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,
- 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 gross margin, non-GAAP operating expenses, non-GAAP EPS, net interest expense, tax expense, capital expenditures and depreciation for the second quarter of fiscal 2018 (on a GAAP or non-GAAP basis); sources of revenue for the second quarter; the expected inventory levels, cash flow, pricing and profitability; estimates of certain GAAP to non-GAAP reconciling items for the second quarter; the demand environment for semiconductors; the expected impact of our gross 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; the 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; 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 and PSoC are registered trademarks and ModusToolbox and Excelon are trademarks of Cypress Semiconductor Corporation. All other trademarks are property of their owners.
| CYPRESS SEMICONDUCTOR CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| April 1, 2018 | December 31, 2017 | |||||||
| ASSETS | ||||||||
| Cash, cash equivalents and short-term investments | $ | 106,752 | $ | 151,596 | ||||
| Accounts receivable, net | 393,303 | 295,991 | ||||||
| Inventories | 275,449 | 272,127 | ||||||
| Property, plant and equipment, net | 294,299 | 289,554 | ||||||
| Goodwill and other intangible assets, net | 2,100,281 | 2,154,592 | ||||||
| Other assets | 370,339 | 373,190 | ||||||
| Total assets | $ | 3,540,423 | $ | 3,537,050 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | 236,930 | $ | 213,101 | ||||
| Income tax liabilities | 54,083 | 52,006 | ||||||
| Revenue reserves, deferred margin and other liabilities | 499,921 | 497,838 | ||||||
| Revolving credit facility and long-term debt | 920,684 | 956,513 | ||||||
| Total liabilities | 1,711,618 | 1,719,458 | ||||||
| Total Cypress stockholders' equity | 1,827,737 | 1,816,536 | ||||||
| Non-controlling interest | 1,068 | 1,056 | ||||||
| Total equity | 1,828,805 | 1,817,592 | ||||||
| Total liabilities and equity | $ | 3,540,423 | $ | 3,537,050 | ||||
| CYPRESS SEMICONDUCTOR CORPORATION | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| ON A GAAP BASIS | |||||||||||||||
| (In thousands, except per-share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| April 1, 2018 | December 31, 2017 | April 2, 2017 | |||||||||||||
| Revenues | $ | 582,241 | $ | 597,547 | $ | 531,874 | |||||||||
| Cost of revenue | 369,849 | 375,162 | 374,766 | ||||||||||||
| Gross profit 1 | 212,392 | 222,385 | 157,108 | ||||||||||||
| Research and development | 93,233 | 94,566 | 89,348 | ||||||||||||
| Selling, general and administrative | 83,397 | 86,125 | 81,333 | ||||||||||||
| Total operating expenses | 176,630 | 180,691 | 170,681 | ||||||||||||
| Operating income (loss) | 35,762 | 41,694 | (13,573 | ) | |||||||||||
| Interest and other expense, net | (18,154 | ) | (21,561 | ) | (19,359 | ) | |||||||||
| Income (loss) before income taxes and non-controlling interest | 17,608 | 20,133 | (32,932 | ) | |||||||||||
| Income tax provision | (5,057 | ) | 2,773 | (4,927 | ) | ||||||||||
| Equity in net loss of equity method investees | (3,461 | ) | (56,930 | ) | (5,076 | ) | |||||||||
| Net income (loss) | 9,090 | (34,024 | ) | (42,935 | ) | ||||||||||
| Net gain attributable to non-controlling interests | (12 | ) | 12 | (64 | ) | ||||||||||
| Net income (loss) attributable to Cypress | $ | 9,078 | $ | (34,012 | ) | $ | (42,999 | ) | |||||||
| Net income (loss) per share attributable to Cypress: | |||||||||||||||
| Basic | $ | 0.03 | $ | (0.10 | ) | $ | (0.13 | ) | |||||||
| Diluted | $ | 0.02 | $ | (0.10 | ) | $ | (0.13 | ) | |||||||
| Cash dividend declared per share | $ | 0.11 | $ | 0.11 | $ | 0.11 | |||||||||
| Shares used in net income (loss) per share calculation: | |||||||||||||||
| Basic | 355,461 | 343,011 | 326,964 | ||||||||||||
| Diluted | 370,592 | 343,011 | 326,964 | ||||||||||||
| 1. | During Q1'18, certain expenses have been reclassified as part of cost of revenue. Historical results have been conformed with Q1'18 presentation. |
| 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 Q1 2018 |
|||||||||||||||||||||||||
|
Selling, general |
Interest and |
Income tax |
|||||||||||||||||||||||
|
Cost of |
Research and |
and |
other |
(provision) |
|||||||||||||||||||||
|
revenues |
development |
administrative |
expense, net |
benefit |
|||||||||||||||||||||
| GAAP [i] | $ | 369,849 | $ | 93,233 | $ | 83,397 | $ | (21,615 | ) | $ | (5,057 | ) | |||||||||||||
| [1] Stock based compensation | 3,584 | 6,713 | 8,161 | — | — | ||||||||||||||||||||
| [2] Changes in value of deferred compensation plan | 61 | 272 | 350 | (266 | ) | — | |||||||||||||||||||
| [3] Share in net loss and impairment of equity method investees | — | — | — | 3,461 | — | ||||||||||||||||||||
| [4] Imputed interest on convertible debt, equity component amortization on convertible debt and others | — | — | — | 3,431 | — | ||||||||||||||||||||
| [5] Loss on extinguishment of Spansion convertible notes and debt issuance cost write off due to refinancing | — | — | — | 3,258 | — | ||||||||||||||||||||
| [6] Amortization of debt issuance costs | — | — | — | 1,073 | — | ||||||||||||||||||||
| [7] Amortization of acquisition-related intangible assets and other | 49,438 | — | 5,150 | — | — | ||||||||||||||||||||
| [8] Restructuring charges | 1,887 | 292 | 1,917 | — | — | ||||||||||||||||||||
| [9] Tax impact | — | — | — | 393 | 2,043 | ||||||||||||||||||||
| Non - GAAP [ii] | $ | 314,879 | $ | 85,956 | $ | 67,819 | $ | (10,265 | ) | $ | (3,014 | ) | |||||||||||||
| Impact of reconciling items [ii - i] | $ | (54,970 | ) | $ | (7,277 | ) | $ | (15,578 | ) | $ | 11,350 | $ | 2,043 | ||||||||||||
|
Table B: GAAP to Non-GAAP reconciling items: Three Months Ended Q4 2017 |
|||||||||||||||||||||||||
|
Research |
Selling, general |
Interest and |
Income tax |
||||||||||||||||||||||
|
Cost of |
and |
and |
other expense, |
(provision) |
|||||||||||||||||||||
|
revenues |
development |
administrative |
net |
benefit |
|||||||||||||||||||||
| GAAP [i] | $ | 375,162 | $ | 94,566 | $ | 86,125 | $ | (78,491 | ) | $ | 2,773 | ||||||||||||||
| [1] Stock based compensation | 3,001 | 8,050 | 12,014 | — | — | ||||||||||||||||||||
| [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 investees | — | — | — | 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 acquisition-related intangible assets | 44,199 | — | 5,025 | — | — | ||||||||||||||||||||
| [9] Litigation settlement | — | — | (1,000 | ) | — | — | |||||||||||||||||||
| [10] Restructuring charges | 317 | 3,205 | 2,097 | — | — | ||||||||||||||||||||
| [11] Tax impact | — | — | — | 151 | (5,027 | ) | |||||||||||||||||||
| Non - GAAP [ii] | $ | 326,219 | $ | 82,922 | $ | 67,507 | $ | (13,970 | ) | $ | (2,254 | ) | |||||||||||||
| Impact of reconciling items [ii - i] | $ | (48,943 | ) | $ | (11,644 | ) | $ | (18,618 | ) | $ | 64,521 | $ | (5,027 | ) | |||||||||||
|
Table C: GAAP to Non-GAAP reconciling items: Three Months Ended Q1 2017 |
||||||||||||||||||||
|
Selling, general |
Interest and |
Income tax |
||||||||||||||||||
|
Cost of |
Research and |
and |
other expense, |
(provision) |
||||||||||||||||
|
revenues |
development |
administrative |
net |
benefit |
||||||||||||||||
| GAAP [i] | 374,766 | 89,348 | 81,333 | (24,435 | ) | (4,927 | ) | |||||||||||||
| [1] Stock based compensation | 3,884 | 10,286 | 8,983 | — | — | |||||||||||||||
| [2] Changes in value of deferred compensation plan | 167 | 597 | 1,008 | (1,558 | ) | — | ||||||||||||||
| [3] Merger, integration, related costs and adjustments related to assets held for sale | 1,350 | — | (1,479 | ) | — | — | ||||||||||||||
| [4] Inventory Step-up related to acquisition accounting | 2,864 | — | — | — | — | |||||||||||||||
| [5] Share in net loss and impairment of equity method investees | — | — | — | 5,076 | — | |||||||||||||||
| [6] Imputed interest on convertible debt, equity component amortization on convertible debt and others | — | — | — | 3,489 | — | |||||||||||||||
| [7] Amortization of debt issuance costs | — | — | — | 858 | — | |||||||||||||||
| [8] Amortization of acquisition-related intangible assets | 43,167 | — | 5,083 | — | — | |||||||||||||||
| [9] Restructuring charges | 231 | 2,352 | (12 | ) | — | — | ||||||||||||||
| [10] Tax impact | — | — | — | 415 | 2,125 | |||||||||||||||
| Non - GAAP [ii] | 323,103 | 76,113 | 67,750 | (16,155 | ) | (2,802 | ) | |||||||||||||
| Impact of reconciling items [ii - i] | (51,663 | ) | (13,235 | ) | (13,583 | ) | 8,280 | 2,125 | ||||||||||||
|
Table D: Gross Margin % |
||||||||||||||||||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||||||||||||||
| Revenue [i] | $ | 582,241 | $ | 582,241 | $ | 597,547 | $ | 597,547 | $ | 531,874 | $ | 531,874 | ||||||||||||||||||
| Cost of revenues (See Table A, B, C) [ii] | 369,849 | 314,879 | 375,162 | 326,219 | 374,766 | 323,103 | ||||||||||||||||||||||||
| Gross profit [iii] [ii - i] | $ | 212,392 | $ | 267,362 | $ | 222,385 | $ | 271,328 | $ | 157,108 | $ | 208,771 | ||||||||||||||||||
| Gross Margin % [iii / i] | 36.5 | % | 45.9 | % | 37.2 | % | 45.4 | % | 29.5 | % | 39.3 | % | ||||||||||||||||||
|
Table E: Operating income |
|||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | |||||||||||||
| GAAP operating income (loss) [i] | $ | 35,762 | $ | 41,694 | $ | (13,573 | ) | ||||||||
| Impact of reconciling items on Cost of revenues (see Table A, B, C) | 54,970 | 48,943 | 51,663 | ||||||||||||
| Impact of reconciling items on R&D (see Table A, B, C) | 7,277 | 11,644 | 13,235 | ||||||||||||
| Impact of reconciling items on SG&A (see Table A, B, C) | 15,578 | 18,618 | 13,583 | ||||||||||||
| Non-GAAP operating income [ii] | $ | 113,587 | $ | 120,899 | $ | 64,908 | |||||||||
| Impact of reconciling items [ii - i] | $ | 77,825 | $ | 79,205 | $ | 78,481 | |||||||||
| GAAP Operating Margin (GAAP Operating income / Revenue) | 6.1 | % | 7.0 | % | (2.6 | )% | |||||||||
| Non-GAAP Operating Margin (Non-GAAP Operating income / Revenue) | 19.5 | % | 20.2 | % | 12.2 | % | |||||||||
|
Table F: Pre-tax profit |
||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||
| GAAP Pre-tax income (loss) | $ | 14,147 | $ | (36,797 | ) | $ | (38,008 | ) | ||||||
| Impact of reconciling items on Operating income (see Table E) | 77,825 | 79,205 | 78,481 | |||||||||||
| Interest and other expense, net (see Table A, B, C) | 11,350 | 64,521 | 8,280 | |||||||||||
| Non-GAAP Pre-tax income | $ | 103,322 | $ | 106,929 | $ | 48,753 | ||||||||
|
Table G: Net income (loss) |
||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||
| GAAP Net income (loss) | $ | 9,078 | $ | (34,012 | ) | $ | (42,999 | ) | ||||||
| Impact of reconciling items on Operating income (see Table E) | 77,825 | 79,205 | 78,481 | |||||||||||
| Interest and other expense, net (see Table A, B, C) | 11,350 | 64,521 | 8,280 | |||||||||||
| Income tax benefit (see Table A, B, C) | 2,043 | (5,027 | ) | 2,125 | ||||||||||
| Non-GAAP Net income | $ | 100,296 | $ | 104,687 | $ | 45,887 | ||||||||
|
Table H: Pretax profit margin % |
||||||||||||||||||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||||||||||||||
| Revenue [i] | $ | 582,241 | $ | 582,241 | $ | 597,547 | $ | 597,547 | $ | 531,874 | $ | 531,874 | ||||||||||||||||||
| Pre-tax profit (loss) (see Table F) [ii] | $ | 14,147 | $ | 103,322 | $ | (36,797 | ) | $ | 106,929 | $ | (38,008 | ) | $ | 48,753 | ||||||||||||||||
| Pre-tax profit margin % [ii / i] | 2.4 | % | 17.7 | % | (6.2 | )% | 17.9 | % | (7.1 | )% | 9.2 | % | ||||||||||||||||||
|
Table I: Weighted-average shares, diluted |
||||||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||
| Weighted-average common shares outstanding, basic | 355,461 | 355,461 | 343,011 | 343,011 | 326,964 | 326,964 | ||||||||||||
| Effect of dilutive securities: | ||||||||||||||||||
| Stock options, unvested restricted stock and other | 7,897 | 12,515 | — | 14,003 | — | 14,852 | ||||||||||||
| Impact of convertible bond | 7,234 | 4,750 | — | 12,110 | — | 17,304 | ||||||||||||
| Weighted-average common shares outstanding, diluted | 370,592 | 372,726 | 343,011 | 369,124 | 326,964 | 359,120 | ||||||||||||
|
Table J: Net income (loss) Per Share |
||||||||||||||||||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||||||||||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||||||||||
| Net income (loss) (see Table G) [i] | $ | 9,078 | $ | 100,296 | $ | (34,012 | ) | $ | 104,687 | $ | (42,999 | ) | $ | 45,887 | ||||||||||||
| Weighted-average common shares outstanding (see Table I) [ii] | 370,592 | 372,726 | 343,011 | 369,124 | 326,964 | 359,120 | ||||||||||||||||||||
| Non-GAAP earnings per share - Diluted [i/ii] | $ | 0.02 | $ | 0.27 | $ | (0.10 | ) | $ | 0.28 | $ | (0.13 | ) | $ | 0.13 | ||||||||||||
|
Table K: Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") |
||||||||||
| Q1'18 | Q4'17 | Q1'17 | ||||||||
| GAAP operating income (loss) (See Table E) | 35,762 | 41,694 | (13,573 | ) | ||||||
| Impact of reconciling items on Operating income (see Table E) | 77,825 | 79,205 | 78,481 | |||||||
| Non-GAAP operating income | 113,587 | 120,899 | 64,908 | |||||||
| GAAP Depreciation | 17,140 | 18,701 | 16,157 | |||||||
| Non-GAAP EBITDA | 130,727 | 139,600 | 81,065 | |||||||
| CYPRESS SEMICONDUCTOR CORPORATION | |||||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||
| (In thousands) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| April 1, 2018 | December 31, 2017 | April 2, 2017 | |||||||||||||
|
Selected Cash Flow Data (Preliminary): |
|||||||||||||||
| Net cash provided by operating activities | $ | 31,678 | $ | 201,541 | $ | 25,721 | |||||||||
| Net cash (used in) provided by investing activities | $ | (14,173 | ) | $ | (6,036 | ) | $ | 21,650 | |||||||
| Net cash used in financing activities | $ | (62,348 | ) | $ | (175,472 | ) | $ | (46,043 | ) | ||||||
|
Other Supplemental Data (Preliminary): |
|||||||||||||||
| Capital expenditures | $ | 17,267 | $ | 7,790 | $ | 13,772 | |||||||||
| Depreciation | $ | 17,140 | $ | 18,701 | $ | 16,157 | |||||||||
| Payment of dividend | $ | 38,741 | $ | 36,670 | $ | 35,537 | |||||||||
| Dividend paid per share | $ | 0.11 | $ | 0.11 | $ | 0.11 | |||||||||
| Total debt (principal amount) | $ | 1,017,588 | $ | 1,061,414 | $ | 1,286,401 | |||||||||
| Leverage ratio | 2.00 | 2.91 | $ | 3.83 | |||||||||||
| CYPRESS SEMICONDUCTOR CORPORATION | ||||||||||||||||||||||||||
|
RECONCILIATION OF GAAP FORWARDING LOOKING ESTIMATES TO NON-GAAP FORWARD LOOKING ESTIMATES |
||||||||||||||||||||||||||
|
Forward looking |
||||||||||||||||||||||||||
|
Forward looking |
Non-GAAP |
|||||||||||||||||||||||||
|
GAAP estimate |
estimate |
|||||||||||||||||||||||||
|
(A) |
Adjustments (B) |
(C)=(A)+(B) |
||||||||||||||||||||||||
|
Share-based |
||||||||||||||||||||||||||
|
Amortization of |
compensation |
Other |
||||||||||||||||||||||||
|
intangibles |
expense |
Restructuring |
items |
|||||||||||||||||||||||
| Gross Margin % | 36.0% - 37.0% | 8.0 | % | 0.8 | % | 0.20 | % | 0.4 | % | 45.5% - 46.5% | ||||||||||||||||
| Diluted earnings per share | $0.01 to $0.04 | $ | 0.15 | $ | 0.09 | $ | 0.01 | $ | 0.03 | $0.27 to $0.31 | ||||||||||||||||
