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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 28, 2019

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             .

Commission file number 000-49602

 

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

77-0118518

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1251 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (Zip code)

(408) 904-1100

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $.001 per share

SYNA

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of Common Stock outstanding at January 31, 2020: 33,940,408

 

 

 

 


 

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 28, 2019

TABLE OF CONTENTS

 

 

 

 

  

 

  

Page

Part I. Financial Information

  

 

 

 

 

 

   

 

Item 1.

   

Condensed Consolidated Financial Statements (Unaudited):

  

3

 

 

 

 

 

 

 

  

Condensed Consolidated Balance Sheets—December 31, 2019 and June 30, 2019

  

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income—Three and Six Months Ended December 31, 2019 and 2018

 

4

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended December 31, 2019 and 2018

  

5

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows—Six Months Ended December 31, 2019 and 2018

  

7

 

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements

  

8

 

 

 

 

 

 

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

24

 

 

 

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

32

 

 

 

 

 

 

Item 4.

  

Controls and Procedures

  

32

 

 

Part II. Other Information

  

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

33

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

33

 

 

 

 

 

 

 

 

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

33

 

 

 

 

 

 

Item 6.

  

Exhibits

  

34

 

 

 

 

 

 

 

Signatures

  

35

 

 

 


 

PART I—FINANCIAL INFORMATION

 

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value and share amounts)

(unaudited)

 

 

 

December 31,

 

 

June 30,

 

 

 

2019

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

424.8

 

 

$

327.8

 

Accounts receivable, net of allowances of $1.7 at December 31, 2019 and $2.1 at June 30, 2019

 

 

246.4

 

 

 

230.0

 

Inventories

 

 

82.1

 

 

 

158.7

 

Current assets held for sale

 

 

21.0

 

 

 

-

 

Prepaid expenses and other current assets

 

 

16.5

 

 

 

14.6

 

Total current assets

 

 

790.8

 

 

 

731.1

 

Property and equipment at cost, net of accumulated depreciation of $134.2 and $133.1 at

   December 31, 2019 and June 30, 2019, respectively

 

 

87.7

 

 

 

103.0

 

Non-current assets held for sale

 

 

16.1

 

 

 

 

Goodwill

 

 

362.8

 

 

 

372.8

 

Acquired intangibles, net

 

 

115.5

 

 

 

144.8

 

Non-current other assets

 

 

84.3

 

 

 

58.1

 

 

 

$

1,457.2

 

 

$

1,409.8

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

88.9

 

 

$

98.3

 

Accrued compensation

 

 

45.5

 

 

 

30.4

 

Income taxes payable

 

 

17.5

 

 

 

19.1

 

Other accrued liabilities

 

 

87.6

 

 

 

106.1

 

Total current liabilities

 

 

239.5

 

 

 

253.9

 

Convertible notes, net

 

 

477.4

 

 

 

468.3

 

Other long-term liabilities

 

 

49.0

 

 

 

30.3

 

Total liabilities

 

 

765.9

 

 

 

752.5

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

$0.001 par value; 120,000,000 shares authorized, 65,388,813 and 64,283,948 shares

   issued, and 33,898,937 and 33,349,735 shares outstanding, at December 31, 2019

   and June 30, 2019, respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

1,294.2

 

 

 

1,266.1

 

Treasury stock: 31,489,876 and 30,934,213 common treasury shares at December 31,

   2019 and June 30, 2019, respectively, at cost

 

 

(1,209.4

)

 

 

(1,192.4

)

Retained earnings

 

 

606.4

 

 

 

583.5

 

Total stockholders' equity

 

 

691.3

 

 

 

657.3

 

 

 

$

1,457.2

 

 

$

1,409.8

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

3


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue

 

$

388.3

 

 

$

425.5

 

 

$

728.2

 

 

$

843.1

 

Cost of revenue

 

 

229.0

 

 

 

275.7

 

 

 

442.7

 

 

 

552.4

 

Gross margin

 

 

159.3

 

 

 

149.8

 

 

 

285.5

 

 

 

290.7

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

77.0

 

 

 

84.2

 

 

 

163.0

 

 

 

174.3

 

Selling, general, and administrative

 

 

31.5

 

 

 

35.6

 

 

 

59.0

 

 

 

69.4

 

Acquired intangibles amortization

 

 

3.0

 

 

 

2.9

 

 

 

5.9

 

 

 

5.8

 

Restructuring costs

 

 

13.3

 

 

 

2.1

 

 

 

19.9

 

 

 

10.4

 

Total operating expenses

 

 

124.8

 

 

 

124.8

 

 

 

247.8

 

 

 

259.9

 

Operating income

 

 

34.5

 

 

 

25.0

 

 

 

37.7

 

 

 

30.8

 

Interest and other expense, net

 

 

(2.3

)

 

 

(4.3

)

 

 

(5.9

)

 

 

(6.2

)

Income/(loss) before provision/(benefit) for income taxes

   and equity investment loss

 

 

32.2

 

 

 

20.7

 

 

 

31.8

 

 

 

24.6

 

Provision/(benefit) for income taxes

 

 

12.0

 

 

 

7.5

 

 

 

7.1

 

 

 

7.2

 

Equity investment loss

 

 

(0.4

)

 

 

(0.4

)

 

 

(0.9

)

 

 

(0.8

)

Net income

 

$

19.8

 

 

$

12.8

 

 

$

23.8

 

 

$

16.6

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.37

 

 

$

0.72

 

 

$

0.48

 

Diluted

 

$

0.58

 

 

$

0.36

 

 

$

0.70

 

 

$

0.47

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

33.5

 

 

 

34.5

 

 

 

33.2

 

 

 

34.8

 

Diluted

 

 

34.4

 

 

 

35.1

 

 

 

34.1

 

 

 

35.6

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

4


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

19.8

 

 

$

12.8

 

 

$

23.8

 

 

$

16.6

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized net gain on investment

 

 

 

 

 

 

 

 

 

 

 

(1.5

)

Comprehensive income

 

$

19.8

 

 

$

12.8

 

 

$

23.8

 

 

$

15.1

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

5


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Earnings

 

 

Equity

 

Balance at June 30, 2019, as reported

 

 

64,283,948

 

 

$

0.1

 

 

$

1,266.1

 

 

$

(1,192.4

)

 

$

583.5

 

 

$

657.3

 

Cumulative effect of changes in accounting

   principles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.9

)

 

$

(0.9

)

Balance at June 30, 2019, as adjusted

 

 

64,283,948

 

 

 

0.1

 

 

 

1,266.1

 

 

 

(1,192.4

)

 

 

582.6

 

 

 

656.4

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.0

 

 

 

4.0

 

Issuance of common stock for share-

   based award compensation plans

 

 

209,110

 

 

 

 

 

 

1.7

 

 

 

 

 

 

 

 

 

1.7

 

Payroll taxes for deferred stock units

 

 

 

 

 

 

 

 

(1.5

)

 

 

 

 

 

 

 

 

(1.5

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(17.0

)

 

 

 

 

 

(17.0

)

Share-based compensation

 

 

 

 

 

 

 

 

11.2

 

 

 

 

 

 

 

 

 

11.2

 

Balance at September 30, 2019

 

 

64,493,058

 

 

 

0.1

 

 

 

1,277.5

 

 

 

(1,209.4

)

 

 

586.6

 

 

 

654.8

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19.8

 

 

 

19.8

 

Issuance of common stock for share-

   based award compensation plans

 

 

895,755

 

 

 

 

 

 

11.8

 

 

 

 

 

 

 

 

 

11.8

 

Payroll taxes for deferred stock units

 

 

 

 

 

 

 

 

(7.2

)

 

 

 

 

 

 

 

 

(7.2

)

Share-based compensation

 

 

 

 

 

 

 

 

12.1

 

 

 

 

 

 

 

 

 

12.1

 

Balance at December 31, 2019

 

 

65,388,813

 

 

$

0.1

 

 

$

1,294.2

 

 

$

(1,209.4

)

 

$

606.4

 

 

$

691.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Comprehensive

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Income

 

 

Earnings

 

 

Equity

 

Balance at June 30, 2018

 

 

62,889,679

 

 

$

0.1

 

 

$

1,195.2

 

 

$

(1,073.9

)

 

$

1.5

 

 

$

606.4

 

 

$

729.3

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.8

 

 

 

3.8

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.5

)

 

 

 

 

 

(1.5

)

Issuance of common stock for share-

   based award compensation plans

 

 

140,379

 

 

 

 

 

 

2.1

 

 

 

 

 

 

 

 

 

 

 

 

2.1

 

Payroll taxes for deferred stock units

 

 

 

 

 

 

 

 

(0.9

)

 

 

 

 

 

 

 

 

 

 

 

(0.9

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(39.4

)

 

 

 

 

 

 

 

 

(39.4

)

Share-based compensation

 

 

 

 

 

 

 

 

16.7

 

 

 

 

 

 

 

 

 

 

 

 

16.7

 

Balance at September 30, 2018

 

 

63,030,058

 

 

 

0.1

 

 

 

1,213.1

 

 

 

(1,113.3

)

 

 

 

 

 

610.2

 

 

 

710.1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.8

 

 

 

12.8

 

Issuance of common stock for share-

   based award compensation plans

 

 

773,486

 

 

 

 

 

 

9.3

 

 

 

 

 

 

 

 

 

 

 

 

9.3

 

Payroll taxes for deferred stock units

 

 

 

 

 

 

 

 

(6.3

)

 

 

 

 

 

 

 

 

 

 

 

(6.3

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(37.9

)

 

 

 

 

 

 

 

 

(37.9

)

Share-based compensation

 

 

 

 

 

 

 

 

16.2

 

 

 

 

 

 

 

 

 

 

 

 

16.2

 

Balance at December 31, 2018

 

 

63,803,544

 

 

$

0.1

 

 

$

1,232.3

 

 

$

(1,151.2

)

 

$

 

 

$

623.0

 

 

$

704.2

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

6


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

23.8

 

 

$

16.6

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Share-based compensation costs

 

 

23.3

 

 

 

32.9

 

Depreciation and amortization

 

 

15.3

 

 

 

19.2

 

Acquired intangibles amortization

 

 

29.3

 

 

 

38.0

 

Deferred taxes

 

 

 

 

 

(4.5

)

Amortization of convertible debt discount and issuance costs

 

 

9.1

 

 

 

8.7

 

Amortization of debt issuance costs

 

 

0.2

 

 

 

0.3

 

Impairment recovery on investments

 

 

 

 

 

(2.8

)

Acquired in-process research and development

 

 

3.7

 

 

 

 

Arbitration settlement

 

 

 

 

 

(1.9

)

Equity investment loss

 

 

0.9

 

 

 

0.8

 

Foreign currency remeasurement loss

 

 

(0.3

)

 

 

0.2

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(16.4

)

 

 

(31.7

)

Inventories