CY
$15.95
Cypress Semiconductr
$.09
.57%
Earnings Details
4th Quarter December 2017
Thursday, February 1, 2018 4:05:03 PM
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Summary

Cypress Semiconductr Beats

Cypress Semiconductr (CY) reported 4th Quarter December 2017 earnings of $0.29 per share on revenue of $597.5 million. The consensus earnings estimate was $0.25 per share on revenue of $593.7 million. The Earnings Whisper number was $0.26 per share. Revenue grew 12.7% on a year-over-year basis.

The company said it expects first quarter non-GAAP earnings of $0.22 to $0.26 per share on revenue of $565.0 million to $595.0 million. The current consensus earnings estimate is $0.22 per share on revenue of $575.7 million for the quarter ending March 31, 2018.

Cypress Semiconductor Corp with its subsidiaries, designs, develops, manufactures and markets high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and system value.

Results
Reported Earnings
$0.29
Earnings Whisper
$0.26
Consensus Estimate
$0.25
Reported Revenue
$597.5 Mil
Revenue Estimate
$593.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cypress Reports Fourth Quarter and Year End 2017 Results

Cypress Semiconductor Corporation (CY), a leader in embedded solutions, today announced its fourth quarter and fiscal 2017 results with the following highlights:

Record fiscal 2017 revenue of $2.33 billion driven by automotive and IoT wireless business performance

Fourth quarter revenue was $597.5 million, a 12.7% year-over-year increase

Fourth quarter GAAP and non-GAAP margin were 44.6% and 45.4%, respectively, and represent a 650bps and 530bps increase year over year

Fourth quarter GAAP EPS and non-GAAP diluted EPS improved by 55% and 87% year over year, respectively

Fiscal 2017 cash from operations of $403.5 million increased 86% year over year.

"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-GAAP(1)
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-GAAP(1)
FY 2017
FY 2016(2)
FY 2017
FY 2016(2,3)
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(R) and Bluetooth(R) 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(R) 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(R) 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,
October 1,
Sequential
2017
2017
Change
Business Unit(1)
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,
January 1,
Sequential
December 31,
January 1,
Sequential
2017
2017
Change
2017
2017
Change
Business Unit(1)
MCD(4,5)
$ 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 & ROW(4)
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%
Direct(4)
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.

-- Revenue;

-- Margin;

-- Margin percent;

-- Research and development expenses;

-- Selling, general and administrative expenses;

Earnings before interest, taxes, depreciation, and amortization ("EBITDA");

-- Provision (benefit) for income taxes;

-- Pretax profit margin percent;

-- 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’ 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:

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’ 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:

-- 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,

-- Loss on extinguishment of debt,

Amortization of debt issuance costs, discounts and 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 and includes the impact of the capped call transactions related to the convertible notes.

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,
October 1,
January 1,
December 31,
January 1,
2017
2017
2017
2017
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
Research and
SG&A and
Amortization of
Interest and
Income tax
revenues
development
Restructuring
Intangible assets
other expense,
(provision)
costs
net
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
1,334
--
(135 )
--
11
--
assets held for sale
[4] Share in net loss and impairment of equity method investees(1)
--
--
--
--
56,930
--
[5] Imputed interest on convertible debt, equity component
--
--
--
--
3,378
--
amortization on convertible debt and others
[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 impact(2)
--
--
--
--
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
Research and
SG&A and
Amortization
Interest and
Income tax
revenues
development
Restructuring
of Intangible
other
(provision)
costs
assets
expense,
benefit
net
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
1,336
--
(636 )
--
--
--
assets held for sale
[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
--
--
--
--
3,521
--
amortization on convertible debt and others
[7] Write-off of unamortized debt issuance costs related to Term
--
--
--
--
2,996
--
Loan A
[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
Research and
SG&A
Amortization
Impairment
Interest
Income tax
revenues
development
of Intangible
related to
and other
provision
assets
assets
expense,
held
net
for sale
GAAP [i]
$ 328,220
$
92,188
$
94,076
$
52,104
$
1,960
$ (33,155 )
$
(790 )
[1] Stock based compensation, including costs related to
6,589
16,687
12,292
--
--
--
--
modification of equity awards
[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
--
--
--
--
--
3,482
--
amortization on convertible debt and others
[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
Research
SG&A
Costs and
Amortization
Interest and
Income
revenues
and
(including
settlement
of Intangible
other
tax
development
restructuring
charges
assets
expense,
(provision)
charges
related
net
benefit
to
shareholder
matter
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
18,816
41,593
43,907
--
--
--
--
modification of equity awards
[2] Changes in value of deferred compensation plan
602
2,826
3,936
--
--
(6,087 )
--
[3] Merger, integration, related costs and adjustments related to
5,357
(96 )
(1,057 )
--
--
10
--
assets held for sale
[4] Inventory Step-up related to acquisition accounting
3,736
--
--
--
--
--
--
[5] Share in net loss and impairment of equity method investees(1)
--
--
--
--
--
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 adjustments(2)
--
--
--
--
--
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
Research
SG&A
Goodwill
(Gain)
Amortization
Impairment
Impairment
Interest
Income tax
revenues
and
(including
impairment
related to
of Intangible
related to
of
and
provision
development
restructuring
charge
investment
assets
assets
acquisition
other
charges)
in
held
related
expense,
Deca
for sale
intangibles
net
Technologies
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
21,366
41,528
42,374
--
--
--
--
--
--
--
modification of equity awards
[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
--
--
30,631
--
--
--
--
--
--
--
charges
[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,
4,923
7,404
10,626
28,511
52,845
D, E)
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,
49,224
48,428
52,104
195,255
174,745
E)
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
--
--
--
--
33,944
Table E)
Costs and settlement charges related to shareholder matter (see
--
--
--
3,500
--
Table D)
(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,
Three Months Ended
Twelve Months Ended
Depreciation and Amortization ("EBITDA")
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,
October 1,
January 1,
December 31,
January 1,
2017
2017
2017
2017
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 ratio(1)
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
Adjustments (B)
Forward
looking GAAP
looking Non-
estimate (A)
GAAP estimate
(C)=(A)+(B)
Amortization of
Share-based
Restructuring
Other
intangibles
compensation
items
expense
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

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SOURCE: Cypress Semiconductor Corporation

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