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MARVELL TECHNOLOGY GROUP LTD - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge)
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which are subject to the "safe harbor" created by
those sections. These statements involve known and unknown risks, uncertainties
and other factors, which may cause our actual results to differ materially from
those implied by the forward-looking statements. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," "can," and
similar expressions identify such forward-looking statements. We make a number
of forward-looking statements that relate to future periods and include
statements relating to our anticipation that the rate of new orders and
shipments may vary significantly from quarter to quarter; our expectations
regarding industry trends; our expectations regarding the impact of the flooding
in Thailand; our expectations regarding our inventory levels; our expectations
regarding the amount of our future sales in Asia; our expectations regarding
competition; our expectations relating to the protection of our intellectual
property; our expectations regarding the amount of customer concentration in the
future; our plans and expectations regarding our auction rate securities; our
expectations regarding acquisitions, investments, strategic alliances and joint
ventures; our expectations regarding net revenue, cost of goods sold as a
percentage of revenue and operating expenses for the fourth quarter ending
February 2, 2013 compared with the third quarter ended October 27, 2012; our
expectations regarding the growth of solid state drive revenue; our expectations
regarding the impact of legal proceedings and claims; our ability to meet our
capital needs for at least the next 12 months; our ability to attract and retain
highly skilled personnel; our expectations regarding future growth
opportunities; our plan regarding forward exchange contracts and the effect of
foreign exchange rates; our expectations regarding unrecognized tax benefits;
the effect of recent accounting pronouncements and changes in taxation rules;
our expectation regarding the effectiveness of our hedges of foreign currency
exposures; our expectations that quarterly operating results will fluctuate from
quarter to quarter; our expectations regarding the current economic environment;
our expectations regarding arrangements with suppliers; our expectations
regarding our ability to develop and introduce new products and achieve market
acceptance of our products; our expectations regarding pricing; our expectations
regarding demand for our products and the impact of seasonality on demand; our
expectations regarding defects; our expectations regarding the implementation
and improvement of operational and financial systems, as well as the
implementation of additional procedures and other internal management systems;
our expectations regarding gross margin and the events that may cause gross
margin to fluctuate; our expectations to transition our semiconductor products
to increasingly smaller line width geometries; our expectations regarding the
portion of our operations and sales outside of the United States; our
expectations regarding the adequacy of our internal control over financial
reporting; our expectations regarding future impairment review of our goodwill
and intangible assets; and the anticipated features and benefits of our
technology solutions. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements. Factors that could cause actual
results to differ materially from those predicted, include but are not limited
to, the impact of international conflict and continued economic volatility in
either domestic or foreign markets; our dependence upon the hard disk drive and
mobile and wireless markets, which are highly cyclical and intensely
competitive; our ability to successfully compete in the markets in which we
serve; the outcome of pending or future litigation and legal proceedings; our
ability to scale our operations in response to changes in demand for existing or
new products and services; our maintenance of an effective system of internal
controls; our dependence on a small number of customers; our ability and our
customers' ability to develop new and enhanced products; our success in
integrating businesses we acquire and the impact such acquisitions may have on
our operating results; our ability to estimate customer demand and future sales
accurately; the success of our strategic relationships; our reliance on
independent foundries and subcontractors for the manufacture, assembly and
testing of our products; our ability to manage future growth; the development
and evolution of markets for our integrated circuits; our ability to protect our
intellectual property; the impact of any change in our application of the United
States federal income tax laws and the loss of any beneficial tax treatment that
we currently enjoy; the impact of changes in international financial and
regulatory conditions and the impact of lengthy and expensive product sales
cycles. Additional factors which could cause actual results to differ materially
include those set forth in the following discussion, as well as the risks
discussed in Part II, Item 1A, "Risk Factors," and other sections of this
Quarterly Report on Form 10-Q. These forward-looking statements speak only as of
the date hereof. Unless required by law, we undertake no obligation to update
any forward-looking statements.
Overview
We are a leading global semiconductor provider of high performance application
specific standard products. Our core strength of expertise is the development of
complex System-on-a-Chip devices leveraging our extensive portfolio of
technology intellectual property in the areas of analog, mixed-signal, digital
signal processing and embedded ARM-based microprocessor integrated circuits. We
also develop platforms that we define as integrated hardware along with software
that incorporates digital computing technologies designed and configured to
provide an optimized computing solution compared to individual components. Our
broad product portfolio includes devices for data storage, enterprise-class
Ethernet data switching, Ethernet physical-layer transceivers, handheld
cellular, Ethernet-based wireless networking, personal area networking,
Ethernet-based PC connectivity, control plane communications controllers,
video-image processing and power management solutions. Our products serve
diverse applications used in carrier, metropolitan, enterprise and PC-client
data communications and storage systems. Additionally, we serve the consumer
electronics market for the convergence of voice, video and data applications. We
are a fabless integrated circuit company, which means that we rely on
independent, third party contractors to perform manufacturing, assembly and test
functions. This approach allows us to focus on designing, developing and
marketing our products and significantly reduces the amount of capital we need
to invest in manufacturing products.
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A significant number of our products are being incorporated into consumer
electronics products, including gaming devices, which are subject to significant
seasonality and fluctuations in demand. Holiday and back to school buying trends
may at times negatively impact our results in the first and fourth quarters and
positively impact our results in the second and third quarters of our fiscal
years.
A relatively large portion of our sales have historically been made on the basis
of purchase orders rather than long-term agreements. In addition, the sales
cycle for our products is long, which may cause us to experience a delay between
the time we incur expenses and the time revenue is generated from these
expenditures. We anticipate that the rate of new orders may vary significantly
from quarter to quarter. Consequently, if anticipated sales and shipments in any
quarter do not occur when expected, expenses and inventory levels could be
disproportionately high, and our operating results for that quarter and future
quarters may be adversely affected.
In this Quarterly Report on Form 10-Q, we refer to the fiscal year ended
February 2, 2008 as fiscal 2008, the fiscal year ended January 31, 2009 as
fiscal 2009, the fiscal year ended January 30, 2010 as fiscal 2010, the fiscal
year ended January 29, 2011 as fiscal 2011, the fiscal year ended January 28,
2012 as fiscal 2012 and the fiscal year ending February 2, 2013 as fiscal 2013.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") requires management to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. Actual results could differ from these estimates, and such
differences could affect the results of operations reported in future periods.
For a description of our critical accounting policies and estimates, please
refer to the "Critical Accounting Policies and Estimates" section of our
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the year ended
January 28, 2012.
Results of Operations
Our revenue during the third quarter of fiscal 2013 was down by 4% compared to
the prior quarter and 18% compared to the third quarter of fiscal 2012.
Continued slowdown in the global economy during the third quarter resulted in a
weaker PC market than previously anticipated as we experienced lower demand from
our hard disk drive ("HDD") customers. We also experienced lower demand for
wireless connectivity products due to an inventory correction at a major
customer for wireless access points. We continued to see a decline in revenue
for our mobile products as we are in a product transition phase within the
TD-SCDMA market in China. Revenue for our solid state drive ("SSD") products
continued to grow as our solutions get adopted in the market.
Despite the lower revenue levels that we have experienced in recent periods, we
remain confident in our investments and multiple near-term and long-term growth
opportunities such as:
• In the mobile market, we believe we have a very strong roadmap based on
our unified platform. We are encouraged by the early design activities
from our customers who are building phones for both the TD-SCDMA and WCDMA
markets. We believe this unified platform will allow us to effectively
address both the top OEMs and the rapidly growing whitebox market. We
expect customers to begin to bring their products to market early next year. In addition, we are now accelerating our TD and FDD-LTE roadmap and
we expect customers to upgrade to these 4G platform solutions over the
course of the next year to 18 months.
• In wireless connectivity, we have historically focused on providing
integrated 1x1 combo solutions for the mobile market, which demands the
lowest power consumption, and high-performance 4x4 solutions for the
enterprise market, which demands the highest possible throughput. In addition to our continued strong presence in the 1x1 and 4x4 markets, we
are now expanding our footprint by offering integrated 2x2 combo solutions
for the tablet and ultrabook markets.
• In our storage business, despite the overall demand challenges within the
PC market, we gained market share within HDDs as we have seen strong
growth for our 500 gigabyte per platter products. In addition, we have
continued to see strong growth for our SSD products. Although a smaller
portion of our overall storage revenue, SSD revenue have continued to grow
over the past few quarters, and as this market continues to expand and our
customers continue to gain success, we will continue to benefit.
• In the networking market, we have outperformed the market during the past year, growing revenue by introducing products in new growth areas such as
in passive optical network and 10 gigabyte switching, as well as the
programmable network processers introduced following our acquisition of
Xelerated. We believe as networks continue to evolve, we will have even
more opportunities.
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Our financial position is strong and we also remain committed to deliver
shareholder value through our share repurchase and dividend programs.
• Our cash, cash equivalents and short-term investments were $2.0 billion at
October 27, 2012 and generated cash flow from operations of $136 million
during the third quarter of fiscal 2013.
• We paid a dividend of $0.06 per share in the third quarter, and recently announced another dividend of $0.06 per share to be paid during the fourth
quarter of fiscal 2013.
• We repurchased an additional 22.9 million of common shares for $203.0 million in cash during the quarter.
The following table sets forth information derived from our unaudited condensed
consolidated statements of operations expressed as a percentage of net revenue:
Three Months Ended Nine Months Ended
October 27, October 29, October 27, October 29,
2012 2011 2012 2011
Net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses:
Cost of goods sold 48.0 43.4 46.9 42.4
Research and development 33.8 28.0 32.7 28.6
Selling and marketing 4.9 4.3 5.0 4.5
General and administrative 3.1 3.0 3.2 2.9
Amortization and write-off of
acquired intangible assets 1.7 1.2 1.7 1.4
Total operating costs and
expenses 91.5 79.9 89.5 79.8
Operating income 8.5 20.1 10.5 20.2
Interest and other income
(expense), net 0.3 0.9 0.4 0.3
Income before income taxes 8.8 21.0 10.9 20.5
Provision for income taxes 0.0 0.5 0.2 0.3
Net income 8.8 % 20.5 % 10.7 % 20.2 %
Three and Nine Months Ended October 27, 2012 and October 29, 2011
Net Revenue
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Net revenue $ 780,881 $ 950,417 (17.8 ) % $ 2,393,336 $ 2,650,339 (9.7 )%
Net revenue for the three months ended October 27, 2012 declined 17.8% compared
to the three months ended October 29, 2011 primarily due to declines in the
storage end market. The total available market for the HDD market declined
compared to the prior year as the global market for PC's contracted. Slightly
offsetting this decline, our sales of SSD products increased significantly in
the three months ended October 27, 2012 compared to the year-ago period as our
products have begun to gain adoption in the market. Within our mobile and
wireless end markets, net revenue from our leading North American handset
customer declined compared to the year-ago period due to the continued
competitive challenges that they face.
Net revenue for the nine months ended October 27, 2012 compared to the nine
months ended October 29, 2011 declined 9.7%. In addition to the impacts of the
above factors, the nine months ended October 27, 2012 benefited from the ramp of
our TD-SCDMA products during the end of fiscal 2012 and beginning of fiscal
2013.
We currently expect overall net revenue for the three months ending February 2,
2013 to be in the range of $700 million to $740 million.
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Historically, a relatively small number of customers have accounted for a
significant portion of our net revenue. Net revenue attributable to significant
end customers is presented in the following table as a percentage of net
revenue:
Three Months Ended Nine Months Ended
October 27, July 28, April 28, October 27,
Customer 2012 2012 2012 2012
Western Digital 24 % 26 % 23 % 24 %
Toshiba * 10 % 10 % 10 %
Three Months Ended Nine Months Ended
October 29, July 29, April 29, October 29,
Customer 2011 2011 2011 2011
Western Digital 26 % 27 % 25 % 26 %
* Less than 10% of net revenue
In May 2012, Western Digital acquired Hitachi's HDD unit. For compatibility
purposes, we have presented the percentage of net revenue for Western Digital in
the above tables to include the net revenue of the Hitachi HDD unit as if the
acquisition had occurred at the beginning of the earliest period presented. In
addition to the end customers reported above, one distributor accounted for more
than 10% of our net revenue for the three and nine months ended October 27,
2012. For the comparable three and nine months ended October 29, 2011, no single
distributor accounted for more than 10% of our net revenue.
Sales to customers located in Asia represented 92% and 90% of our net revenue
for the three and nine months ended October 27, 2012, respectively, compared to
90% and 87% of our net revenue for the three and nine months ended October 29,
2011, respectively. A large portion of our OEM partners use contract
manufacturing companies in Asia to manufacture their products. These contract
manufacturing companies are generally considered our direct customer. Therefore,
we expect that a significant portion of our net revenue will continue to come
from customers in Asia.
Cost of Goods Sold
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Cost of goods sold $ 374,503 $ 412,100 (9.1 )% $ 1,122,664 $ 1,124,692 (0.2 )%
% of net revenue 48.0 % 43.4 % 46.9 % 42.4 %
Cost of goods sold as a percentage of net revenue increased for the three and
nine months ended October 27, 2012 compared to the three and nine months ended
October 29, 2011. This was primarily due to the shift in the mix of our products
sold to lower margin products as compared to the corresponding periods of fiscal
2012. In addition, average selling price declines outpaced the cost reductions
received from our manufacturing partners. Our cost of goods sold as a percentage
of net revenue may fluctuate in future periods due to, among other things,
changes in the mix of products sold; the timing of production ramps of new
products; increased pricing pressures from our customers and competitors,
particularly in the consumer product markets that we are targeting; charges for
obsolete or potentially excess inventory; changes in the costs charged by our
foundry; assembly and test subcontractors; product warranty costs; changes in
commodity prices such as gold; and the margin profiles of our new product
introductions.
We currently expect cost of goods sold as a percentage of net revenue for the
three months ending February 2, 2013 to be slightly lower compared to the three
months ended October 27, 2012, due to a better mix of higher-margin products.
Share-Based Compensation Expense
Three Months Ended Nine Months Ended
October 27, October 29, October 27, October 29,
2012 2011 2012 2011
(in thousands)
Cost of goods sold $ 1,944 $ 1,940 $ 5,842 $ 5,551
Research and development 22,565 21,905 62,152 63,626
Selling and marketing 3,101 3,402 9,595 9,263
General and administrative 2,764 3,364 13,205 10,006
$ 30,374 $ 30,611 $ 90,794 $ 88,446
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Share-based compensation expense for the three and nine months ended October 27,
2012 included the recovery of previously recognized expense associated with
unvested share-based awards that were cancelled as a result of the resignation
in October 2012 of our chief financial officer. However, we recognized higher
expenses as a result of higher headcount in fiscal 2013, combined with the
impact of an increase in expense related to the employee stock purchase plan.
The offering price of the employee stock purchase plan was reset in June 2012
due to the decline in our stock price. As a result, share-base compensation
expense during the three months ended October 27, 2012 was essentially flat
compared to the three months ended October 29, 2011, while it increased slightly
in the nine months ended October 27, 2012 compared to the nine months ended
October 29, 2011.
Research and Development
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Research and development $ 263,615 $ 266,255 (1.0 )% $ 783,760 $ 758,396 3.3 %
% of net revenue 33.8 % 28.0 % 32.7 % 28.6 %
Research and development expense decreased for the three months ended
October 27, 2012 by $2.6 million, primarily related to lower personnel-related
expenses as compared to the three months ended October 29, 2011. Since
personnel-related expenses in the three months ended October 29, 2011 included
$4.2 million in assessments related to payroll taxes in certain jurisdictions,
excluding those amounts, personnel-related expenses in the three months ended
October 27, 2012 reflect an increase due to higher costs associated with
increased headcount in fiscal 2013 over fiscal 2012.
Research and development expense increased for the nine months ended October 27,
2012 by $25.4 million, compared to the nine months ended October 29, 2011,
primarily attributable to increased headcount to support new designs.
We currently expect that research and development expense for the three months
ending February 2, 2013 will be higher than the three months ended October 27,
2012. This is driven primarily by the additional week in our quarter ending
February 2, 2013, due to the timing of our fiscal calendar.
Selling and Marketing
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Selling and marketing $ 38,398 $ 40,500 (5.2 )% $ 119,498 $ 119,042 0.4 %
% of net revenue 4.9 % 4.3 % 5.0 % 4.5 %
Selling and marketing expense decreased for the three months ended October 27,
2012 by $2.1 million, compared to the three months ended October 29, 2011. The
decrease primarily reflects lower expenses for contractor services and other
professional services as we continue to tightly manage this spending.
Selling and marketing expense increased for the nine months ended October 27,
2012 by $0.5 million, compared to the nine months ended October 29, 2011. The
increase was primarily attributable to increased trade show and marketing
communication activities, which were partially offset by lower expenses for
contractor and other professional services.
We currently expect that selling and marketing expense for the three months
ending February 2, 2013 will be higher than the level of expense reported for
the three months ended October 27, 2012. This is driven primarily by the
additional week in our quarter ending February 2, 2013, due to the timing of our
fiscal calendar.
General and Administrative
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
General and administrative $ 24,514 $ 29,021 (15.5 )% $ 75,937 $ 77,436 (1.9 )%
% of net revenue 3.1 % 3.0 % 3.2 % 2.9 %
General and administrative expense for the three and nine months ended
October 27, 2012 decreased by $4.5 million and $1.5 million, respectively,
compared to the three and nine months ended October 29, 2011. These decreases
were due primarily to lower share-based compensation expense combined with lower
legal expenses as legal expenses in the comparable period included certain legal
settlements.
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We currently expect that general and administrative expense for the three months
ending February 2, 2013 will be higher than the level of expense reported for
the three months ended October 27, 2012. This is driven primarily by the
additional week in our quarter ending February 2, 2013, due to the timing of our
fiscal calendar.
Amortization and Write-Off of Acquired Intangible Assets
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Amortization and write-off of
acquired intangible assets $ 13,054 $ 11,155 17.0 % $ 40,432 $ 36,634 10.4 %
% of net revenue 1.7 % 1.2 % 1.7 % 1.4 %
Amortization and write-off of acquired intangible assets for the three and nine
months ended October 27, 2012 increased by $1.9 million and $3.8 million,
respectively, as compared to the three and nine months ended October 29, 2011.
These increases were primarily due to the intangible assets acquired in the
fourth quarter of fiscal 2012 from a small acquisition. Also, amortization and
write-off of acquired intangible assets for the nine months ended October 27,
2012 included a $0.8 million write-off of in-process research and development
related to an abandoned project. These increases were partially offset by
certain intangible assets acquired in earlier acquisitions that became fully
amortized.
Interest and Other Income, Net
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Interest and other income, net $ 2,387 $ 7,729 (69.1 )% $ 9,308 $ 9,575 (2.8 )%
% of net revenue 0.3 % 0.9 % 0.4 % 0.3 %
Interest and other income, net, decreased for the three months ended October 27,
2012, compared to the three months ended October 29, 2011 primarily due to the
impact of the relative weakening of the U.S. dollar on our foreign currency
denominated tax liabilities. This was partially offset by lower interest income
in the three and nine months ended October 27, 2012 from lower average cash and
investment balances, as well as a lower rate of return.
Interest and other income, net, decreased slightly for the nine months ended
October 27, 2012, compared to the nine months ended October 29, 2011 primarily
due to lower interest income from lower average cash and investment balances, as
well as lower rate of return.
Provision for Income Taxes
Three Months Ended Nine Months Ended
October 27, October 29, % October 27, October 29, %
2012 2011 Change 2012 2011 Change
(in thousands, except percentage)
Provision for income taxes $ 368 $ 3,994 (90.8 )% $ 3,920 $ 9,340 (58.0 )%
% of net revenue - % 0.5 % 0.2 % 0.3 %
The income tax provision for the three and nine months ended October 27, 2012
included the current income tax liability of $5.9 million and $14.5 million,
respectively, which was primarily offset by net reductions in unrecognized tax
benefits of $5.5 million in the three months ended October 27, 2012 and $11.5
million in the nine months ended October 27, 2012. These net reductions in
unrecognized tax benefits primarily arose from the expiration of statute of
limitations and from the settlement of audits in non-U.S. jurisdictions less
increases in current unrecognized tax benefit estimates.
The income tax provision for the three and nine months ended October 29, 2011
included the current income tax liability of $5.9 million and $14.2 million,
respectively, which was partially offset by a net reduction in unrecognized tax
benefits of $2.8 million in the three months ended October 29, 2011 and $6.2
million in the nine months ended October 29, 2011 primarily due to the
expiration of the statute of limitations in non-U.S. jurisdictions less
increases in current unrecognized tax benefit estimates.
During the next 12 months, it is reasonably possible that the amount of
unrecognized tax benefits could decrease due to a potential settlement with tax
authorities and/or the expiration of applicable statutes of limitations.
However, the amount cannot be reasonably estimated as we will have negotiations
with various tax authorities throughout the year.
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Liquidity and Capital Resources
Our principal source of liquidity as of October 27, 2012 consisted of
approximately $2.0 billion of cash, cash equivalents and short-term investments.
We believe that our existing cash, cash equivalents and short term investments,
together with cash generated from operations and from the issuance of common
shares through our employee stock option and purchase plans, will be sufficient
to cover our working capital needs, capital expenditures, investment
requirements, commitments, repurchases of our common shares and payment of
quarterly dividends for at least the next 12 months. To the extent that our
existing cash, cash equivalents and short-term investments and cash generated by
operations are insufficient to fund our future activities, we may need to raise
additional funds through public or private debt or equity financing. We may
enter into additional acquisitions of businesses, assets, products, technologies
or other strategic arrangements in the future, which could also require us to
seek debt or equity financing. If we elect to raise additional funds, we may not
be able to obtain such funds on a timely basis or on acceptable terms, if at
all. If we raise additional funds by issuing additional equity or convertible
debt securities, the ownership percentages of existing shareholders would be
reduced. In addition, the equity or debt securities that we issue may have
rights, preferences or privileges senior to our common shares.
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $524.4 million for the nine months
ended October 27, 2012. The cash inflows from operations for the nine months
ended October 27, 2012 were due to $458.8 million of net income adjusted for
non-cash items and positive working capital changes of $65.6 million. The
increase in working capital for the nine months ended October 27, 2012 was
primarily driven by a decrease in accounts receivable and inventories due to
lower shipments on lower sales combined with a decrease in prepaid expenses and
other assets. This positive impact on working capital was partially offset by a
decrease in accounts payable caused by lower spending as production activity
declined in the latter part of the third quarter of fiscal 2013.
Net cash provided by operating activities was $702.1 million for the nine months
ended October 29, 2011. The cash inflows from operations in the nine months
ended October 29, 2011 were primarily due to $740.6 million of net income
adjusted for non-cash items, offset by a negative effect from changes in working
capital.
Net Cash Provided by and (Used in) Investing Activities
Net cash provided by investing activities was $45.9 million for the nine months
ended October 27, 2012 compared to net cash used in investing activities of
$593.9 million for the nine months ended October 29, 2011. For the nine months
ended October 27, 2012, net cash provided by investing activities was primarily
generated from the sale and maturities of marketable securities of $1.3 billion
less purchases of marketable securities of $1.2 billion. The net cash inflow
from marketable securities for the nine months ended October 27, 2012 was
partially offset by the purchase of $49.1 million of property and equipment and
$10.7 million of IP licenses.
For the nine months ended October 29, 2011, net cash used in investing
activities was primarily due to net purchases of marketable securities of $499.7
million. In addition, we paid $62.3 million for the purchase of property and
equipment, $18.8 million for acquisitions and $9.6 million for technology
licenses.
Net Cash Used in Financing Activities
Net cash used in financing activities was $687.0 million for the nine months
ended October 27, 2012 compared to net cash used in financing activities of $1.1
billion for the nine months ended October 29, 2011. For the nine months ended
October 27, 2012, net cash used in financing activities was primarily
attributable to repurchases under our share repurchase program of 57.3 million
of its common shares in the open market for $676.5 million and the payment of
our quarterly dividends of $67.0 million. The cash outflow was partially offset
by net proceeds of $56.4 million from the issuance of our common shares under
our share-based plans less the minimum tax withholding paid on behalf of
employees for net share settlements. For the nine months ended October 29, 2011,
net cash used in financing activities was primarily attributable to repurchases
under our share repurchase program of 74.3 million of its common shares in the
open market for $1.2 billion. The cash outflow was partially offset net proceeds
of $50.4 million from the issuance of common shares under our share-based plans
less the minimum tax withholding paid on behalf of employees for net share
settlements.
Subsequent to the end of the quarter through November 21, 2012, we repurchased
an additional 1.5 million of our common shares for $11.5 million at an average
price per share of $7.68.
Off-Balance Sheet Arrangements
As of October 27, 2012, we did not have any material off-balance sheet
arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
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Contractual Obligations
We presented our contractual obligations at January 28, 2012 in our Annual
Report on Form 10-K for the fiscal year then ended. There has been no material
changes outside the ordinary course of business in those obligations during nine
months ended October 27, 2012.
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