Merger Termination Fees - because we believe such non-recurring fees have no direct correlation to our business operations or performance during the period in which they are received or for any future period.
Certain Income Tax Items - including certain deferred tax charges and benefits that do not result in a current tax payment or tax refund and other adjustments, including but not limited to, items unrelated to the current fiscal year or that are not indicative of our ongoing business operations.
The non-GAAP financial measures presented in the table above should not be considered in isolation and are not an alternative for the respective GAAP financial measure that is most directly comparable to each such non-GAAP financial measure. Investors are cautioned against placing undue reliance on these non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures to arrive at these non-GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures are likely to have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.
Our earnings release contains forward-looking estimates of non-GAAP diluted earnings per share for the first quarter of our 2018 fiscal year (“Q1 2018”). We provide this non-GAAP measure to investors on a prospective basis for the same reasons (set forth above) that we provide it to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of Q1 2018 GAAP diluted earnings per share to a forward-looking estimate of Q1 2018 non-GAAP diluted earnings per share because certain information needed to make a reasonable forward-looking estimate of GAAP diluted earnings per share for Q1 2018 (other than estimated share-based compensation expense of $0.14 to $0.16 per diluted share, certain tax items of ($0.07) to ($0.13) per diluted share and estimated amortization of intangibles of $0.03 to $0.05 per diluted share) is difficult to predict and estimate and is often dependent on future events that may be uncertain or outside of our control. Such events may include unanticipated changes in our GAAP effective tax rate, unanticipated one-time charges related to asset impairments (fixed assets, inventory, intangibles or goodwill), unanticipated acquisition-related expenses, unanticipated litigation settlement gains, losses and expenses and other unanticipated non-recurring items not reflective of ongoing operations. We believe the probable significance of these unknown items, in the aggregate, to be in the range of $0.00 to $0.05 in quarterly earnings per diluted share on a GAAP basis. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.
| [a] | These charges represent expense recognized in accordance with ASC 718 - Compensation, Stock Compensation. For the three months ended September 29, 2017, approximately $3.5 million, $9.4 million and $11.3 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively. For the fiscal year ended September 29, 2017, approximately $13.6 million, $35.3 million and $39.6 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively. | ||
| For the three months ended September 30, 2016, approximately $1.9 million, $8.3 million and $9.5 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively. For the fiscal year ended September 30, 2016, approximately $11.3 million, $32.2 million and $34.5 million were included in cost of goods sold, research and development expense and selling, general and administrative expense, respectively. | |||
| [b] | The acquisition-related expenses recognized during the three months and fiscal year ended September 29, 2017, include a $0.3 million and a $4.6 million charge, respectively, to general and administrative expenses primarily associated with acquisitions completed or contemplated during the period. | ||
| The acquisition-related expenses recognized during the three months and fiscal year ended September 30, 2016, include a $0.4 million credit and a $1.4 million charge, respectively, to cost of goods sold related to the sale of acquired inventory and $0.7 million and $6.1 million, respectively, in general and administrative expenses primarily associated with acquisitions completed or contemplated during the periods. | |||
| [c] | During the three months and fiscal year ended September 29, 2017, the Company incurred $5.0 million and $27.6 million, respectively, in amortization of intangibles. | ||
| During the three months and fiscal year ended September 30, 2016, the Company incurred $6.4 million and $33.4 million, respectively, in amortization of intangibles. | |||
| [d] | During the three months and fiscal year ended September 29, 2017, the Company incurred a $0.2 million credit and a $0.6 million charge, respectively, in employee severance costs primarily related to restructuring plans that were implemented during the periods. | ||
| During the three months and fiscal year ended September 30, 2016, the Company incurred a $0.4 million credit and a $4.8 million charge, respectively, in employee severance costs primarily related to restructuring plans that were implemented during the periods. | |||
| [e] | During the three months and fiscal year ended September 29, 2017, the Company recognized a $4.0 million charge to general and administrative expenses associated with ongoing litigations. | ||
| During the three months and fiscal year ended September 30, 2016, the Company recognized a $0.1 million credit and a $1.7 million charge, respectively, primarily related to general and administrative expenses associated with ongoing litigations. | |||
| [f] | During the three months and fiscal year ended September 30, 2016, the Company incurred $0.6 million in deferred executive compensation expenses. | ||
| [g] | During the fiscal year ended September 30, 2016, PMC-Sierra, Inc. (“PMC”), notified the Company on November 23, 2015, that it had terminated the Amended and Restated Agreement and Plan of Merger entered into between the parties in order to accept a superior acquisition proposal. As a result, on November 24, 2015, PMC paid the Company a $88.5 million merger termination fee. | ||
| [h] | During the three months and fiscal year ended September 30, 2016, the Company recognized $0.1 million and $1.1 million, respectively, in interest expense associated with the accretion of the present value of the $76.5 million liability related to the future purchase of the remaining 34% interest in the joint venture between the Company and Panasonic. The Company acquired the remaining 34% interest from Panasonic on August 1, 2016. | ||
| [i] | During the three months and fiscal year ended September 29, 2017, these amounts primarily represent the use of net operating loss carryforwards, deferred tax expense not affecting taxes payable, tax deductible share-based compensation expense in excess of GAAP share-based compensation expense, the release of previously reserved items that are no longer required as a result of audits, and non-cash expense (benefit) related to uncertain tax positions. | ||
| During the three months and fiscal year ended September 30, 2016, these amounts primarily represent the use of net operating loss and research and development tax credit carryforwards, deferred tax expense not affecting taxes payable, tax deductible share-based compensation expense in excess of GAAP share-based compensation expense, the tax attributable to the merger termination fee, the release of previously reserved items that are no longer required as a result of the IRS audits, and non-cash expense (benefit) related to uncertain tax positions. | |||
| SKYWORKS SOLUTIONS, INC. | |||||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| (in millions) |
September 29,
2017 |
September 30,
2016 |
|||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,616.8 | $ | 1,083.8 | |||||
| Accounts receivable, net | 454.7 | 416.6 | |||||||
| Inventory | 493.5 | 424.0 | |||||||
| Other current assets | 68.7 | 77.7 | |||||||
| Property, plant and equipment, net | 882.3 | 806.3 | |||||||
| Goodwill and intangible assets, net | 950.8 | 940.3 | |||||||
| Other assets | 106.8 | 106.7 | |||||||
| Total assets | $ | 4,573.6 | $ | 3,855.4 | |||||
| Liabilities and Equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 258.4 | $ | 110.4 | |||||
| Accrued and other current liabilities | 129.5 | 99.8 | |||||||
| Other long-term liabilities | 120.0 | 103.8 | |||||||
| Stockholders’ equity | 4,065.7 | 3,541.4 | |||||||
| Total liabilities and equity | $ | 4,573.6 | $ | 3,855.4 | |||||
|
SKYWORKS SOLUTIONS, INC. |
||||||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
| (in millions) |
September 29,
2017 |
September 30,
2016 |
September 29,
2017 |
September 30,
2016 |
||||||||||||||
| Cash flow from operating activities | ||||||||||||||||||
| Net income | $ | 281.3 | $ | 246.8 | $ | 1,010.2 | $ | 995.2 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||
| Share-based compensation | 24.2 | 19.7 | 88.5 | 78.0 | ||||||||||||||
| Depreciation | 60.4 | 54.8 | 227.2 | 214.4 | ||||||||||||||
| Amortization of intangible assets | 5.0 | 6.4 | 27.6 | 33.4 | ||||||||||||||
| Contribution of common shares to savings and retirement plans | 7.8 | 6.7 | 15.0 | 18.0 | ||||||||||||||
| Deferred income taxes | (0.6 | ) | (1.5 | ) | 2.2 | — | ||||||||||||
| Excess tax benefit from share-based compensation | (5.4 | ) | 1.4 | (40.8 | ) | (43.7 | ) | |||||||||||
| Other | 0.3 | 0.1 | 0.3 | 0.3 | ||||||||||||||
| Changes in operating assets: | ||||||||||||||||||
| Receivables, net | (57.3 | ) | 153.4 | (37.1 | ) | 121.4 | ||||||||||||
| Inventory | (10.5 | ) | 13.4 | (69.2 | ) | (147.3 | ) | |||||||||||
| Other current and long-term assets | 12.6 | (13.2 | ) | 3.3 | (20.4 | ) | ||||||||||||
| Accounts payable | 79.7 | (71.3 | ) | 147.8 | (181.5 | ) | ||||||||||||
| Other current and long-term liabilities | 27.9 | 38.3 | 96.3 | 27.9 | ||||||||||||||
| Net cash provided by operations | 425.4 | 455.0 | 1,471.3 | 1,095.7 | ||||||||||||||
| Cash flow from investing activities | ||||||||||||||||||
| Capital expenditures | (85.3 | ) | (15.7 | ) | (303.3 | ) | (189.3 | ) | ||||||||||
| Payments for acquisitions, net of cash acquired | — | (0.6 | ) | (13.7 | ) | (55.6 | ) | |||||||||||
| Purchased intangibles | (12.1 | ) | (5.5 | ) | (12.1 | ) | (6.0 | ) | ||||||||||
| Maturity of investments | — | — | 3.2 | — | ||||||||||||||
| Net cash used in investing activities | (97.4 | ) | (21.8 | ) | (325.9 | ) | (250.9 | ) | ||||||||||
| Cash flow from financing activities | ||||||||||||||||||
| Payments for obligations recorded for business combinations | — | (76.5 | ) | — | (76.5 | ) | ||||||||||||
| Excess tax benefit from share-based compensation | 5.4 | (1.4 | ) | 40.8 | 43.7 | |||||||||||||
| Repurchase of common stock — payroll tax withholdings on equity awards | (1.2 | ) | (0.4 | ) | (49.2 | ) | (73.3 | ) | ||||||||||
| Repurchase of common stock — share repurchase program | (101.8 | ) | (198.6 | ) | (432.3 | ) | (525.6 | ) | ||||||||||
| Dividends paid | (58.9 | ) | (52.2 | ) | (214.6 | ) | (201.0 | ) | ||||||||||
| Net proceeds from exercise of stock options | 8.0 | 6.0 | 53.8 | 28.1 | ||||||||||||||
| Deferred payments for intangible assets | (5.5 | ) | — | (5.5 | ) | — | ||||||||||||
| Payments of contingent consideration | (1.2 | ) | — | (5.4 | ) | — | ||||||||||||
| Net cash used in financing activities | (155.2 | ) | (323.1 | ) | (612.4 | ) | (804.6 | ) | ||||||||||
| Net increase (decrease) in cash and cash equivalents | 172.8 | 110.1 | 533.0 | 40.2 | ||||||||||||||
| Cash and cash equivalents at beginning of period | 1,444.0 | 973.7 | 1,083.8 | 1,043.6 | ||||||||||||||
| Cash and cash equivalents at end of period | $ | 1,616.8 | $ | 1,083.8 | $ | 1,616.8 | $ | 1,083.8 | ||||||||||
