Cypress Semiconductor Corporation
Feb 1, 2018

Cypress Reports Fourth Quarter and Year End 2017 Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Cypress Semiconductor Corporation (NASDAQ: CY), a leader in embedded solutions, today announced its fourth quarter and fiscal 2017 results with the following highlights:

"We had a record fiscal 2017 with strong business performance," said Hassane El-Khoury, Cypress president and chief executive officer. "The Cypress 3.0 strategy we set in 2016 of focusing on the fast-growing automotive, industrial and consumer markets, fueled by the proliferation of IoT, contributed to strong revenue growth and earnings growing more than four times revenue in 2017. We have established Cypress as an embedded solutions leader for the IoT. This success was built on the strength of our unmatched IoT connectivity solutions, along with our broad portfolio of microcontrollers and high-performance memory solutions, in our target end-markets."

Revenue and earnings for the fourth quarter and fiscal 2017 are shown below with comparable periods:

(In thousands, except per-share data)

   
GAAP NON-GAAP1
Q4 2017   Q3 2017 Q4 2017   Q3 2017
Revenue $ 597,547 $ 604,574 $ 597,547 $ 604,574
Margin 44.6 % 41.8 % 45.4 % 43.0 %
Pretax profit margin

(6.5)

%

2.6 % 17.9 % 16.9 %
Net income (loss) $

(35,998)

 

$ 11,033 $ 104,685 $ 98,980
Diluted EPS (loss) $

(0.10)

 

$ 0.03 $ 0.28 $ 0.27
 
GAAP NON-GAAP1
FY 2017 FY 20162 FY 2017 FY 20162,3
Revenue $ 2,327,771 $ 1,923,108 $ 2,327,771 $ 1,941,858
Margin 41.0 % 35.6 % 42.2 % 39.0 %
Pretax profit margin

(3.5)

%

(35.6)

%

14.4 % 9.4 %
Net income (loss) $

(93,650)

 

$

(686,251)

 

$ 324,257 $ 170,471
Diluted EPS (loss) $

(0.28)

 

$

(2.15)

 

$ 0.89 $ 0.49
 
1.   See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables ("Non-GAAP Results" tables) included below.
2. 2016 includes results from the IoT business acquired from Broadcom on July 5, 2016.
3. Revenue for the twelve months ended 2016 includes $18.75 million of legacy Spansion non-GAAP licensing revenue.
 

BUSINESS REVIEW

+ Cypress expanded its automotive infotainment solution portfolio with the introduction of two new products. The Company announced production availability of the industry's first Real Simultaneous Dual Band (RSDB) automotive-grade Wi-Fi® and Bluetooth® combo solution, which enables multiple users to connect and stream unique content to their devices simultaneously. In parallel, Cypress introduced a new automotive capacitive touchscreen controller family that delivers the market's most advanced feature set for next-generation infotainment systems, including the capability to detect a finger up to 35 mm above the screen and provide accurate measurement of the pressure applied by multiple fingers.

+ At the recent Consumer Electronics Show in Las Vegas, Cypress showed products based on its PSoC® 6 microcontroller (MCU), the industry's lowest power, most flexible dual-core MCU with built-in Bluetooth Low Energy (BLE) wireless connectivity. PSoC 6 is targeted for a variety of smart home, wearables, smart speakers, audio and other IoT applications.

+ Cypress' single-chip wireless MCU and combo solutions for the IoT are the world's first to deliver certified Bluetooth mesh connectivity to a consumer product—SYLVANIA SMART+ Bluetooth lighting products from LEDVANCE. Cypress announced three of its wireless combo chips and the latest version of its WICED® software development kit support state-of-the-art Bluetooth connectivity with mesh networking capability. Cypress' solutions enable a low-cost, low-power mesh network of devices that can communicate with each other—and with smartphones, tablets and voice-controlled home assistants—via simple, secure and ubiquitous Bluetooth connectivity.

+ Cypress paid a cash dividend of $38.7 million, or $0.11 per share, to holders of record of the Company's common stock as of the close of business on December 28, 2017. The dividend was equivalent to a 2.9% annualized yield as of December 28, 2017. This dividend was paid on January 18, 2018.

REVENUE SUMMARY

(In thousands, except percentages)

(Unaudited)

 
Three Months Ended

December 31,
2017

 

October 1,
2017

 

Sequential
Change

Business Unit1

         
MCD $ 357,247 $ 373,584 (4) %
MPD $ 240,300   $ 230,990   4 %
Total $ 597,547   $ 604,574   (1) %
 

Geographic

China & ROW 55 % 53 % 4 %
Americas 10 % 12 % (17) %
Europe 12 % 13 % (8) %
Japan 23 % 22 % 5 %
Total 100 % 100 % %
 

Channel

Distribution 72 % 73 % (1) %
Direct 28 % 27 % 4 %
Total 100 % 100 % %
 
  Twelve Months Ended   Twelve Months Ended
(GAAP)3 (Non-GAAP)2,3

December 31,
2017

 

January 1,
2017

 

Sequential
Change

December 31,
2017

 

January 1,
2017

 

Sequential
Change

Business Unit1

MCD4,5

$ 1,409,265 $ 994,482 42% $ 1,409,265 $ 1,013,232 39%
MPD 918,506 928,626 (1)% 918,506 928,626 (1)%
Total $ 2,327,771 $ 1,923,108 21% $ 2,327,771 $ 1,941,858 20%
 

Geographic

China & ROW4 54% 53% 2% 54% 53% 2%
Americas 11% 12% (8)% 11% 12% (8)%
Europe 13% 13% 0% 13% 13% 0%
Japan 22% 22% 0% 22% 22% 0%
Total 100% 100% 0% 100% 100% 0%
 

Channel

Distribution 73% 73% 0% 73% 72% 1%
Direct4 27% 27% 0% 27% 28% (4)%
Total 100% 100% 0% 100% 100% 0%
 
1.   The Microcontroller and Connectivity Division ("MCD") includes microcontroller, automotive and connectivity products and the Memory Products Division ("MPD") includes RAM, Flash and AgigA Tech products.
2. See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables ("Non-GAAP Results" tables) included below.
3. 2016 includes results from the IoT business acquired from Broadcom on July 5, 2016.
4. Revenue for the twelve months ended 2016 includes $18.75 million of legacy Spansion non-GAAP licensing revenue in MCD, APAC region and direct channel, respectively.
5. Historical results of MCD through July 29, 2016 include Deca Technologies.
 

FIRST QUARTER 2018 FINANCIAL OUTLOOK

For the first quarter of 2018, Cypress estimates financial results as follows:

      GAAP     Non-GAAP
Revenue     $565 million to $595 million
Margin %     43.0% to 44.0%     44.5% to 45.5%
Diluted EPS     $(0.03) to $0.01     $0.22 to $0.26
       

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 2018 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 2018. 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 1, 2018 at 1:30 p.m. Pacific Standard Time to discuss its fourth quarter and fiscal year 2017 results and outlook for the first quarter of 2018.

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' 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

Cypress is a leader in advanced embedded system solutions for the world's most innovative automotive, industrial, smart home appliances, consumer electronics and medical products. Cypress' 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 the best support and development resources on the planet enabling them to disrupt markets by creating 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.

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' 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 Cypress' 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:

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' 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' 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.

EBITDA: Consolidated EBITDA is calculated by adding back depreciation to the Non-GAAP operating income. EBITDA may be useful to management, investors, and other users of our financial information because it, during a given period, is an indicator of the amount of cash generated that is available to repay debt obligations, make investments, and for certain other activities. However, EBITDA should not be considered as a measure of discretionary cash available to invest in the growth of the business. In addition, EBITDA should not be considered as a substitute for, or superior to net income, operating income, diluted earnings, or net cash provided by operating activities, or other financial measures prepared in accordance with GAAP.

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' 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:

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 revenue, margin, operating expenses, EPS, net interest expense, tax expense, capital expenditures and depreciation for the first quarter of fiscal 2018 (on a GAAP or non-GAAP basis); 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; cross-selling opportunities in the automotive business; our ability to meet our targeted range of inventory; 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 acquisition of Broadcom's wireless IoT business; our ability to attract and retain key personnel; the unpredictability and expense of legal proceedings; 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, PSoC and WICED 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)

   
December 31, 2017 January 1, 2017
ASSETS
Cash, cash equivalents and short-term investments $ 151,596 $ 120,172
Accounts receivable, net 295,991 333,037
Inventories 272,127 287,776
Property, plant and equipment, net 289,554 297,266
Goodwill and other intangible assets, net 2,154,592 2,344,033
Other assets 374,940 489,587
Total assets $ 3,538,800 $ 3,871,871
LIABILITIES AND EQUITY
Accounts payable $ 214,851 $ 241,424
Income tax liabilities 52,006 44,934
Revenue reserves, deferred margin and other liabilities 497,838 497,782
Revolving credit facility and long-term debt 956,513 1,194,979
Total liabilities 1,721,208 1,979,119
Total Cypress stockholders' equity 1,816,535 1,891,828
Non-controlling interest 1,056 924
Total equity 1,817,592 1,892,752
Total liabilities and equity $ 3,538,800 $ 3,871,871
 

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

December 31,
2017

 

October 1,
2017

 

January 1,
2017

December 31,
2017

 

January 1,
2017

Revenues $ 597,547 $ 604,574 $ 530,172 $ 2,327,771 $ 1,923,108
Costs and expenses:
Cost of revenues 331,143 351,969 328,220 1,373,520 1,237,974
Research and development 92,254 91,334 92,188 361,805 331,737
Selling, general and administrative 79,598 73,746 76,839 308,434 317,383
Amortization of intangible assets 49,224 48,428 52,104 195,255 174,745
Costs and settlement charges related to shareholder matter 14,310
Impairment of acquisition-related intangible assets 33,944
Impairment related to assets held for sale 1,960 37,219
Goodwill impairment charge 488,504
Restructuring costs 5,618 17,237 9,088 26,131
(Gain) related to investment in Deca Technologies Inc.         (112,774 )
Total costs and expenses 557,837   565,477   568,548   2,262,412   2,534,863  
Operating income (loss) 39,710 39,097 (38,376 ) 65,359 (611,755 )
Interest and other expense, net (21,563 ) (18,619 ) (24,389 ) (75,951 ) (54,879 )
Income (loss) before income taxes and non-controlling interest 18,147 20,478 (62,765 ) (10,592 ) (666,634 )
Income tax benefit (provision) 2,773 (4,500 ) (790 ) (11,155 ) (2,616 )
Share in net loss of equity method investees (56,930 ) (4,931 ) (8,766 ) (71,772 ) (17,644 )
Net income (loss) (36,010 ) 11,047 (72,321 ) (93,519 ) (686,894 )
Net (gain) loss attributable to non-controlling interests 12   (14 ) (46 ) (132 ) 643  
Net income (loss) attributable to Cypress $ (35,998 ) $ 11,033   $ (72,367 ) $ (93,651 ) $ (686,251 )
Net income (loss) per share attributable to Cypress:
Basic $ (0.10 ) $ 0.03 $ (0.22 ) $ (0.28 ) $ (2.15 )
Diluted $ (0.10 ) $ 0.03 $ (0.22 ) $ (0.28 ) $ (2.15 )
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 343,011 332,873 322,800 333,451 319,522
Diluted 343,011 360,311 322,800 333,451 319,522
 

CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per-share data)

(Unaudited)

 

Table A: GAAP to Non-GAAP reconciling items: Three Months Ended Q4 2017

 

Cost of
revenues

 

Research and
development

 

SG&A and
Restructuring
costs

 

Amortization of
Intangible assets

 

Interest and
other expense,
net

 

Income tax
(provision)
benefit

GAAP [i] $ 331,143 $ 92,254 $ 85,217 $ 49,224 $ (78,493 ) $ 2,773
[1] Stock based compensation 3,497 8,943 12,610
[2] Changes in value of deferred compensation plan 92 389 617 (1,210 )
[3] Merger, integration, related costs and adjustments related to assets held for sale 1,334 (135 ) 11
[4] Share in net loss and impairment of equity method investees1 56,930
[5] Imputed interest on convertible debt, equity component amortization on convertible debt and others 3,378
[6] Loss on extinguishment of Spansion convertible notes 4,250
[7] Amortization of debt issuance costs 1,011
[8] Amortization of intangible assets 49,224
[9] Litigation settlement (1,000 )
[10] Restructuring charges 5,618
[11] Tax impact2         151   (5,027 )
Non - GAAP [ii] $ 326,220   $ 82,922   $ 67,507   $   $ (13,972 ) $ (2,254 )
Impact of reconciling items [ii - i] $ (4,923 ) $ (9,332 ) $ (17,710 ) $ (49,224 ) $ 64,521 $ (5,027 )
 

1. Includes $51.2 million impairment charge recorded for the investment in Enovix Corporation.

2. Includes benefit of $8.6 million related to impact from recent tax reform.

 

Table B: GAAP to Non-GAAP reconciling items: Three Months Ended Q3 2017

 

Cost of
revenues

 

Research and
development

 

SG&A and
Restructuring
costs

 

Amortization
of Intangible
assets

 

Interest and
other
expense, net

 

Income tax
(provision)
benefit

GAAP [i] $ 351,969 $ 91,334 $ 73,746 $ 48,428 $ (23,550 ) $ (4,500 )
[1] Stock based compensation 5,156 9,604 8,235
[2] Changes in value of deferred compensation plan 208 1,278 1,415 (1,734 )
[3] Merger, integration, related costs and adjustments related to assets held for sale 1,336 (636 )
[4] Inventory step-up related to acquisition accounting 704
[5] Share in net loss from equity method investees 4,931
[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others 3,521
[7] Write-off of unamortized debt issuance costs related to Term Loan A 2,996
[8] Amortization of debt issuance costs 856
[9] Amortization of intangible assets 48,428
[10] Tax impact         51   1,598  
Non - GAAP [ii] $ 344,565   $ 80,452   $ 64,732   $   $ (12,929 ) $ (2,902 )
Impact of reconciling items [ii - i] $ (7,404 ) $ (10,882 ) $ (9,014 ) $ (48,428 ) $ 10,621 $ 1,598
 

Table C: 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] Share in net loss from equity method investees

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 5,618

[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 D: GAAP to Non-GAAP reconciling items (Twelve Months Ended Q4 2017)

 

Cost of
revenues

 

Research
and
development

 

SG&A
(including
restructuring
charges

 

Costs and
settlement
charges
related to
shareholder
matter

 

Amortization
of Intangible
assets

 

Interest and
other
expense,
net

 

Income
tax
(provision)
benefit

GAAP [i] $ 1,373,520 $ 361,805 $ 317,522 $ 14,310 $ 195,255 $ (147,723 ) $ (11,157 )
[1] Stock based compensation, including costs related to modification of equity awards 18,816 41,593 43,907
[2] Changes in value of deferred compensation plan 602 2,826 3,936 (6,087 )
[3] Merger, integration, related costs and adjustments related to assets held for sale 5,357 (96 ) (1,057 ) 10
[4] Inventory Step-up related to acquisition accounting 3,736
[5] Share in net loss and impairment of equity method investees1 71,772
[6] Amortization of intangible assets 195,255
[7] Imputed interest on Convertible debt and others 20,538
[8] Settlement charges (1,000 ) 3,500
[9] Restructuring charges

9,088
[10] Loss on extinguishment of Spansion convertible notes

4,250

[11] Tax impact of Non-GAAP adjustments2           844   118  
Non - GAAP [ii] $ 1,345,009   $ 317,482   $ 262,648   $ 10,810   $   $ (56,396 ) $ (11,039 )
Impact of reconciling items [ii - i] $ (28,511 ) $ (44,323 ) $ (54,874 ) $ (3,500 ) $ (195,255 ) $ 91,327   $ 118  
 

1. Includes $51.2 million impairment charge recorded for the investment in Enovix Corporation.

2. Includes benefit of $8.6 million related to impact from recent tax reform.

 

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

 

Cost of
revenues

 

Research
and
development

 

SG&A
(including
restructuring
charges)

 

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] Share in net loss from equity method investees 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: Revenue

  Three Months Ended   Twelve Months Ended (a)
Q4'17   Q3'17   Q4'16 Q4'17   Q4'16
 
GAAP revenue $ 597,547 $ 604,574 $ 530,172 $ 2,327,771 $ 1,923,108
Add: Revenue from Intellectual Property License         18,750
Non-GAAP revenue $ 597,547   $ 604,574   $ 530,172   $ 2,327,771   $ 1,941,858

(a) Our net sales for twelve months ended 2016 include $18.75 million, of legacy Spansion non-GAAP licensing revenue in MPD, APAC region and direct channel, respectively.

 

Table G: Margin %

Three Months Ended
Q4'17   Q3'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP GAAP   Non-GAAP
Revenue (See Table F) [i] $ 597,547 $ 597,547 $ 604,574 $ 604,574 $ 530,172 $ 530,172
Cost of revenues (See Table A, B, C) [ii] 331,143   326,220   351,969   344,565   328,220   317,594  
Margin [iii] [ii - i] $ 266,404   $ 271,327   $ 252,605   $ 260,009   $ 201,952   $ 212,578  
Margin % [iii / i] 44.6 % 45.4 % 41.8 % 43.0 % 38.1 % 40.1 %
 

Table H: Margin %

  Twelve Months Ended
Q4'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP
Revenue (See Table A) [i] $ 2,327,771 $ 2,327,771 $ 1,923,108 $ 1,941,858
Cost of revenues (See Table D, E) [ii] 1,373,520   1,345,009   1,237,974   1,185,129  
Margin [iii] [ii - i] $ 954,251   $ 982,762   $ 685,134   $ 756,729  
Margin % [iii / i] 41.0 % 42.2 % 35.6 % 39.0 %
 

Table I: Operating income (loss)

  Three Months Ended   Twelve Months Ended
Q4'17   Q3'17   Q4'16 Q4'17   Q4'16
GAAP operating income (loss) [i] $ 39,710 $ 39,097 $ (38,376 ) $ 65,359 $ (611,755 )
Impact of reconciling items on Revenue (see Table F) 18,750
Impact of reconciling items on Cost of revenues (see Table A, B, C, D, E) 4,923 7,404 10,626 28,511 52,845
Impact of reconciling items on R&D (see Tables A, B, C, D, E) 9,332 10,882 17,310 44,323 45,518
Impact of reconciling items on SG&A (see Tables A, B, C, D, E) 17,710 9,014 34,957 54,874 103,713
Impact of Amortization of Intangible Assets (see Tables A, B, C, D, E) 49,224 48,428 52,104 195,255 174,745
Impact of Goodwill impairment charge (see Table E) 488,504
Impact of Impairment related to assets held for sale (see Table C, E) 1,960 37,219
Impact of Impairment related to acquisition related intangibles (see Table E) 33,944

Costs and settlement charges related to shareholder matter (see Table D)

3,500
(Gain) related to investment in Deca Technologies (see Table E)   $       (112,774 )
Non-GAAP operating income [ii] $ 120,899   $ 114,825   $ 78,581   $ 391,822   $ 230,709  
Impact of reconciling items [ii - i] 81,189   75,728   116,957   326,463   842,464  
 

Table J: Pre-tax profit

  Three Months Ended   Twelve Months Ended
Q4'17   Q3'17   Q4'16 Q4'17   Q4'16
GAAP Pre-tax profit $ (38,783 ) $ 15,547 $ (71,531 ) $ (82,364 ) $ (684,278 )
Impact of reconciling items on operating income (see Table I) 81,189 75,728 116,957 326,463 842,464
Interest and other expense, net (see Table A, B, C, D, E) 64,521   10,621   11,675   91,327   24,945  
Non-GAAP Pre-tax income $ 106,927   $ 101,896   $ 57,101   $ 335,426   $ 183,131  
 

Table K: Net income (loss)

  Three Months Ended   Twelve Months Ended
Q4'17   Q3'17   Q4'16 Q4'17   Q4'16
GAAP Net income (loss) $ (35,998 ) $ 11,033 $ (72,367 ) $ (93,651 ) $ (686,251 )
Impact of reconciling items on Operating income (see Table I) 81,189 75,728 116,957 326,463 842,464
Interest and other expense, net (see Table A, B, C, D, E) 64,521 10,621 11,675 91,327 24,945
Income tax (provision) benefit (see Table A, B, C, D, E) (5,027 ) 1,598   (2,442 ) 118   (10,687 )
Non-GAAP Net income $ 104,685   $ 98,980   $ 53,823   $ 324,257   $ 170,471  
 

Table L: Pretax profit margin %

  Three Months Ended
Q4'17   Q3'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP   GAAP   Non-GAAP
Revenue (See Table F) [i] $ 597,547 $ 597,547 $ 604,574 $ 604,574 $ 530,172 $ 530,172
Pre-tax profit (see Table J) [ii] $ (38,783 ) $ 106,927 $ 15,547 $ 101,896 (71,531 ) 57,101
Pre-tax profit margin % [ii / i] (6.5 )% 17.9 % 2.6 % 16.9 % (13.5

)%

10.8 %
 

Table M: Pretax profit margin %

  Twelve Months Ended
Q4'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP
Revenue (See Table F) [i] $ 2,327,771 $ 2,327,771 $ 1,923,108 $ 1,941,858
Pre-tax profit (see Table J) [ii] $ (82,364 ) $ 335,426 $ (684,278 ) $ 183,131
Pre-tax profit margin % [ii / i] (3.5 )% 14.4 % (35.6 )% 9.4 %
 

Table N: Weighted-average shares, diluted

  Three Months Ended
Q4'17   Q3'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP GAAP   Non-GAAP
Weighted-average common shares outstanding, basic 343,011 343,011 332,873 332,873 322,800 322,800
Effect of dilutive securities:
Stock options, unvested restricted stock and other 14,003 7,884 12,948 17,199
Impact of convertible bond   12,110   19,554   18,790     15,138
Weighted-average common shares outstanding, diluted 343,011   369,124   360,311   364,611   322,800   355,137
 

Table O: Weighted-average shares, diluted

  Twelve Months Ended
Q4'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP
Weighted-average common shares outstanding, basic 333,451 333,451 319,522 319,522
Effect of dilutive securities:
Stock options, unvested restricted stock and other 14,838 15,370
Impact of convertible bond   16,851     15,138
Weighted-average common shares outstanding, diluted 333,451   365,140   319,522   350,030
 

Table P: Net income (loss) Per Share

  Three Months Ended
Q4'17   Q3'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP GAAP   Non-GAAP
Net income (loss) (see Table K) $ (35,998 ) $ 104,685 $ 11,033 $ 98,980 $ (72,367 ) $ 53,823
Weighted-average common shares outstanding (see Table N) [ii] 343,011   369,124   360,311   364,611   322,800   355,137
Non-GAAP earnings per share - Diluted [i/ii] $ (0.10 ) $ 0.28   $ 0.03   $ 0.27   $ (0.22 ) $ 0.15
 

Table Q: Net income (loss) Per Share

  Twelve Months Ended
Q4'17   Q4'16
GAAP   Non-GAAP GAAP   Non-GAAP
Net income (loss) (see Table K) $ (93,651 ) $ 324,257 $ (686,251 ) $ 170,471
Weighted-average common shares outstanding (see Table O) [ii] 333,451   365,140   319,522   350,030
Non-GAAP earnings per share - Diluted [i/ii] $ (0.28 ) $ 0.89   $ (2.15 ) $ 0.49
 

Table R: Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")

  Three Months Ended   Twelve Months Ended
Q4'17   Q3'17   Q4'16 Q4'17   Q4'16
GAAP operating income (loss) (See Table I) $ 39,710 $ 39,097 $ (38,376 ) $ 65,359 $ (611,755 )
Impact of reconciling items on Operating income (see Table I) 81,189   75,728   116,957   326,463   842,464  
Non-GAAP operating income $ 120,899 $ 114,825 $ 78,581 $ 391,822 $ 230,709
GAAP depreciation 18,701 16,674 16,057 67,578 89,464
Merger-related depreciation         (13,964 )
Non-GAAP EBITDA $ 139,600   $ 131,499   $ 94,638   $ 459,400   $ 306,209  
 

CYPRESS SEMICONDUCTOR CORPORATION

SUPPLEMENTAL FINANCIAL DATA

(In thousands except financial ratios and per share amounts)

(Unaudited)

   
Three Months Ended Twelve Months Ended

December 31,
2017

 

October 1,
2017

 

January 1,
2017

December 31,
2017

 

January 1,
2017

Selected Cash Flow Data (Preliminary):

 
Net cash provided by operating activities $ 201,541 $ 143,778 $ 89,787 $ 403,487 $ 217,419
Net cash used in investing activities $ (6,036 ) $ (15,051 ) $ (19,008 ) $ (14,429 ) $ (613,439 )
Net cash (used in) provided by financing activities $ (175,472 ) $ (105,935 ) $ (37,262 ) $ (357,634 ) $ 289,502

Other Supplemental Data (Preliminary):

Capital expenditures $ 7,790 $ 17,144 $ 11,889 $ 54,284 $ 57,398
Depreciation $ 18,701 $ 16,674 $ 16,057 $ 67,578 $ 89,464
Payment of dividend $ 36,670 $ 36,325 $ 35,350 $ 144,749 $ 141,410
Dividend paid per share $ 0.11 $ 0.11 $ 0.11 $ 0.44 $ 0.44
Total debt (principal amount) $ 1,061,414 $ 1,204,240 $ 1,309,017 $ 1,061,414 $ 1,309,017
Leverage ratio1 2.31 2.91 4.27 2.31 4.27
 

1.  Total debt (principal amount) / Last 12 months Non-GAAP EBITDA (Table R)

 

CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FORWARDING 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 % 43.0% - 44.0% % 0.6 % % 0.7 % 44.5% - 45.5%
Diluted earnings per share $(0.03) to $0.01 $ 0.15 $ 0.07 $ 0.02 $ 0.01 $0.22 to $0.26

Cypress Semiconductor Corporation
Thad Trent, 408-943-2925
EVP Finance & Administration and CFO
Ann Minooka, 408-456-1962
Vice President, Corporate Communications

Source: Cypress Semiconductor Corporation

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