
|
|
|
1,829
|
|
|
2,312
|
|
|
2,312
|
|
|
53,424
|
|
Operating leases
|
86,126
|
|
|
21,586
|
|
|
23,891
|
|
|
13,455
|
|
|
27,194
|
|
Purchase obligations
(4)
|
264,971
|
|
|
245,982
|
|
|
15,262
|
|
|
3,727
|
|
|
—
|
|
Cross-licensing
liability (5)
|
5,400
|
|
|
2,400
|
|
|
3,000
|
|
|
—
|
|
|
—
|
|
Deferred
compensation (6)
|
19,398
|
|
|
892
|
|
|
1,251
|
|
|
713
|
|
|
16,542
|
|
Total
|
$
|
2,641,152
|
|
|
$
|
410,351
|
|
|
$
|
293,290
|
|
|
$
|
170,609
|
|
|
$
|
1,766,902
|
|
(1) Capital
commitments represent obligations for the purchase of property and
equipment, a majority of which are not recorded as liabilities on
our Consolidated Balance Sheet because we had not received the
related goods or services as of March 28,
2020.
(2) Long-term debt
obligations represent future cash payments of principal and
interest over the life of the 2025 Notes, the 2026 Notes, the 2029
Notes and the Term Loan, including anticipated interest payments
not recorded as liabilities on our Consolidated Balance Sheet as
of March 28,
2020. Debt
obligations are classified based on their stated maturity date, and
any future redemptions would impact our cash payments. See
Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II,
Item 8 of this report for further information.
(3) The finance
lease obligation primarily relates to a lease that was signed in
fiscal 2018 for an assembly and test facility in Beijing, China.
This lease will allow us to consolidate several leased facilities
in Beijing, China. The lease is not recorded on our Consolidated
Balance Sheet as of March 28,
2020 because the lease term
is not expected to commence until fiscal 2021.
(4) Purchase
obligations represent payments due related to the purchase of
materials and manufacturing services, a majority of which are not
recorded as liabilities on our Consolidated Balance Sheet because
we had not received the related goods or services as of
March 28,
2020.
(5) The
cross-licensing liability represents payables under a
cross-licensing agreement and are included in "Accrued liabilities"
and "Other long-term liabilities" in the Consolidated Balance Sheet
as of March 28,
2020.
(6) Commitments
for deferred compensation represent the liability under our
Non-Qualified Deferred Compensation Plan. See Note
10
of the Notes to
the Consolidated Financial Statements set forth in Part II,
Item 8 of this report for further information.
Other
Contractual Obligations
As of
March 28,
2020, in
addition to the amounts shown in the contractual obligations table
above, we have $124.6 million
of unrecognized
income tax benefits and accrued interest and penalties, of
which $19.4 million
has been recorded
as a liability. We are uncertain as to if, or when, such
amounts may be settled. We also have an obligation related to the
Transitional Repatriation Tax. We have elected to pay the remaining
obligation of $5.6
million,
which has been recorded as a liability, over eight years.
As discussed in
Note 10 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report, we have two pension plans in Germany with a combined
benefit obligation of approximately $12.3 million
as of
March 28,
2020.
Pension benefit payments are not included in the schedule above
because they are not available for all periods presented. Pension
benefit payments were approximately $0.2 million
in fiscal
2020
and are expected
to be approximately $0.3 million
in fiscal
2021.
SUPPLEMENTAL
PARENT AND GUARANTOR FINANCIAL INFORMATION
In accordance
with the Indentures, our obligations under the Notes are fully and
unconditionally guaranteed on a joint and several unsecured basis
by the Guarantors, each of which is 100% owned, directly or
indirectly, by Qorvo, Inc. ("Parent"). A Guarantor can be released
in certain customary circumstances. Our other U.S. subsidiaries and
our non-U.S. subsidiaries do not guarantee the Notes (such
subsidiaries are referred to as the "Non-Guarantors").
The following
presents summarized financial information for the Parent and the
Guarantors on a combined basis as of and for the periods indicated,
after eliminating (i) intercompany transactions and balances among
the Parent and Guarantors, and (ii) equity earnings from, and
investments in, any Non-Guarantor. The summarized financial
information may not necessarily be indicative of the financial
position and results of operations had the combined Parent and
Guarantors operated independently from the
Non-Guarantors.
|
|
|
|
|
|
Summarized
Balance Sheet
(in thousands)
|
|
March 28,
2020
|
Current assets
(1)
|
|
$
|
1,112,828
|
|
Non-current
assets
|
|
$
|
2,346,759
|
|
|
|
|
Current
liabilities
|
|
$
|
253,324
|
|
Long-term liabilities
(2)
|
|
$
|
1,901,756
|
|
(1) Includes
current receivable from Non-Guarantors of $484.2
million.
(2) Includes
non-current payable to Non-Guarantors of $249.9
million.
|
|
|
|
|
|
Summarized
Statement of Operations
(in thousands)
|
|
Fiscal
Year
2020
|
Revenue
|
|
$
|
981,845
|
|
Gross profit
|
|
$
|
108,096
|
|
Net loss
|
|
$
|
(254,769
|
)
|
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The preparation
of consolidated financial statements requires management to use
judgment and estimates. The level of uncertainty in estimates and
assumptions increases with the length of time until the underlying
transactions are completed. Actual results could differ from those
estimates. The accounting policies that are most critical in the
preparation of our consolidated financial statements are those that
are both important to the presentation of our financial condition
and results of operations and require significant judgment and
estimates on the part of management. Our critical accounting
policies are reviewed periodically with the Audit Committee of the
Board of Directors. We also have other policies that we consider
key accounting policies; however, these policies typically do not
require us to make estimates or judgments that are difficult or
subjective (see Note 1 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report).
Inventory Reserves. The valuation of inventory
requires us to estimate obsolete or excess inventory. The
determination of obsolete or excess inventory requires us to
estimate the future demand for our products within specific time
horizons, generally 12 to 24 months. The estimates of future demand
that we use in the valuation of inventory reserves are the same as
those used in our revenue forecasts and are also consistent with
the estimates used in our manufacturing plans to enable consistency
between inventory valuations and build decisions. Product-specific
facts and circumstances reviewed in the inventory valuation process
include a review of the customer base, market conditions, and
customer acceptance of our products and technologies, as well as an
assessment of the selling price in relation to the product
cost.
Historically,
inventory reserves have fluctuated as new technologies have been
introduced and customers’ demand has shifted. Inventory reserves
had an impact on margins of less than 2%
in fiscal
years 2020 and 2019.
Property and Equipment. Periodically, we evaluate the
period over which we expect to recover the economic value of our
property and equipment, considering factors such as changes in
machinery and equipment technology, our ability to re-use equipment
across generations of process technology and historical usage
trends. When we determine that the useful lives of assets are
shorter or longer than we had originally estimated, we adjust the
rate of depreciation to reflect the revised useful lives of the
assets.
We assess
property and equipment for impairment when events or changes in
circumstances indicate that the carrying value of the assets or the
asset group may not be recoverable. Factors that we consider in
deciding when to perform an impairment review include an adverse
change in our use of the assets or an expectation that the assets
will be sold or otherwise disposed. We assess the recoverability of
the assets held and used by comparing the projected undiscounted
net cash flows associated with the related asset or group of assets
over their remaining estimated useful lives against their
respective carrying amounts. Assets identified as "held for
sale" are recorded at the lesser of their carrying value or their
fair market value less costs to sell. Impairment, if any, is
based on the excess of the carrying amount over the fair value of
those assets. The process of evaluating property and
equipment for impairment is highly subjective and requires
significant judgment as we are required to make assumptions about
items such as future demand for our products and industry
trends.
Business Acquisitions. We record goodwill when the
consideration paid for a business acquisition exceeds the estimated
fair value of the net identified tangible and intangible assets
acquired. Goodwill is assigned to our reporting unit that is
expected to benefit from the synergies of the business
combination.
A number of
assumptions, estimates and judgments are used in determining the
fair value of acquired assets and liabilities, particularly with
respect to the intangible assets acquired. The valuation of
intangible assets requires our use of valuation techniques such as
the income approach. The income approach includes management’s
estimation of future cash flows (including expected revenue growth
rates and profitability), the underlying product or technology life
cycles and the discount rates applied to future cash
flows.
Further judgment
is required in estimating the fair values of deferred tax assets
and liabilities, uncertain tax positions and tax-related valuation
allowances, which are initially estimated as of the acquisition
date, as well as inventory, property and equipment, pre-existing
liabilities or legal claims, deferred revenue and contingent
consideration, each as may be applicable.
While we use our
best estimates and assumptions to accurately value assets acquired
and liabilities assumed at the acquisition date as well as
contingent consideration, where applicable, our estimates are
inherently uncertain and subject to refinement. As a result, during
the measurement period, which may be up to one year from the
acquisition date, we may record adjustments to the assets acquired
and liabilities assumed with the corresponding offset to goodwill.
Upon the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities
assumed, whichever comes first, any subsequent adjustments are
recognized in our Consolidated Statements of
Operations.
Goodwill. We perform an annual
impairment assessment of goodwill at the reporting unit level on
the first day of the fourth quarter in each fiscal year, or more
frequently if indicators of potential impairment exist. Reporting
units, as defined by ASC 350, "Intangibles
- Goodwill and Other," may be operating segments as
a whole or an operation one level below an operating segment,
referred to as a component. We have determined that our reporting
units are our two operating and reportable segments, MP and
IDP.
In accordance
with ASC 350, we may assess qualitative factors to determine
whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value, including
goodwill.
In performing a
qualitative assessment, we consider (i) our overall historical and
projected future operating results, (ii) if there was a significant
decline in our stock price for a sustained period, (iii) if there
was a significant change in our market capitalization relative to
our net book value, and (iv) if there was a prolonged or more
significant slowdown in the worldwide economy of the semiconductor
industry, as well as other relevant events and factors affecting
the reporting unit. If we assess these qualitative factors and
conclude that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, or if we decide
not to perform a qualitative assessment, then a quantitative
impairment test is performed.
In fiscal years
2019 and 2018, we completed qualitative assessments and concluded
that based on the relevant facts and circumstances, it was more
likely than not that each reporting unit’s fair value exceeded its
related carrying value and no further impairment testing was
required.
In fiscal 2020,
we performed a quantitative impairment test. Our quantitative
impairment test considered both the income approach and the market
approach to estimate each reporting unit’s fair value. Under the
income approach, the fair value of each reporting unit is based on
the present value of estimated future cash flows. Cash flow
projections are based on our estimates of revenue growth rates and
operating margins, taking into consideration industry and market
conditions. The discount rate used to determine the present value
of future cash flows is based on the weighted-average cost of
capital adjusted for the relevant risk associated with
business-specific characteristics and the uncertainty related to
the business's ability to execute on the projected cash flows. The
market approach estimates fair value based on market multiples of
revenue and earnings derived from comparable publicly traded
companies with similar operating and investment characteristics.
The resulting fair value, based on the income and market
approaches, is then compared to the carrying value to determine if
impairment is necessary.
As a result of
the quantitative analysis performed in fiscal 2020, it was
determined that the fair value of each of our reporting units
substantially exceeded their carrying values. As the assumptions
used in the income approach and market approach can have a material
impact on the fair value determinations, we performed a sensitivity
analysis of key assumptions used in the assessment and determined
that a one percentage point increase in the discount rate along
with a one percentage point decrease in the long-term growth rate
would not result in an impairment of goodwill for either reporting
unit and their fair values substantially exceeded their carrying
values.
Identified Intangible Assets. We amortize finite-lived
intangible assets (including developed technology, customer
relationships, trade names, technology licenses and backlog) over
their estimated useful life. In-process research and development
("IPRD") assets represent the fair value of incomplete R&D
projects that had not reached technological feasibility as of the
date of the acquisition; initially, these are classified as IPRD
and are not subject to amortization. Upon completion of
development, IPRD assets are transferred to developed technology
and are amortized over their useful lives. The asset balances
relating to abandoned projects are impaired and expensed to
R&D. We perform a quarterly review of significant intangible
assets to determine whether facts and circumstances (including
external factors such as industry and economic trends and internal
factors such as changes in our business strategy and forecasts)
indicate that the carrying amount of the assets may not be
recoverable. If such facts and circumstances exist, we assess the
recoverability of identified intangible assets by comparing the
projected undiscounted net cash flows associated with the related
asset or group of assets over their remaining lives against their
respective carrying amounts. Impairments, if any, are based on the
excess of the carrying amounts over the fair value of those assets
and occur in the period in which the impairment determination was
made.
Revenue Recognition. We generate revenue primarily
from the sale of semiconductor products, either directly to a
customer or to a distributor, or at completion of a consignment
process. Revenue is recognized when control of the promised goods
or services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled in exchange for
those goods or services. A majority of our revenue is recognized at
a point in time, either on shipment or delivery of the product,
depending on individual customer terms and conditions. Revenue from
sales to our distributors is recognized upon shipment of the
product to the distributors (sell-in). Revenue is recognized from
our consignment programs at a point in time when the products are
pulled from consignment inventory by the customer. Revenue
recognized for products and services over-time is immaterial (less
than 2% of overall revenue). We apply
a five-step approach as defined in ASC 606, "Revenue
from Contracts with Customers," in determining the amount and
timing of revenue to be recognized: (1) identifying the contract
with a customer; (2) identifying the performance obligations in the
contract; (3) determining the transaction price; (4) allocating the
transaction price to the performance obligations in the contract;
and (5) recognizing revenue when the corresponding performance
obligation is satisfied.
Sales agreements
are in place with certain customers and contain terms and
conditions with respect to payment, delivery, warranty and supply,
but typically do not require minimum purchase commitments. In the
absence of a sales agreement, our standard terms and conditions
apply. We consider a customer's
purchase order,
which is governed by a sales agreement or our standard terms and
conditions, to be the contract with the customer.
Our pricing terms
are negotiated independently, on a stand-alone basis. In
determining the transaction price, we evaluate whether the price is
subject to a refund or adjustment to determine the net
consideration to which we expect to be entitled. Variable
consideration in the form of rebate programs is offered to certain
customers, including distributors. A majority of these rebates are
accrued and classified as a contra accounts receivable and
represent less than 5% of net revenue. We determine
variable consideration by estimating the most likely amount of
consideration we expect to receive from the customer. Our terms and
conditions do not give our customers a right of return associated
with the original sale of our products. However, we may authorize
sales returns under certain circumstances, which include courtesy
returns and like-kind exchanges. Sales returns are classified as a
refund liability. We reduce revenue and record reserves for product
returns and allowances, rebate programs and scrap allowance based
on historical experience or specific identification depending on
the contractual terms of the arrangement.
Our accounts
receivable balance is from contracts with customers and represents
our unconditional right to receive consideration from our
customers. Payments are due upon completion of the performance
obligation and subsequent invoicing. Substantially all payments are
collected within our standard terms, which do not include any
financing components. To date, there have been no material
impairment losses on accounts receivable. Contract assets and
contract liabilities recorded on the Consolidated Balance Sheets
were immaterial as of March 28, 2020
and
March 30,
2019.
We invoice
customers upon shipment and recognize revenues in accordance with
delivery terms. As of March 28,
2020, we
had $37.8
million in
remaining unsatisfied performance obligations with an original
duration greater than one year, of which the majority is expected
to be recognized as income over the next 12 months.
We include
shipping charges billed to customers in "Revenue" and include the
related shipping costs in "Cost of goods sold" in the Consolidated
Statements of Operations. Taxes assessed by government authorities
on revenue-producing transactions, including tariffs, value-added
and excise taxes, are excluded from revenue in the Consolidated
Statements of Operations.
We incur
commission expense that is incremental to obtaining contracts with
customers. Sales commissions (which are recorded in the "Selling,
general and administrative" expense line item in the Consolidated
Statements of Operations) are expensed when incurred because such
commissions are not owed until the performance obligation is
satisfied, which coincides with the end of the contract term, and
therefore no remaining period exists over which to amortize the
commissions.
Income Taxes. In determining income for
financial statement purposes, we must make certain estimates and
judgments in the calculation of tax expense, the resultant tax
liabilities, and the recoverability of deferred tax assets that
arise from temporary differences between the tax and financial
statement recognition of revenue and expense.
As part of our
financial process, we assess on a tax jurisdictional basis the
likelihood that our deferred tax assets can be recovered. If
recovery is not more likely than not (a likelihood of less than 50
percent), the provision for taxes must be increased by recording a
reserve in the form of a valuation allowance for the deferred tax
assets that are estimated not to ultimately be recoverable. In this
process, certain relevant criteria are evaluated including: the
amount of income or loss in prior years, the existence of deferred
tax liabilities that can be used to absorb deferred tax assets, the
taxable income in prior carryback years that can be used to absorb
net operating losses and credit carrybacks, future expected taxable
income, and prudent and feasible tax planning strategies. Changes
in taxable income, market conditions, U.S. or international tax
laws, and other factors may change our judgment regarding whether
we will be able to realize the deferred tax assets. These changes,
if any, may require material adjustments to the net deferred tax
assets and an accompanying reduction or increase in income tax
expense which will result in a corresponding increase or decrease
in net income in the period when such determinations are made. See
Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report for additional information regarding changes in the
valuation allowance and net deferred tax assets.
As part of our
financial process, we also assess the likelihood that our tax
reporting positions will ultimately be sustained. To the extent it
is determined it is more likely than not (a likelihood of more than
50 percent) that some portion or all of a tax reporting position
will ultimately not be recognized and sustained, a provision for
unrecognized tax benefit is provided by either reducing the
applicable deferred tax asset or accruing an income tax liability.
Our judgment regarding the sustainability of our tax reporting
positions may change in the future due to changes in U.S. or
international tax laws and other factors. These changes, if any,
may require material adjustments to the related deferred tax assets
or accrued income tax liabilities and an accompanying reduction or
increase in income tax expense which will result in a corresponding
increase or decrease in net income in the period when such
determinations are made. See Note 13 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report for additional information regarding our uncertain tax
positions and the amount of unrecognized tax benefits.
RECENT
ACCOUNTING PRONOUNCEMENTS
For a description of recent
accounting pronouncements, including those recently adopted and not
yet effective, see Note 1 of the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8 of
this report.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Financial Risk Management
We are exposed to
financial market risks, including changes in interest rates,
foreign currency exchange rates, equity prices and certain
commodity prices. The overall objective of our financial risk
management program is to seek a reduction in the potential negative
earnings effects from changes in interest rates, foreign currency
exchange rates, equity prices, and commodity prices arising from
our business activities. We manage these financial exposures
through operational means and by using various financial
instruments, when deemed appropriate. These practices may change as
economic conditions change.
Interest Rate Risk
We are exposed to
interest rate risk via the terms of our Credit Facility, which is
comprised of a Term Loan and Revolving Facility with interest rates
(see Note 9 of the Notes to the
Consolidated Financial Statements set forth in Part II,
Item 8 of this report). The outstanding balance related to the
Credit Facility as of March 28, 2020
was
$100.0
million. A
potential change in the associated interest rates would be
immaterial to the results of our operations.
Foreign Currency Exchange Rate Risk
As a global
company, our results are affected by movements in currency exchange
rates. Our exposure may increase or decrease over time as our
foreign business levels fluctuate in the countries where we have
operations, and these changes could have a material impact on our
financial results. The functional currency for most of our
international operations is the U.S. dollar. We have foreign
operations in Asia, Central America and Europe, and a substantial
portion of our revenue is derived from sales to customers outside
the U.S. Our international revenue is primarily denominated in U.S.
dollars. Operating expenses and certain working capital items
related to our foreign-based operations are, in some instances,
denominated in the local foreign currencies and therefore are
affected by changes in the U.S. dollar exchange rate in relation to
foreign currencies, such as the Costa Rican Colon, Euro, Pound
Sterling, Renminbi, and Singapore Dollar. If the U.S. dollar
weakens compared to these and other currencies, our operating
expenses for foreign operations will be higher when remeasured back
into U.S. dollars. We seek to manage our foreign currency exchange
risk in part through operational means.
For fiscal
2020, we incurred a foreign
currency loss of $2.2 million
as compared to a
loss of $2.1 million
in fiscal
2019, which is recorded in “Other
income (expense).”
Our financial
instrument holdings, including foreign receivables, cash and
payables at March 28,
2020, were
analyzed to determine their sensitivity to foreign exchange rate
changes. In this sensitivity analysis, we assumed that the change
in one currency's rate relative to the U.S. dollar would not have
an effect on other currencies' rates relative to the U.S. dollar.
All other factors were held constant. If the U.S. dollar declined
in value 10% in relation to the re-measured foreign currency
instruments, our net income would have decreased by approximately
$2.8
million. If the U.S. dollar
increased in value 10% in relation to the re-measured foreign
currency instruments, our net income would have increased by approximately
$2.3
million.
Equity Price Risk
Our marketable
equity investments in publicly traded companies are subject to
equity market price risk. Accordingly, a fluctuation in the price
of each equity security could have an adverse impact on the fair
value of our investments. As of March 28,
2020, our
equity investments were immaterial (see Note 7 of the Notes to the
Consolidated Financial Statements set forth in Part II,
Item 8 of this report).
Commodity Price Risk
We routinely use
precious metals in the manufacture of our products. Supplies for
such commodities may from time to time become restricted, or
general market factors and conditions may affect the pricing of
such commodities. We also have an active reclamation process to
capture any unused gold. While we attempt to mitigate the risk of
increases in commodities-related costs, there can be no assurance
that we will be able to successfully safeguard against potential
short-term and long-term commodity price fluctuations.
|
|
|
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qorvo, Inc.
and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
March 28,
2020
|
|
March 30,
2019
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
714,939
|
|
|
$
|
711,035
|
|
Accounts
receivable, less allowance of $55 and $40 as of March 28, 2020 and
March 30, 2019, respectively
|
367,172
|
|
|
378,172
|
|
Inventories
|
517,198
|
|
|
511,793
|
|
Prepaid
expenses
|
37,872
|
|
|
25,766
|
|
Other
receivables
|
15,016
|
|
|
21,934
|
|
Other current
assets
|
38,305
|
|
|
36,141
|
|
Total current
assets
|
1,690,502
|
|
|
1,684,841
|
|
Property and equipment,
net
|
1,259,203
|
|
|
1,366,513
|
|
Goodwill
|
2,614,274
|
|
|
2,173,889
|
|
Intangible assets,
net
|
808,892
|
|
|
408,210
|
|
Long-term
investments
|
22,515
|
|
|
97,786
|
|
Other non-current
assets
|
165,296
|
|
|
76,785
|
|
Total assets
|
$
|
6,560,682
|
|
|
$
|
5,808,024
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
246,954
|
|
|
$
|
233,307
|
|
Accrued
liabilities
|
217,801
|
|
|
160,516
|
|
Current portion
of long-term debt
|
6,893
|
|
|
80
|
|
Other current
liabilities
|
67,355
|
|
|
41,711
|
|
Total current
liabilities
|
539,003
|
|
|
435,614
|
|
Long-term debt
|
1,567,231
|
|
|
920,935
|
|
Other long-term
liabilities
|
161,783
|
|
|
91,796
|
|
Total
liabilities
|
2,268,017
|
|
|
1,448,345
|
|
Commitments and contingent
liabilities
|
|
|
|
|
|
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; 114,625 and 119,063 shares issued and outstanding at
March 28, 2020 and March 30, 2019, respectively
|
4,290,377
|
|
|
4,687,455
|
|
Accumulated other
comprehensive income (loss), net of tax
|
2,288
|
|
|
(6,624
|
)
|
Accumulated
deficit
|
—
|
|
|
(321,152
|
)
|
Total stockholders’
equity
|
4,292,665
|
|
|
4,359,679
|
|
Total liabilities and
stockholders’ equity
|
$
|
6,560,682
|
|
|
$
|
5,808,024
|
|
See
accompanying notes.
Qorvo, Inc.
and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Revenue
|
$
|
3,239,141
|
|
|
$
|
3,090,325
|
|
|
$
|
2,973,536
|
|
Cost of goods
sold
|
1,917,378
|
|
|
1,895,142
|
|
|
1,826,570
|
|
Gross
profit
|
1,321,763
|
|
|
1,195,183
|
|
|
1,146,966
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Research and
development
|
484,414
|
|
|
450,482
|
|
|
445,103
|
|
Selling, general and
administrative
|
343,569
|
|
|
476,074
|
|
|
527,751
|
|
Other operating
expense
|
70,564
|
|
|
52,161
|
|
|
103,830
|
|
Total operating
expenses
|
898,547
|
|
|
978,717
|
|
|
1,076,684
|
|
Operating income
|
423,216
|
|
|
216,466
|
|
|
70,282
|
|
|
|
|
|
|
|
Interest expense
|
(60,392
|
)
|
|
(43,963
|
)
|
|
(59,548
|
)
|
Interest income
|
12,066
|
|
|
10,971
|
|
|
7,017
|
|
Other income
(expense)
|
20,199
|
|
|
(91,682
|
)
|
|
(606
|
)
|
Income before income
taxes
|
395,089
|
|
|
91,792
|
|
|
17,145
|
|
|
|
|
|
|
|
Income tax (expense)
benefit
|
(60,764
|
)
|
|
41,333
|
|
|
(57,433
|
)
|
Net income
(loss)
|
$
|
334,325
|
|
|
$
|
133,125
|
|
|
$
|
(40,288
|
)
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
Basic
|
$
|
2.86
|
|
|
$
|
1.07
|
|
|
$
|
(0.32
|
)
|
Diluted
|
$
|
2.80
|
|
|
$
|
1.05
|
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
|
Weighted average shares of
common stock outstanding:
|
|
|
|
|
|
Basic
|
117,007
|
|
|
124,534
|
|
|
126,946
|
|
Diluted
|
119,293
|
|
|
127,356
|
|
|
126,946
|
|
|
|
|
|
|
|
See
accompanying notes.
Qorvo, Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
2020
|
|
2019
|
|
2018
|
Net income
(loss)
|
$
|
334,325
|
|
|
$
|
133,125
|
|
|
$
|
(40,288
|
)
|
Total comprehensive income
(loss):
|
|
|
|
|
|
Unrealized gain on
available-for-sale debt securities, net of tax
|
—
|
|
|
85
|
|
|
204
|
|
Change in pension liability,
net of tax
|
501
|
|
|
(651
|
)
|
|
476
|
|
Foreign currency translation
adjustment, including intra-entity foreign currency transactions
that are of a long-term-investment nature
|
7,923
|
|
|
(3,396
|
)
|
|
1,276
|
|
Reclassification adjustments,
net of tax:
|
|
|
|
|
|
Foreign currency loss (gain)
recognized and included in net income (loss)
|
353
|
|
|
—
|
|
|
(581
|
)
|
Amortization of
pension actuarial loss
|
135
|
|
|
90
|
|
|
179
|
|
Other comprehensive income
(loss)
|
8,912
|
|
|
(3,872
|
)
|
|
1,554
|
|
Total comprehensive income
(loss)
|
$
|
343,237
|
|
|
$
|
129,253
|
|
|
$
|
(38,734
|
)
|
See
accompanying notes.
Qorvo, Inc.
and Subsidiaries
Consolidated
Statements of Stockholders’ Equity
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
Accumulated
Deficit
|
|
|
|
Common
Stock
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
Balance, April 1,
2017
|
126,464
|
|
|
$
|
5,357,394
|
|
|
$
|
(4,306
|
)
|
|
$
|
(456,366
|
)
|
|
$
|
4,896,722
|
|
Net
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,288
|
)
|
|
(40,288
|
)
|
Other
comprehensive income
|
—
|
|
|
—
|
|
|
1,554
|
|
|
—
|
|
|
1,554
|
|
Exercise of stock
options and vesting of restricted stock units, net of shares
withheld for employee taxes
|
2,246
|
|
|
4,735
|
|
|
—
|
|
|
—
|
|
|
4,735
|
|
Issuance of
common stock in connection with employee stock purchase
plan
|
541
|
|
|
28,064
|
|
|
—
|
|
|
—
|
|
|
28,064
|
|
Cumulative-effect
adoption of ASU 2016-09
|
—
|
|
|
—
|
|
|
—
|
|
|
36,684
|
|
|
36,684
|
|
Cumulative-effect
adoption of ASU 2016-16
|
—
|
|
|
—
|
|
|
—
|
|
|
1,201
|
|
|
1,201
|
|
Repurchase of
common stock, including transaction costs
|
(2,929
|
)
|
|
(219,907
|
)
|
|
—
|
|
|
—
|
|
|
(219,907
|
)
|
Stock-based
compensation
|
—
|
|
|
66,799
|
|
|
—
|
|
|
—
|
|
|
66,799
|
|
Balance, March 31,
2018
|
126,322
|
|
|
$
|
5,237,085
|
|
|
$
|
(2,752
|
)
|
|
$
|
(458,769
|
)
|
|
$
|
4,775,564
|
|
Net
income
|
—
|
|
|
—
|
|
|
—
|
|
|
133,125
|
|
|
133,125
|
|
Other
comprehensive loss
|
—
|
|
|
—
|
|
|
(3,872
|
)
|
|
—
|
|
|
(3,872
|
)
|
Exercise of stock
options and vesting of restricted stock units, net of shares
withheld for employee taxes
|
1,368
|
|
|
(10,833
|
)
|
|
—
|
|
|
—
|
|
|
(10,833
|
)
|
Issuance of
common stock in connection with employee stock purchase
plan
|
468
|
|
|
26,817
|
|
|
—
|
|
|
—
|
|
|
26,817
|
|
Cumulative-effect
adoption of ASU 2014-09
|
—
|
|
|
—
|
|
|
—
|
|
|
4,492
|
|
|
4,492
|
|
Repurchase of
common stock, including transaction costs
|
(9,095
|
)
|
|
(638,074
|
)
|
|
—
|
|
|
—
|
|
|
(638,074
|
)
|
Stock-based
compensation
|
—
|
|
|
72,460
|
|
|
—
|
|
|
—
|
|
|
72,460
|
|
Balance, March 30,
2019
|
119,063
|
|
|
$
|
4,687,455
|
|
|
$
|
(6,624
|
)
|
|
$
|
(321,152
|
)
|
|
$
|
4,359,679
|
|
Net
income
|
—
|
|
|
—
|
|
|
—
|
|
|
334,325
|
|
|
334,325
|
|
Other
comprehensive income
|
—
|
|
|
—
|
|
|
8,912
|
|
|
—
|
|
|
8,912
|
|
Exercise of stock
options and vesting of restricted stock units, net of shares
withheld for employee taxes
|
1,551
|
|
|
(974
|
)
|
|
—
|
|
|
—
|
|
|
(974
|
)
|
Issuance of
common stock in connection with employee stock purchase
plan
|
452
|
|
|
28,657
|
|
|
—
|
|
|
—
|
|
|
28,657
|
|
Cumulative-effect
adoption of ASU 2016-02
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
69
|
|
Repurchase of
common stock, including transaction costs
|
(6,441
|
)
|
|
(501,868
|
)
|
|
—
|
|
|
(13,263
|
)
|
|
(515,131
|
)
|
Stock-based
compensation
|
—
|
|
|
77,107
|
|
|
—
|
|
|
—
|
|
|
77,107
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
Balance, March 28,
2020
|
114,625
|
|
|
$
|
4,290,377
|
|
|
$
|
2,288
|
|
|
$
|
—
|
|
|
$
|
4,292,665
|
|
See
accompanying notes.
Qorvo, Inc.
and Subsidiaries
Consolidated
Statements of Cash Flows
(In
thousands)