This report and other documents we have filed with the
RESULTS OF OPERATIONS
THREE MONTHS ENDED
The following table sets forth the results of our operations expressed as a percentage of net revenue: Three Months Ended December 27, December 28, 2019 2018 Net revenue 100.0 % 100.0 % Cost of goods sold 50.4 50.1 Gross profit 49.6 49.9 Operating expenses: Research and development 12.0 11.2 Selling, general and administrative 6.2 4.9 Amortization of intangibles 0.3 0.8 Restructuring and other charges (benefit) 0.1 - Total operating expenses 18.6 16.9 Operating income 31.0 33.0 Other income, net 0.2 0.3 Income before income taxes 31.2 33.3 Provision for income taxes 2.4 4.0 Net income 28.8 % 29.3 % OVERVIEW 14
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We, together with our consolidated subsidiaries, are empowering the wireless networking revolution. Our analog semiconductors are connecting people, places, and things spanning a number of new applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet and wearable markets.
GENERAL
During the three months ended
• Net revenue decreased by 7.8% to$896.1 million for the three months endedDecember 27, 2019 , as compared with the corresponding period in fiscal 2019. This decrease in revenue was primarily driven by reduced demand resulting from theU.S. Bureau of Industry and Security of theU.S. Department of Commerce placingHuawei Technologies Co., Ltd. and certain of its affiliates (collectively, "Huawei") on the Bureau's Entity List (the "Entity List") inMay 2019 . • Our ending cash, cash equivalents and marketable securities balance increased 13.5% to$1,228.6 million as ofDecember 27, 2019 , from$1,082.2 million as ofSeptember 27, 2019 . This increase in cash, cash equivalents and marketable securities during the three months endedDecember 27, 2019 , was primarily the result of cash generated from operations of$398.4 million , partially offset by the repurchase of 0.7 million shares of common stock for$74.2 million , capital expenditures of$111.2 million , and dividend payments of$75.1 million . NET REVENUE Three Months Ended December 27, December 28, 2019 Change 2018 (dollars in millions) Net revenue$ 896.1 (7.8)%$ 972.0
We market and sell our products directly to OEMs of communications and electronics products, third-party original design manufacturers and contract manufacturers, and indirectly through electronic components distributors. We generally experience seasonal peaks during our fourth and first fiscal quarters (which correspond to the second half of the calendar year), primarily as a result of increased worldwide production of consumer electronics in anticipation of increased holiday sales, whereas our second and third fiscal quarters are typically lower and in line with seasonal industry trends.
We generated net revenue of
GROSS PROFIT
Three Months Ended December 27, December 28, 2019 Change 2018 (dollars in millions) Gross profit$ 444.3 (8.4)%$ 485.1 % of net revenue 49.6 % 49.9 %
Gross profit represents net revenue less cost of goods sold. Our cost of goods sold consists primarily of purchased materials, labor and overhead (including depreciation and share-based compensation expense) associated with product manufacturing. Erosion of average selling prices of established products is typical of the semiconductor industry. As part of our normal course of business, we mitigate the gross margin impact of declining average selling prices with efforts to increase unit volumes, reduce material costs, improve manufacturing efficiencies, lower manufacturing costs of existing products and by introducing new and higher value-added products.
The
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Gross profit margin decreased to 49.6% of net revenue for the three months ended
RESEARCH AND DEVELOPMENT
Three Months Ended December 27, December 28, 2019 Change 2018 (dollars in millions) Research and development$ 107.7 (1.4)%$ 109.2 % of net revenue 12.0 % 11.2 %
Research and development expenses consist primarily of direct personnel costs including share-based compensation expense, costs for pre-production evaluation and testing of new devices, masks, engineering prototypes and design tool costs.
The decrease in research and development expenses for the three months ended
SELLING, GENERAL AND ADMINISTRATIVE
Three Months Ended December 27, December 28, 2019 Change 2018
(dollars in millions)
Selling, general and administrative
6.2 % 4.9 %
Selling, general and administrative expenses include legal and related costs, accounting, treasury, human resources, information systems, customer service, bad debt expense, sales commissions, share-based compensation expense, advertising, marketing, costs associated with business combinations completed or contemplated during the period and other costs.
The increase in selling, general and administrative expenses for the three
months ended
AMORTIZATION OF INTANGIBLES Three Months Ended December 27, December 28, 2019 Change 2018
(dollars in millions)
Amortization of intangibles, cost of goods sold $ 8.3 2.5%
3.1 (58.1)% 7.4 Total amortization of intangibles, including inventory step-up 11.4 15.5 % of net revenue 1.3 % 1.6 %
The decrease in total amortization expense for the three months ended
PROVISION FOR INCOME TAXES
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Table of Contents Three Months Ended December 27, December 28, 2019 Change 2018 (dollars in millions) Provision for income taxes$ 21.6 (44.4)%$ 38.9 % of net revenue 2.4 % 4.0 %
We recorded a provision for income taxes of
The
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended December 27, December 28, (in millions) 2019 2018
Cash and cash equivalents at beginning of period
398.4 549.0 Net cash provided by (used in) investing activities (180.5 ) 171.5 Net cash used in financing activities (141.0 ) (368.1 )
Cash and cash equivalents at end of period
Cash provided by operating activities:
Cash provided by operating activities consists of net income for the period
adjusted for certain non-cash items and changes in certain operating assets and
liabilities. The decrease of
Cash provided by (used in) investing activities:
Cash used in investing activities consists primarily of capital expenditures and
cash paid related to the purchase of marketable securities, offset by cash
received related to the sale or maturity of marketable securities. The
Cash used in financing activities:
Cash used in financing activities consists primarily of cash transactions
related to equity. The
Liquidity:
Cash, cash equivalents and marketable securities totaled
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resources. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.
Our invested cash balances primarily consist of highly liquid marketable
securities that are available to meet near-term cash requirements including:
term deposits, certificate of deposits, money market funds,
CONTRACTUAL OBLIGATIONS
Our contractual obligations disclosure in the 2019 10-K has not materially changed since we filed that report.
OFF-BALANCE SHEET ARRANGEMENTS
We have no material off-balance sheet arrangements as defined in SEC Regulation S-K Item 303(a)(4)(ii).
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