NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Skyworks Solutions, Inc., together with its consolidated subsidiaries (“Skyworks” or the “Company”), is empowering the wireless networking revolution. The Company’s highly innovative analog semiconductors are connecting people, places, and things, spanning a number of new and previously unimagined applications within the automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet and wearable markets.
The Company has evaluated subsequent events through the date of issuance of the audited consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All Skyworks subsidiaries are included in the Company’s consolidated financial statements and all intercompany balances are eliminated in consolidation.
FISCAL YEAR
The Company’s fiscal year ends on the Friday closest to September 30. Fiscal years 2016 and 2015 each consisted of
52
weeks and ended on September 30, 2016 and October 2, 2015, respectively. Fiscal year 2014 consisted of 53 weeks and ended on October 3, 2014.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, expenses, comprehensive income and accumulated other comprehensive loss during the reporting period. The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Significant judgment is required in determining the reserves for and fair value of items such as allowance for doubtful accounts, overall fair value assessments of assets and liabilities, particularly those classified as Level 2 or Level 3 in the fair value hierarchy, inventory, intangible assets associated with business combinations, share-based compensation, loss contingencies, and income taxes. In addition, significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows for any necessary impairment testing. Actual results could differ significantly from these estimates.
CASH AND CASH EQUIVALENTS
The Company invests excess cash in time deposits, certificate of deposits and money market funds which primarily consist of United States treasury obligations, United States agency obligations, and repurchase agreements collateralized by United States government and agency obligations. The Company considers highly liquid investments with original maturities of 90 days or less when purchased as cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains general allowances for doubtful accounts related to potential losses that could arise due to customers’ inability to make required payments. These reserves require management to apply judgment in deriving these estimates. In addition, the Company performs ongoing credit evaluations of its customers’ financial condition and if it becomes aware of any specific receivables which may be uncollectable, they perform additional analysis including, but not limited to, factors such as a customer’s credit worthiness, intent and ability to pay and overall financial position, and reserves are recorded if deemed necessary. If the data the Company uses to calculate the allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and results of operations could be materially affected.
INVESTMENTS
The Company classifies its investment in marketable securities as “available for sale”. Available for sale securities are carried at fair value with unrealized holding gains or losses recorded in other comprehensive income. Gains or losses are included in earnings in the period in which they are realized.
DERIVATIVES
The Company may utilize derivative financial instruments to manage market risks associated with fluctuations in foreign currency exchange rates on specific transactions that occur in the normal course of business. The criteria the Company uses for designating an instrument as a hedge is the instrument’s effectiveness in risk reduction. To receive hedge accounting treatment, hedges must be highly effective at offsetting the impact of the hedge transaction. All derivatives, whether designated as hedging relationships or not, are recorded at fair value and are included as either an asset or liability on the balance sheet.
FAIR VALUE
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principle or most advantageous market in an orderly transaction between market participants at the measurement date. Applicable accounting guidance provides a hierarchy for inputs used in measuring fair value that prioritize the use of observable inputs over the use of unobservable inputs, when such observable inputs are available. The three levels of inputs that may be used to measure fair value are as follows:
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•
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Level 1 - Quoted prices in active markets for identical assets or liabilities.
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•
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Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
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•
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Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by the Company.
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It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, the Company uses quoted market prices to measure fair value. If market prices are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.
The Company measures certain assets and liabilities at fair value on a recurring basis in three levels, based on the market in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. It recognizes transfers within the fair value hierarchy at the end of the fiscal quarter in which the change in circumstances that caused the transfer occurred.
The carrying value of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities approximates fair value due to short-term maturities of these assets and liabilities.
INVENTORY
Inventory is stated at the lower of cost or market on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated depreciation, with significant renewals and betterments being capitalized and retired equipment written off in the respective periods. Maintenance and repairs are expensed as incurred.
Depreciation is calculated using the straight-line method over the estimated useful lives, which range from
five
to
thirty
years for buildings and improvements and
three
to
ten
years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic life or the life of the associated lease.
VALUATION OF LONG-LIVED ASSETS
Definite lived intangible assets are carried at cost less accumulated amortization. Amortization is calculated based on the pattern of benefit to be recognized from the underlying asset over its estimated useful life. Carrying values for long-lived assets and definite lived intangible assets are reviewed for possible impairment as circumstances warrant. Factors considered important that could result in an impairment review include significant underperformance relative to expected, historical or projected future operating results, significant changes in the manner of use of assets or the Company’s business strategy, or significant negative industry or economic trends. In addition, impairment reviews are conducted at the judgment of management whenever asset/asset group values are deemed to be unrecoverable relative to future undiscounted cash flows expected to be generated by that particular asset/asset group. The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset/asset group and its eventual disposition. Such estimates require management to exercise judgment and make assumptions regarding factors such as future revenue streams, operating expenditures, cost allocation and asset utilization levels, all of which collectively impact future operating performance. The Company’s estimates of undiscounted cash flows may differ from actual cash flows due to, among
other things, technological changes, economic conditions, changes to its business model or changes in its operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value of an asset/asset group, the Company would recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset or asset group.
GOODWILL AND INDEFINITE INTANGIBLE ASSETS
Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually as of the first day of the fourth fiscal quarter for impairment or more frequently if indicators of impairment exist during the fiscal year
.
Indefinite-lived intangible assets comprise an insignificant portion of the total book value of the Company’s intangible assets. The Company assesses its conclusion regarding segments and reporting units in conjunction with its annual goodwill impairment test, and has determined that it has one reporting unit for the purposes of allocating and testing goodwill.
The goodwill impairment test is a two-step process. The first step of the Company’s impairment analysis compares its fair value to its net book value to determine if there is an indicator of impairment. In the Company’s calculation of fair value, it considers the closing price of its common stock on the selected testing date, the number of shares of its common stock outstanding and other marketplace activity such as a related control premium. If the calculated fair value is determined to be less than the book value of the Company, then the Company performs step two of the impairment analysis. Step two of the analysis compares the implied fair value of the Company’s goodwill to its book value. If the book value of the Company’s goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess.
BUSINESS COMBINATIONS
The Company uses the acquisition method of accounting for business combinations and recognizes assets acquired and liabilities assumed at their fair values on the date acquired. Goodwill represents the excess of the purchase price over the fair value of the net assets. The fair values of the assets and liabilities acquired are determined based upon the Company’s valuation using a combination of market, income or cost approaches. The valuation involves making significant estimates and assumptions, which are based on detailed financial models including the projection of future cash flows, the weighted average cost of capital and any cost savings that are expected to be derived in the future.
EMPLOYEE RETIREMENT BENEFIT PLANS
The funded status of benefit pension plans, or the balance of plan assets and benefit obligations is recognized on the consolidated balance sheet and pension liability adjustments, net of tax, are recorded in Accumulated Other Comprehensive Income. The Company determines discount rates considering the rates of return on high-quality fixed income investments, and the expected long-term rate of return on pension plan assets by considering the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. Decreases in discount rates lead to increases in benefit obligations that, in turn, could lead to an increase in amortization cost through amortization of actuarial gain or loss. A decline in the market values of plan assets will generally result in a lower expected rate of return, which would result in an increase of future retirement benefit costs.
REVENUE RECOGNITION
Revenue from product sales is recognized when there is persuasive evidence of an arrangement, the price to the buyer is fixed and determinable, delivery and transfer of title have occurred in accordance with the shipping terms specified in the arrangement with the customer and collectability is reasonably assured. Revenue from license fees and intellectual property is recognized when due and payable, and all other criteria previously noted have been met. The Company ships product on consignment to certain customers and only recognizes revenue when the customer notifies the Company that the inventory has been consumed. Revenue recognition is deferred in all instances where the earnings process is incomplete. Certain product sales are made to electronic component distributors under agreements allowing for price protection and stock rotation on unsold products. Reserves for sales returns and allowances are recorded based on historical experience or pursuant to contractual arrangements necessitating revenue reserves.
SHARE-BASED COMPENSATION
The Company recognizes compensation expense for all share-based payment awards made to employees and directors including non-qualified employee stock options, share awards and units, employee stock purchase plan and other special share-based awards based on estimated fair values.
The fair value of share-based payment awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. The Company uses a straight-line attribution method for all grants that include only a service condition. Awards with both performance and service conditions are expensed over the service period for each separately vesting tranche.
Share-based compensation expense recognized during the period includes actual expense on vested awards and expense associated with unvested awards that has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company reviews actual forfeitures at least annually.
The Company determines the fair value of share-based option awards based on the Company’s closing stock price on the date of grant using a Black-Scholes options pricing model. Under the Black-Scholes model, a number of highly complex and subjective variables are used including, but not limited to: the expected stock price volatility over the term of the award, the risk-free rate, the expected life of the award and dividend yield. The determination of fair value of restricted and certain performance share awards and units is based on the value of the Company’s stock on the date of grant with performance awards and units adjusted for the actual outcome of the underlying performance condition.
For more complex performance awards including units with market-based performance conditions the Company employs a Monte Carlo simulation valuation method to calculate the fair value of the awards based on the most likely outcome. Under the Monte Carlo simulation, a number of highly complex and subjective variables are used including, but not limited to: the expected stock price volatility over the term of the award, a correlation coefficient, the risk-free rate, the expected life of the award, and dividend yield.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
LOSS CONTINGENCIES
The Company records its best estimates of a loss contingency when it is considered probable and the amount can be reasonably estimated. When a range of loss can be reasonably estimated with no best estimate in the range, the minimum estimated liability related to the claim is recorded. As additional information becomes available, the Company assesses the potential liability related to the potential pending loss contingency and revises its estimates. Loss contingencies are disclosed if there is at least a reasonable possibility that a loss or an additional loss may have been incurred and legal costs are expensed as incurred.
RESTRUCTURING
A liability for post-employment benefits is recorded when payment is probable, the amount is reasonably estimable, and the obligation relates to rights that have vested or accumulated.
FOREIGN CURRENCIES
The Company’s primary functional currency is the United States dollar. Gains and losses related to foreign currency transactions, conversion of foreign denominated cash balances and translation of foreign currency financial statements are included in current results. For certain foreign entities that utilize local currencies as their functional currency, the resulting unrealized translation gains and losses are reported as currency translation adjustment through other comprehensive income (loss) for each period.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. This method also requires the recognition of future tax benefits such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The carrying value of the Company’s net deferred tax assets assumes the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets resulting in additional income tax expense in its Consolidated Statement of Operations. Management evaluates the realizability of the deferred tax assets and assesses the adequacy of the valuation allowance quarterly. Likewise, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax assets would increase income or decrease the carrying value of goodwill in the period such determination was made.
The determination of recording or releasing tax valuation allowances is made, in part, pursuant to an assessment performed by management regarding the likelihood that the Company will generate future taxable income against which benefits of its deferred tax assets may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respect to its ability to generate revenues, gross profits, operating income and taxable income in future periods. Amongst other factors, management must make assumptions regarding overall business and semiconductor industry conditions, operating efficiencies, the Company’s ability to develop products to its customers’ specifications, technological change, the competitive environment and changes in regulatory requirements which may impact its ability to generate taxable income and, in turn, realize the value of its deferred tax assets.
The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
The Company recognizes liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its recognition threshold and measurement attribute of whether it is more likely than not that the positions the Company has taken in tax filings will be sustained upon tax audit, and the extent to which, additional taxes would be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. The Company recognizes any interest or penalties, if incurred, on any unrecognized tax benefits as a component of income tax expense.
EARNINGS PER SHARE
Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporate the potentially dilutive incremental shares issuable upon the assumed exercise of stock options, the assumed vesting of outstanding restricted stock units and performance stock units, and the assumed issuance of common stock under the stock purchase plan using the treasury share method.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In August 2015, the FASB deferred the effective date of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The guidance will be effective for the first quarter of the Company’s fiscal year 2019. Early adoption is permitted, but not before the first quarter of fiscal year 2018. The new guidance is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition method and is still evaluating the impact of this ASU on its consolidated financial statements and related disclosure.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to reflect most leases on their balance sheet as assets and obligations. The effective date for the standard is for fiscal years beginning after December 15, 2018, with early adoption permitted. The standard is to be applied under the modified retrospective method, with elective reliefs, which requires application of the new guidance for all periods presented. The Company is evaluating the effects that this ASU will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB Issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company does not anticipate it will adopt this ASU early and is evaluating the effects that this ASU will have on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The standard addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. This pronouncement is effective for annual reporting periods beginning after December 15, 2017. The amendments in this ASU should be applied using a retrospective approach. The Company is evaluating the effects that this ASU will have on its consolidated financial statements.
There have been no other recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to the Company.
3. BUSINESS COMBINATIONS
On October 29, 2015, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with PMC-Sierra, Inc. (“PMC”), providing for, subject to the terms and conditions of the Merger Agreement, the cash acquisition of PMC by the Company. On November 23, 2015, PMC notified the Company that it had terminated the Merger Agreement. As a result, on November 24, 2015, PMC paid the Company a termination fee of
$88.5 million
pursuant to the Merger Agreement.
During the fiscal year ended September 30, 2016, the Company acquired two businesses for total aggregate cash consideration of
$55.6 million
together with future contingent payments. The total future contingent consideration payments range from
zero
to
$10.0 million
and are based upon the achievement of specified objectives that are payable up to two years from the anniversary of the acquisitions, which at closing had a total estimated fair value of
$7.4 million
. In allocating the total purchase consideration for these acquisitions based on preliminary estimated fair values, the Company recorded
$16.6 million
of goodwill and
$35.5 million
of identifiable intangibles assets. Intangible assets acquired primarily included customer relationships and developed technology with weighted average useful lives of 4.0 years. These acquisitions are treated as asset purchases for tax purposes and accordingly, the goodwill resulting from these acquisitions is expected to be deductible.
The fair value estimates for the assets acquired and liabilities assumed for acquisitions completed during the fiscal year ended September 30, 2016, were based upon preliminary calculations and valuations, and the Company’s estimates and assumptions for each of these acquisitions are subject to change as it obtains additional information during the respective measurement periods (up to one year from the respective acquisition dates).
Net revenue and net income from these acquisitions has been included in the Consolidated Statements of Operations from the acquisition date through the end of the fiscal year on September 30, 2016. The impact of these acquisitions to the ongoing operations on the Company’s net revenue and net income was not significant for the fiscal year ended September 30, 2016. The Company incurred immaterial transaction-related costs during the period fiscal year September 30, 2016, which were included within the sales, administrative and general account. Due to the materiality of these acquisitions, the disclosures required by the applicable accounting guidance have been excluded.
On August 1, 2016, the Company exercised its purchase option on the joint venture with Panasonic with respect to the design, manufacture and sale of Panasonic filter products, and paid Panasonic
$76.5 million
in cash. As a result of exercising the purchase option, the Company owns
100%
of the filter joint venture.
On
October 7, 2016
, the Company acquired a business for
$14.4 million
in cash and contingent consideration ranging from
zero
to
$20.0 million
payable over a three-year period. Due to the timing of the acquisition and the date of this filing, the Company has yet to assess the fair value of the assets acquired and liabilities assumed and accordingly, the disclosures required have been omitted.
4. FAIR VALUE
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The Company measures certain assets and liabilities at fair value on a recurring basis such as its financial instruments and derivatives. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the fiscal year ended
September 30, 2016
.
Level 3 assets include an auction rate security that is classified as available for sale and recorded in other current assets and that is scheduled to mature in 2017. Due to the illiquid market for this security the Company has classified the carrying value as a Level 3 asset with the difference between the par and carrying value being categorized as a temporary loss and recorded in accumulated other comprehensive loss.
On August 1, 2016, the Company exercised its option and paid cash for the remaining interest in the joint venture with Panasonic as detailed in
Note 3
of these Notes to Consolidated Financial Statements. This purchase option was recorded as a Level 3 liability as of October 2, 2015.
The Company held foreign currency call and put options (“foreign currency options”) that were intended to hedge the potential cash exposure related to the Panasonic purchase option. These foreign currency options expired unexercised during the fiscal year ended September 30, 2016, as the call and put options were out of the money,
The Company classifies its contingent consideration related to its business combinations as detailed in
Note 3
of these Notes to Consolidated Financial Statements, made during the fiscal year ended September 30, 3016, as Level 3 liabilities. This assessment is
based on management judgment involved in computing the expected achievements of specified objectives that are payable up to two years from the anniversary of the acquisitions. The Company reassesses the fair value of the contingent consideration on a quarterly basis and records any applicable adjustments to earnings in the period they are determined.
Assets and liabilities recorded at fair value on a recurring basis consisted of the following (in millions):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2016
|
|
As of October 2, 2015
|
|
|
|
Fair Value Measurements
|
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|
Fair Value Measurements
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
408.7
|
|
|
$
|
408.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
464.6
|
|
|
$
|
464.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Auction rate security
|
2.3
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
Foreign currency derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
Total
|
$
|
411.0
|
|
|
$
|
408.7
|
|
|
$
|
—
|
|
|
$
|
2.3
|
|
|
$
|
470.2
|
|
|
$
|
464.6
|
|
|
$
|
—
|
|
|
$
|
5.6
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligation recorded for business combinations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75.4
|
|
Foreign currency derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
Contingent consideration liability recorded for business combinations
|
7.9
|
|
|
—
|
|
|
—
|
|
|
7.9
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
Total
|
$
|
7.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.9
|
|
|
$
|
78.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78.7
|
|
The following table summarizes changes to the fair value of the Level 3 assets (in millions):
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|
|
|
|
|
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|
Auction rate security
|
|
Foreign currency derivative
|
Balance as of October 2, 2015
|
$
|
2.3
|
|
|
$
|
3.3
|
|
Changes in fair value included in earnings
|
—
|
|
|
(3.3
|
)
|
Balance as of September 30, 2016
|
$
|
2.3
|
|
|
$
|
—
|
|
The following table summarizes changes to the fair value of the Level 3 liabilities (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligation
|
|
Foreign currency derivative
|
|
Contingent consideration
|
Balance as of October 2, 2015
|
$
|
75.4
|
|
|
$
|
2.8
|
|
|
$
|
0.5
|
|
Increases to Level 3 liabilities
|
—
|
|
|
—
|
|
|
7.4
|
|
Changes in fair value included in earnings
|
—
|
|
|
(2.8
|
)
|
|
—
|
|
Decreases of Level 3 liabilities
|
(75.4
|
)
|
|
—
|
|
|
—
|
|
Balance as of September 30, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.9
|
|
Assets Measured and Recorded at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets and liabilities, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations are measured at fair value using income approach valuation methodologies at the date of acquisition and are subsequently re-measured if there are indicators of impairment.
5. INVENTORY
Inventory consists of the following (in millions):
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|
|
|
|
|
|
|
As of
|
|
September 30,
2016
|
|
October 2,
2015
|
Raw materials
|
$
|
18.5
|
|
|
$
|
30.0
|
|
Work-in-process
|
255.5
|
|
|
192.4
|
|
Finished goods
|
140.4
|
|
|
38.0
|
|
Finished goods held on consignment by customers
|
9.6
|
|
|
7.5
|
|
Total inventory
|
$
|
424.0
|
|
|
$
|
267.9
|
|
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment net consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2016
|
|
October 2,
2015
|
Land and improvements
|
$
|
11.6
|
|
|
$
|
11.6
|
|
Buildings and improvements
|
133.5
|
|
|
101.7
|
|
Furniture and fixtures
|
29.5
|
|
|
26.9
|
|
Machinery and equipment
|
1,533.3
|
|
|
1,285.4
|
|
Construction in progress
|
59.9
|
|
|
159.8
|
|
Total property, plant and equipment, gross
|
1,767.8
|
|
|
1,585.4
|
|
Accumulated depreciation
|
(961.5
|
)
|
|
(759.0
|
)
|
Total property, plant and equipment, net
|
$
|
806.3
|
|
|
$
|
826.4
|
|
7. GOODWILL AND INTANGIBLE ASSETS
The changes to the carrying amount of goodwill are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2016
|
|
October 2,
2015
|
Goodwill at beginning of the period
|
$
|
856.7
|
|
|
$
|
851.0
|
|
Goodwill recognized through business combinations (
Note 3
)
|
16.6
|
|
|
3.3
|
|
Goodwill adjustments
|
—
|
|
|
2.4
|
|
Impairments
|
—
|
|
|
—
|
|
Goodwill at the end of the period
|
$
|
873.3
|
|
|
$
|
856.7
|
|
The changes in goodwill during the fiscal year ended September 30, 2016, relate to the amounts recognized through the business combinations completed during the period as detailed in
Note 3
, Business Combinations, in these Notes to the Consolidated Financial Statements.
The Company performed an impairment test of its goodwill as of the first day of the fourth fiscal quarter in accordance with its regularly scheduled testing. The results of this test indicated that the Company’s goodwill was not impaired. There were no other indicators of impairment noted during the fiscal year ended
September 30, 2016
.
Intangible assets consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
Weighted
average
amortization
period remaining (years)
|
September 30, 2016
|
|
October 2, 2015
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
carrying
amount
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
carrying
amount
|
Customer relationships
|
4.2
|
$
|
78.5
|
|
|
$
|
(57.7
|
)
|
|
$
|
20.8
|
|
|
$
|
57.2
|
|
|
$
|
(48.7
|
)
|
|
$
|
8.5
|
|
Developed technology and other
|
5.8
|
133.8
|
|
|
(89.2
|
)
|
|
44.6
|
|
|
99.7
|
|
|
(64.8
|
)
|
|
34.9
|
|
Trademarks
|
Indefinite
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
Total intangible assets
|
|
$
|
213.9
|
|
|
$
|
(146.9
|
)
|
|
$
|
67.0
|
|
|
$
|
158.5
|
|
|
$
|
(113.5
|
)
|
|
$
|
45.0
|
|
The net carrying amount of intangible assets increased for the fiscal year ended September 30, 2016, primarily due to the identifiable intangible assets acquired during the fiscal year as discussed in
Note 3
, Business Combinations, in these Notes to the Consolidated Financial Statements.
Annual amortization expense for the next five years related to intangible assets is expected to be as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
Amortization expense
|
$
|
23.6
|
|
|
$
|
11.0
|
|
|
$
|
9.3
|
|
|
$
|
7.4
|
|
|
$
|
5.3
|
|
|
$
|
8.8
|
|
8. INCOME TAXES
Income before income taxes consists of the following components (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
United States
|
$
|
697.5
|
|
|
$
|
602.1
|
|
|
$
|
346.8
|
|
Foreign
|
503.1
|
|
|
421.5
|
|
|
218.4
|
|
Income before income taxes
|
$
|
1,200.6
|
|
|
$
|
1,023.6
|
|
|
$
|
565.2
|
|
The provision for income taxes consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Current tax expense (benefit):
|
|
|
|
|
|
Federal
|
$
|
181.8
|
|
|
$
|
199.5
|
|
|
$
|
88.2
|
|
State
|
0.1
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
Foreign
|
25.8
|
|
|
33.9
|
|
|
13.5
|
|
|
207.7
|
|
|
232.9
|
|
|
101.2
|
|
Deferred tax expense (benefit):
|
|
|
|
|
|
Federal
|
(0.8
|
)
|
|
(2.0
|
)
|
|
12.3
|
|
Foreign
|
(1.5
|
)
|
|
(5.6
|
)
|
|
(6.0
|
)
|
|
(2.3
|
)
|
|
(7.6
|
)
|
|
6.3
|
|
|
|
|
|
|
|
Provision for income taxes
|
$
|
205.4
|
|
|
$
|
225.3
|
|
|
$
|
107.5
|
|
The actual income tax expense is different than that which would have been computed by applying the federal statutory tax rate to income before income taxes. A reconciliation of income tax expense as computed at the United States federal statutory income tax rate to the provision for income tax expense is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Tax expense at United States statutory rate
|
$
|
420.2
|
|
|
$
|
358.3
|
|
|
$
|
197.8
|
|
Foreign tax rate difference
|
(164.1
|
)
|
|
(120.9
|
)
|
|
(77.3
|
)
|
Research and development credits
|
(33.7
|
)
|
|
(15.0
|
)
|
|
(2.8
|
)
|
Change in tax reserve
|
18.9
|
|
|
25.5
|
|
|
11.0
|
|
Change in valuation allowance
|
13.9
|
|
|
4.4
|
|
|
9.8
|
|
Domestic production activities deduction
|
(19.1
|
)
|
|
(19.7
|
)
|
|
(10.9
|
)
|
Audit settlements and adjustments
|
(21.4
|
)
|
|
—
|
|
|
(19.7
|
)
|
Other, net
|
(9.3
|
)
|
|
(7.3
|
)
|
|
(0.4
|
)
|
Provision for income taxes
|
$
|
205.4
|
|
|
$
|
225.3
|
|
|
$
|
107.5
|
|
The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate of
35%
. The Company’s tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were
$164.1 million
and
$120.9 million
for the fiscal years ended
September 30, 2016
, and
October 2, 2015
, respectively.
During the fiscal year ended September 30, 2016, the Company concluded an IRS examination of its federal income tax returns for fiscal years 2012 and 2013. The Company agreed to various adjustments to its fiscal year 2012 and 2013 tax returns that resulted in the recognition of current year tax expense of
$2.6 million
during the fiscal year ended September 30, 2016. With the conclusion of the audit, the Company decreased the reserve for uncertain tax positions, which resulted in the recognition of an income tax benefit of
$24.0 million
in fiscal 2016.
In December 2015, the United States Congress enacted the Protecting Americans from Tax Hikes Act of 2015, extending numerous tax provisions that had expired. This legislation included a permanent extension of the federal research and experimentation tax credit. As a result of the enactment of this legislation,
$11.6 million
of federal research and experimentation tax credits that were earned in the fiscal year ended October 2, 2015 reduced the Company’s tax expense and tax rate during the fiscal year ended September 30, 2016.
The federal tax credit available under the Internal Revenue Code for research and development expenses expired on December 31, 2014. As of October 2, 2015, the United States Congress had not taken action to extend the Research and Experimentation Tax Credit. Accordingly, the income tax provision for the year ended October 2, 2015, did not reflect the impact of any research and development tax credits that would have been earned after December 31, 2014, had the federal tax credit not expired.
On December 19, 2014, the Tax Increase Prevention Act of 2014 was signed into law, extending the Research and Experimentation Tax Credit to reinstate and retroactively extend credits earned in calendar year 2014. As a result of the enactment of this law,
$11.0 million
of federal research and development tax credits that were earned in fiscal 2014 reduced the tax rate during fiscal 2015. These credits were not reflected in the fiscal 2014 tax rate.
During the fourth quarter of fiscal 2014, the Company concluded an IRS examination of its federal income tax return for fiscal year 2011. As a result of the conclusion of the IRS examination, the Company agreed to various adjustments to its fiscal 2011 tax return that resulted in the recognition of tax expense of
$0.7 million
and
$1.9 million
for fiscal years 2014 and 2013, respectively. In addition, the conclusion of the IRS examination also resulted in a decrease in the uncertain tax positions of
$20.9 million
in fiscal 2014, of which
$20.4 million
was recognized as a benefit to tax expense.
In December 2013, Mexico enacted a comprehensive tax reform package, which became effective on January 1, 2014. As a result of this change, the Company adjusted its deferred taxes in that jurisdiction, resulting in the recognition of a tax benefit that reduced the Company’s foreign income tax expense by
$4.6 million
for year ended October 3, 2014.
On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through
September 30, 2020
and is conditional upon the Company’s compliance with certain employment and investment thresholds in Singapore. The impact of the tax holiday decreased Singapore’s taxes by
$30.8 million
and
$26.6 million
for the fiscal years ended
September 30, 2016
, and
October 2, 2015
, respectively, which resulted in tax benefits of
$0.16
and
$0.14
of diluted earnings per share, respectively.
Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in millions):
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
Deferred tax assets:
|
|
|
|
Current:
|
|
|
|
Inventory
|
$
|
8.1
|
|
|
$
|
4.9
|
|
Bad debts
|
0.2
|
|
|
0.1
|
|
Accrued compensation and benefits
|
5.4
|
|
|
5.2
|
|
Product returns, allowances and warranty
|
8.6
|
|
|
4.3
|
|
Restructuring
|
0.8
|
|
|
0.1
|
|
Other, net
|
3.1
|
|
|
0.6
|
|
Current deferred tax assets
|
26.2
|
|
|
15.2
|
|
Less valuation allowance
|
(12.2
|
)
|
|
(6.4
|
)
|
Net current deferred tax assets
|
14.0
|
|
|
8.8
|
|
Long-term:
|
|
|
|
Intangible assets
|
11.6
|
|
|
11.6
|
|
Share-based and other deferred compensation
|
40.2
|
|
|
44.6
|
|
Net operating loss carry forwards
|
7.4
|
|
|
7.4
|
|
Non-United States tax credits
|
14.7
|
|
|
11.5
|
|
State tax credits
|
64.0
|
|
|
53.4
|
|
Other, net
|
2.5
|
|
|
2.4
|
|
Long-term deferred tax assets
|
140.4
|
|
|
130.9
|
|
Less valuation allowance
|
(66.9
|
)
|
|
(58.8
|
)
|
Net long-term deferred tax assets
|
73.5
|
|
|
72.1
|
|
|
|
|
|
Deferred tax assets
|
166.6
|
|
|
146.1
|
|
Less valuation allowance
|
(79.1
|
)
|
|
(65.2
|
)
|
Net deferred tax assets
|
87.5
|
|
|
80.9
|
|
Deferred tax liabilities:
|
|
|
|
Current:
|
|
|
|
Prepaid insurance
|
(0.8
|
)
|
|
(0.8
|
)
|
Current deferred tax liabilities
|
(0.8
|
)
|
|
(0.8
|
)
|
Long-term:
|
|
|
|
Property, plant and equipment
|
(16.5
|
)
|
|
(10.1
|
)
|
Intangible assets
|
(8.4
|
)
|
|
(8.2
|
)
|
Long-term deferred tax liabilities
|
(24.9
|
)
|
|
(18.3
|
)
|
|
|
|
|
Net deferred tax liabilities
|
(25.7
|
)
|
|
(19.1
|
)
|
Total net deferred tax assets
|
$
|
61.8
|
|
|
$
|
61.8
|
|
In accordance with GAAP, management has determined that it is more likely than not that a portion of its historic and current year income tax benefits will not be realized. As of
September 30, 2016
, the Company has maintained a valuation allowance of
$79.1 million
. This valuation allowance is comprised of
$64.0 million
related to United States state tax credits, and
$15.1 million
related to foreign deferred tax assets. The Company does not anticipate sufficient taxable income or tax liability to utilize these state and foreign credits. If these benefits are recognized in a future period the valuation allowance on deferred tax assets will be reversed and up to a
$79.1 million
income tax benefit may be recognized. The Company will need to generate
$137.5 million
of future United States federal taxable income to utilize our United States deferred tax assets as of
September 30, 2016
. The Company believes that
future reversals of taxable temporary differences, and its forecast of continued earnings in its domestic and foreign jurisdictions, support its decision to not record a valuation allowance on other deferred tax assets.
Deferred tax assets are recognized for foreign operations when management believes it is more likely than not that the deferred tax assets will be recovered during the carry forward period. The Company will continue to assess its valuation allowance in future periods.
As of
September 30, 2016
, the Company has United States federal net operating loss carry forwards of approximately
$9.3 million
. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The United States federal net operating loss carry forwards expire at various dates through
2035
. The Company also has state income tax credit carry forwards of
$64.0 million
, net of federal benefits, for which the Company has provided a valuation allowance. The state tax credits relate primarily to California research tax credits that can be carried forward indefinitely.
The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of
September 30, 2016
, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately
$1,676.8 million
of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested due to its foreign operations. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):
|
|
|
|
|
|
Unrecognized tax benefits
|
Balance at October 2, 2015
|
$
|
81.2
|
|
Increases based on positions related to prior years
|
2.0
|
|
Increases based on positions related to current year
|
19.7
|
|
Decreases relating to settlements with taxing authorities
|
(22.6
|
)
|
Decreases relating to lapses of applicable statutes of limitations
|
(0.6
|
)
|
Balance at September 30, 2016
|
$
|
79.7
|
|
Of the total unrecognized tax benefits at
September 30, 2016
,
$60.8 million
would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions that were required to be capitalized. During the fiscal year ended September 30, 2016, the Company concluded an IRS examination of its federal income tax returns for fiscal 2012 and 2013. The conclusion of the IRS examination resulted in a decrease in the uncertain tax positions of $24.0 million in fiscal 2016, all of which was recognized as a benefit to its tax expense in fiscal 2016. The Company anticipates reversals within the next 12 months related to items such as the lapse of the statute of limitations, audit closures, and other items that occur in the normal course of business. During the fiscal year ended
September 30, 2016
, the Company recognized
$0.6 million
of previously unrecognized tax benefits related to the expiration of the statute of limitations and
$1.9 million
of accrued interest or penalties related to unrecognized tax benefits.
The Company’s major tax jurisdictions as of
September 30, 2016
, are the United States, California, Canada, Luxembourg, Mexico and Singapore. For the United States, the Company has open tax years dating back to fiscal
1999
due to the carry forward of tax attributes. For California, the Company has open tax years dating back to fiscal
1999
due to the carry forward of tax attributes. For Canada, the Company has open tax years dating back to fiscal
2008
. For Luxembourg, the Company has open tax years back to fiscal
2011
. For Mexico, the Company has open tax years back to fiscal
2009
. For Singapore, the Company has open tax years dating back to fiscal
2011
. The Company is subject to audit examinations by the respective taxing authorities on a periodic basis, of which the results could impact our financial position, results of operations or cash flows.
9. STOCKHOLDERS’ EQUITY
COMMON STOCK
At
September 30, 2016
, the Company is authorized to issue
525.0 million
shares of common stock, par value
$0.25
per share, of which
222.5 million
shares are issued and
184.9 million
shares are outstanding.
Holders of the Company’s common stock are entitled to dividends in the event declared by the Company’s Board of Directors out of funds legally available for such purpose. Dividends may not be paid on common stock unless all accrued dividends on preferred stock, if any, have been paid or declared and set aside. In the event of the Company’s liquidation, dissolution or winding up, the holders of common stock will be entitled to share pro rata in the assets remaining after payment to creditors and after payment of the liquidation preference plus any unpaid dividends to holders of any outstanding preferred stock.
Each holder of the Company’s common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors. The Company’s restated certificate of incorporation as amended to date, (the “Certificate of Incorporation”) provides that, unless otherwise determined by the Company’s Board of Directors, no holder of stock has any preemptive right to purchase or subscribe for any stock of any class which the Company may issue or sell.
PREFERRED STOCK
The Company’s Certificate of Incorporation has authorized and permits the Company to issue up to
25.0 million
shares of preferred stock without par value in one or more series and with rights and preferences that may be fixed or designated by the Company’s Board of Directors without any further action by the Company’s stockholders. The designation, powers, preferences, rights and qualifications, limitations and restrictions of the preferred stock of each series will be fixed by the certificate of designation relating to such series, which will specify the terms of the preferred stock. At
September 30, 2016
, the Company had no shares of preferred stock issued or outstanding.
SHARE REPURCHASE
On
July 19, 2016
, the Board of Directors approved a new share repurchase program, pursuant to which the Company is authorized to repurchase up to
$400.0 million
of its common stock from time to time on the open market or in privately negotiated transactions as permitted by securities laws and other legal requirements. The repurchase program is set to expire on July 19, 2018; however, it may be suspended, discontinued or extended by the Board of Directors at any time prior to its expiration on July 19, 2018. This authorized stock repurchase program replaced in its entirety the November 10, 2015, stock repurchase program. These repurchases have been and will be funded with the Company’s working capital.
During the fiscal year ended
September 30, 2016
, the company paid approximately
$525.6 million
(including commissions) in connection with the repurchase of
8.0 million
shares of its common stock (paying an average price of
$65.70
per share) under the
July 19, 2016
, share repurchase plan and the replaced November 10, 2015, share repurchase plan. As of
September 30, 2016
,
$201.4 million
remained available under the July 19, 2016, share repurchase plan.
During the fiscal year ended
October 2, 2015
, the Company paid approximately
$237.3 million
(including commissions) in connection with the repurchase of
2.9 million
shares of its common stock (paying an average price of
$83.29
per share).
DIVIDENDS
On
November 3, 2016
, the Company announced that the Board of Directors declared a cash dividend on the Company’s common stock of
$0.28
per share. This dividend is payable on
December 8, 2016
, to the Company’s stockholders of record as of the close of business on
November 17, 2016
. Future dividends are subject to declaration by the Board of Directors. The dividends charged to retained earnings in fiscal 2016 and 2015 were as follows (in millions except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
Per Share
|
|
Total
|
|
Per Share
|
|
Total
|
First quarter
|
$
|
0.26
|
|
|
$
|
49.8
|
|
|
$
|
0.13
|
|
|
$
|
24.7
|
|
Second quarter
|
0.26
|
|
|
49.3
|
|
|
0.13
|
|
|
24.9
|
|
Third quarter
|
0.26
|
|
|
49.5
|
|
|
0.13
|
|
|
24.8
|
|
Fourth quarter
|
0.28
|
|
|
52.2
|
|
|
0.26
|
|
|
49.6
|
|
|
$
|
1.06
|
|
|
$
|
200.8
|
|
|
$
|
0.65
|
|
|
$
|
124.0
|
|
EMPLOYEE STOCK BENEFIT PLANS
As of
September 30, 2016
, the Company has the following equity compensation plans under which its equity securities were authorized for issuance to its employees and/or directors:
|
|
•
|
the 1999 Employee Long-Term Incentive Plan
|
|
|
•
|
the Directors’ 2001 Stock Option Plan
|
|
|
•
|
the Non-Qualified Employee Stock Purchase Plan
|
|
|
•
|
the 2002 Employee Stock Purchase Plan
|
|
|
•
|
the 2005 Long-Term Incentive Plan
|
|
|
•
|
the AATI 2005 Equity Incentive Plan
|
|
|
•
|
the 2008 Director Long-Term Incentive Plan
|
|
|
•
|
the 2015 Long-Term Incentive Plan
|
Except for the 1999 Employee Long-Term Incentive Plan and the Non-Qualified Employee Stock Purchase Plan, each of the foregoing equity compensation plans was approved by the Company’s stockholders.
As of
September 30, 2016
, a total of
100.7 million
shares are authorized for grant under the Company’s share-based compensation plans, with
4.8 million
options outstanding. The number of common shares reserved for future awards to employees and directors under these plans was
19.1 million
at
September 30, 2016
. The Company grants new equity awards under the 2015 Long-Term Incentive Plan to employees, which replaced the 2005 Long-Term Incentive Plan on May 19, 2015, and the 2008 Director Long-Term Incentive Plan for non-employee directors.
2015 Long-Term Incentive Plan.
Under this plan, officers, employees, non-employee directors and certain consultants may be granted stock options, restricted stock awards and units, performance stock awards and units and other share-based awards. The plan has been approved by the stockholders. Under the plan, up to
27.1 million
shares have been authorized for grant. A total of
18.4 million
shares are available for new grants as of
September 30, 2016
. The maximum contractual term of options under the plan is
seven
years from the date of grant. Options granted under the plan are exercisable at the determination of the compensation committee and generally vest ratably over
four
years. Restricted stock awards and units granted under the plan at the determination of the compensation committee generally vest over
four
or more years. With respect to restricted stock awards, dividends are accumulated and paid when the underlying shares vest. If the underlying shares are forfeited for any reason, the rights to the dividends with respect to such shares are also forfeited. No dividends or dividend equivalents are paid or accrued with respect to restricted stock unit awards or other awards until the shares underlying such awards become vested and are issued to the award holder. Performance stock awards and units are contingently granted depending on the achievement of certain predetermined performance goals and generally vest over
three
or more years.
2008 Director Long-Term Incentive Plan.
Under this plan, non-employee directors may be granted stock options, restricted stock awards and other share-based awards. The plan has been approved by the stockholders. Under the plan a total of
1.5 million
shares have been authorized for grant. A total of
0.7 million
shares are available for new grants as of
September 30, 2016
. The maximum contractual term of options granted under the plan is
ten
years from the date of grant. Options granted under the plan are generally exercisable over
four
years. Restricted stock awards and units granted under the plan generally vest over
one
or more years. With respect to restricted stock awards, dividends are accumulated and paid when the underlying shares vest. If the underlying shares are forfeited for any reason, the rights to the dividends with respect to such shares are also forfeited.
Employee Stock Purchase Plans.
The Company maintains a domestic and an international employee stock purchase plan. Under these plans, eligible employees may purchase common stock through payroll deductions of up to
10%
of their compensation. The price per share is the lower of
85%
of the fair market value of the common stock at the beginning or end of each offering period (generally six months). The plans provide for purchases by employees of up to an aggregate of
9.7 million
shares. Shares of common stock purchased under these plans in the fiscal years ended September 30, 2016, October 2, 2015, and October 3, 2014, were
0.3 million
,
0.3 million
, and
0.5 million
, respectively. At
September 30, 2016
, there are
1.0 million
shares available for purchase. The Company recognized compensation expense of
$4.6 million
,
$4.7 million
and
$4.1 million
for the fiscal years ended
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, respectively, related to the employee stock purchase plan. The unrecognized compensation expense on the employee stock purchase plan at
September 30, 2016
, was
$1.5 million
. The weighted average period over which the cost is expected to be recognized is approximately
four
months.
Stock Options
The following table represents a summary of the Company’s stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (in millions)
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual life (in years)
|
|
Aggregate intrinsic value (in millions)
|
Balance outstanding at October 2, 2015
|
5.4
|
|
|
$
|
30.08
|
|
|
|
|
|
Granted
|
0.8
|
|
|
$
|
82.36
|
|
|
|
|
|
Exercised
|
(1.3
|
)
|
|
$
|
21.14
|
|
|
|
|
|
Canceled/forfeited
|
(0.1
|
)
|
|
$
|
45.49
|
|
|
|
|
|
Balance outstanding at September 30, 2016
|
4.8
|
|
|
$
|
41.35
|
|
|
3.9
|
|
$
|
174.0
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2016
|
2.1
|
|
|
$
|
25.00
|
|
|
2.6
|
|
$
|
108.3
|
|
The weighted-average grant date fair value per share of employee stock options granted during the fiscal years ended
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, was
$26.30
,
$23.26
, and
$11.91
, respectively. The total grant date fair value of the options vested during the fiscal years ending
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, was
$21.9 million
,
$16.6 million
and
$21.8 million
, respectively.
Restricted and Performance Awards and Units
The following table represents a summary of the Company’s restricted and performance awards and units:
|
|
|
|
|
|
|
|
|
Shares (In millions)
|
|
Weighted average
grant date fair value
|
Non-vested awards outstanding at October 2, 2015
|
4.8
|
|
|
$
|
23.20
|
|
Granted (1)
|
1.3
|
|
|
$
|
84.89
|
|
Vested
|
(2.4
|
)
|
|
$
|
33.81
|
|
Canceled/forfeited
|
(0.1
|
)
|
|
$
|
25.73
|
|
Non-vested awards outstanding at September 30, 2016
|
3.6
|
|
|
$
|
25.01
|
|
(1)
includes performance shares granted and earned based on maximum performance under the underlying performance metrics
|
The weighted average grant date fair value per share for awards granted during the fiscal years ended
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, was
$84.89
,
$63.56
, and
$26.69
, respectively. The total grant date fair value of the awards vested during the fiscal years ending
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, was
$197.6 million
,
$149.0 million
and
$63.1 million
, respectively.
The following table summarizes the total intrinsic value for stock options exercised and awards vested (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Options
|
$
|
68.9
|
|
|
$
|
170.8
|
|
|
$
|
101.3
|
|
Awards
|
$
|
197.6
|
|
|
$
|
149.0
|
|
|
$
|
63.1
|
|
Valuation and Expense Information
The following table summarizes pre-tax share-based compensation expense by financial statement line and related tax benefit (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Cost of goods sold
|
$
|
11.3
|
|
|
$
|
14.5
|
|
|
$
|
11.3
|
|
Research and development
|
32.2
|
|
|
45.4
|
|
|
36.2
|
|
Selling, general and administrative
|
34.5
|
|
|
39.9
|
|
|
38.5
|
|
Total share-based compensation expense
|
$
|
78.0
|
|
|
$
|
99.8
|
|
|
$
|
86.0
|
|
|
|
|
|
|
|
Share-based compensation tax benefit
|
$
|
22.5
|
|
|
$
|
29.3
|
|
|
$
|
25.6
|
|
Capitalized share-based compensation expense
|
$
|
3.7
|
|
|
$
|
2.3
|
|
|
$
|
1.7
|
|
The following table summarizes total compensation costs related to unvested share based awards not yet recognized and the weighted average period over which it is expected to be recognized at
September 30, 2016
:
|
|
|
|
|
|
|
|
Unrecognized compensation cost for unvested awards
(in millions)
|
|
Weighted average remaining recognition period
(in years)
|
Options
|
$
|
33.5
|
|
|
2.0
|
Awards
|
$
|
63.2
|
|
|
1.0
|
The fair value of the restricted stock awards and units is equal to the closing market price of the Company’s common stock on the date of grant.
The Company issued performance share units during fiscal 2016, fiscal 2015 and fiscal 2014 that contained market-based conditions. The fair value of these performance share units was estimated on the date of the grant using a Monte Carlo simulation with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Volatility of common stock
|
38.24
|
%
|
|
37.51
|
%
|
|
36.96
|
%
|
Average volatility of peer companies
|
34.76
|
%
|
|
28.42
|
%
|
|
29.59
|
%
|
Average correlation coefficient of peer companies
|
0.49
|
|
|
0.55
|
|
|
0.47
|
|
Risk-free interest rate
|
0.44
|
%
|
|
0.12
|
%
|
|
0.11
|
%
|
Dividend yield
|
1.23
|
|
|
0.85
|
|
|
—
|
%
|
The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Expected volatility
|
42.93
|
%
|
|
45.75
|
%
|
|
47.40
|
%
|
Risk-free interest rate
|
0.98
|
%
|
|
1.33
|
%
|
|
1.83
|
%
|
Dividend yield
|
1.23
|
|
|
1.16
|
|
|
0.83
|
|
Expected option life (in years)
|
4.0
|
|
|
4.5
|
|
|
4.6
|
|
The Company used a historical volatility calculated by the mean reversion of the weekly-adjusted closing stock price over the expected life of the options. The risk-free interest rate assumption is based upon observed treasury bill interest rates appropriate for the expected life of the Company’s employee stock options. The dividend yield was included in the Black-Scholes option pricing model for options granted after the Company declared its first dividend.
The expected life of employee stock options represents a calculation based upon the historical exercise, cancellation and forfeiture experience for the Company across its demographic population. The Company believes that this historical data is the best estimate of the expected life of a new option and that generally all groups of the Company’s employees exhibit similar behavior.
10. EMPLOYEE BENEFIT PLAN, PENSIONS AND OTHER RETIREE BENEFITS
The Company maintains a 401(k) plan covering substantially all of its employees based in the United States under which all employees at least
twenty-one
years old are eligible to receive discretionary Company contributions. Discretionary Company contributions in the form of cash are determined by the Board of Directors. The Company has generally contributed a match of up to
4%
of an employee’s contributed annual eligible compensation. The Company no longer provides shares of its common stock as contributions to the 401(k) plan and recognized expense of
$2.8 million
for the fiscal year ended September 30, 2016. For the fiscal years ended
October 2, 2015
, and
October 3, 2014
, the Company contributed shares of
0.1 million
, and
0.2 million
, respectively, and recognized expense of
$7.2 million
and
$6.2 million
, respectively.
Defined Benefit Pension:
The Company has a defined benefit pension plan for certain employees in Japan. This plan has been frozen and new employees are not eligible. However, the Company is obligated to make future contributions to fund benefits to the participants with the benefits under the plan being based primarily on a combination of years of service and compensation.
The net amount of the unfunded obligation recognized in other long-term liabilities on the Balance Sheet consists of (in millions):
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
Pension benefit obligations at the end of the fiscal year
|
$
|
19.0
|
|
|
$
|
14.9
|
|
Fair value of plan assets at the end of the fiscal year
|
11.4
|
|
|
9.8
|
|
Funded status
|
$
|
(7.6
|
)
|
|
$
|
(5.1
|
)
|
|
|
|
|
Net periodic benefit costs
|
$
|
0.1
|
|
|
$
|
0.1
|
|
The pension obligation has an immaterial impact to the Company’s results of operations and financial position and accordingly, the disclosures required have been excluded from this Annual Report on Form 10-K.
11. COMMITMENTS
The Company has various operating leases primarily for buildings, computers and equipment. Rent expense amounted to
$19.5 million
,
$16.5 million
, and
$11.1 million
in the fiscal years ended
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, respectively. Future minimum payments under these non-cancelable leases are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Future minimum payments
|
|
$
|
23.9
|
|
|
22.0
|
|
|
17.0
|
|
|
13.2
|
|
|
4.7
|
|
|
17.3
|
|
|
$
|
98.1
|
|
In addition, the Company has entered into licensing agreements for intellectual property rights and maintenance and support services. Pursuant to the terms of these agreements, the Company is committed to making aggregate payments of
$6.2 million
,
$0.5 million
and
$0.1 million
in the fiscal years 2017, 2018, and 2019, respectively.
12. CONTINGENCIES
Legal Matters
From time to time, various lawsuits, claims and proceedings have been, and may in the future be, instituted or asserted against the Company, including those pertaining to patent infringement, intellectual property, environmental hazards, product liability and warranty, safety and health, employment and contractual matters.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark and other intellectual property rights to technologies that are important to the Company’s business and have demanded and may in the future demand that the Company
license their technology. The outcome of any such litigation cannot be predicted with certainty and some such lawsuits, claims or proceedings may be disposed of unfavorably to the Company. Generally speaking, intellectual property disputes often have a risk of injunctive relief, which, if imposed against the Company, could materially and adversely affect the Company’s financial condition, or results of operations. From time to time the Company may also be involved in legal proceedings in the ordinary course of business.
The Company monitors the status of legal proceedings and other contingencies on an ongoing basis to ensure amounts are recognized and/or disclosed in its financial statements and footnotes as required. At the time of this filing, the Company recorded an estimated $13.0 million accrual for loss contingencies, which is recorded in other current liabilities as of September 30, 2016. The Company does not believe that the possible range of loss is significantly different than the amount currently accrued. The Company also does not believe there are any additional pending legal proceedings that are reasonably possible to result in a material loss. The Company is engaged in various legal actions in the normal course of business and, while there can be no assurances, the Company believes the outcome of all pending litigation involving the Company will not have, individually or in the aggregate, a material adverse effect on its business.
13. GUARANTEES AND INDEMNITIES
The Company has made no significant contractual guarantees for the benefit of third parties. However, the Company generally indemnifies its customers from third-party intellectual property infringement litigation claims related to its products and, on occasion, also provides other indemnities related to product sales. In connection with certain facility leases, the Company has indemnified its lessors for certain claims arising from the facility or the lease.
The Company indemnifies its directors and officers to the maximum extent permitted under the laws of the state of Delaware. The duration of the indemnities varies, and in many cases is indefinite. The indemnities to customers in connection with product sales generally are subject to limits based upon the amount of the related product sales and in many cases are subject to geographic and other restrictions. In certain instances, the Company’s indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities in the accompanying consolidated balance sheets and does not expect that such obligations will have a material adverse impact on its financial condition or results of operations.
14. RESTRUCTURING AND OTHER CHARGES
As of September 30, 2016, the Company recorded restructuring and other charges of approximately
$4.8 million
primarily related to restructuring plans to reduce redundancies associated with acquisitions during the year. The Company began formulating the plan prior to the date of acquisition. The Company does not anticipate any further significant charges associated with these restructuring activities and substantially all of the remaining cash payments related to these restructuring plans are expected to occur during the next fiscal year.
As of October 2, 2015, the Company recorded restructuring and other charges of approximately
$3.4 million
related to costs associated with organizational restructuring plans initiated in the fiscal year. The Company does not anticipate any material charges in future periods related to these plans.
As of October 3, 2014, the Company recorded restructuring and other charges of approximately
$0.3 million
related to costs associated with organizational restructuring plans initiated in the prior fiscal year. The Company does not anticipate any material charges in future periods related to these plans.
Activity and liability balances related to the Company’s restructuring actions are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 27, 2013
|
|
Current Charges
|
|
Cash Payments
|
|
Balance at October 3, 2014
|
FY13 restructuring programs
|
|
|
|
|
|
|
|
Employee severance costs
|
$
|
0.6
|
|
|
$
|
0.3
|
|
|
$
|
(0.6
|
)
|
|
$
|
0.3
|
|
Other restructuring
|
|
|
|
|
|
|
|
Employee severance costs, lease and other contractual obligations
|
0.4
|
|
|
—
|
|
|
(0.2
|
)
|
|
0.2
|
|
Total
|
$
|
1.0
|
|
|
$
|
0.3
|
|
|
$
|
(0.8
|
)
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
Balance at October 3, 2014
|
|
Current Charges
|
|
Cash Payments
|
|
Balance at October 2, 2015
|
FY13 restructuring programs
|
|
|
|
|
|
|
|
Employee severance costs
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
$
|
0.1
|
|
Other restructuring
|
|
|
|
|
|
|
|
Employee severance costs, lease and other contractual obligations
|
0.2
|
|
|
3.4
|
|
|
(3.3
|
)
|
|
0.3
|
|
Total
|
$
|
0.5
|
|
|
$
|
3.4
|
|
|
$
|
(3.5
|
)
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Balance at October 2, 2015
|
|
Current Charges
|
|
Cash Payments
|
|
Balance at September 30, 2016
|
FY16 restructuring programs
|
|
|
|
|
|
|
|
Employee severance costs
|
$
|
—
|
|
|
$
|
4.8
|
|
|
$
|
(2.4
|
)
|
|
2.4
|
|
FY13 restructuring programs
|
|
|
|
|
|
|
|
Employee severance costs
|
0.1
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
Other restructuring
|
|
|
|
|
|
|
|
Employee severance costs, lease and other contractual obligations
|
0.3
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
Total
|
$
|
0.4
|
|
|
$
|
4.8
|
|
|
$
|
(2.8
|
)
|
|
$
|
2.4
|
|
15. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Net income
|
$
|
995.2
|
|
|
$
|
798.3
|
|
|
$
|
457.7
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic
|
188.7
|
|
|
189.5
|
|
|
187.2
|
|
Dilutive effect of equity based awards
|
3.4
|
|
|
5.4
|
|
|
5.4
|
|
Weighted average shares outstanding – diluted
|
192.1
|
|
|
194.9
|
|
|
192.6
|
|
|
|
|
|
|
|
Net income per share – basic
|
$
|
5.27
|
|
|
$
|
4.21
|
|
|
$
|
2.44
|
|
Net income per share – diluted
|
$
|
5.18
|
|
|
$
|
4.10
|
|
|
$
|
2.38
|
|
|
|
|
|
|
|
Anti-dilutive common stock equivalents
|
1.5
|
|
|
0.3
|
|
|
0.9
|
|
Basic earnings per share are calculated by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period. The calculation of diluted earnings per share includes the dilutive effect of equity based awards that were outstanding during the fiscal years ending
September 30, 2016
,
October 2, 2015
, and
October 3, 2014
, using the treasury stock method. Certain of the Company’s outstanding share-based awards, noted in the table above, were excluded because they were anti-dilutive, but they could become dilutive in the future.
16. SEGMENT INFORMATION AND CONCENTRATIONS
The Company considers itself to be a single reportable operating segment which designs, develops, manufactures and markets similar proprietary semiconductor products, including intellectual property. In reaching this conclusion, management considers the definition of the chief operating decision maker (“
CODM
”), how the business is defined by the CODM, the nature of the information provided to the CODM and how that information is used to make operating decisions, allocate resources and assess performance. The Company’s CODM is the president and chief executive officer. The results of operations provided to and analyzed by the CODM are at the consolidated level and accordingly, key resource decisions and assessment of performance is performed at the consolidated level. The Company assesses its determination of operating segments at least annually.
GEOGRAPHIC INFORMATION
Net revenue by geographic area presented based upon the country of destination are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
United States
|
$
|
63.3
|
|
|
$
|
66.8
|
|
|
$
|
47.5
|
|
Other Americas
|
28.8
|
|
|
33.0
|
|
|
25.5
|
|
Total Americas
|
92.1
|
|
|
99.8
|
|
|
73.0
|
|
|
|
|
|
|
|
China
|
2,324.6
|
|
|
2,249.2
|
|
|
1,574.4
|
|
Taiwan
|
474.2
|
|
|
506.9
|
|
|
322.2
|
|
South Korea
|
94.8
|
|
|
100.0
|
|
|
107.4
|
|
Other Asia-Pacific
|
252.2
|
|
|
249.7
|
|
|
166.9
|
|
Total Asia-Pacific
|
3,145.8
|
|
|
3,105.8
|
|
|
2,170.9
|
|
|
|
|
|
|
|
Europe, Middle East and Africa
|
51.1
|
|
|
52.8
|
|
|
47.6
|
|
Total
|
$
|
3,289.0
|
|
|
$
|
3,258.4
|
|
|
$
|
2,291.5
|
|
The Company’s revenues by geography do not necessarily correlate to end market demand by region. For example, the Company’s revenues reflected in the China line item above include sales of products to a company that is not headquartered in China but that manufactures its products in China for sale to consumers throughout the world, including in the United States, Europe, China, and other markets in Asia. The Company’s revenue to external customers is generated principally from the sale of semiconductor products that facilitate various wireless communication applications. Accordingly, the Company considers its product offerings to be similar in nature and therefore not segregated for reporting purposes.
Net property, plant and equipment balances, based on the physical locations within the indicated geographic areas are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Mexico
|
$
|
355.9
|
|
|
$
|
406.1
|
|
|
$
|
290.1
|
|
Singapore
|
180.1
|
|
|
89.9
|
|
|
60.8
|
|
United States
|
140.5
|
|
|
148.8
|
|
|
138.7
|
|
Japan
|
121.6
|
|
|
173.8
|
|
|
58.8
|
|
Rest of world
|
8.2
|
|
|
7.8
|
|
|
7.5
|
|
|
$
|
806.3
|
|
|
$
|
826.4
|
|
|
$
|
555.9
|
|
CONCENTRATIONS
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. Trade accounts receivable are primarily derived from sales to manufacturers of communications and consumer products and electronic component distributors. Ongoing credit evaluations of customers’ financial condition are performed and collateral, such as letters of credit and bank guarantees, are required whenever deemed necessary.
In fiscal 2016 and fiscal 2014, Foxconn Technology Group (together with its affiliates and other suppliers to a large OEM for use in multiple applications including smartphones, tablets, routers, desktop and notebook computers, “Foxconn”) and Samsung—each constituted more than ten percent of the Company’s net revenue. In fiscal 2015, Foxconn constituted more than ten percent of the Company’s net revenue.
The Company’s greater than ten percent customers comprised the following percentages of net revenue:
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
September 30,
2016
|
|
October 2,
2015
|
|
October 3,
2014
|
Company A
|
|
40%
|
|
44%
|
|
34%
|
Company B
|
|
10%
|
|
*
|
|
10%
|
*
Customer did not represent greater than ten percent of net revenue
|
|
|
|
|
|
|
At
September 30, 2016
, the Company’s three largest accounts receivable balances comprised
54%
of aggregate gross accounts receivable. This concentration was
62%
and
58%
at
October 2, 2015
, and
October 3, 2014
, respectively.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Net income and earnings per share for the first fiscal quarter of 2016 include other income related to the receipt of the PMC merger termination fee as detailed in
Note 3
, Business Combinations, in these Notes to the Consolidated Financial Statements. The following table summarizes the quarterly and annual results (in millions, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
Second quarter
|
|
Third quarter
|
|
Fourth quarter
|
|
Fiscal year
|
Fiscal 2016
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
926.8
|
|
|
$
|
775.1
|
|
|
$
|
751.7
|
|
|
$
|
835.4
|
|
|
$
|
3,289.0
|
|
Gross profit
|
472.1
|
|
|
390.4
|
|
|
378.3
|
|
|
424.4
|
|
|
1,665.2
|
|
Net income
|
355.3
|
|
|
208.1
|
|
|
185.0
|
|
|
246.8
|
|
|
995.2
|
|
Per share data (1)
|
|
|
|
|
|
|
|
|
|
Net income, basic
|
$
|
1.87
|
|
|
$
|
1.09
|
|
|
$
|
0.98
|
|
|
$
|
1.33
|
|
|
$
|
5.27
|
|
Net income, diluted
|
$
|
1.82
|
|
|
$
|
1.08
|
|
|
$
|
0.97
|
|
|
$
|
1.31
|
|
|
$
|
5.18
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
805.5
|
|
|
$
|
762.1
|
|
|
$
|
810.0
|
|
|
$
|
880.8
|
|
|
$
|
3,258.4
|
|
Gross profit
|
373.0
|
|
|
352.2
|
|
|
393.1
|
|
|
436.2
|
|
|
1,554.5
|
|
Net income
|
195.2
|
|
|
166.5
|
|
|
207.4
|
|
|
229.2
|
|
|
798.3
|
|
Per share data (1)
|
|
|
|
|
|
|
|
|
|
Net income, basic
|
$
|
1.03
|
|
|
$
|
0.88
|
|
|
$
|
1.09
|
|
|
$
|
1.21
|
|
|
$
|
4.21
|
|
Net income, diluted
|
$
|
1.01
|
|
|
$
|
0.85
|
|
|
$
|
1.06
|
|
|
$
|
1.18
|
|
|
$
|
4.10
|
|
____________
|
|
(1)
|
Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding and included common stock equivalents in each period. Therefore, the sums of the quarters do not necessarily equal the full year earnings per share.
|