MARVELL TECHNOLOGY GROUP LTD 
SANTA CLARA, Calif., July 19, 2016 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the fourth fiscal quarter and fiscal year 2016, ended January 30, 2016, and reported updated financial results for the second and third quarters of fiscal 2016, ended August 1, 2015 and October 31, 2015, respectively.
Key Fourth Quarter of Fiscal 2016 and Fiscal Year 2016 Financial Highlights
-- Revenue: Q4 FY 2016, $616 Million; FY 2016, $2.7 Billion
-- GAAP Net Earnings (Loss): Q4 FY 2016, $4 Million; FY 2016, ($811)
Million (includes the settlement with CMU described below)
-- GAAP Diluted Earnings (Loss) Per Share: Q4 FY 2016, $0.01; FY 2016,
($1.59)
-- Non-GAAP Net Income: Q4 FY 2016, $55 Million; FY 2016 $194 Million
-- Non-GAAP Diluted EPS: Q4 FY 2016, $0.11; FY 2016 $0.37
-- Cash Flow from Operations: Q4 FY 2016, $53 Million; FY 2016 $205 Million
-- Cash and ST Investments: $2.3 Billion (prior to giving effect to the
settlement with CMU described below)
Fourth Quarter of Fiscal 2016 and Fiscal Year 2016 Summary
Revenues for the fourth quarter of fiscal 2016 were $616 million, down approximately 9 percent from $675 million in the third quarter of fiscal 2016, ended October 31, 2015, and down approximately 28 percent from $857 million in the fourth quarter of fiscal 2015, ended January 31, 2015.
In the fourth quarter of fiscal 2016, storage revenue increased 12 percent sequentially, reflecting improved demand from HDD customers but was partially offset by slightly lower SSD controller sales. Networking revenue in the fourth quarter of fiscal 2016 grew 8 percent sequentially due to broad-based demand improvement across most of our product areas. Mobile and wireless revenue decreased 34 percent sequentially, mainly driven by the previously anticipated declines in revenue resulting from Marvell's exit of the mobile handset business. The Company anticipates mobile handset platform-related revenue to decline through fiscal year 2017 due to the restructuring actions announced on September 24, 2015.
For the fiscal year end January 30, 2016, revenue was $2.7 billion, a decrease of 26 percent from $3.7 billion for the fiscal year ended January 31, 2015. For the fiscal year 2016, storage revenues declined 31 percent from fiscal year 2015 mainly due to soft PC demand compounded by lower SSD controller shipments. Networking revenue in fiscal 2016 declined 18 percent due to weak enterprise switching/routing demand. Mobile and wireless revenue in fiscal 2016 declined 27 percent mainly due to lower mobile handset platform-related revenue resulting from Marvell's exit of the mobile handset business.
GAAP net earnings for the fourth quarter of fiscal 2016 was $4 million, or $0.01 per share (diluted) compared with a GAAP net loss of ($58) million, or ($0.11) loss per share (diluted), for the third quarter of fiscal 2016, and GAAP net income of $82 million, or $0.16 per share (diluted), for the fourth quarter of fiscal 2015.
For the fiscal year ended January 30, 2016, GAAP net loss was ($811) million, or ($1.59) per share (diluted), compared with GAAP net income of $435 million, or $0.84 per share (diluted), for the fiscal year ended January 31, 2015. The GAAP net loss in fiscal year 2016 was largely due to the payment of $750 million related to the Carnegie Mellon University litigation settlement.
Non-GAAP net income for the fourth quarter of fiscal 2016 was $55 million, or $0.11 per share (diluted), which included adjustments of approximately $50 million including: $4 million for restructuring related to the mobile handset platform business, $32 million for share-based compensation, $4 million for litigation reserves and settlements, and $10 million for other items. By comparison, non-GAAP net income for the third quarter of fiscal 2016 was $29 million, or $0.06 per share (diluted), which included adjustments of $87 million including: $46 million for restructuring related to the mobile handset platform business, $31 million for share-based compensation, $1 million for litigation reserves and settlements, and $9 million for other items. Non-GAAP net income for the fourth quarter of fiscal 2015 was $131 million, or $0.25 per share (diluted), which included adjustments of $49 million including: $38 million for share-based compensation and $11 million for other items. Refer to the GAAP to Non-GAAP reconciliation table and related footnotes contained in this press release for more details.
For the fiscal year ended January 30, 2016, non-GAAP net income was $194 million, or $0.37 per share (diluted), compared with non-GAAP net income of $611 million, or $1.15 per share (diluted) for the fiscal year ended January 31, 2015.
Marvell reports net income, basic and diluted net income per share, in accordance with generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income to non-GAAP net income for the three months ended January 30, 2016, October 31, 2015, and August 31, 2015, as well as the fiscal years ended January 30, 2016 and January 31, 2015, appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of share-based compensation, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other related charges, estimated litigation reserves and settlements, and certain one-time expenses and benefits that are driven by discrete events that management does not consider to be directly related to Marvell's core operating performance.
GAAP gross margin percentage for the fourth quarter of fiscal 2016 was 50.9 percent, compared to 43.8 percent for the third quarter of fiscal 2016 and 51.4 percent for the fourth quarter of fiscal 2015. GAAP gross margin for fiscal year 2016 was 45.2 percent as compared to 50.3 percent in fiscal year 2015.
Non-GAAP gross margin percentage for the fourth quarter of fiscal 2016 was 51.9 percent, compared to 46.0 percent for the third quarter of fiscal 2016 and 51.8 percent for the fourth quarter of fiscal 2015. The sequential improvement in fourth quarter GAAP and Non-GAAP gross margin percentages was mainly due to a more lower mix of lower margin mobile handset platform-related revenues relative the prior quarter. Non-GAAP gross margin for fiscal year 2016 was 49.1 percent compared to 50.5 percent in fiscal year 2015. The decline in GAAP and non-GAAP gross margin percentages in fiscal year 2016 was mainly due to a higher mix of lower margin mobile handset platform-related revenues relative to fiscal year 2015. Refer to the GAAP to Non-GAAP reconciliation table and related footnotes at the end of this press release for more details.
Operating expenses on a GAAP basis for the fourth quarter of fiscal 2016 were $311 million, or 12 percent lower compared with $355 million in the third quarter of fiscal year 2016, and 14 percent lower compared to $360 million in the fourth quarter of fiscal 2015. Operating expenses on a GAAP basis for fiscal year 2016 were $2 billion, or 41 percent higher compared to $1.5 billion in fiscal year 2015. GAAP operating expenses for fiscal 2016 include approximately $655 million related to the Carnegie Mellon University litigation settlement, with $78.9 million of the $750 million settlement recorded in COGS. Operating expenses for the third and fourth quarters of fiscal year 2016 include $6 million and $11 million, respectively, of legal and accounting fees related to the Audit Committee investigation, and the related shareholder litigation and inquiries by the SEC and United States Attorney's Office.
Non-GAAP operating expenses were $267 million in the fourth quarter compared to $283 million in the third quarter, a 6 percent decline, and $315 million in the fourth quarter of fiscal 2015, a 15 percent decline. For fiscal year 2016, non-GAAP operating expenses were $1.2 billion (excluding the impact of $655 million related to Carnegie Mellon University litigation settlement recorded in operating expenses), a decline of 10 percent from $1.3 billion in fiscal year 2015. Refer to the GAAP to Non-GAAP reconciliation table and related footnotes contained in this press release for more details.
Shares used to compute GAAP net income per diluted share for the fourth quarter of fiscal 2016 were 509 million shares, compared with 505 million shares in the third quarter of fiscal 2016 and 522 million shares in the fourth quarter of fiscal 2015. Shares used to compute GAAP net income per diluted share for fiscal year 2016 were 511 million shares as compared with 521 million shares for fiscal year 2015.
Shares used to compute non-GAAP net income per diluted share for the fourth quarter of fiscal 2016 were 519 million shares, compared with 519 million shares for the third quarter of fiscal 2016 and 533 million shares for the fourth quarter of fiscal 2015. Shares used to compute non-GAAP net income per diluted share for fiscal year 2016 were 526 million shares as compared with 532 million shares for fiscal year 2015.
Cash flow from operations for the fourth quarter of fiscal 2016 was $53 million, compared to $67 million in the third quarter of fiscal 2016 and $155 million reported in the fourth quarter of fiscal 2015. Cash flow from operations for fiscal year 2016 was $205 million, compared to $729 million in fiscal year 2015. Free cash flow for the fourth quarter of fiscal 2016 was $47 million, compared to the $64 million in the third quarter of fiscal 2016 and the $135 million reported in the fourth quarter of fiscal 2015. Free cash flow for fiscal year 2016 was $147 million, compared to $636 million in fiscal year 2015. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of technology licenses reported under investing and financing activities in the consolidated statement of cash flows.
Marvell made no share repurchases in the fourth quarter of fiscal 2016. In fiscal year 2016, under the company's authorized share repurchase program, Marvell repurchased approximately 19.7 million shares for about $261 million. The remaining authorized amount for share repurchases at the end of fiscal 2016 was approximately $183 million.
Marvell paid a quarterly dividend of $0.06 per share on December 29, 2015 to all shareholders of record as of December 16, 2015. On March 16 and May 18, 2016, the Company declared cash dividends of $0.06 per share that were paid on April 22 and July 12, 2016, respectively.
The payment of future quarterly cash dividends on Marvell's common shares is subject to, among other things, the best interests of the company and its shareholders, its results of operations, cash balances and future cash requirements, financial condition, developments in ongoing litigation, statutory requirements of Bermuda law, and other factors that the board of directors may deem relevant.
Key Third Quarter of Fiscal 2016 Financial Highlights (Updated)
-- Revenue: Q3 FY 2016, $675 Million
-- GAAP Net Loss: Q3 FY 2016, ($58) Million
-- GAAP Diluted Loss Per Share: Q3 FY 2016, ($0.11)
-- Non-GAAP Net Income: Q3 FY 2016, $29 Million
-- Non-GAAP Diluted EPS: Q3 FY 2016, $0.06
-- Cash Flow from Operations: Q3 FY 2016, $67 Million
On December 7, 2015, Marvell released preliminary financial results for the third quarter of fiscal 2016, ended October 31, 2015. Due to the Company's delayed filing of its Form 10-Q, the Company is obligated to continue to adjust its financial results to account for subsequent activities (Type 1 subsequent events) occurring after December 7, 2015. For the third quarter of fiscal 2016, adjustments that have been recorded to the Company's preliminary financial results after December 7, 2015 are detailed in the footnotes to the condensed consolidated statements of operations at the end of this press release. Accordingly, the Company's GAAP net loss and GAAP diluted loss per share for the third quarter of fiscal 2016 are approximately ($4) million and ($0.01) less than previously reported, respectively. Due to the delayed filing and as a result of future subsequent events, there may be additional adjustments to these preliminary financial results through the date of the Company's filing of its Form 10-Q for the third quarter of fiscal 2016.
Key Second Quarter of Fiscal 2016 Financial Highlights (Updated)
-- Revenue: Q2 FY 2016, $710 Million
-- GAAP Net Loss: Q2 FY 2016, ($772) Million
-- GAAP Diluted Loss Per Share: Q2 FY 2016, ($1.49)
-- Non-GAAP Net Income: Q2 FY 2016, $39 Million
-- Non-GAAP Diluted EPS: Q2 FY 2016, $0.07
-- Cash Flow from Operations: Q2 FY 2016, $27 Million
On December 7, 2015, Marvell released updated preliminary financial results for the second quarter of fiscal 2016, ended August 1, 2015. Due to the Company's delayed filing of its Form 10-Q, the Company is obligated to continue to adjust its financial results to account for subsequent activities (Type 1 subsequent events) occurring after September 11, 2015. For the second quarter of fiscal 2016, adjustments that that have been recorded to the Company's preliminary financial results after December 7, 2015 are detailed in the footnotes to the condensed consolidated statements of operations at the end of this press release including an additional $350.5 million charge due to the subsequent settlement in February 2016 for the Carnegie Mellon litigation (of which $78.9 million was recorded to COGS). Accordingly, the Company's GAAP net loss and GAAP diluted loss per share for the second quarter of fiscal 2016 are approximately ($369) million and ($0.71) more than previously reported, respectively. Due to the delayed filing and as a result of future subsequent events, there may be additional adjustments to these preliminary financial results through the date of the Company's filing of its Form 10-Q for the second quarter of fiscal 2016.
From time to time, our customers agreed to take shipments in an earlier fiscal quarter than the fiscal quarter they originally requested delivery. When such agreement would not have occurred but for the request made by Marvell, we refer to such transactions internally as "pull-ins." Pull-in sales increased compared to historical levels beginning in the fourth quarter of fiscal 2015 and returned to historical levels in the third quarter of fiscal 2016. Net revenue in fiscal 2016 related to pull-in sales for shipments taken early by our customers was approximately 9 percent and 11 percent of net revenue in the first and second quarters of fiscal 2016, respectively, and declined to less than 1 percent of net revenue in both the third and fourth quarters of fiscal 2016. This compares to net revenue in fiscal 2015 related to pull-in sales for shipments taken early by our customers, which was less than 1 percent in the first and second quarters of fiscal 2015, 1 percent in the second quarter of fiscal 2015, and increased to 3 percent in the fourth quarter of fiscal 2015. Beginning in fiscal 2017, our policy is not to engage in pull-in transactions and we therefore do not expect them to have any meaningful impact on net revenue in future periods.
CMU Settlement
On February 17, 2016, Marvell announced that, pursuant to a court-ordered mediation, the company and Carnegie Mellon University settled their patent infringement lawsuit. The parties resolved the case on mutually acceptable terms, including an aggregate payment by Marvell to CMU of $750 million, with no ongoing royalty payments. Marvell paid the $750 million in the first quarter of fiscal 2017.
NASDAQ Compliance Plan
On May 3, 2016, Marvell announced that the company received written notification from Nasdaq that, following Marvell's hearing before The Nasdaq Hearings Panel on April 14, 2016, it granted the Company an extension of time to September 6, 2016 to regain compliance with continued listing requirements. Until that time, shares of Marvell stock will remain listed on The Nasdaq Stock Market.
On February 22, 2016, the Audit Committee approved the engagement of Deloitte & Touche LLP as the Company's new independent public accounting firm. On March 1, 2016, the Company reported the results of the Audit Committee's independent investigation of certain accounting and internal control matters. The preparation and filing of the Company's Annual Report on Form 10-K for fiscal 2016 and its Quarterly Reports on Form 10-Q for the second and third quarters of fiscal 2016 and for the first quarter of fiscal 2017 have yet to be completed. The Company is working diligently to complete these filings as soon as practicable, at which time Marvell believes it will regain full compliance with continued listing requirements.
Additions to Company Leadership
On April 5, 2016, Marvell announced a senior leadership transition with the departure of Chief Executive Officer Dr. Sehat Sutardja and President Weili Dai from their management positions. On May 1, 2016, Richard S. Hill was appointed Chairman of the Board. Mr. Hill will also serve as the company's principal executive officer through the filing of Marvell's Quarterly Report on Form 10-Q for the quarter ended July 30, 2016.
On July 11, 2016, Matthew J. Murphy joined Marvell as President and Chief Executive Officer and as a director. A veteran of Maxim Integrated, Mr. Murphy joins an executive team and Board of Directors that has seen a significant infusion of new talent over the past few months, and will be leading that team in the transformation of the Company with a focus on profitable growth.
In addition to Mr. Murphy and Mr. Hill, joining the Board of Directors since April 1, 2016 are Peter A. Feld, Oleg Khaykin, Robert E. Switz and Michael Strachan. Recent additions to the executive team include Mitchell Gaynor, Executive Vice President and Chief Legal Officer, Chris Koopmans, Executive Vice President Marketing and Sales, and Andy Micallef, Chief Operations Officer. Maya Strelar-Migotti has returned to her role as Executive Vice President of the Smart Networked Devices and Solutions Business Group and Pantelis Alexopoulos has returned to his role as Executive Vice President of the Storage Business Group. While a search for a permanent Chief Financial Officer is on-going, the company also recently announced Willem Meintjes as Senior Vice President of Finance.
Conference Call
Marvell will conduct a conference call on Tuesday, July 19, 2016 at 1:45 p.m. Pacific Time to discuss results for the fourth quarter and full year fiscal 2016. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 45077084. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until August 19, 2016.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other related charges, litigation settlement, and certain one-time expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP diluted net income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP diluted net income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of share-based compensation expected to be incurred in future periods but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/anti-dilutive effects of common stock options and restricted stock units.
Marvell believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Marvell's financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell's Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC's website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.
Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including: its use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "can," "will" and similar expressions identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Actual events or results may differ materially from those described in this press release due to a number of risks and uncertainties, including, but not limited to: actions that may be taken by Marvell as a result of the Audit Committee's investigation; adverse impacts of litigation or regulatory activities; Marvell's ability to hire a permanent Chief Financial Officer and Chief Accounting Officer and Controller in a timely manner; Marvell's ability to regain compliance with its SEC reporting obligations within the time of the exemption granted by NASDAQ; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's reliance on the hard disk drive and mobile and wireless markets, which are highly cyclical and intensely competitive; costs and liabilities relating to current and future litigation; Marvell's reliance on a few customers for a significant portion of its revenue; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner and the adoption of those products in the market; seasonality in sales of consumer devices in which Marvell's products are incorporated; uncertainty in the worldwide economic conditions; risks associated with manufacturing and selling a majority of Marvell's products and Marvell's customers' products outside of the United States; and other risks detailed in Marvell's SEC filings from time to time. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the year ended January 31, 2015 and its latest Quarterly Report on Form 10-Q for the quarter ended May 2, 2015 as filed with the SEC on June 4, 2015, and other factors detailed from time to time in Marvell's filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.
About Marvell
Marvell (NASDAQ: MRVL) is a global leader in providing complete silicon solutions. From storage to cloud infrastructure, Internet of Things (IoT), connectivity and multimedia, Marvell's diverse product portfolio aligns complete platform designs with industry-leading performance, security, reliability and efficiency. At the core of the world's most powerful consumer, network and enterprise systems, Marvell empowers partners and their customers to always stand at the forefront of innovation, performance and mass appeal. By providing people around the world with mobility and ease of access to services, adding value to their social, personal and work lives, Marvell is committed to enhancing the human experience.
As used in this release, the term "Marvell" refers to Marvell Technology Group Ltd. and its subsidiaries. For more information, please visit www.Marvell.com.
Marvell® and the Marvell logo are registered trademarks of Marvell and/or its affiliates.
For further information, contact:
John Spencer Ahn Sue Kim
Investor Relations Media Relations
408-222-7544 408-222-1942
johnahn@marvell.com suekim@marvell.com
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Fiscal 2016 Fiscal 2015
----------- -----------
Three Months Ended Three Months Ended Year Ended
------------------ ------------------ ----------
January 30, October 31, August 1, January 31, November 1, August 2, January 30, January 31,
2016 (a) 2015 (a) (b) 2015 (a) (c) 2015 2014 2014 2016 (a) 2015
------- ----------- ----------- ---- ---- ---- ------- ----
(Preliminary) (Preliminary)
Net revenue $616,158 $674,890 $710,492 $857,452 $930,136 $961,545 $2,725,828 $3,706,963
Cost of goods sold 302,610 379,254 461,719 417,131 454,974 477,741 1,494,736 1,843,706
------- ------- ------- ------- ------- ------- --------- ---------
Gross profit 313,548 295,636 248,773 440,321 475,162 483,804 1,231,092 1,863,257
Operating expenses:
Research and
development 239,703 284,308 297,321 285,497 288,435 294,764 1,101,446 1,164,059
Selling and
marketing 31,301 32,481 30,841 37,235 34,410 33,949 130,797 143,952
General and
administrative 37,812 34,771 36,563 34,651 33,473 31,333 150,173 130,030
Carnegie
Mellon
University
litigation
settlement - - 654,667 - - - 654,667 -
Amortization
and write-
off of
acquired
intangible
assets 2,462 3,150 2,568 3,100 3,304 3,304 10,748 16,397
Total operating expenses 311,278 354,710 1,021,960 360,483 359,622 363,350 2,047,831 1,454,438
------- ------- --------- ------- ------- ------- --------- ---------
Operating income (loss) 2,270 (59,074) (773,187) 79,838 115,540 120,454 (816,739) 408,819
Interest and other income, net 1,084 4,644 6,790 4,382 4,764 12,263 17,685 23,334
----- ----- ----- ----- ----- ------ ------ ------
Income (loss) before income
taxes 3,354 (54,430) (766,397) 84,220 120,304 132,717 (799,054) 432,153
Provision (benefit) for income
taxes (846) 3,320 5,543 2,527 5,000 (6,153) 12,346 (3,193)
---- ----- ----- ----- ----- ------ ------ ------
Net income (loss) $4,200 $(57,750) $(771,940) $81,693 $115,304 $138,870 $(811,400) $435,346
====== ======== ========= ======= ======== ======== ========= ========
Basic net income (loss) per
share $0.01 $(0.11) $(1.49) $0.16 $0.22 $0.27 $(1.59) $0.85
===== ====== ====== ===== ===== ===== ====== =====
Diluted net income (loss) per
share $0.01 $(0.11) $(1.49) $0.16 $0.22 $0.27 $(1.59) $0.84
===== ====== ====== ===== ===== ===== ====== =====
Shares used in computing basic
earnings (loss) per share 506,352 504,831 516,368 513,574 513,859 511,821 510,945 511,089
Shares used in computing
diluted earnings (loss) per
share 508,590 504,831 516,368 522,112 519,907 520,269 510,945 520,760
(a) The condensed consolidated financial statements for each
of the three months ended January 30, 2016, October
31, 2015 and August 1, 2015 are preliminary, as well as
the twelve months ended January 30, 2016, and
therefore, subject to adjustments in connection with
subsequent events arising through the date of the
Company's filing of its Quarterly Reports on Form 10-Q
and Annual Report on Form 10-K for the corresponding
periods. The filing of each respective Form 10-Q and
10-K will be completed as soon as practicable after the
completion of the audit of the Company's fiscal 2016
financial statements by Deloitte & Touche LLP, its
newly appointed independent registered public
accounting firm.
(b) The condensed consolidated financial statements for the
three months ended October 31, 2015, for which the
Company previously reported preliminary financial
results on December 7, 2015 have been adjusted due to
the delayed filing of its Form 10-Q for the third
quarter. These adjustments were made to account for
subsequent activities associated with conditions that
existed as of October 31, 2015 (Type I Subsequent
Events) and are not related to the Audit Committee's
investigation of certain accounting and internal
control matters. Adjustments that have been recorded to
the Company's preliminary financial results after
December 7, 2015 include a credit adjustment of $4.3
million to COGS due to the subsequent settlement in
February 2016 for the Carnegie Mellon University
litigation, a $1.5 million charge to write down
equipment and intangible asset related to a development
project the Company decided to discontinue, the
recognition of an additional $0.8 million of revenue
due to a subsequent rebate adjustment and corresponding
reduction to the tax provision of $0.4 million. Due to
the delayed filing and as a result of future subsequent
events, there may be additional adjustments to these
preliminary financial results through the date of the
Company's filing of its Form 10-Q.
(c) The condensed consolidated financial statements for the
three months ended August 1, 2015, for which the
Company previously reported preliminary financial
results on September 11, 2015, have been adjusted due
to the delayed filing of its Form 10-Q for the second
quarter. These adjustments were made to account for
subsequent activities associated with conditions that
existed as of August 1, 2015 (Type I Subsequent Events)
and are not related to the Audit Committee's
investigation of certain accounting and internal
control matters. Adjustments that have been recorded to
the Company's preliminary financial results after
September 11, 2015 include an additional $350.5 million
charge due to the subsequent settlement in February
2016 for the Carnegie Mellon University litigation (of
which $78.9 million was recorded to COGS), a $13.9
million write down of inventory primarily associated
with certain products for the mobile platform business,
$3.7 million related to other litigation charges, a
$1.5 million charge related to a pension plan and an
additional $3.0 million representing other net
subsequent charges, as well as corresponding changes to
the income tax benefit from $11.4 million to an income
tax provision of $ 5.5 million. Due to the delayed
filing and as a result of future subsequent events,
there may be additional adjustments to these
preliminary financial results through the date of the
Company's filing of its Form 10-Q.
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
January 30, January 31,
Assets 2016 (a) 2015
------- ----
(Preliminary)
Current assets:
Cash, cash
equivalents and
short-term
investments $2,282,749 $2,529,555
Accounts
receivable, net 323,300 420,955
Inventories 210,017 308,162
Prepaid expenses
and other
current assets 102,560 85,368
-------
Total current assets 2,918,626 3,344,040
Property and equipment, net 299,540 340,639
Long-term investments 11,296 10,226
Goodwill and acquired intangible
assets, net 2,047,955 2,060,643
Other non-current assets 164,710 128,839
------- -------
Total assets $5,442,127 $5,884,387
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $180,372 $282,899
Accrued
liabilities 253,691 286,357
Carnegie Mellon
University
accrued
litigation
settlement 736,000 -
Deferred income 55,722 68,120
------
Total current liabilities 1,225,785 637,376
Other non-current liabilities 76,219 100,922
------ -------
Total liabilities 1,302,004 738,298
--------- -------
Shareholders' equity:
Common stock 1,015 1,030
Additional paid-
in capital 3,028,921 3,099,548
Accumulated other
comprehensive
income (loss) (795) 308
Retained earnings 1,110,982 2,045,203
---------
Total shareholders' equity 4,140,123 5,146,089
Total liabilities and shareholders'
equity $5,442,127 $5,884,387
========== ==========
(a) The condensed
consolidated
balance sheet
at January
30, 2016 is
preliminary
and
therefore,
subject to
adjustments
in connection
with
subsequent
events
arising
through the
date of the
Company's
filing of its
Annual Report
on Form 10-K
for the
corresponding
period. The
filing of the
Form 10-K
will be
completed as
soon as
practicable
after the
completion of
the audit of
the Company's
fiscal 2016
financial
statements by
Deloitte &
Touche LLP,
its newly
appointed
independent
registered
public
accounting
firm.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Fiscal 2016 Fiscal 2015
----------- -----------
Three Months Ended Three Months Ended Year Ended
------------------ ------------------ ----------
January 30, October 31, August 1, January 31, November 1, August 2, January 30, January 31,
2016 (a) 2015 (a) 2015 (a) 2015 2014 2014 2016 (a) 2015
------- ------- ------- ---- ---- ---- ------- ----
(Preliminary) (Preliminary)
Cash flows from operating activities:
Net income (loss) $4,200 $(57,750) $(771,940) $81,693 $115,304 $138,870 $(811,400) $435,346
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and
amortization 22,800 25,565 25,191 26,464 26,515 26,263 100,176 106,248
Share-based
compensation 32,419 31,465 36,674 37,963 34,294 35,020 133,779 137,246
Amortization and
write-off of
acquired
intangible assets 2,947 3,635 3,053 3,585 3,789 3,789 12,688 18,337
Non-cash
restructuring and
other related
charges 289 14,270 900 3,230 - - 16,032 17
Other non-cash
expense (income),
net 7,885 4,205 2,283 (1,699) (6,034) (7,596) 13,811 (10,646)
Excess tax
benefits from
share-based
compensation 1 (2) (7) (67) (2) (32) (26) (145)
Changes in assets
and liabilities:
Accounts
receivable 57,628 36,793 (23,907) 25,719 40,214 33,419 97,655 34,165
Inventories 69,544 39,457 12,903 48,247 37,506 (43,194) 90,586 39,454
Prepaid
expenses and
other assets (35,245) 6,804 9,358 4,087 18,536 (24,996) (17,113) (7,125)
Accounts
payable (62,163) (55,693) (5,167) (60,808) (70,749) 2,558 (105,898) (43,871)
Accrued
liabilities
and other
non-current
liabilities (27,218) 3,958 19,634 (12,189) (24,997) 10,096 (15,202) (30,024)
Carnegie
Mellon
University
accrued
litigation
settlement 1,285 1,158 733,557 - - - 736,000 -
Accrued
employee
compensation (18,702) 14,295 (14,507) 1,910 19,101 (7,451) (33,338) 43,561
Deferred
income (2,364) (1,566) (1,441) (2,714) (12,053) (9,792) (12,398) 6,373
------ ------ ------ ------ ------- ------ ------- -----
Net cash provided by
operating activities 53,306 66,594 26,584 155,421 181,424 156,954 205,352 728,936
Cash flows from investing activities:
Purchases of
available-for-
sale securities (133,215) (356,465) (173,465) (344,023) (448,526) (153,881) (1,056,045) (1,128,319)
Sales and
maturities of
available-for-
sale securities 477,301 356,409 222,295 248,215 205,685 190,099 1,303,500 826,310
Distribution from
(investments in)
privately-held
companies (119) (130) 208 - (260) - (41) (701)
Proceeds from sale
of an investment
in a privately-
held company - - - - 13,220 - - 13,220
Purchases of
technology
licenses (1,579) (980) (2,071) (1,910) (5,105) (1,298) (8,236) (16,424)
Purchases of
property and
equipment (3,894) (9,041) (16,986) (14,415) (16,661) (15,823) (37,255) (63,030)
Purchase of
equipment
previously leased - - - - - - (10,240) -
Net proceeds from
sale of equipment
held for sale - 10,007 - - - - 10,007 -
------------------
Net cash provided by (used
in) investing activities 338,494 (200) 29,981 (112,133) (251,647) 19,097 201,690 (368,944)
Cash flows from financing activities:
Repurchase of
common stock (b) - (65,291) (175,311) (21,188) (43,774) - (260,875) (64,962)
Proceeds from
employee stock
plans 21,369 2,174 44,161 41,049 2,934 49,282 80,717 112,357
Minimum tax
withholding paid
on behalf of
employees for net
share settlement
(482) (869) (697) (908) (663) (637) (24,358) (26,494)
Dividend payments
to shareholders (30,447) (30,270) (31,194) (30,942) (30,867) (30,820) (122,821) (122,801)
Payments on
technology
license
obligations (1,112) (2,617) (4,732) (4,382) (5,951) (2,677) (12,528) (13,010)
Excess tax
benefits from
share-based
compensation (1) 2 7 67 2 32 26 145
---
Net cash provided by (used
in) financing activities (10,673) (96,871) (167,766) (16,304) (78,319) 15,180 (339,839) (114,765)
------- ------- -------- ------- ------- ------ -------- --------
Net increase (decrease) in cash and
cash equivalents 381,127 (30,477) (111,201) 26,984 (148,542) 191,231 67,203 245,227
Cash and cash equivalents at beginning
of period 897,053 927,530 1,038,731 1,183,993 1,332,535 1,141,304 1,210,977 965,750
------- ------- --------- --------- --------- --------- --------- -------
Cash and cash equivalents at end of
period $1,278,180 $897,053 $927,530 $1,210,977 $1,183,993 $1,332,535 $1,278,180 $1,210,977
========== ======== ======== ========== ========== ========== ========== ==========
(a) The condensed
consolidated
statement of
cash flows
for each of
the three
months ended
January 30,
2016, October
31, 2015 and
August 1,
2015 are
preliminary,
as well as
the twelve
months ended
January 30,
2016, and
therefore,
subject to
adjustments
in connection
with
subsequent
events
arising
through the
date of the
Company's
filing of its
Annual Report
on Form 10-K
for the
corresponding
period. The
filing of the
Form 10-K
will be
completed as
soon as
practicable
after the
completion of
the audit of
the Company's
fiscal 2016
financial
statements by
Deloitte &
Touche LLP,
its newly
appointed
independent
registered
public
accounting
firm.
(b) Marvell
records all
repurchases
as well as
investment
purchases and
sales, based
on trade date
in accordance
with U.S.
GAAP.
Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP
(Unaudited)
(In thousands, except per share amounts)
Fiscal 2016 Fiscal 2015
----------- -----------
Three Months Ended Three Months Ended Year Ended
------------------ ------------------ ----------
January 30, October 31, August 1, January 31, November 1, August 2, January 30, January 31,
2016 (e) 2015 (e) (f) 2015 (e) (g) 2015 2014 2014 2016 (e) 2015
------- ----------- ----------- ---- ---- ---- ------- ----
(Preliminary) (Preliminary)
GAAP net income (loss) $4,200 $(57,750) $(771,940) $81,693 $115,304 $138,870 $(811,400) $435,346
Share-based compensation 32,419 31,465 36,674 37,963 34,294 35,020 133,779 137,246
Restructuring and other related
charges (a) 4,396 45,555 13,000 3,412 1,203 735 63,543 10,438
4,229
Amortization and write-off of
acquired intangible assets 2,947 3,635 3,346 4,025 4,229 13,421 20,097
Litigation matters (b) 3,791 1,158 748,117 - (2,398) 475 751,366 77
Other (c) 6,754 4,942 10,205 3,764 2,318 2,155 43,283 8,237
Non-GAAP net income $54,507 $29,005 $39,402 $130,857 $154,950 $181,484 $193,992 $611,441
======= ======= ======= ======== ======== ======== ======== ========
GAAP weighted average shares -
diluted 508,590 504,831 516,368 522,112 519,907 520,269 510,945 520,760
Non-GAAP adjustment 9,978 13,674 16,574 10,688 12,905 13,201 15,349 11,604
-----
532,800 533,470
Non-GAAP weighted average
shares diluted (d) 518,568 518,505 532,942 532,812 526,294 532,364
======= ======= ======= ======= ======= =======
GAAP diluted net income (loss)
per share $0.01 $(0.11) $(1.49) $0.16 $0.22 $0.27 $(1.59) $0.84
===== ====== ====== ===== ===== ===== ====== =====
Non-GAAP diluted net income per
share $0.11 $0.06 $0.07 $0.25 $0.29 $0.34 $0.37 $1.15
===== ===== ===== ===== ===== ===== ===== =====
GAAP gross profit: $313,548 $295,636 $248,773 $440,321 $475,162 $483,804 $1,231,092 $1,863,257
Share-based compensation 1,861 2,495 2,012 2,006 1,934 1,733 7,915 7,972
Restructuring and other related
charges (a) 7 10,285 - - - - 10,292 -
Amortization of acquired intangible
assets 485 485 778 925 925 925 2,673 3,700
Litigation matters (b) 3,711 1,158 81,390 - (3,998) - 84,559 (3,998)
Other (c) - - - 1,000 - - - 1,000
Non-GAAP gross profit $319,612 $310,059 $332,953 $444,252 $474,023 $486,462 $1,336,531 $1,871,931
======== ======== ======== ======== ======== ======== ========== ==========
GAAP gross margin 50.9% 43.8% 35.0% 51.4% 51.1% 50.3% 45.2% 50.3%
Share-based compensation 0.3% 0.4% 0.3% 0.2% 0.2% 0.2% 0.3% 0.2%
Restructuring and other related
charges (a) 0.0% 1.5% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0%
Amortization of acquired intangible
assets 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Litigation matters (b) 0.6% 0.1% 11.5% 0.0% -0.4% 0.0% 3.0% -0.1%
Other (c) 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0%
Non-GAAP gross margin 51.9% 45.9% 46.9% 51.8% 51.0% 50.6% 49.0% 50.5%
==== ==== ==== ==== ==== ==== ==== ====
GAAP research and development: $239,703 $284,308 $297,321 $285,497 $288,435 $294,764 $1,101,446 $1,164,059
Share-based compensation (23,631) (22,573) (27,807) (25,590) (24,198) (24,276) (98,792) (94,432)
Restructuring and other related
charges (a) (3,703) (31,806) (11,680) (67) (88) (412) (47,189) (5,249)
Litigation matters (b) - - (5,000) - - - (5,000) -
Other (c) (3,485) (894) (134) - - - (4,513) -
Non-GAAP research and
development $208,884 $229,035 $252,700 $259,840 $264,149 $270,076 $945,952 $1,064,378
======== ======== ======== ======== ======== ======== ======== ==========
GAAP selling and marketing: $31,301 $32,481 $30,841 $37,235 $34,410 $33,949 $130,797 $143,952
Share-based compensation (3,214) (2,608) (2,707) (3,069) (2,855) (2,617) (11,106) (11,469)
Restructuring and other related
charges (a) (118) (1,899) - - - 48 (2,017) -
Litigation matters (b) - - - - (1,600) - - (1,600)
Other (c) (393) (39) - - - - (432) -
Non-GAAP selling and marketing $27,576 $27,935 $28,134 $34,166 $29,955 $31,380 $117,242 $130,883
======= ======= ======= ======= ======= ======= ======== ========
GAAP general and administrative: $37,812 $34,771 $36,563 $34,651 $33,473 $31,333 $150,173 $130,030
Share-based compensation (3,713) (3,789) (4,148) (7,298) (5,307) (6,394) (15,966) (23,373)
Restructuring and other related
charges (a) (568) (1,565) (1,320) (3,345) (1,115) (371) (4,045) (5,189)
Litigation matters (b) (80) - (7,060) - - (475) (7,140) (2,475)
Other (c) (2,876) (2,901) (2,748) (2,764) (2,318) (2,155) (26,827) (7,237)
Non-GAAP general and
administrative $30,575 $26,516 $21,287 $21,244 $24,733 $21,938 $96,195 $91,756
======= ======= ======= ======= ======= ======= ======= =======
$ -
GAAP Carnegie Mellon University
litigation settlement $ - $ - $654,667 $ - $ - $ - $654,667
Litigation matters (b) - - (654,667) - - - (654,667) -
---------------------
Non-GAAP Carnegie Mellon
University litigation
settlement $ - $ - $ - $ - $ - $ - $ - $ -
================== =================== ====================== ================== ======================== ======================= ====================== ======================
GAAP provision (benefit) for
income taxes $(846) $3,320 $5,543 $2,527 $5,000 $(6,153) $12,346 $(3,193)
Other (c) - (1,108) (7,323) - - - (11,511) -
--------
Non-GAAP provision (benefit)
for income taxes $(846) $2,212 $(1,780) $2,527 $5,000 $(6,153) $835 $(3,193)
===== ====== ======= ====== ====== ======= ==== =======
(a) Restructuring and other related charges include costs that
qualify under U.S. GAAP as restructuring costs and other
incremental charges that are a direct result of restructuring.
For the three months ended January 30, 2016, such other related
charges include $0.3 million for the impairment of certain
leasehold improvements due to the restructuring of the mobile
platform business, in addition to $4.1 million of restructuring
charges, primarily for severance and facility-related costs.
For the three months ended October 31, 2015, such other related
charges include $6.2 million for the impairment of certain
equipment (of which $2.2 million is in cost of goods sold) and
an $8.1 million write down of inventory (in cost of goods sold)
due to the restructuring of the mobile platform business, in
addition to $31.3 million of restructuring charges, primarily
for severance and other-exit related costs. For the three
months ended August 1, 2015, such other related charges
included a $0.9 million impairment of equipment held for sale
(in general and administrative), in addition to $12.1 million
of restructuring charges, primarily for severance. In addition,
other related charges for all periods reported include
operating expenses incurred for the maintenance of equipment
held for sale.
(b) Litigation matters represent accruals recognized by the Company
under ASC Topic 450, "Contingencies," in connection with the
Carnegie Mellon University and certain other pending
litigation.
(c) Other costs included in general and administrative expenses for
the year ended January 30, 2016 include a cash payment
authorized by the Board of Directors of $15.4 million to Dr.
Sehat Sutardja, the Company's former Chief Executive Officer
("CEO") (see "Note 15 -Subsequent Events" in the Notes to the
Consolidated Financial Statements set forth in Part II, Item 8
of the Company's Annual Report on Form 10-K for fiscal 2015).
Other costs for all periods presented includes costs primarily
associated with the surety bond to appeal the Carnegie Mellon
University judgment. Other costs included in the provision for
income taxes also reflects the tax effect of restructuring
costs in each of the three months ended August 1, 2015 and
October 31, 2015, as well as the year ended January 30, 2015.
Other costs included in the provision for income taxes for the
year ended January 30, 2016 include the corporate income tax
effect of the $15.4 million cash payment to the Company's CEO.
(d) For purposes of calculating non-GAAP diluted net income per
share in all periods presented, the GAAP diluted weighted
average shares outstanding is adjusted to exclude the potential
benefits of share-based compensation costs expected to be
incurred in future periods but not yet recognized in the
financial statements. The non-GAAP diluted weighted average
shares outstanding for the three months ended August 1, 2015
and October 31, 2015, and for the twelve months ended January
30, 2016 also include the effects from dilutive securities
which were excluded from the GAAP diluted weighted average
shares outstanding since their effect was antidilutive due to
the GAAP net loss reported in each of the corresponding
periods.
(e) The condensed consolidated financial statements for each of the
three months ended August 1, 2015, October 31, 2015 and January
30, 2016, as well as the twelve months ended January 30, 2016
are preliminary and therefore, subject to adjustments in
connection with subsequent events arising through the date of
the Company's filing of its Quarterly Reports on Form 10-Q and
Annual Report on Form 10-K for the corresponding periods. The
filing of each respective Form 10-Q and Form 10-K will be
completed as soon as practicable after the completion of the
audit of the Company's fiscal 2016 financial statements by
Deloitte & Touche LLP, its newly appointed independent
registered public accounting firm.
(f) The condensed consolidated financial statements for the three
months ended October 31, 2015, for which the Company previously
reported preliminary financial results on December 7, 2015 have
been adjusted due to the delayed filing of its Form 10-Q for
the third quarter. These adjustments were made to account for
subsequent activities associated with conditions that existed
as of October 31, 2015 (Type I Subsequent Events) and are not
related to the Audit Committee's investigation of certain
accounting and internal control matters. Adjustments that have
been recorded to the Company's preliminary financial results
after December 7, 2015 include a credit adjustment of $4.3
million to COGS due to the subsequent settlement in February
2016 for the Carnegie Mellon University litigation, a $1.5
million charge to write down equipment and intangible asset
related to a development project the Company decided to
discontinue, the recognition of an additional $0.8 million of
revenue due to a subsequent rebate adjustment and corresponding
reduction to the tax provision of $0.4 million. Due to the
delayed filing and as a result of future subsequent events,
there may be additional adjustments to these preliminary
financial results through the date of the Company's filing of
its Form 10-Q.
(g) The condensed consolidated financial statements for the three
months ended August 1, 2015, for which the Company previously
reported preliminary financial results on September 11, 2015,
have been adjusted due to the delayed filing of its Form 10-Q
for the second quarter. These adjustments were made to account
for subsequent activities associated with conditions that
existed as of August 1, 2015 (Type I Subsequent Events) and are
not related to the Audit Committee's investigation of certain
accounting and internal control matters. Adjustments that have
been recorded to the Company's preliminary financial results
after September 11, 2015 include an additional $350.5 million
charge due to the subsequent settlement in February 2016 for
the Carnegie Mellon University litigation (of which $78.9
million was recorded to COGS), a $13.9 million write down of
inventory primarily associated with certain products for the
mobile platform business, $3.7 million related to other
litigation charges, a $1.5 million charge related to a pension
plan and an additional $3.0 million representing other net
subsequent charges, as well as corresponding changes to the
income tax benefit from $11.4 million to an income tax
provision of $ 5.5 million. Due to the delayed filing and as a
result of future subsequent events, there may be additional
adjustments to these preliminary financial results through the
date of the Company's filing of its Form 10-Q.
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SOURCE Marvell Technology Group Ltd.
