QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of exchange on which registered |
☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | |||
Emerging growth company |
Page No. | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 6. | |||
ITEM 1. | FINANCIAL STATEMENTS |
April 3, 2020 | September 27, 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term investments | |||||||
Accounts receivable (less allowances of $4,407 and $5,047, respectively) | |||||||
Inventories | |||||||
Income tax receivable | |||||||
Prepaid and other current assets | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Deferred income taxes | |||||||
Other investments | |||||||
Other long-term assets | |||||||
TOTAL ASSETS | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current portion of finance lease obligations and other | $ | $ | |||||
Current portion of long-term debt | |||||||
Accounts payable | |||||||
Accrued liabilities | |||||||
Deferred revenue | |||||||
Total current liabilities | |||||||
Finance lease obligations and other, less current portion | |||||||
Long-term debt, less current portion | |||||||
Warrant liability | |||||||
Deferred income taxes | |||||||
Other long-term liabilities | |||||||
Total liabilities | |||||||
Stockholders’ equity: | |||||||
Common stock | |||||||
Treasury stock, at cost | ( | ) | ( | ) | |||
Accumulated other comprehensive income | |||||||
Additional paid-in capital | |||||||
Accumulated deficit | ( | ) | ( | ) | |||
Total stockholders’ equity | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||
Cost of revenue | |||||||||||||||
Gross profit | |||||||||||||||
Operating expenses: | |||||||||||||||
Research and development | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Restructuring charges | |||||||||||||||
Total operating expenses | |||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other expense: | |||||||||||||||
Warrant liability gain (expense) | ( | ) | |||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total other expense net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income tax expense | |||||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Net loss per share: | |||||||||||||||
Basic loss per share: | |||||||||||||||
Loss per share - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Diluted loss per share: | |||||||||||||||
Loss per share - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Shares used: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Unrealized (loss) gain on short-term investments, net of tax | ( | ) | ( | ) | |||||||||||
Foreign currency translation (loss) gain, net of tax | ( | ) | ( | ) | |||||||||||
Other comprehensive (loss) income, net of tax | ( | ) | ( | ) | |||||||||||
Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Three Months Ended | |||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 3, 2020 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Stock options exercises | — | — | — | — | — | ||||||||||||||||||||||||
Vesting of restricted common stock and units | — | — | — | — | — | ||||||||||||||||||||||||
Shares repurchased for tax withholdings on equity awards | ( | ) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Balance at April 3, 2020 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Six Months Ended | |||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at September 27, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Cumulative effect of ASU 2016-02 | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Stock options exercises | — | — | — | — | — | ||||||||||||||||||||||||
Vesting of restricted common stock and units | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of common stock pursuant to employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||
Shares repurchased for tax withholdings on equity awards | ( | ) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Balance at April 3, 2020 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Three Months Ended | |||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 28, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Stock options exercises | — | — | — | — | — | ||||||||||||||||||||||||
Vesting of restricted common stock and units | — | — | — | — | — | ||||||||||||||||||||||||
Shares repurchased for tax withholdings on equity awards | ( | ) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Balance at March 29, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Six Months Ended | |||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at September 28, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Stock option exercises | — | — | — | — | — | ||||||||||||||||||||||||
Vesting of restricted common stock and units | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of common stock pursuant to employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||
Shares repurchased for tax withholdings on equity awards | ( | ) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||
Balance at March 29, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Six Months Ended | |||||||
April 3, 2020 | March 29, 2019 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | ( | ) | $ | ( | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and intangibles amortization | |||||||
Share-based compensation | |||||||
Warrant liability gain | ( | ) | ( | ) | |||
Deferred financing cost amortization | |||||||
Deferred income taxes | |||||||
Impairment and restructuring related | |||||||
Loss on minority equity investment | |||||||
Other adjustments, net | |||||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | |||||||
Inventories | |||||||
Prepaid expenses and other assets | ( | ) | |||||
Accounts payable | ( | ) | |||||
Accrued and other liabilities | ( | ) | |||||
Income taxes | ( | ) | |||||
Net cash provided by operating activities | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Proceeds from sales and maturities of short-term investments | |||||||
Purchases of short-term investments | ( | ) | ( | ) | |||
Sale of businesses and assets | |||||||
Acquisition of businesses, net | ( | ) | |||||
Net cash used in investing activities | ( | ) | ( | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from stock option exercises and employee stock purchases | |||||||
Payments on long-term debt | ( | ) | ( | ) | |||
Payments on finance leases and other | ( | ) | ( | ) | |||
Repurchase of common stock - tax withholdings on equity awards | ( | ) | ( | ) | |||
Payments of contingent consideration and other | ( | ) | |||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Foreign currency effect on cash | ( | ) | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | |||||
CASH AND CASH EQUIVALENTS — Beginning of period | |||||||
CASH AND CASH EQUIVALENTS — End of period | $ | $ |
1. | BASIS OF PRESENTATION AND |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Revenue by Market: | |||||||||||||||
Telecommunications | $ | $ | $ | $ | |||||||||||
Industrial & Defense | |||||||||||||||
Data Center | |||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Revenue by Geographic Region: | |||||||||||||||
United States | $ | $ | $ | $ | |||||||||||
China | |||||||||||||||
Asia Pacific, excluding China (1) | |||||||||||||||
Other Countries (2) | |||||||||||||||
Total | $ | $ | $ | $ |
(1) | Asia Pacific represents Taiwan, Japan, Singapore, India, Thailand, South Korea, Australia, Malaysia, New Zealand and the Philippines. |
(2) | Outside the United States, no country or region represented greater than 10% of our total revenue as of the dates presented, other than China and the Asia Pacific region as presented above. |
April 3, 2020 | September 27, 2019 | $ Change | % Change | |||||||||||
Contract liabilities | $ | $ | $ | ( | ) | ( | )% |
April 3, 2020 | |||||||||||||||
Amortized Cost | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Aggregate Fair Value | ||||||||||||
Corporate bonds | $ | $ | $ | ( | ) | $ | |||||||||
Commercial paper | ( | ) | |||||||||||||
Total short-term investments | $ | $ | $ | ( | ) | $ |
September 27, 2019 | |||||||||||||||
Amortized Cost | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Aggregate Fair Value | ||||||||||||
Corporate bonds | $ | $ | $ | ( | ) | $ | |||||||||
Commercial paper | ( | ) | |||||||||||||
Total short-term investments | $ | $ | $ | ( | ) | $ |
April 3, 2020 | September 27, 2019 | ||||||
Less than 1 year | $ | $ | |||||
Over 1 year | |||||||
Total short-term investments | $ | $ |
Level 1 - Quoted prices in active markets for identical assets or liabilities. |
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. |
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us. |
April 3, 2020 | |||||||||||||||
Fair Value | Active Markets for Identical Assets (Level 1) | Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||
Assets | |||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||
Commercial paper | |||||||||||||||
Corporate bonds | |||||||||||||||
Total assets measured at fair value | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Common stock warrant liability | $ | $ | $ | $ | |||||||||||
Total liabilities measured at fair value | $ | $ | $ | $ |
September 27, 2019 | |||||||||||||||
Fair Value | Active Markets for Identical Assets (Level 1) | Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||
Assets | |||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||
Commercial paper | |||||||||||||||
Corporate bonds | |||||||||||||||
Total assets measured at fair value | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Common stock warrant liability | $ | $ | $ | $ | |||||||||||
Total liabilities measured at fair value | $ | $ | $ | $ |
Inputs | ||||||||
Liabilities | Valuation Technique | Unobservable Input | April 3, 2020 | September 27, 2019 | ||||
Warrant liability | Black-Scholes model | Volatility | ||||||
Discount rate | ||||||||
Expected life | ||||||||
Exercise price | $ | $ | ||||||
Stock price | $ | $ | ||||||
Dividend rate |
September 27, 2019 | Net Realized/Unrealized Losses Included in Earnings | Purchases and Issuances | Sales and Settlements | April 3, 2020 | |||||||||||||||
Common stock warrant liability | $ | $ | ( | ) | $ | $ | $ |
September 28, 2018 | Net Realized/Unrealized Losses (Gains) Included in Earnings | Purchases and Issuances | Sales and Settlements | March 29, 2019 | |||||||||||||||
Contingent consideration | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Common stock warrant liability | $ | $ | ( | ) | $ | $ | $ |
April 3, 2020 | September 27, 2019 | ||||||
Raw materials | $ | $ | |||||
Work-in-process | |||||||
Finished goods | |||||||
Total inventory, net | $ | $ |
April 3, 2020 | September 27, 2019 | ||||||
Construction in process | $ | $ | |||||
Machinery and equipment | |||||||
Leasehold improvements | |||||||
Furniture and fixtures | |||||||
Computer equipment and software | |||||||
Capital lease and financed assets | |||||||
Finance lease assets | |||||||
Total property and equipment | $ | $ | |||||
Less accumulated depreciation and amortization | ( | ) | ( | ) | |||
Property and equipment, net | $ | $ |
Principal Outstanding | LIBOR Rate | Margin | Effective Interest Rate | |
Term loans | $ |
April 3, 2020 | |||
Principal balance | $ | ||
Unamortized discount | ( | ) | |
Unamortized deferred financing costs | ( | ) | |
Total term loans | |||
Current portion | |||
Long-term, less current portion | $ |
Amount | |||
2020 (remainder of fiscal year) | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Total | $ |
April 3, 2020 | September 27, 2019 | Consolidated Balance Sheet Classification | |||||||
Assets: | |||||||||
Operating lease ROU assets | $ | $ | — | Other long-term assets | |||||
Finance lease assets | — | Property and equipment, net | |||||||
Capital lease and financed assets | — | Property and equipment, net | |||||||
Total lease assets | $ | $ | |||||||
Liabilities: | |||||||||
Current: | |||||||||
Operating lease liabilities | $ | $ | — | Accrued liabilities | |||||
Finance lease liabilities | — | Current portion of finance lease obligations and other | |||||||
Capital lease and financing obligations | — | Current portion of finance lease obligations and other | |||||||
Long-term: | |||||||||
Operating lease liabilities | — | Other long-term liabilities | |||||||
Finance lease liabilities | — | Finance lease obligations and other, less current portion | |||||||
Capital lease and financing obligations | — | Finance lease obligations and other, less current portion | |||||||
Total lease liabilities | $ | $ |
April 3, 2020 | ||
Weighted-average remaining lease term (in years): | ||
Operating leases | ||
Finance leases | ||
Weighted-average discount rate: | ||
Operating leases | % | |
Finance leases | % |
Three Months Ended | Six Months Ended | ||||||
April 3, 2020 | |||||||
Finance lease cost: | |||||||
Amortization of lease assets | $ | $ | |||||
Interest on lease liabilities | |||||||
Total finance lease cost | $ | $ | |||||
Operating lease cost | $ | $ | |||||
Variable lease cost | |||||||
Short-term lease cost | |||||||
Sublease income | ( | ) | ( | ) |
Six Months Ended | |||
April 3, 2020 | |||
Cash paid for amounts included in measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | ||
Operating cash flows from finance leases | |||
Financing cash flows from finance leases | |||
Non-cash activities: | |||
Operating lease right-of-use assets obtained in exchange for new lease liabilities | $ | ||
Financing lease assets obtained in exchange for new lease liabilities |
Fiscal year ending: | Operating Leases | Finance Leases | |||||
2020 (remainder of fiscal year) | $ | $ | |||||
2021 | |||||||
2022 | |||||||
2023 | |||||||
2024 | |||||||
2025 | |||||||
Thereafter | |||||||
Total lease payments | |||||||
Less: interest | |||||||
Present value of lease liabilities | $ | $ |
Fiscal year ending: | Operating Leases | Capital Leases | ||||||
2020 | $ | $ | ||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
Thereafter | ||||||||
Total future minimum lease payments | $ | |||||||
Less amount representing interest | ( | ) | ||||||
Present value of net minimum capital lease payments | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Cost of revenue | $ | $ | $ | $ | |||||||||||
Selling, general and administrative | |||||||||||||||
Total | $ | $ | $ | $ |
April 3, 2020 | September 27, 2019 | ||||||
Acquired technology | $ | $ | |||||
Customer relationships | |||||||
Trade name (indefinite-lived) | |||||||
Total | $ | $ | |||||
Less accumulated amortization | ( | ) | ( | ) | |||
Intangible assets — net | $ | $ |
Intangible Assets | |||||||||||||||||||
Total Intangible Assets | Acquired Technology | Customer Relationships | Trade Name | Goodwill | |||||||||||||||
Balance at September 27, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Disposal of a fully amortized intangible asset | ( | ) | ( | ) | |||||||||||||||
Currency translation adjustment | |||||||||||||||||||
Balance at April 3, 2020 | $ | $ | $ | $ | $ |
2020 Remaining | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | ||||||||||
Amortization expense | $ | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Numerator: | |||||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Warrant liability gain | ( | ) | ( | ) | ( | ) | |||||||||
Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Denominator: | |||||||||||||||
Weighted average common shares outstanding-basic | |||||||||||||||
Dilutive effect of warrants | |||||||||||||||
Weighted average common shares outstanding-diluted | $ | $ | $ | ||||||||||||
Loss per share-basic: | |||||||||||||||
Net loss to common stockholders per share-basic: | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Loss per share-diluted: | |||||||||||||||
Net loss to common stockholders per share-diluted: | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Employee related expenses | $ | $ | $ | $ | |||||||||||
Facility related expenses | |||||||||||||||
Total restructuring charges | $ | $ | $ | $ |
Employee-Related Expense (1) | Facility-Related Expense (2) | Total | |||||||
Balance at September 27, 2019 | $ | $ | $ | ||||||
Charges and adjustments | |||||||||
Charges paid/settled/other | ( | ) | ( | ) | ( | ) | |||
Balance at April 3, 2020 | $ | $ | $ |
Employee-Related Expense | Facility-Related Expense | Total | |||||||
Balance at September 27, 2019 | $ | $ | $ | ||||||
Charges and adjustments | ( | ) | ( | ) | |||||
Charges paid/settled | ( | ) | ( | ) | ( | ) | |||
Balance at April 3, 2020 | $ | $ | $ |
Facility-Related Expense | |||
Balance at September 27, 2019 | $ | ||
Charges and adjustments | ( | ) | |
Charges paid/settled | ( | ) | |
Balance at April 3, 2020 | $ |
Employee-Related Expense | Facility-Related Expense | Total | |||||||
Balance at September 27, 2019 | $ | $ | $ | ||||||
Charges and adjustments | |||||||||
Charges paid/settled/other | ( | ) | ( | ) | ( | ) | |||
Balance at April 3, 2020 | $ | $ | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Cost of revenue | $ | $ | $ | $ | |||||||||||
Research and development | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Total share-based compensation expense | $ | $ | $ | $ |
Number of Shares | Weighted-Average Exercise Price per Share | Weighted-Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value | |||||||||
Options outstanding - September 27, 2019 | $ | |||||||||||
Exercised | ( | ) | ||||||||||
Forfeited, canceled or expired | ||||||||||||
Options outstanding - April 3, 2020 | $ | $ | ||||||||||
Options vested and expected to vest - April 3, 2020 | ||||||||||||
Options exercisable - April 3, 2020 | $ | $ |
Number of RSAs, RSUs and PRSUs (in thousands) | Weighted- Average Grate Date Fair Value | Aggregate Intrinsic Value (in thousands) | ||||||||
Balance at September 27, 2019 | $ | $ | ||||||||
Granted | ||||||||||
Vested and released | ( | ) | ||||||||
Forfeited, canceled or expired | ( | ) | ||||||||
Balance at April 3, 2020 | $ | $ |
Six Months Ended | |||||||
April 3, 2020 | March 29, 2019 | ||||||
Cash paid for interest | $ | $ | |||||
Cash paid (refunded) for income taxes | $ | $ | ( | ) |
April 3, 2020 | September 27, 2019 | |||||||
United States | $ | $ | ||||||
Asia Pacific (1) | ||||||||
Other Countries (2) | ||||||||
Total | $ | $ |
(1) | Asia Pacific represents Taiwan, Japan, Singapore, India, Thailand, South Korea, Malaysia, the Philippines, Vietnam and China. |
(2) |
Three Months Ended | Six Months Ended | ||||||||
Revenue | April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | |||||
Customer A | % | % | |||||||
Customer B | % | % |
Accounts Receivable | April 3, 2020 | September 27, 2019 | |||
Customer A | % | % | |||
Customer C | % | % |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | engaging early with our lead customers to develop custom and standard products; |
• | leveraging our core strength and leadership position in standard, catalog products that service all of our end applications; |
• | increasing content of our semiconductor solutions in customers’ systems through cross-selling our product lines; |
• | introducing new products using advanced technologies, added features, higher levels of integration and improved performance; and |
• | continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets in particular. |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
Revenue | $ | 126,424 | $ | 128,465 | $ | 245,521 | $ | 279,154 | |||||||
Cost of revenue (1) | 63,054 | 71,135 | 123,947 | 145,199 | |||||||||||
Gross profit | $ | 63,370 | $ | 57,330 | $ | 121,574 | $ | 133,955 | |||||||
Operating expenses: | |||||||||||||||
Research and development (1) | 35,830 | 42,361 | 70,988 | 85,885 | |||||||||||
Selling, general and administrative (1) | 31,994 | 41,998 | 64,334 | 84,518 | |||||||||||
Restructuring charges (2) | 815 | 3,182 | 2,049 | 8,160 | |||||||||||
Total operating expenses | $ | 68,639 | $ | 87,541 | $ | 137,371 | $ | 178,563 | |||||||
Loss from operations | $ | (5,269 | ) | $ | (30,211 | ) | $ | (15,797 | ) | $ | (44,608 | ) | |||
Other expense: | |||||||||||||||
Warrant liability gain (expense) (3) | 8,647 | (1,607 | ) | 4,560 | 3,862 | ||||||||||
Interest expense | (7,672 | ) | (9,402 | ) | (16,293 | ) | (18,175 | ) | |||||||
Other expense (4) | (4,352 | ) | (4,440 | ) | (8,092 | ) | (9,010 | ) | |||||||
Total other expense net | $ | (3,377 | ) | $ | (15,449 | ) | $ | (19,825 | ) | $ | (23,323 | ) | |||
Loss before income taxes | (8,646 | ) | (45,660 | ) | (35,622 | ) | (67,931 | ) | |||||||
Income tax expense | 1,580 | 544 | 2,966 | 1,669 | |||||||||||
Net loss | $ | (10,226 | ) | $ | (46,204 | ) | $ | (38,588 | ) | $ | (69,600 | ) |
(1) | Includes (a) Amortization expense related to intangible assets arising from acquisitions and (b) Share-based compensation expense included in our condensed consolidated statements of operations as set forth below (in thousands): |
Three Months Ended | Six Months Ended | ||||||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||
(a) Intangible amortization expense: | |||||||||||||||
Cost of revenue | $ | 4,347 | $ | 7,883 | $ | 8,767 | $ | 15,935 | |||||||
Selling, general and administrative | 8,072 | 11,873 | 16,726 | 24,392 | |||||||||||
(b) Share-based compensation expense: | |||||||||||||||
Cost of revenue | $ | 995 | $ | 841 | $ | 1,957 | $ | 1,514 | |||||||
Research and development | 4,111 | 1,200 | 7,018 | 4,022 | |||||||||||
Selling, general and administrative | 5,170 | 6,035 | 9,451 | 11,813 |
Three Months Ended | Six Months Ended | ||||||||||
April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Cost of revenue | 49.9 | 55.4 | 50.5 | 52.0 | |||||||
Gross profit | 50.1 | 44.6 | 49.5 | 48.0 | |||||||
Operating expenses: | |||||||||||
Research and development | 28.3 | 33.0 | 28.9 | 30.8 | |||||||
Selling, general and administrative | 25.3 | 32.7 | 26.2 | 30.3 | |||||||
Restructuring charges | 0.6 | 2.5 | 0.8 | 2.9 | |||||||
Total operating expenses | 54.3 | 68.1 | 56.0 | 64.0 | |||||||
Loss from operations | (4.2 | ) | (23.5 | ) | (6.4 | ) | (16.0 | ) | |||
Other expense: | |||||||||||
Warrant liability gain (expense) | 6.8 | (1.3 | ) | 1.9 | 1.4 | ||||||
Interest expense | (6.1 | ) | (7.3 | ) | (6.6 | ) | (6.5 | ) | |||
Other expense, net | (3.4 | ) | (3.5 | ) | (3.3 | ) | (3.2 | ) | |||
Total other expense net | (2.7 | ) | (12.0 | ) | (8.1 | ) | (8.4 | ) | |||
Loss before income taxes | (6.8 | ) | (35.5 | ) | (14.5 | ) | (24.3 | ) | |||
Income tax expense | 1.2 | 0.4 | 1.2 | 0.6 | |||||||
Net loss | (8.1 | )% | (36.0 | )% | (15.7 | )% | (24.9 | )% |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
April 3, 2020 | March 29, 2019 | % Change | April 3, 2020 | March 29, 2019 | % Change | ||||||||||||||||
Telecom | $ | 51,648 | $ | 47,337 | 9.1 | % | $ | 97,249 | $ | 97,496 | (0.3 | )% | |||||||||
Industrial & Defense | 48,069 | 50,471 | (4.8 | )% | 98,552 | 107,754 | (8.5 | )% | |||||||||||||
Data Center | 26,707 | 30,657 | (12.9 | )% | 49,720 | 73,904 | (32.7 | )% | |||||||||||||
Total | $ | 126,424 | $ | 128,465 | (1.6 | )% | $ | 245,521 | $ | 279,154 | (12.0 | )% | |||||||||
Telecom | 40.9 | % | 36.8 | % | 39.6 | % | 34.9 | % | |||||||||||||
Industrial & Defense | 38.0 | % | 39.3 | % | 40.1 | % | 38.6 | % | |||||||||||||
Data Center | 21.1 | % | 23.9 | % | 20.3 | % | 26.5 | % | |||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Six Months Ended | ||||||||
April 3, 2020 | March 29, 2019 | |||||||
Cash and cash equivalents, beginning of period | $ | 75,519 | $ | 94,676 | ||||
Net cash provided by operating activities | 62,938 | 26,838 | ||||||
Net cash used in investing activities | (9,048 | ) | (23,479 | ) | ||||
Net cash used in financing activities | (8,210 | ) | (5,547 | ) | ||||
Foreign currency effect on cash | (464 | ) | 189 | |||||
Cash and cash equivalents, end of period | $ | 120,735 | $ | 92,677 |
Period | Total Number of Shares (or Units) Purchased (1) | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||
January 4, 2020-January 31, 2020 | — | $ | — | — | — | |||||||
February 1, 2020-February 28, 2020 | 197,625 | 29.63 | — | — | ||||||||
February 29, 2020-April 3, 2020 | — | — | — | — | ||||||||
Total | 197,625 | $ | 29.63 | — | — |
(1) | We employ “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees, pursuant to which, we withheld from employees the shares noted in the table above to cover tax withholding related to the vesting of their awards. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld. |
Exhibit Number | Description |
3.1 | |
3.2 | |
31.1 | |
31.2 | |
32.1 | |
101 | The following material from the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended April 3, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements and (vii) document and entity information, tagged as blocks of text and including detailed tags. |
104 | The cover page for the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended April 3, 2020, formatted in Inline XBRL and included as Exhibit 101 |
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. | ||
Dated: April 30, 2020 | By: | /s/ Stephen G. Daly |
Stephen G. Daly | ||
President and Chief Executive Officer (Principal Executive Officer) | ||
Dated: April 30, 2020 | By: | /s/ John F. Kober |
John F. Kober | ||
Senior Vice President and Chief Financial Officer (Principal Accounting and Principal Financial Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | April 30, 2020 |
/s/ Stephen G. Daly | |
Stephen G. Daly | |
President and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | April 30, 2020 |
/s/ John F. Kober | |
John F. Kober | |
SVP and Chief Financial Officer | |
(Principal Financial Officer) |
Date: | April 30, 2020 |
By: | /s/ Stephen G. Daly |
Stephen G. Daly | |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
By: | /s/ John F. Kober |
John F. Kober | |
SVP and Chief Financial Officer | |
(Principal Financial Officer) |
Geographic and Significant Customer Information - Summary of Different Geographic Regions (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Sep. 27, 2019 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets by Geographic Region | $ 125,765 | $ 132,647 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets by Geographic Region | 107,892 | 116,037 |
Asia Pacific | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets by Geographic Region | 7,946 | 8,917 |
Other Countries | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets by Geographic Region | $ 9,927 | $ 7,693 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Investments, Owned, Federal Income Tax Note [Line Items] | ||||
Effective Income Tax Rate Reconciliation, Percent | (18.30%) | (1.20%) | (8.30%) | (2.50%) |
Income tax expense | $ 1,580 | $ 544 | $ 2,966 | $ 1,669 |
Unrecognized tax benefit | 300 | $ 300 | ||
Effective tax rate | 21.00% | |||
Deferred tax assets | 39,800 | $ 39,800 | ||
Net Operating Loss Carryforward | ||||
Investments, Owned, Federal Income Tax Note [Line Items] | ||||
Increase to deferred tax valuation allowance | $ 1,400 |
Related-Party Transactions (Details) $ in Millions |
6 Months Ended |
---|---|
Apr. 03, 2020
USD ($)
| |
Director | |
Related Party Transaction [Line Items] | |
Revenue from related parties | $ 0.2 |
Debt - Schedule of Remained Outstanding on Term Loans (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Sep. 27, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Unamortized deferred financing costs | $ (6,600) | |
Current portion | 6,885 | $ 6,885 |
Long-term, less current portion | 653,722 | $ 655,272 |
Term Loans | ||
Debt Instrument [Line Items] | ||
Principal balance | 669,529 | |
Unamortized discount | (2,809) | |
Unamortized deferred financing costs | (6,113) | |
Total term loans | 660,607 | |
Current portion | 6,885 | |
Long-term, less current portion | $ 653,722 |
Leases Weighted-average Lease Term and Discount Rate (Details) |
Apr. 03, 2020 |
---|---|
Weighted Average Remaining Lease Term [Abstract] | |
Operating leases | 6 years 8 months 8 days |
Finance leases | 17 years 2 months 1 day |
Weighted-average discount rate: | |
Operating leases | 6.36% |
Finance leases | 6.72% |
Restructurings - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs | The following is a summary of the restructuring charges incurred under the plans noted below (in thousands):
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Schedule of Restructuring Reserve by Type of Cost |
The following is a rollforward of the accrued restructuring liabilities for the six months ended April 3, 2020 (in thousands):
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Revenue (Notes) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Text Block] | . REVENUE Disaggregation of Revenue We disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following tables present our revenue disaggregated by markets and geography (in thousands):
Contract Balances We record contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advance consideration received from customers for contracts prior to the transfer of control to the customer, and therefore revenue is recognized upon delivery of products and services. The following table presents the changes in contract liabilities during the six months ended April 3, 2020 (in thousands):
As of April 3, 2020 and September 27, 2019, approximately $3.5 million and $8.5 million of our contract liabilities, respectively, were recorded as other long-term liabilities on our balance sheet with the remainder recorded as deferred revenue. The decrease in contract liabilities during the six months ended April 3, 2020, as shown in the table above, was primarily from the recognition of revenue deferred for funds received prior to when certain of our customers obtain control of the product or services. During the three and six months ended April 3, 2020, we recognized net sales of $0.1 million and $0.2 million, respectively, that were included in the contract liabilities balance at the beginning of the period.
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Apr. 03, 2020 | |||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments [Table Text Block] | All principal amounts outstanding and interest rate information as of April 3, 2020, for the Credit Agreement were as follows (in thousands, except rate data):
|
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Schedule of Remained Outstanding on Term Loans | As of April 3, 2020, the following remained outstanding on the Term Loans (in thousands):
|
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Schedule of Minimum Principal Payments under Term Loans | As of April 3, 2020, the minimum principal payments under the Term Loans in future fiscal years were as follows (in thousands):
|
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (10,226) | $ (46,204) | $ (38,588) | $ (69,600) |
Unrealized (loss) gain on short-term investments, net of tax | (1,376) | 606 | (1,297) | 350 |
Foreign currency translation (loss) gain, net of tax | (687) | 351 | (935) | 1,260 |
Other comprehensive (loss) income, net of tax | (2,063) | 957 | (2,232) | 1,610 |
Total comprehensive loss | $ (12,289) | $ (45,247) | $ (40,820) | $ (67,990) |
Inventories |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 03, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES Inventories consist of the following (in thousands):
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Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | INTANGIBLE ASSETS Amortization expense related to intangible assets is as follows (in thousands):
Intangible assets consist of the following (in thousands):
A summary of the activity in gross intangible assets and goodwill is as follows (in thousands):
As of April 3, 2020, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
Accumulated amortization for acquired technology and customer relationships were $143.4 million and $129.6 million, respectively, as of April 3, 2020, and $134.8 million and $112.9 million, respectively, as of September 27, 2019.
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Restructurings |
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Restructurings | RESTRUCTURINGS We have periodically implemented restructuring actions in connection with broader plans to reduce staffing, reduce our internal manufacturing footprint and generally reduce operating costs. The restructuring expenses are primarily comprised of direct and incremental costs related to headcount reductions including severance and outplacement fees for the terminated employees, as well as facility closure costs. The following is a summary of the restructuring charges incurred under the plans noted below (in thousands):
The following is a rollforward of the accrued restructuring liabilities for the six months ended April 3, 2020 (in thousands):
(1) Primarily includes severance charges associated with the reduction of our workforce in certain facilities. (2) Primarily includes activities associated with the closure of certain facilities, including any associated asset impairments and contract termination costs. Ithaca Plan During the fiscal quarter ended December 28, 2018, we commenced a plan to exit certain production and product lines, primarily related to certain production facilities located in Ithaca, New York (the “Ithaca Plan”). We incurred restructuring charges for the Ithaca Plan of $0.4 million in the three months ended March 29, 2019 including $0.2 million of employee-related costs and $0.2 million of facility-related costs, and $5.4 million in the six months ended March 29, 2019, including $1.4 million of employee-related costs and $4.0 million of facility-related costs. This action was completed in fiscal year 2019 and no further costs will be incurred. The remaining charges were paid during the three months ended January 3, 2020. Details of the Ithaca Plan activities during the six months ended April 3, 2020 are as follows (in thousands):
Design Facilities Plan During the fiscal quarter ended March 29, 2019, we committed to a plan to exit certain design facilities and activities (the “Design Facilities Plan”). We incurred restructuring charges of $2.8 million in the three months ended March 29, 2019, including $0.3 million of employee-related costs and $2.5 million of facility-related costs. This action was completed in fiscal year 2019 and no further costs will be incurred. The remaining charges are expected to be paid during fiscal year 2020. Details of the Design Facilities Plan activities during the six months ended April 3, 2020 are as follows (in thousands):
2019 Plan During the fiscal quarter ended June 28, 2019, we committed to a plan to strategically realign, streamline and improve certain of our business and operations, including reducing our workforce by approximately 250 employees and exiting six development facilities in France, Japan, the Netherlands, Florida, Massachusetts, and Rhode Island; additionally, we made the decision to no longer invest in the design and development of optical modules and subsystems for Data Center applications (the “2019 Plan”). We incurred restructuring charges of $0.8 million in the three months ended April 3, 2020 under the 2019 Plan, including $0.4 million of employee-related costs and $0.4 million of other costs, and $2.1 million in the six months ended April 3, 2020, including $1.5 million of employee-related costs and $0.6 million of other costs. We expect to incur restructuring costs of approximately $0.1 million to $0.2 million through fiscal year 2020 as we complete this restructuring action. Details of the 2019 Plan activities during the six months ended April 3, 2020 are as follows (in thousands):
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Supplemental Cash Flow Information |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Cash Flow Information | SUPPLEMENTAL CASH FLOW INFORMATION As of April 3, 2020 and March 29, 2019, we had $0.6 million and $2.7 million, respectively, in unpaid amounts related to purchases of property and equipment included in accounts payable and accrued liabilities during each period. These amounts have been excluded from the payments for purchases of property and equipment in the accompanying condensed consolidated statements of cash flows until paid. During the six months ended March 29, 2019, we capitalized $1.5 million of net construction costs, of which $0.3 million was accounted for as a non-cash transaction as the costs were paid by the developer. The following is supplemental cash flow information regarding non-cash investing and financing activities (in thousands):
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Revenue (Tables) |
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Disaggregation of Revenue | The following tables present our revenue disaggregated by markets and geography (in thousands):
(2) Outside the United States, no country or region represented greater than 10% of our total revenue as of the dates presented, other than China and the Asia Pacific region as presented above.
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Contract with Customer, Asset and Liability | The following table presents the changes in contract liabilities during the six months ended April 3, 2020 (in thousands):
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Leases FutureMinimumLeasePayments under Topic 840 (Details) $ in Thousands |
Sep. 27, 2019
USD ($)
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Operating Leases | |
2020 | $ 9,987 |
2021 | 9,233 |
2022 | 7,447 |
2023 | 6,061 |
2024 | 5,564 |
Thereafter | 16,437 |
Total future minimum lease payments | 54,729 |
Capital Leases | |
2020 | 3,299 |
2021 | 3,343 |
2022 | 2,884 |
2023 | 2,816 |
2024 | 2,853 |
Thereafter | 39,927 |
Total future minimum lease payments | 55,122 |
Less amount representing interest | (26,241) |
Present value of net minimum capital lease payments | $ 28,881 |
Intangible Assets - Summary of Estimated Amortization of Intangible Assets (Details) $ in Thousands |
Apr. 03, 2020
USD ($)
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Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 Remaining | $ 24,837 |
2019 | 46,213 |
2020 | 33,433 |
2021 | 26,048 |
2022 | 15,410 |
Thereafter | 6,394 |
Total | $ 152,335 |
Investments - Summary of Available for Sale Investments (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Sep. 27, 2019 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 102,142 | $ 101,224 |
Gross Unrealized Holding Gains | 28 | 113 |
Gross Unrealized Holding Losses | (1,323) | (111) |
Aggregate Fair Value | 100,847 | 101,226 |
Corporate bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 29,778 | 29,578 |
Gross Unrealized Holding Gains | 0 | 112 |
Gross Unrealized Holding Losses | (1,291) | (93) |
Aggregate Fair Value | 28,487 | 29,597 |
Commercial paper | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 72,364 | 71,646 |
Gross Unrealized Holding Gains | 28 | 1 |
Gross Unrealized Holding Losses | (32) | (18) |
Aggregate Fair Value | $ 72,360 | $ 71,629 |
Prepaids and Other Current Assets Prepaids and Other Current Assets - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
May 10, 2018 |
Apr. 03, 2020 |
Mar. 29, 2019 |
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Discontinued Operations and Disposal Groups [Abstract] | |||
Sale of businesses and assets | $ 5,000 | $ 363 | $ 0 |
Other Receivables, Net, Current | 13,100 | ||
Disposal Group, Including Discontinued Operation, Other Assets, Current | 600 | ||
Disposal Group, Including Discontinued Operation, Consideration | 17,200 | ||
Disposal Group, Including Discontinued Operation, Transition Services Reimbursement To Be Received | 1,500 | ||
Allowance for Doubtful Other Receivables, Current | 1,200 | ||
Disposal Group, Including Discontinued Operation, Additional Consideration Expected To Be Received | $ 11,000 |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Apr. 03, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation—The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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Fiscal Period, Policy [Policy Text Block] | We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal year 2020 includes 53 weeks and fiscal year 2019 includes 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in such fiscal years in the first quarter. Our first fiscal quarter ended January 3, 2020 included 14 weeks.
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Use of Estimates | Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in the 2019 Annual Report on Form 10-K. Pronouncements Adopted in Fiscal Year 2020 On the first day of our fiscal year 2020, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”), which requires lease arrangements be presented on the lessee’s balance sheet by recording a right-of-use (“ROU”) asset and a lease liability equal to the present value of related future minimum lease payments. We adopted the new lease guidance using the modified retrospective approach and the transition method available in accordance with ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides the option to use the effective date as the date of initial application of the guidance. As a result, the comparative information for prior periods has not been adjusted and continues to be reported in accordance with the accounting standards in effect for those periods under the previously applicable guidance. We elected the “practical expedients package of three” permitted under the transition guidance within ASC 842, which permitted us to carry forward our historical assessments of whether contracts contain leases, lease classification, and initial direct costs, for leases in existence prior to September 28, 2019. We evaluated our identified leases and applied the new lease guidance as discussed in Note 8 - Leases. At the effective date, the adoption of ASC 842 resulted in an increase to our total assets of approximately $37.1 million, an increase to total liabilities of approximately $39.0 million and a decrease to retained earnings of approximately $1.9 million primarily due to derecognition of financing obligations and associated assets established under ASC 840, Leases. We have operating leases for certain facilities as well as manufacturing and office equipment. Based on the present value of lease payments for the remaining lease term of our existing leases, we recognized $37.7 million and $43.6 million of both operating ROU assets and operating lease liabilities, respectively, on our condensed consolidated balance sheet upon adoption of ASC 842 on September 28, 2019. The difference between the ROU asset and liability represents deferred rent and lease incentives of approximately $5.9 million, recorded as a reduction to our gross ROU assets. We have finance leases for our corporate headquarters, including our fabrication facility, and to a lesser extent, various manufacturing equipment. Upon the adoption of ASC 842 on September 28, 2019, we derecognized the previous financed assets, recorded financing obligations for our corporate headquarters, and recorded finance lease assets and financing obligations for various manufacturing equipment. On September 28, 2019 we recognized a finance lease ROU asset and finance lease liability of $35.7 million and $31.8 million, respectively, on our condensed consolidated balance sheet. The difference between the ROU asset and liability represents net prepaid rent for our corporate headquarters, which is recorded as part of the finance lease ROU asset and is being amortized on a straight-line basis over the remaining lease term. The adoption of the new lease guidance did not have a material impact to the condensed consolidated statement of operations or cash flows, or earnings per share for the three and six months ended April 3, 2020. Pronouncements for Adoption in Subsequent Periods In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU introduces a new accounting model known as Credit Expected Credit Losses (“CECL”), which requires earlier recognition of credit losses. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired, replacing the current incurred loss methodology that delays recognition of credit losses until a probable loss has been incurred. There are other provisions within the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. We plan to adopt this standard on the first day of our fiscal year 2021, October 3, 2020. We are currently evaluating the impact of this standard, although we do not believe the adoption will have a material impact on our consolidated financial statements.
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Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
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Earnings Per Share [Abstract] | ||||
Fair Value Adjustment of Warrants | $ (8,647) | $ 1,607 | $ (4,560) | $ (3,862) |
Numerator: | ||||
Net loss | (10,226) | (46,204) | (38,588) | (69,600) |
Warrant liability gain | (8,647) | 0 | (4,560) | (3,862) |
Net loss attributable to common stockholders | $ (18,873) | $ (46,204) | $ (43,148) | $ (73,462) |
Denominator: | ||||
Weighted average common shares outstanding-basic | 66,522,000 | 65,531,000 | 66,375,000 | 65,404,000 |
Dilutive effect of options and warrants (in shares) | 562,567 | 0 | 545,578 | 206,104 |
Weighted average common shares outstanding-diluted | 67,085,000 | 65,531,000 | 66,921,000 | 65,610,000 |
Loss per share-basic: | ||||
Loss per share - basic | $ (0.15) | $ (0.71) | $ (0.58) | $ (1.06) |
Loss per share-diluted: | ||||
Loss per share - diluted | $ (0.28) | $ (0.71) | $ (0.64) | $ (1.12) |
Number of antidilutive shares of common stock excluded from the calculation (in shares) | 1,009,830 | 425,202 | 886,671 | 154,377 |
Leases Lease Maturity Under Topic 842 (Details) $ in Thousands |
Apr. 03, 2020
USD ($)
|
---|---|
Operating Leases | |
2020 | $ 5,028 |
2021 | 9,183 |
2022 | 7,427 |
2023 | 5,989 |
2024 | 5,571 |
2025 | 3,636 |
Thereafter | 12,276 |
Total lease payments | 49,110 |
Less: interest | 9,445 |
Present value of lease liabilities | 39,665 |
Finance Leases | |
2020 | 1,923 |
2021 | 3,394 |
2022 | 2,836 |
2023 | 2,820 |
2024 | 2,856 |
2025 | 2,783 |
Thereafter | 37,150 |
Total lease payments | 53,762 |
Less: interest | 22,469 |
Present value of lease liabilities | $ 31,293 |
Fair Value - Changes in Assets and Liabilities with Inputs Classified within Level 3 of Fair Value (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
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Contingent consideration | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 585 | |
Net Realized/Unrealized Losses Included in Earnings | 65 | |
Purchases and Issuances | 0 | |
Sales and Settlements | (650) | |
Balance at end of period | 0 | |
Common stock warrant liability | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 12,364 | 13,129 |
Net Realized/Unrealized Losses Included in Earnings | (4,560) | (3,861) |
Purchases and Issuances | 0 | 0 |
Sales and Settlements | 0 | 0 |
Balance at end of period | $ 7,804 | $ 9,268 |
Investments - Summary of Contractual Maturities of Investments (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Sep. 27, 2019 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Less than 1 year | $ 77,862 | $ 75,233 |
Over 1 year | 22,985 | 25,993 |
Total short-term investments | $ 100,847 | $ 101,226 |
Supplemental Cash Flow Information - Additional Information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Income (Loss) from Equity Method Investments | $ (9,066) | $ (8,971) |
Consideration on sale of business | 17,200 | |
Unpaid amounts related to purchase of assets | $ 600 | 2,700 |
Capitalized construction costs for finance leases | 1,500 | |
Developer Funded [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Capitalized construction costs for finance leases | $ 300 |
Share-Based Compensation - Effects of Stock-Based Compensation Expense Related to Stock-Based Awards to Employees and Non-Employees (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
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Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total share-based compensation expense | $ 10,276 | $ 8,076 | $ 18,426 | $ 17,349 |
Cost of Revenue | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total share-based compensation expense | 995 | 841 | 1,957 | 1,514 |
Research and Development | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total share-based compensation expense | 4,111 | 1,200 | 7,018 | 4,022 |
Selling, General and Administrative | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total share-based compensation expense | $ 5,170 | $ 6,035 | $ 9,451 | $ 11,813 |
Geographic and Significant Customer Information - Summary of Customer Concentrations as Percentage of Revenue and Accounts Receivable (Details) - Customer Concentration Risk [Member] |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
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Revenue | ||||
Revenue from External Customer [Line Items] | ||||
Concentration risk, percentage | 58.00% | 55.00% | 59.00% | 56.00% |
Revenue | Customer A | ||||
Revenue from External Customer [Line Items] | ||||
Concentration risk, percentage | 15.00% | 14.00% | 15.00% | 15.00% |
Revenue | Customer B | ||||
Revenue from External Customer [Line Items] | ||||
Concentration risk, percentage | 11.00% | 5.00% | 10.00% | 6.00% |
Accounts Receivable [Member] | Customer A | ||||
Revenue from External Customer [Line Items] | ||||
Concentration risk, percentage | 23.00% | 24.00% | ||
Accounts Receivable [Member] | Customer C [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Concentration risk, percentage | 13.00% | 10.00% |
Debt Debt - Schedule of Long-term Debt Instruments (Details) - Term Loans $ in Thousands |
6 Months Ended |
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Apr. 03, 2020
USD ($)
| |
Debt Instrument [Line Items] | |
Principal balance | $ 669,529 |
Effective interest rate | 3.24% |
LIBOR Rate | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 2.25% |
Margin | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.99% |
Leases Assets and Liabilities of Lessee (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Sep. 27, 2019 |
---|---|---|
Assets: | ||
Operating lease ROU assets | $ 33,807 | |
Finance lease assets | 34,667 | |
Capital Leased Assets, Gross | $ 40,442 | |
Total lease assets | 68,474 | 40,442 |
Current: | ||
Operating lease liabilities | 7,613 | |
Finance lease liabilities | 1,596 | 1,084 |
Long-term: | ||
Operating lease liabilities | 32,052 | |
Finance lease liabilities | 29,697 | 29,506 |
Total lease liabilities | $ 70,958 | $ 30,590 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Apr. 03, 2020 |
Mar. 29, 2019 |
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Income Statement [Abstract] | ||||
Revenue | $ 126,424 | $ 128,465 | $ 245,521 | $ 279,154 |
Cost of revenue | 63,054 | 71,135 | 123,947 | 145,199 |
Gross profit | 63,370 | 57,330 | 121,574 | 133,955 |
Operating expenses: | ||||
Research and development | 35,830 | 42,361 | 70,988 | 85,885 |
Selling, general and administrative | 31,994 | 41,998 | 64,334 | 84,518 |
Restructuring charges | 815 | 3,182 | 2,049 | 8,160 |
Total operating expenses | 68,639 | 87,541 | 137,371 | 178,563 |
Loss from operations | (5,269) | (30,211) | (15,797) | (44,608) |
Other expense: | ||||
Warrant liability gain (expense) | 8,647 | (1,607) | 4,560 | 3,862 |
Interest expense, net | (7,672) | (9,402) | (16,293) | (18,175) |
Other expense, net | (4,352) | (4,440) | (8,092) | (9,010) |
Total other expense net | (3,377) | (15,449) | (19,825) | (23,323) |
Loss before income taxes | (8,646) | (45,660) | (35,622) | (67,931) |
Income tax expense | 1,580 | 544 | 2,966 | 1,669 |
Net loss | $ (10,226) | $ (46,204) | $ (38,588) | $ (69,600) |
Basic loss per share: | ||||
Loss per share - basic | $ (0.15) | $ (0.71) | $ (0.58) | $ (1.06) |
Diluted loss per share: | ||||
Loss per share - diluted | $ (0.28) | $ (0.71) | $ (0.64) | $ (1.12) |
Shares used: | ||||
Basic (in shares) | 66,522 | 65,531 | 66,375 | 65,404 |
Diluted (in shares) | 67,085 | 65,531 | 66,921 | 65,610 |
Share-Based Compensation (Tables) |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of Stock-Based Compensation Expense Related to Stock-Based Awards to Employees and Nonemployees | The following table shows a summary of share-based compensation expense included in the condensed consolidated statements of operations (in thousands):
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Share-based Payment Arrangement, Option, Activity [Table Text Block] | A summary of stock option activity for the six months ended April 3, 2020 is as follows (in thousands, except per share amounts and contractual term):
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Summary of Restricted Stock, Restricted Stock Unit and Performance-based Restricted Stock Unit Activity | A summary of RSAs, RSUs and PRSUs activity for the six months ended April 3, 2020 is as follows:
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Summary of Significant Accounting Policies |
6 Months Ended |
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Apr. 03, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading. The condensed consolidated balance sheet as of September 27, 2019 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our September 27, 2019 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended September 27, 2019 filed with the SEC on November 26, 2019 (the “2019 Annual Report on Form 10-K”). We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our 2019 Annual Report on Form 10-K. Principles of Consolidation—The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal year 2020 includes 53 weeks and fiscal year 2019 includes 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in such fiscal years in the first quarter. Our first fiscal quarter ended January 3, 2020 included 14 weeks. Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions. Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in the 2019 Annual Report on Form 10-K. Pronouncements Adopted in Fiscal Year 2020 On the first day of our fiscal year 2020, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”), which requires lease arrangements be presented on the lessee’s balance sheet by recording a right-of-use (“ROU”) asset and a lease liability equal to the present value of related future minimum lease payments. We adopted the new lease guidance using the modified retrospective approach and the transition method available in accordance with ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides the option to use the effective date as the date of initial application of the guidance. As a result, the comparative information for prior periods has not been adjusted and continues to be reported in accordance with the accounting standards in effect for those periods under the previously applicable guidance. We elected the “practical expedients package of three” permitted under the transition guidance within ASC 842, which permitted us to carry forward our historical assessments of whether contracts contain leases, lease classification, and initial direct costs, for leases in existence prior to September 28, 2019. We evaluated our identified leases and applied the new lease guidance as discussed in Note 8 - Leases. At the effective date, the adoption of ASC 842 resulted in an increase to our total assets of approximately $37.1 million, an increase to total liabilities of approximately $39.0 million and a decrease to retained earnings of approximately $1.9 million primarily due to derecognition of financing obligations and associated assets established under ASC 840, Leases. We have operating leases for certain facilities as well as manufacturing and office equipment. Based on the present value of lease payments for the remaining lease term of our existing leases, we recognized $37.7 million and $43.6 million of both operating ROU assets and operating lease liabilities, respectively, on our condensed consolidated balance sheet upon adoption of ASC 842 on September 28, 2019. The difference between the ROU asset and liability represents deferred rent and lease incentives of approximately $5.9 million, recorded as a reduction to our gross ROU assets. We have finance leases for our corporate headquarters, including our fabrication facility, and to a lesser extent, various manufacturing equipment. Upon the adoption of ASC 842 on September 28, 2019, we derecognized the previous financed assets, recorded financing obligations for our corporate headquarters, and recorded finance lease assets and financing obligations for various manufacturing equipment. On September 28, 2019 we recognized a finance lease ROU asset and finance lease liability of $35.7 million and $31.8 million, respectively, on our condensed consolidated balance sheet. The difference between the ROU asset and liability represents net prepaid rent for our corporate headquarters, which is recorded as part of the finance lease ROU asset and is being amortized on a straight-line basis over the remaining lease term. The adoption of the new lease guidance did not have a material impact to the condensed consolidated statement of operations or cash flows, or earnings per share for the three and six months ended April 3, 2020. Pronouncements for Adoption in Subsequent Periods In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU introduces a new accounting model known as Credit Expected Credit Losses (“CECL”), which requires earlier recognition of credit losses. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired, replacing the current incurred loss methodology that delays recognition of credit losses until a probable loss has been incurred. There are other provisions within the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. We plan to adopt this standard on the first day of our fiscal year 2021, October 3, 2020. We are currently evaluating the impact of this standard, although we do not believe the adoption will have a material impact on our consolidated financial statements.
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities of Lessee | Included in our condensed consolidated balance sheets were the following amounts related to operating and finance lease assets and liabilities (in thousands):
The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases as of April 3, 2020 were as follows:
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Lease, Cost | As of April 3, 2020, maturities of lease liabilities by fiscal year were as follows (in thousands):
The components of lease expense were as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities were as follows (in thousands):
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Schedule of Future Minimum Lease Payments for Operating and Capital Leases | As of September 27, 2019, future minimum lease payments under our operating and capital leases were as follows as determined in accordance with the previous guidance under ASC 840 and as previously disclosed in our 2019 Annual Report on Form 10-K (in thousands):
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