Cypress Semiconductor Corporation
Feb 2, 2017

Cypress Reports Fourth Quarter and Year-End 2016 Results

SAN JOSE, Calif., Feb. 2, 2017 /PRNewswire/ --

  • Fourth quarter GAAP and non-GAAP revenue was $530.2 million
  • Fourth quarter GAAP margin was 38.1% and non-GAAP margin was 40.1% 
  • Enhanced go-to-market strategy to align to high-growth markets, resulting in change in corporate structure from four divisions to two
  • Wireless connectivity solutions acquired from Broadcom increased revenue by 15.6% sequentially
  • Realized annualized synergies of $188.5 million exceeding the plan at the time of Spansion merger

Cypress Semiconductor Corporation (NASDAQ: CY) today announced its fourth quarter and fiscal year 2016 results.

"We're pleased to report a strong fourth quarter and full year for Cypress in 2016," said Hassane El-Khoury, Cypress president and chief executive officer. "We grew the company, improved our gross margin, exceeded our expectations in terms of our plan for cost synergies from the Spansion merger and changed the strategic direction of the company, fully implementing Cypress 3.0, our blueprint for selling complete embedded solutions into markets growing faster than the broader semiconductor industry.

"For the year, our GAAP revenue of $1.92 billion and non-GAAP revenue of $1.94 billion reflect 20% and 19% growth, respectively," El-Khoury continued. "We continue to see strong demand for our expanding portfolio of solutions for embedded systems, and our IoT business, which cuts across all of our target markets, has exceeded our expectations.

"We have now fully aligned our go-to-market strategy with our target markets - automotive, industrial and consumer - and reorganized our reporting structure to two divisions to improve our efficiency. In 2017 we expect to grow faster than the overall semiconductor market, driven by automotive, connectivity and USB-C."

Revenue and earnings for the quarter are given below, compared with those of the prior quarter:

(In thousands, except per-share data)



GAAP



NON-GAAP1



Q4 2016


Q3 2016



Q4 2016


Q3 2016

Revenue


$

530,172



$

523,845




$

530,172



$

530,095


Margin


38.1%



37.9%




40.1%



40.5%


Pretax profit margin


(13.5)%



2.4%




10.8%



10.7%


Net income (loss)


$

(72,367)



$

9,411




$

53,823



$

53,467


Diluted EPS (loss)


$

(0.22)



$

0.03




$

0.15



$

0.15


 

  1. See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables included below.

Revenue and earnings for the fiscal year are given below, compared with those of the prior year:

 



GAAP



NON-GAAP1



FY 20163


FY 20152



FY 20163


FY 20152

Revenue


$

1,923,108



$

1,607,853




$

1,941,858



$

1,626,603


Margin


35.6%



24.9%




39.0%



35.3%


Pretax profit margin


(35.6)%



(22.6)%




9.4%



4.8%


Net income (loss)


$

(686,251)



$

(378,867)




$

170,471



$

70,532


Diluted EPS (loss)


$

(2.15)



$

(1.25)




$

0.49



$

0.21


 

  1. See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables included below.
  2. 2015 includes results of the merger with Spansion as of March 12, 2015.
  3. 2016 includes results from the IoT business acquired from Broadcom on July 5, 2016.

BUSINESS REVIEW

+ At the Electronica trade show in November, Cypress introduced the all-inclusive, turnkey Wireless Internet Connectivity for Embedded Devices (WICED®) Studio 4 platform, which provides a single development environment for multiple wireless technologies, including Cypress's world-class Wi-Fi®, Bluetooth® and combination solutions for the IoT. This software introduction reinforces the Company's positioning as a leader in the wireless connectivity business with both embedded system solutions and supporting software.

+ For the connectivity business acquired from Broadcom on July 5, 2016, Cypress reported $72.3 million in revenue for the fourth quarter of 2016, above the high end of guidance.

+ Cypress changed its corporate structure from four divisions to two, to align with its go-to-market strategy and enhance operational efficiency. The new Microcontroller and Connectivity Division, or MCD, includes the following:

  • Microcontroller and PSoC® product lines of the former Programmable Systems Division;
  • Wireless Connectivity/IoT and USB product lines of the former Data Communications Division;
  • The foundry business from the former Emerging Technologies Division (ETD);
  • The Intellectual Property Business Unit, which was formerly part of the Memory Products Division.

The Memory Products Division, or MPD, now includes Flash, SRAM and specialty memories, as well as the AgigA Tech subsidiary, which was formerly part of ETD.

+ GAAP and non-GAAP consolidated margins for the fourth quarter of 2016 were 38.1% and 40.1%, respectively, attributable to the Company's margin-enhancing initiatives and favorable product mix. Fab utilization increased to approximately 63% in the fourth quarter as production levels ramped to meet customer demand.  

+ Cash from operations during the fourth quarter was $89.8 million as a result of the Company's focus on working capital improvement.

+ Inventory at the end of the fourth quarter was $287.8 million, up 16.2% from the third quarter of 2016, due to an increase in MCU and connectivity inventory to support end-customer demand. The Company's lean inventory initiative has resulted in a reduction of more than $80 million of excess inventory in 2016 as planned.

+ Cypress paid a dividend of $35.4 million, or $0.11 per share, to holders of record of the Company's common stock as of the close of business on December 29, 2016. The dividend was equivalent to a 3.8% annualized yield as of December 30, 2016.

 

REVENUE SUMMARY

(In thousands, except percentages)

(Unaudited)



Three Months Ended


Three Months Ended


(GAAP)1


(Non-GAAP)4


January 1,
2017


October 2,
2016


Sequential
Change


January 1,
2017


October 2,
2016


Sequential
Change

Business Unit












MCD1,3

$

294,893



$

284,242



4%



$

294,893



$

290,492



2%


MPD

235,279



239,603



(2)%



235,279



239,603



(2)%


Total

$

530,172



$

523,845



1%



$

530,172



$

530,095



0%














Geographic2












China & ROW1

57%



55%



4%



57%



56%



2%


Americas

11%



12%



(8)%



11%



12%



(8)%


Europe

11%



12%



(8)%



11%



12%



(8)%


Japan

21%



21%



0%



21%



20%



5%


Total

100%



100%



0%



100%



100%



0%














Channel












Distribution

74%



74%



0%



74%



73%



1%


Direct1

26%



26%



0%



26%



27%



(4)%


Total

100%



100%



0%



100%



100%



0%


 

  1. GAAP revenue for the third quarter of 2016 excludes $6.25 million of non-GAAP licensing revenue in MCD, China & ROW region and direct channel.
  2. Prior quarter geographic numbers have been revised to conform to current period presentation.
  3. Historical results of MCD include Deca Technologies.
  4. See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables included below.

 


Twelve Months Ended


Twelve Months Ended


(GAAP)1,2,3


(Non-GAAP)6


January 1,
2017


January 3,
2016


Sequential
Change


January 1,
2017


January 3,
2016


Sequential
Change

Business Unit












MCD2,5

$

994,482



$

731,279



36%



$

1,013,232



$

750,029



35%


MPD

928,626



876,574



6%



928,626



876,574



6%


Total

$

1,923,108



$

1,607,853



20%



$

1,941,858



$

1,626,603



19%














Geographic4












China & ROW2

53%



44%



20%



53%



44%



20%


Americas

12%



14%



(14)%



12%



15%



(20)%


Europe

13%



13%



0%



13%



13%



0%


Japan

22%



29%



(24)%



22%



28%



(21)%


Total

100%



100%



0%



100%



100%



0%














Channel












Distribution

73%



71%



3%



72%



70%



3%


Direct2

27%



29%



(7)%



28%



30%



(7)%


Total

100%



100%



0%



100%



100%



0%


 

  1. 2015 includes results of the merger with Spansion as of March 12, 2015.
  2. Net sales for twelve months ended 2015 and 2016 include $18.75 million of legacy Spansion non-GAAP licensing revenue in MCD, APAC region and direct channel, respectively.
  3. 2016 includes results of the IoT acquisition as of July 5, 2016.
  4. Prior quarter geographic numbers have been revised to conform to current period presentation.
  5. Historical results of MCD include Deca Technologies.
  6. See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables included below.

FIRST QUARTER 2017 FINANCIAL OUTLOOK

For the first quarter of 2017, Cypress estimates financial results as follows:





GAAP

Non-GAAP

Revenue

$495 million to $525 million

Margin %

37% + / - 50 bps

39% + / - 50 bps

Diluted EPS

$(0.22) to $(0.18)

$0.09 to $0.13

 

A reconciliation of GAAP forward-looking estimates to non-GAAP forward-looking estimates may be found in the tables at the end of this earnings report.

The timing and amount of certain material items, including restructuring charges, asset impairments, changes in value of deferred compensation assets and liabilities, impact of stock-based compensation from modification of equity awards, and the tax impact of non-GAAP adjustments, which are needed to estimate GAAP financial measures are either inherently unpredictable or outside the control of the Company, and may have a significant impact on the Company's financial results. Accordingly, Cypress cannot provide a full quantitative reconciliation for such non-GAAP financial measures included as part of the first quarter 2017 financial outlook to the most directly comparable GAAP measure without unreasonable effort and additional adjustments may be reflected in our non-GAAP results for the first quarter of 2017. Cypress has qualitatively described below, under the section "Non-GAAP Financial Measures," the anticipated differences between the non-GAAP financial measures and the most directly comparable GAAP measures.

CONFERENCE CALL AND WEBCAST INFORMATION

Cypress will host its quarterly conference call on February 2, 2017 at 1:30 p.m. Pacific Time to discuss its fourth quarter and fiscal year 2016 results and provide an outlook for the first quarter of 2017.

All interested parties may dial 517-308-9119 and provide the passcode "Cypress" to listen to the call. The event will be broadcast over the Internet and may be accessed through Cypress's website at www.cypress.com/investors. The archived presentation will be available for two weeks immediately following the event.

FOLLOW CYPRESS ONLINE

Join the Cypress Developer Community, read our Core & Code blog, follow us on Twitter, Facebook and LinkedIn, and watch Cypress videos on our Video Library or YouTube.

ABOUT CYPRESS

Founded in 1982, Cypress is a leader in advanced embedded system solutions for the world's most innovative automotive, industrial, home automation and appliances, consumer electronics and medical products. Cypress's programmable systems-on-chip, general-purpose microcontrollers, analog ICs, wireless and USB-based connectivity solutions and reliable, high-performance memories help engineers design differentiated products and get them to market first. Cypress is committed to providing customers with support and engineering resources that enable innovators and out-of-the-box thinkers to disrupt markets and create new product categories. To learn more, go to www.cypress.com.

NON-GAAP FINANCIAL MEASURES

To supplement its condensed consolidated unaudited financial results presented in accordance with GAAP, Cypress uses the non-GAAP financial measures listed below, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in more detail below.

  • Revenue;
  • Margin;
  • Margin %;
  • Research and development expenses;
  • Selling, general and administrative expenses;
  • Provision (benefit) for income taxes;
  • Pretax profit margin %;
  • Operating income (loss);
  • Net income (loss); and
  • Diluted earnings (loss) per share.

Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations which, when viewed in conjunction with Cypress's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations.

The Company presents non-GAAP financial measures because management uses these measures to analyze and assess the Company's financial results and to manage the business.

There are limitations in using non-GAAP financial measures including those discussed below. Moreover, the Company's non-GAAP measures may be calculated differently than the non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement and should be viewed in conjunction with GAAP financial measures.

As presented in the "Non-GAAP Results" tables in this press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related charges: Acquisition-related charges are not factored into management's evaluation of potential acquisitions or Cypress's long-term performance after the completion of acquisitions. However, a limitation of non-GAAP measures that exclude acquisition-related charges is that these charges may represent payments that reduce the cash available to the Company for other purposes.  Acquisition-related expenses primarily include:

  • Amortization of purchased intangibles, including purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements;
  • Amortization of step-up in value of inventory recorded as part of purchase price accounting; and
  • One-time charges associated with the completion of an acquisition including items such as contract termination costs, severance and other acquisition-related restructuring costs; costs incurred in connection with integration activities, and legal and accounting costs.

Share-based compensation expense: Share-based compensation expense relates primarily to employee stock options, restricted stock units, performance stock units and the employee stock purchase plan. Share-based compensation expense is a non-cash expense that is affected by changes in market factors including the price of Cypress's common shares, which are not within the control of management. In addition, the valuation of share-based compensation is subjective, and the expense recognized by Cypress may be significantly different than the expense recognized by other companies for similar equity awards, which makes it difficult to assess Cypress's results compared to its competitors. Accordingly, management excludes this item from its internal operating forecasts and models. However, a limitation of non-GAAP measures that exclude share-based compensation expense is that they do not reflect the full costs of compensating employees.

Other adjustments: These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and ongoing operating performance of Cypress. Excluding these items, which can vary significantly from quarter to quarter, allows management to better compare Cypress's period-over-period performance. However, limitations of non-GAAP measures that exclude these items include that these adjustments are often subjective and may not be comparable to similarly titled non-GAAP financial measures used by other companies. Other adjustments primarily include:

  • Revenue from an intellectual property license,
  • Changes in value of deferred compensation plan assets and liabilities,
  • Investment-related gains or losses, including equity method investments,
  • Restructuring and related costs,
  • Debt issuance costs, including imputed interest related to the equity component of convertible debt,
  • Asset impairments,
  • Tax effects of non-GAAP adjustments,
  • Certain other expenses and benefits, and
  • Diluted weighted average shares non-GAAP adjustment - for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits related to share-based compensation expense.

FORWARD-LOOKING STATEMENTS

Statements herein that are not historical facts and that refer to Cypress or its subsidiaries' plans and expectations for the future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as "may," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "future," "continue" or other wording indicating future results or expectations to identify such forward-looking statements that include, but are not limited to: statements related to our estimated non-GAAP revenue, non-GAAP margin, non-GAAP operating expenses, non-GAAP EPS, net interest expense, tax expense, capital expenditures and depreciation for the first quarter of fiscal 2017; the expected benefits of our acquisition of Broadcom's wireless IoT business, including revenue growth and margin improvement; sources of revenue for the first quarter; the expected impact of our lean inventory initiative on fab utilization, inventory levels, cash flow, pricing and profitability; estimates of certain GAAP to non-GAAP reconciling items for the first quarter; the demand environment for semiconductors; the expected impact of our margin improvement plan; the impact of seasonality on revenue; the CEO transition; cross-selling opportunities in the automotive business; our ability to meet our targeted range of inventory; the expected synergies related to our merger with Spansion; expected or anticipated uses of cash flow, including to pay dividends, repurchase shares of common stock, or pay down our existing indebtedness; and plans to reduce excess inventory. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this press release. Our actual results may differ materially due to a variety of risks and uncertainties, including, but not limited to:  global economic and market conditions; business conditions and growth trends in the semiconductor market; our ability to compete effectively; the volatility in supply and demand conditions for our products, including but not limited to the impact of seasonality on supply and demand; our ability to develop, introduce and sell new products and technologies; potential problems relating to our manufacturing activities; the impact of acquisitions, including but not limited to the continuing integration of Spansion and the recent acquisition of Broadcom's wireless IoT business; our ability to attract and retain key personnel; and other risks and uncertainties described in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, WICED and PSoC are registered trademarks of Cypress Semiconductor Corporation. All other trademarks are property of their owners.

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)




January 1, 2017


January 3, 2016






ASSETS





Cash, cash equivalents and short-term investments


$

121,144



$

227,561


Accounts receivable, net


333,037



292,736


Inventories


287,776



243,595


Property, plant and equipment, net


297,266



425,003


Goodwill and other intangible assets, net


2,344,033



2,528,077


Other assets


488,615



287,289


Total assets


$

3,871,871



$

4,004,261


LIABILITIES AND EQUITY





Accounts payable


$

241,424



$

143,383


Income tax liabilities


49,552



54,999


Revenue reserves, deferred margin and other liabilities


493,164



419,535


Revolving credit facility and long-term debt


1,194,979



673,659


Total liabilities


1,979,119



1,291,576


Total Cypress stockholders' equity


1,891,828



2,720,848


Non-controlling interest


924



(8,163)


Total equity


1,892,752



2,712,685


Total liabilities and equity


$

3,871,871



$

4,004,261


   

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

ON A GAAP BASIS

(In thousands, except per-share data)

(Unaudited)




Three Months Ended


Twelve Months Ended



January 1, 2017


October 2, 2016


January 3, 2016


January 1, 2017


January 3, 2016

Revenues


$

530,172



$

523,845



$

450,128



$

1,923,108



$

1,607,853


Costs and expenses:











Cost of revenues


328,220



325,225



306,881



1,237,974



1,207,850


Research and development


92,188



95,411



73,682



331,737



281,391


Selling, general and administrative


76,839



84,209



85,385



317,383



323,570


Amortization of intangible assets


52,104



54,849



33,959



174,745



108,335


Restructuring charges


17,237



7,970



1,406



26,131



90,084


Impairment of acquisition-related intangible assets








33,944




Impairment related to assets held for sale


1,960



35,259





37,219




Loss (gain) related to investment in Deca Technologies




(112,774)





(112,774)




(Gain) on divestiture of TrueTouch® Mobile business










(66,472)


Goodwill impairment charge








488,504




Total costs and expenses


568,548



490,149



501,313



2,534,863



1,944,758


Operating income (loss)


(38,376)



33,696



(51,185)



(611,755)



(336,905)


Interest and other expense, net


(24,389)



(16,924)



(3,556)



(54,879)



(20,125)


Income (loss) before income taxes and non-controlling interest


(62,765)



16,772



(54,741)



(666,634)



(357,030)


Income tax provision


(790)



(3,304)



(15,726)



(2,616)



(16,960)


Equity in net loss of equity method investees


(8,766)



(4,233)



(2,330)



(17,644)



(7,148)


Net income (loss)


(72,321)



9,235



(72,797)



(686,894)



(381,138)


Net (gain) loss attributable to non-controlling interests


(46)



176



467



643



2,271


Net income (loss) attributable to Cypress


$

(72,367)



$

9,411



$

(72,330)



$

(686,251)



$

(378,867)


Net income (loss) per share attributable to Cypress:











Basic


$

(0.22)



$

0.03



$

(0.22)



$

(2.15)



$

(1.25)


Diluted


$

(0.22)



$

0.03



$

(0.22)



$

(2.15)



$

(1.25)


Cash dividend declared per share


$

0.11



$

0.11



$

0.11



$

0.44



$

0.44


Shares used in net income (loss) per share calculation:











Basic


322,800



321,276



334,447



319,522



302,036


Diluted


322,800



343,718



334,447



319,522



302,036


CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per-share data)

(Unaudited)


Table A: Revenue


Three Months Ended (a)


Twelve Months Ended (b)



Q4'16


Q3'16


Q4'15


Q4'16


Q4'15












GAAP revenue


$

530,172



$

523,845



$

450,128



$

1,923,108



$

1,607,853


Add: Revenue from Intellectual Property License




6,250



6,250



18,750



18,750


Non-GAAP revenue


$

530,172



$

530,095



$

456,378



$

1,941,858



$

1,626,603



(a)

Non-GAAP revenue for the third quarter of fiscal 2016 and fourth quarter of fiscal 2015, includes $6.25 million of non-GAAP licensing revenue in MCD, China & ROW region and direct channel.                                                                                 

(b)

 Non-GAAP revenue for the twelve months ended 2015 and 2016, includes $18.8 million of non-GAAP licensing revenue in MCD, China & ROW region and direct channel.                 

 

Table B: GAAP to Non-GAAP reconciling items (Three Months Ended Q4 2016)




Cost of
revenues


Research and
development


SG&A


Amortization
of Intangible
assets


Impairment related to assets held for sale


Interest and
other expense,
net


Income tax
provision

GAAP [i]


$

328,220



$

92,188



$

94,076



$

52,104



$

1,960



$

(33,155)



$

(790)


[1] Stock based compensation, including costs related to modification of equity awards


6,589



16,687



12,292










[2] Changes in value of deferred compensation plan


42



147



292







(641)




[3] Merger, integration and related costs


2,614



476



5,136










[4] Inventory Step-up related to acquisition accounting


1,381














[5] Losses from equity method investments












8,766




[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others












3,482




[7] Amortization of debt issuance costs












976




[8] Amortization of  Intangible assets








52,104








[9] Impairment related to assets held for sale










1,960






[10] Restructuring costs, including executive severance






17,237










[11] Tax impact of Non-GAAP adjustments












(908)



(2,442)


Non - GAAP [ii]


$

317,594



$

74,878



$

59,119



$



$



$

(21,480)



$

(3,232)


Impact of reconciling items [ii - i]


$

(10,626)



$

(17,310)



$

(34,957)



$

(52,104)



$

(1,960)



$

11,675



$

(2,442)


 

Table C: GAAP to Non-GAAP reconciling items (Three Months Ended Q3 2016)














Cost of revenues


Research and development


SG&A


Amortization of Intangible assets


Impairment related to assets held for sale


(Gain) related to investment in Deca Technologies


Interest and other expense, net


Income tax provision

GAAP [i]


$

325,225



$

95,411



$

92,179



$

54,849



$

35,259



$

(112,774)



$

21,157



$

(3,304)


[1] Stock based compensation, including costs related to modification of equity awards


4,852



12,581



9,880












[2] Changes in value of deferred compensation plan


113



365



785









(1,207)




[3] Merger, integration and related costs


192



1,937



10,390












[4] Inventory Step-up related to acquisition accounting


4,742
















[5] Losses from equity method investments














4,233




[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others














2,926




[7] Amortization of debt issuance costs














950




[8] Amortization of  Intangible assets








54,849










[9] (Gain) related to investment in Deca Technologies












(112,774)






[10] Impairment related to assets held for sale










35,259








[11] Restructuring costs, including executive severance






7,970












[12] Tax impact of Non-GAAP adjustments






(179)









(55)



(4)


Non - GAAP [ii]


$

315,326



$

80,528



$

63,333



$



$



$



$

14,310



$

(3,308)


Impact of reconciling items [ii - i]


$

(9,899)



$

(14,883)



$

(28,846)



$

(54,849)



$

(35,259)



$

112,774



$

(6,847)



$

(4)


 

Table D: GAAP to Non-GAAP reconciling items (Three Months Ended Q4 2015)



Cost of revenues


Research and development


SG&A


Amortization of Intangible assets


Interest and other expense, net


Income tax (provision) benefit

GAAP [i]


$

306,881



$

73,682



$

86,791



$

33,959



$

(5,886)



$

(15,726)


[1] Stock based compensation, including costs related to modification of equity awards


3,321



6,270



12,519








[2] Changes in value of deferred compensation plan


53



102



313





(785)




[3] Merger, integration and related costs


19,330



981



9,351








[4] Inventory Step-up related to acquisition accounting


9,231












[5] Losses from equity method investments










2,330




[6] Amortization of  Intangible assets








33,959






[7] Imputed interest on Convertible debt and others










726




[8] Restructuring costs, including executive severance






1,406








[9] Tax impact of Non-GAAP adjustments










(153)



12,653


Non - GAAP [ii]


$

274,946



$

66,329



$

63,202



$



$

(3,768)



$

(3,073)


Impact of reconciling items [ii - i]


$

(31,935)



$

(7,353)



$

(23,589)



$

(33,959)



$

2,118



$

12,653


 

Table E: GAAP to Non-GAAP reconciling items (Twelve Months Ended Q4 2016)











Cost of revenues


Research and development


SG&A


Goodwill impairment charge


(Gain) related to investment in Deca Technologies


Amortization of Intangible assets


Impairment related to assets held for sale


Impairment of acquisition related intangibles


Interest and other expense, net


Income tax provision

GAAP [i]


$

1,237,974



$

331,737



$

343,514



488,504



(112,774)



$

174,745



37,219



$

33,944



$

(72,523)



$

(2,616)


[1] Stock based compensation, including costs related to modification of equity awards


21,366



41,528



42,374
















[2] Changes in value of deferred compensation plan


288



884



1,889













(2,326)




[3] Merger, integration and related costs


17,927



3,106



28,819
















[4] Inventory Step-up related to acquisition accounting


13,264




















[5] Losses from equity method investments


















17,644




[6] Amortization of  Intangible assets












174,745










[7] Imputed interest on Convertible debt and others


















8,306




[8] Amortization of debt issuance costs


















1,961




[9] (Gain) related to investment in Deca Technologies










(112,774)












[10] Impairment related to assets held for sale














37,219








[11] Goodwill impairment charge








488,504














[12] Impairment of acquisition related intangibles
















33,944






[13] Restructuring costs, including executive severance and other charges






30,631
















[14] Tax impact of Non-GAAP adjustments


















(640)



(10,687)


Non - GAAP [ii]


$

1,185,129



$

286,219



$

239,801



$



$



$



$



$



$

(47,578)



$

(13,303)


Impact of reconciling items [ii - i]


$

(52,845)



$

(45,518)



$

(103,713)



$

(488,504)



$

112,774



$

(174,745)



$

(37,219)



$

(33,944)



$

24,945



$

(10,687)


 

Table F: GAAP to Non-GAAP reconciling items (Twelve Months Ended Q4 2015)







Cost of revenues


Research and development


SG&A


Gain on Divestiture


Amortization of Intangible assets


Interest and other expense, net


Income tax (provision) benefit

GAAP [i]


1,207,850



281,391



413,654



(66,472)



108,335



(27,273)



(16,960)


[1] Stock based compensation, including costs related to modification of equity awards


15,699



26,373



51,457










[2] Changes in value of deferred compensation plan


(38)



(233)



(260)







1,353




[3] Merger, integration and related costs


54,733



2,681



39,939










[4] Inventory Step-up related to acquisition accounting


84,297














[5] Losses from equity method investments












7,148




[6] Amortization of  Intangible assets










108,335






[7] Imputed interest on Convertible debt and others












8,256




[8] Gain on divestiture








(66,472)








[9] Restructuring and other charges


73



326



91,320










[10] Tax impact of Non-GAAP adjustments












(1,344)



7,006


Non - GAAP [ii]


$

1,053,086



$

252,244



$

231,198



$



$



$

(11,860)



$

(9,954)


Impact of reconciling items [ii - i]


$

(154,764)



$

(29,147)



$

(182,456)



$

66,472



$

(108,335)



$

15,413



$

7,006


 

Table G: Operating income (loss)


Three Months Ended


Twelve Months Ended



Q4'16


Q3'16


Q4'15


Q4'16


Q4'15

GAAP operating income (loss) [i]


$

(38,376)



$

33,696



$

(51,185)



$

(611,755)



$

(336,905)


Impact of reconciling items on Revenue (see Table A)




6,250



6,250



18,750



18,750


Impact of reconciling items on Cost of revenues (see Table B, C, D, E, F)


10,626



9,899



31,935



52,845



154,764


Impact of reconciling items on R&D (see Table B, C, D, E, F)


17,310



14,883



7,353



45,518



29,147


Impact of reconciling items on SG&A (see Table B, C, D, E, F)


34,957



28,846



23,589



103,713



182,456


Impact of Amortization of Intangible Assets (see Table B,C, D, E, F)


52,104



54,849



33,959



174,745



108,335


Impact of Goodwill impairment charge (see Table E)








488,504




Impact of Impairment related to assets held for sale (see Table B, C, E)


1,960



35,259





37,219




Impact of Impairment related to acquisition related intangibles (see Table E)








33,944




Gain from divestiture transaction (see Table F)










(66,472)


(Gain) related to investment in Deca Technologies (see Table C, E)




(112,774)





(112,774)




Non-GAAP operating income [ii]


$

78,581



$

70,908



$

51,901



$

230,709



$

90,075


Impact of reconciling items [ii - i]


$

116,957



$

37,212



$

103,086



$

842,464



$

426,980


 

Table H: Pre-tax profit


Three Months Ended


Twelve Months Ended



Q4'16


Q3'16


Q4'15


Q4'16


Q4'15

GAAP Pre-tax profit


$

(71,531)



$

12,539



$

(57,071)



$

(684,278)



$

(364,178)


Impact of reconciling items on Operating income (see Table G)


116,957



37,212



103,086



842,464



426,980


Interest and other expense, net (see Table B,C, D, E, F)


11,675



6,847



2,118



24,945



15,413


Non-GAAP Pre-tax income


$

57,101



$

56,598



$

48,133



$

183,131



$

78,215


 

Table I: Net income (loss)


Three Months Ended


Twelve Months Ended



Q4'16


Q3'16


Q4'15


Q4'16


Q4'15

GAAP Net income (loss)


$

(72,367)



$

9,411



$

(72,330)



$

(686,251)



$

(378,867)


Impact of reconciling items on Operating income (see Table G)


116,957



37,212



103,086



842,464



426,980


Interest and other expense, net (see Table B,C, D, E, F)


11,675



6,847



2,118



24,945



15,413


Income tax (provision) benefit  (see Table B,C,D,E,F)


(2,442)



(4)



12,653



(10,687)



7,006


Non-GAAP Net income


$

53,823



$

53,467



$

45,527



$

170,471



$

70,532


 

Table J: Margin %


Three Months Ended



Q4'16


Q3'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP


GAAP


Non-GAAP

Revenue (See Table A) [i]


$

530,172



$

530,172



$

523,845



$

530,095



$

450,128



$

456,378


Cost of revenues (See Table B, C, D) [ii]


328,220



317,594



325,225



315,326



306,881



274,946


Margin [iii] [ii - i]


$

201,952



$

212,578



$

198,620



$

214,769



$

143,247



$

181,432


Margin % [iii / i]


38.1

%


40.1

%


37.9

%


40.5

%


31.8

%


39.8

%

 

Table K: Margin %


Twelve Months Ended



Q4'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP

Revenue (See Table A) [i]


$

1,923,108



$

1,941,858



$

1,607,853



$

1,626,603


Cost of revenues (See Table E, F) [ii]


1,237,974



1,185,129



1,207,850



1,053,086


Margin [iii] [ii - i]


$

685,135



$

756,730



$

400,003



$

573,517


Margin % [iii / i]


35.6

%


39.0

%


24.9

%


35.3

%

 

Table L: Pretax profit margin %


Three Months Ended



Q4'16


Q3'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP


GAAP


Non-GAAP

Revenue (See Table A) [i]


$

530,172



$

530,172



$

523,845



$

530,095



$

450,128



$

456,378


Pre-tax profit (see Table H)  [ii]


$

(71,531)



$

57,101



$

12,539



$

56,598



(57,071)



48,133


Pre-tax profit margin % [ii / i]


(13.5)%



10.8

%


2.4

%


10.7

%


(12.7)%



10.5

%

 

Table M: Pretax profit margin %


Twelve Months Ended



Q4'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP

Revenue (See Table A) [i]


$

1,923,108



$

1,941,858



$

1,607,853



$

1,626,603


Pre-tax profit (see Table H)  [ii]


$

(684,278)



$

183,131



$

(364,178)



$

78,215


Pre-tax profit margin % [ii / i]


(35.6)%



9.4

%


(22.6)%



4.8

%

 

Table N: Weighted-average shares, diluted


Three Months Ended




Q4'16


Q3'16


Q4'15




GAAP


Non-GAAP


GAAP


Non-GAAP


GAAP


Non-GAAP


Weighted-average common shares outstanding, basic


322,800



322,800



321,276



321,276



334,447



334,447



Effect of dilutive securities:














Stock options, unvested restricted stock and other




17,199



7,017



14,008





15,363



Impact of convertible bond




15,138



15,425



15,425





12,419



Weighted-average common shares outstanding, diluted


322,800



355,137



343,718



350,709



334,447



362,229



 

Table O: Weighted-average shares, diluted


Twelve Months Ended



Q4'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP

Weighted-average common shares outstanding, basic


319,522



319,522



302,036



302,036


Effect of dilutive securities:









Stock options, unvested restricted stock and other




15,370





21,223


Impact of convertible bond




15,138





12,419


Weighted-average common shares outstanding, diluted


319,522



350,030



302,036



335,678


Table P: Net income (loss) Per Share


Three Months Ended



Q4'16


Q3'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP


GAAP


Non-GAAP

Net income (loss) (see Table I)


$

(72,367)



$

53,823



$

9,411



$

53,467



$

(72,330)



$

45,527


Weighted-average common shares outstanding (see Table N) [ii]


322,800



355,137



343,718



350,709



334,447



362,229


Non-GAAP earnings per share - Diluted [i/ii]


$

(0.22)



$

0.15



$

0.03



$

0.15



$

(0.22)



$

0.13


 

Table Q: Net income (loss) Per Share


Twelve Months Ended



Q4'16


Q4'15



GAAP


Non-GAAP


GAAP


Non-GAAP

Net income (loss) (see Table I)


$

(686,251)



$

170,471



$

(378,867)



$

70,532


Weighted-average common shares outstanding (see Table O) [ii]


319,522



350,030



302,036



335,678


Non-GAAP earnings per share - Diluted [i/ii]


$

(2.15)



$

0.49



$

(1.25)



$

0.21


 

CYPRESS SEMICONDUCTOR CORPORATION

SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)








Three Months Ended


Twelve Months Ended



January 1, 2017


October 2, 2016


January 3, 2016


January 1, 2017


January 3, 2016

Selected Cash Flow Data (Preliminary):











Net cash provided by operating activities


$

89,787



$

105,130



$

42,094



$

217,419



$

8,801


Net cash used in investing activities


$

(19,008)



$

(560,248)



$

(24,351)



$

(613,438)



$

(79,088)


Net cash (used in) provided by financing activities


$

(37,262)



$

353,441



$

15,188



$

289,502



$

193,240


Other Supplemental Data (Preliminary):











Capital expenditures


$

11,889



$

19,695



$

9,227



$

57,398



$

47,206


Depreciation


$

16,057



$

19,454



$

39,443



$

89,464



$

126,496


Payment of dividend


$

35,350



$

35,240



$

36,914



$

141,410



$

127,995


Dividend paid per share


$

0.11



$

0.11



$

0.11



$

0.44



$

0.44


CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FORWARD LOOKING ESTIMATES TO NON-GAAP FORWARD LOOKING ESTIMATES










Forward looking GAAP estimate (A)


Adjustments (B)


Forward looking Non-GAAP estimate (C)=(A)+(B)





Amortization of intangibles


Share-based compensation expense


Restructuring


Other items



Margin %


 37% +/- 50 bps


%


1.3

%


%


0.4

%


 39% +/- 50 bps

Diluted earnings per share


 $(0.22) to $(0.18)


$

0.15



$

0.11



$

0.03



$

0.02



 $0.09 to $0.13

 

 

 

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SOURCE Cypress

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