Marvell Technology Group Ltd. Reports Fourth Fiscal Quarter and Fiscal Year 2016 Financial Results

 

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

Amortization and write-off of acquired intangible assets

2,947


3,635


3,346


4,025


4,229


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

Non-GAAP weighted average shares diluted (d)

518,568


518,505


532,942


532,800


532,812


533,470



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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