2016 Q3 Form 10-Q Financial Statement

#000119312516763000 Filed on November 08, 2016

View on sec.gov

Income Statement

Concept 2016 Q3 2015 Q3
Revenue $2.150B $2.100B
YoY Change 2.38% -4.11%
Cost Of Revenue $1.662B $1.290B
YoY Change 28.84% -33.3%
Gross Profit $488.0M $810.0M
YoY Change -39.75% 216.41%
Gross Profit Margin 22.7% 38.57%
Selling, General & Admin $269.0M $314.0M
YoY Change -14.33% 10.56%
% of Gross Profit 55.12% 38.77%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $94.00M $563.0M
YoY Change -83.3% 177.34%
% of Gross Profit 19.26% 69.51%
Operating Expenses $269.0M $314.0M
YoY Change -14.33% 10.56%
Operating Profit -$405.0M $64.00M
YoY Change -732.81% -119.81%
Interest Expense $77.00M $105.0M
YoY Change -26.67% 0.96%
% of Operating Profit 164.06%
Other Income/Expense, Net
YoY Change
Pretax Income -$125.0M -$351.0M
YoY Change -64.39% -64.18%
Income Tax $222.0M -$134.0M
% Of Pretax Income
Net Earnings -$380.0M -$284.0M
YoY Change 33.8% -66.35%
Net Earnings / Revenue -17.67% -13.52%
Basic Earnings Per Share -$0.76 -$0.57
Diluted Earnings Per Share -$0.76 -$0.57
COMMON SHARES
Basic Shares Outstanding 498.3M shares 497.4M shares
Diluted Shares Outstanding 498.3M shares 497.4M shares

Balance Sheet

Concept 2016 Q3 2015 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments
YoY Change
Cash & Equivalents $3.078B $3.666B
Short-Term Investments
Other Short-Term Assets
YoY Change
Inventory
Prepaid Expenses
Receivables
Other Receivables
Total Short-Term Assets
YoY Change
LONG-TERM ASSETS
Property, Plant & Equipment
YoY Change
Goodwill $14.00M
YoY Change -95.57%
Intangibles $284.0M
YoY Change -5.33%
Long-Term Investments $74.13B $70.86B
YoY Change 4.61% -3.08%
Other Assets $0.00 $1.206B
YoY Change -100.0%
Total Long-Term Assets
YoY Change
TOTAL ASSETS
Total Short-Term Assets
Total Long-Term Assets
Total Assets $108.9B $108.2B
YoY Change 0.58% -2.07%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable
YoY Change
Accrued Expenses
YoY Change
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities
YoY Change
LONG-TERM LIABILITIES
Long-Term Debt $4.582B $6.740B
YoY Change -32.02% -2.28%
Other Long-Term Liabilities $4.096B $4.799B
YoY Change -14.65% 33.12%
Total Long-Term Liabilities $8.678B $11.54B
YoY Change -24.79% 9.87%
TOTAL LIABILITIES
Total Short-Term Liabilities
Total Long-Term Liabilities $8.678B $11.54B
Total Liabilities $92.10B $92.81B
YoY Change -0.76% -0.63%
SHAREHOLDERS EQUITY
Retained Earnings $409.0M $856.0M
YoY Change -52.22% -55.85%
Common Stock $1.000M $1.000M
YoY Change 0.0% 0.0%
Preferred Stock
YoY Change
Treasury Stock (at cost) $2.700B $2.700B
YoY Change 0.0% 0.0%
Treasury Stock Shares 88.00M shares 88.00M shares
Shareholders Equity $14.87B $13.58B
YoY Change
Total Liabilities & Shareholders Equity $108.9B $108.2B
YoY Change 0.58% -2.07%

Cashflow Statement

Concept 2016 Q3 2015 Q3
OPERATING ACTIVITIES
Net Income -$380.0M -$284.0M
YoY Change 33.8% -66.35%
Depreciation, Depletion And Amortization $94.00M $563.0M
YoY Change -83.3% 177.34%
Cash From Operating Activities $732.0M $647.0M
YoY Change 13.14% 15.12%
INVESTING ACTIVITIES
Capital Expenditures
YoY Change
Acquisitions
YoY Change
Other Investing Activities -$766.0M -$902.0M
YoY Change -15.08% -15.31%
Cash From Investing Activities -$766.0M -$902.0M
YoY Change -15.08% -15.31%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -351.0M -146.0M
YoY Change 140.41% 80.25%
NET CHANGE
Cash From Operating Activities 732.0M 647.0M
Cash From Investing Activities -766.0M -902.0M
Cash From Financing Activities -351.0M -146.0M
Net Change In Cash -385.0M -401.0M
YoY Change -3.99% -31.34%
FREE CASH FLOW
Cash From Operating Activities $732.0M $647.0M
Capital Expenditures
Free Cash Flow
YoY Change

Facts In Submission

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Our repurchase agreement and securities lending programs expose us to liquidity risk if we did not have enough cash or collateral readily available to return to the counterparty when required to do so under the agreements. We manage this risk by regularly monitoring our available sources of cash and collateral to ensure we can meet short-term liquidity demands under normal and stressed scenarios. We are also exposed to credit risk in the event of default of our counterparties or changes in collateral values. This risk is significantly reduced because our programs require over collateralization and collateral exposures are trued up on a daily basis. We manage this risk by using multiple counterparties and ensuring that changes in required collateral are monitored and adjusted daily. We also monitor the creditworthiness, including credit ratings, of our counterparties on a regular basis.
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<div> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>(7) Deferred Acquisition Costs</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; -webkit-text-stroke-width: 0px"> The following table presents the activity impacting deferred acquisition costs (&#x201C;DAC&#x201D;) for the dates indicated:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="78%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"> <b>As&#xA0;of&#xA0;or&#xA0;for&#xA0;the&#xA0;nine&#xA0;months<br /> ended&#xA0;September 30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom" nowrap="nowrap"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'; WIDTH: 74.05pt; BORDER-BOTTOM: rgb(0,0,0) 1pt solid; MARGIN-TOP: 0pt"> <b>(Amounts in millions)</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"> <b>&#xA0;&#xA0;&#xA0;&#xA0;2016&#xA0;&#xA0;&#xA0;&#xA0;</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"> <b>&#xA0;&#xA0;&#xA0;&#xA0;2015&#xA0;&#xA0;&#xA0;&#xA0;</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unamortized beginning balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,569</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Impact of foreign currency translation</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(20</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Costs deferred</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">124</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">228</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Amortization, net of interest accretion</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(257</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(266</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Impairment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(455</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; 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BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; -webkit-text-stroke-width: 0px"> We regularly review DAC to determine if it is recoverable from future income. In the second quarter of 2016, we performed our loss recognition testing and determined that we had a premium deficiency in our fixed immediate annuity products. The results of the test were primarily driven by the low interest rate environment in the second quarter of 2016. As a result, as of June 30, 2016, we wrote off the entire DAC balance for our fixed immediate annuity products of $14 million through amortization and increased our future policy benefit reserves by $18 million. In the third quarter of 2016, driven by aging of the in-force and the low interest rate environment, we determined that an additional premium deficiency existed in our fixed immediate annuity products that resulted in a further increase to our future policy benefit reserves of $6 million. As of September 30, 2016, we believe all of our other businesses had sufficient future income and therefore the related DAC was recoverable.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; -webkit-text-stroke-width: 0px"> On September&#xA0;30, 2015, Genworth Life and Annuity Insurance Company (&#x201C;GLAIC&#x201D;), our indirect wholly-owned subsidiary, entered into a Master Agreement (the &#x201C;Master Agreement&#x201D;) for a life block transaction with Protective Life Insurance Company (&#x201C;Protective Life&#x201D;). Pursuant to the Master Agreement, GLAIC and Protective Life agreed to enter into a reinsurance agreement (the &#x201C;Reinsurance Agreement&#x201D;), under the terms of which Protective Life would coinsure certain term life insurance business of GLAIC, net of third-party reinsurance. The Reinsurance Agreement was entered into in January 2016. In connection with entering into the Master Agreement, we recorded a DAC impairment of $455 million as a result of loss recognition testing of certain term life insurance policies as part of this life block transaction.</p> </div>
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