Cypress Semiconductor Corporation (NASDAQ: CY), today announced
its third quarter 2019 results with the following highlights:
- $574.5 million in revenue, up 7.9% sequentially, and down 8.8%
year-over-year after adjusting for the divestiture of our NAND
business, which was completed on April 1, 2019
- GAAP and Non-GAAP gross margins were 37.7% and 46.9%,
respectively
- GAAP and Non-GAAP operating margins were 7.9% and 21.8%,
respectively
- GAAP and Non-GAAP diluted EPS were $0.03 and $0.30,
respectively
"Cypress had a solid third quarter with strong demand in our MCD
division, where revenue was up 16% sequentially driven by IoT
growth, particularly in our wireless, USB-C, and PSoC product
families," said Hassane El-Khoury, Cypress’ president and chief
executive officer. "Our Cypress 3.0 strategy remains on track as we
deliver consistently strong operating margins, even in a soft
market environment."
On October 16, 2019, the European Commission cleared the
proposed acquisition of Cypress by Infineon Technologies AG
("Infineon") without any conditions. The proposed transaction
previously received antitrust clearances in the Philippines and
South Korea. As announced on June 3, 2019, Infineon and Cypress
have entered into an agreement and plan of merger providing for
Infineon to acquire Cypress for $23.85 per share in cash,
corresponding to an enterprise value of approximately $10 billion.
The combination of our highly-complementary product portfolios
opens up great potential in the high-growth areas of automotive and
IoT. Due to the pending transaction, Cypress will not hold an
earnings conference call and has suspended the practice of
providing forward-looking guidance.
Revenue and earnings for the quarter are shown below with
comparable periods:
(In thousands, except percentages and per-share data)
GAAP
Non-GAAP1
Q3 2019
Q2 2019
Q3 2018
Q3 2019
Q2 2019
Q3 2018
Revenue
$
574,521
$
532,221
$
673,035
$
574,521
$
532,221
$
673,035
Gross margin
37.7
%
37.3
%
38.6
%
46.9
%
47.0
%
47.0
%
Operating margin
7.9
%
2.5
%
11.2
%
21.8
%
20.4
%
24.7
%
Net income (loss)
$
12,683
$
(12,729
)
$
50,695
$
115,794
$
97,241
$
152,725
Diluted EPS
$
0.03
$
(0.03
)
$
0.14
$
0.30
$
0.25
$
0.40
Year-to-date revenue and earnings are shown below with
comparable periods:
(In thousands, except percentages and per-share data)
GAAP
Non-GAAP1
Nine Months Ended
Nine Months Ended
Q3 2019
Q3 2018
Q3 2019
Q3 2018
Revenue
$
1,645,746
$
1,879,366
$
1,645,746
$
1,879,366
Gross margin
37.5
%
37.6
%
47.1
%
46.4
%
Operating margin
5.5
%
8.6
%
21.1
%
22.3
%
Net income
$
19,668
$
87,478
$
315,138
$
377,984
Diluted EPS
$
0.05
$
0.23
$
0.82
$
1.01
1. See the "Reconciliation of GAAP Financial Measures to
Non-GAAP Financial Measures" tables ("Non-GAAP Reconciliation
Tables") included below.
REVENUE SUMMARY
(In thousands, except
percentages)
(Unaudited)
Three Months Ended
Business
Unit¹
September 29, 2019
June 30, 2019
September 30, 2018
Sequential Change
Year-over-year Change
MCD
$
410,748
$
354,225
$
413,413
16.0
%
(0.6
)%
MPD2
163,773
177,996
259,622
(8.0
)%
(36.9
)%
Total
$
574,521
$
532,221
$
673,035
7.9
%
(14.6
)%
Three Months Ended
End
Use
September 29, 2019
June 30, 2019
September 30, 2018
IoT
42.6
%
37.5
%
37.4
%
Automotive
36.5
%
38.0
%
31.0
%
Legacy
20.9
%
24.5
%
31.6
%
Total
100
%
100
%
100
%
- The Microcontroller and Connectivity Division ("MCD") includes
microcontroller, wireless connectivity and USB products and the
Memory Products Division ("MPD") includes RAM, Flash and AgigA Tech
products.
- MPD revenue for the three months ended September 29, 2019 and
June 30, 2019 reflect divestment of our NAND business to a newly
formed joint venture, which was completed on April 1, 2019.
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ABOUT CYPRESS
Cypress is a leader in advanced embedded 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.
- Non-GAAP gross profit;
- Non-GAAP gross margin;
- Non-GAAP cost of revenues;
- Non-GAAP interest and other expense, net;
- Non-GAAP research and development expenses;
- Non-GAAP selling, general and administrative expenses;
- Adjusted EBITDA;
- Non-GAAP income tax provision (benefit);
- Non-GAAP pre-tax profit;
- Non-GAAP pre-tax profit margin;
- Non-GAAP operating income;
- Non-GAAP operating margin;
- Non-GAAP net income;
- Non-GAAP diluted earnings per share; and
- Free cash flow.
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 Reconciliation Tables in this press
release, each of the non-GAAP financial measures (other than free
cash flow) 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.
Stock-based compensation expense:
Stock-based compensation expense relates primarily to employee
stock options, restricted stock units, performance stock units and
the employee stock purchase plan. Stock-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
stock-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 stock-based compensation expense is
that they do not reflect the full costs of compensating
employees.
Other adjustments: Other items are
excluded from non-GAAP financial measures because management does
not consider them to be 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
such non-GAAP measures may not be comparable to similarly titled
non-GAAP financial measures used by other companies. Other
adjustments primarily include:
- Costs incurred in connection with the proposed merger,
- Impairments of equity-method investments,
- 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,
- Income tax adjustment related to the use of the net operating
loss, non-cash impact of not asserting indefinite reinvestment on
earnings of our foreign subsidiaries, deferred tax expense not
affecting taxes payable (i.e. release of valuation allowance), and
non-cash expense (benefit) related to uncertain tax positions,
- 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
include the impact of non-GAAP adjustments on the number of diluted
shares underlying stock-based compensation awards and the impact of
the capped call transactions related to the convertible notes.
Adjusted EBITDA: Adjusted EBITDA is
calculated by adjusting net income (loss) attributable to Cypress
to exclude (without duplication): interest expense, income tax
provision, depreciation, amortization, equity in net loss of equity
method investees, and the non-GAAP adjustments described above
(acquisition related charges, stock-based compensation expense, and
other adjustments). Adjusted EBITDA may be useful to management,
investors and other users of our financial information because the
exclusion of certain gains, losses, and expenses facilitates
comparisons of Cypress' operating performance on a period to period
basis. Adjusted EBITDA should not be considered as a measure of
discretionary cash available to invest in the growth of the
business. In addition, adjusted EBITDA should not be considered as
a substitute for, or superior to net income attributable to
Cypress, operating income, or diluted earnings per share, or other
financial measures prepared in accordance with GAAP.
Free Cash Flow: Free cash
flow is calculated as net cash provided by (used in) operating
activities, less acquisition of property, plant and equipment, net
(i.e., acquisition of property, plant and equipment less proceeds
received from disposition of property, plant and equipment). We
consider free cash flow to be a liquidity measure that provides
useful information to management and investors about the amount of
cash generated by business operations, after deducting our net
payments for acquisitions and dispositions of property and
equipment, which cash can then be used for strategic opportunities
or other business purposes including, among others, investing in
the Company's business, repurchasing stock, making strategic
acquisitions, repayment of debt, and strengthening the balance
sheet. A limitation of free cash flow is that it does not represent
the total increase or decrease in the cash balance for the period.
Management compensates for this limitation by also relying on the
net increase in cash and cash equivalents and restricted cash as
presented in the Company’s condensed consolidated statements of
cash flows prepared in accordance with GAAP which incorporates all
cash movements during the period.
FORWARD-LOOKING STATEMENTS
Statements in this press release that are not historical facts
and that refer to Cypress or its subsidiaries’ plans and
expectations for the future are forward-looking statements as such
term is used in the Private Securities Litigation Reform Act of
1995. We may use words such as "may," "will," "should," "plan,"
"anticipate," "believe," "expect," "future," "intend," "estimate,"
"predict," "potential," "continue" or similar expressions to
identify forward-looking statements. Our forward-looking statements
are based on the expectations, beliefs, and intentions of, and the
information available to, our executive management on the date of
this press release. Forward-looking statements involve risks and
uncertainties, and readers are cautioned not to place undue
reliance on forward-looking statements. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to: the
occurrence of any event, change or other circumstances that could
give rise to the termination of the Agreement and Plan of Merger
(the "Merger Agreement") dated June 3, 2019, by and among Infineon
Technologies AG, a stock corporation (Aktiengesellschaft) organized
under the laws of the Federal Republic of Germany ("Infineon"), IFX
Merger Sub Inc., a Delaware corporation and a wholly owned
subsidiary of Infineon ("Merger Sub") and the Company, pursuant to
which Merger Sub will merge with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation
in the Merger and as a wholly owned subsidiary of Infineon; the
inability to complete the Merger due to the failure to satisfy
conditions to completion of the Merger, including that a
governmental entity may prohibit, delay or refuse to grant approval
for the Merger; risks related to disruption of management’s
attention from our ongoing business operations due to the Merger;
the effect of the announcement of the Merger on our relationships
with our customers, operating results and business generally; the
risk that certain approvals or consents will not be received in a
timely manner or that the Merger will not be completed in a timely
manner; the impact of the Merger on our ability to retain key
employees; the outcome of any legal proceedings related to the
Merger; potential tariffs and other disruptions in the
international trade and investment environment; global economic and
market conditions; our ability to execute on our Cypress 3.0
strategy and our margin improvement plan; risks related to paying
down our indebtedness and meeting the covenants in our debt
agreements; our efforts to retain and expand our customer base;
business conditions and growth trends in the semiconductor market;
competition; volatility in supply and demand 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; reliance on distributors, resellers, third-party
manufacturers, and others; risks related to changing relationships
with distributors; risks related to our "take or pay" agreements
with certain vendors; the risk of defects, errors, or security
vulnerabilities in our products; the impact of acquisitions; risks
related to our joint venture for NAND flash memory products; the
possibility of impairment charges; 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," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Quantitative and
Qualitative Disclosures about Market Risk" sections in our most
recent Annual Report on Form 10-K filing and in our subsequent
quarterly filings with the U.S. Securities and Exchange Commission
(the "SEC") which are available on our investor relations website
at http://investors.cypress.com/financial-information/sec-filings.
We assume no responsibility to update our forward-looking
statements.
Cypress, the Cypress logo and PSoC are registered trademarks of
Cypress Semiconductor Corporation. All other trademarks are
property of their owners.
CYPRESS SEMICONDUCTOR
CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
September 29, 2019
December 30, 2018
ASSETS
Cash and cash equivalents
$
343,027
$
285,720
Accounts receivable, net
389,896
324,274
Inventories
327,392
292,093
Assets held for sale
—
13,510
Property, plant and equipment, net
262,955
282,986
Goodwill and other intangible assets,
net
1,708,676
1,864,340
Other assets
628,045
630,292
Total assets
$
3,659,991
$
3,693,215
LIABILITIES AND EQUITY
Accounts payable
$
181,704
$
210,715
Income tax liabilities
55,228
53,469
Revenue reserves, deferred margin and
other liabilities
503,801
430,814
Current portion of long-term debt
63,518
6,943
Revolving credit facility and long-term
debt
756,853
874,235
Total liabilities
1,561,104
1,576,176
Total Cypress stockholders' equity
2,098,887
2,115,734
Non-controlling interest
—
1,305
Total equity
2,098,887
2,117,039
Total liabilities and equity
$
3,659,991
$
3,693,215
CYPRESS SEMICONDUCTOR
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
ON A GAAP BASIS
(In thousands, except
per-share data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 29, 2019
June 30, 2019
September 30,
2018
September 29, 2019
September 30, 2018
Revenues
$
574,521
$
532,221
$
673,035
$
1,645,746
$
1,879,366
Cost of revenue
358,080
333,463
413,320
1,028,138
1,173,121
Gross profit
216,441
198,758
259,715
617,608
706,245
Research and development
89,253
93,639
91,691
271,498
281,617
Selling, general and administrative
81,963
91,633
92,943
255,583
262,940
Total operating expenses
171,216
185,272
184,634
527,081
544,557
Operating income
45,225
13,486
75,081
90,527
161,688
Interest and other expense, net
(14,922
)
(12,003
)
(15,059
)
(36,168
)
(47,356
)
Income before income taxes, share in
gain/loss, net and impairment of equity method investees and
non-controlling interest
30,303
1,483
60,022
54,359
114,332
Income tax (provision) benefit
(16,247
)
18,189
(5,618
)
2,672
(15,829
)
Share in gain/loss, net and impairment of
equity method investees
(1,383
)
(32,405
)
(3,657
)
(37,378
)
(10,873
)
Net income (loss)
12,673
(12,733
)
50,747
19,653
87,630
Net loss (income) attributable to
non-controlling interest
10
4
(52
)
15
(152
)
Net income (loss) attributable to
Cypress
$
12,683
$
(12,729
)
$
50,695
$
19,668
$
87,478
Net income (loss) per share attributable
to Cypress:
Basic
$
0.03
$
(0.03
)
$
0.14
$
0.05
$
0.24
Diluted
$
0.03
$
(0.03
)
$
0.14
$
0.05
$
0.23
Cash dividend declared per share
$
0.11
$
0.11
$
0.11
$
0.33
$
0.33
Shares used in net income (loss) per share
calculation:
Basic
369,241
365,600
361,631
366,444
358,560
Diluted
388,243
365,600
374,266
381,633
373,064
CYPRESS SEMICONDUCTOR
CORPORATION
RECONCILIATION OF GAAP
FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except
percentages and per-share data)
(Unaudited)
Table A: GAAP to
non-GAAP reconciling items: Three Months Ended Q3
2019
Cost of revenues
Research and development
Selling, general and
administrative
Interest and other expense, net
GAAP [i]
$
358,080
$
89,253
$
81,963
$
(16,305
)
[1] Stock-based compensation
5,907
7,708
11,276
—
[2] Changes in value of deferred
compensation plan
(6
)
(38
)
(37
)
237
[3] Gain on sale of NAND business to joint
venture
—
—
—
(1,887
)
[4] Share in gain/loss, net of equity
method investees
—
—
—
1,383
[5] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
—
—
—
3,101
[6] Amortization of debt issuance
costs
—
—
—
626
[7] Loss on extinguishment of debt
—
—
—
6,402
[8] Amortization of acquisition-related
intangible assets and other
47,084
—
4,310
—
[9] Restructuring charges
(68
)
291
169
—
[10] Merger-related expenses
—
—
3,043
—
[11] Other income and expenses
—
280
381
(631
)
Non - GAAP [ii]
$
305,163
$
81,012
$
62,821
$
(7,074
)
Impact of reconciling items [ii -
i]
$
(52,917
)
$
(8,241
)
$
(19,142
)
$
9,231
Table B: GAAP to
non-GAAP reconciling items: Three Months Ended Q2
2019
Cost of revenues
Research and development
Selling, general and
administrative
Interest and other expense, net
GAAP [i]
$
333,463
$
93,639
$
91,633
$
(44,408
)
[1] Stock-based compensation
2,817
12,304
15,359
—
[2] Changes in value of deferred
compensation plan
130
632
627
(1,145
)
[3] Share in gain/loss, net and impairment
of equity method investees1
—
—
—
32,405
[4] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
—
—
—
3,276
[5] Amortization of debt issuance
costs
—
—
—
929
[6] Amortization of acquisition-related
intangible assets and other
47,293
—
4,304
—
[7] Restructuring charges
1,018
1,362
641
—
[8] Merger-related expenses
—
—
8,409
—
[9] Other income and expenses
—
—
32
(103
)
Non - GAAP [ii]
$
282,205
$
79,341
$
62,261
$
(9,046
)
Impact of reconciling items [ii -
i]
$
(51,258
)
$
(14,298
)
$
(29,372
)
$
35,362
1. Includes a $29.5 million impairment charge recorded for the
investment in Deca Technologies, Inc.
Table C: GAAP to
non-GAAP reconciling items: Three Months Ended Q3
2018
Cost of revenues
Research and development
Selling, general and
administrative
Interest and other expense, net
GAAP [i]
$
413,320
$
91,691
$
92,943
$
(18,716
)
[1] Stock-based compensation
5,120
8,206
10,869
—
[2] Changes in value of deferred
compensation plan
136
667
768
(1,108
)
[3] Share in gain/ loss, net of equity
method investee
—
—
—
3,657
[4] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
—
—
—
6,782
[5] Amortization of acquisition-related
intangible assets and other
51,565
—
4,310
—
[6] Acquisition costs
—
—
119
—
[7] Restructuring charges
(340
)
516
9,815
—
[8] Litigation settlement and other
—
—
(605
)
(1,286
)
Non - GAAP [ii]
$
356,839
$
82,302
$
67,667
$
(10,671
)
Impact of reconciling items [ii -
i]
$
(56,481
)
$
(9,389
)
$
(25,276
)
$
8,045
Table D: GAAP to
non-GAAP reconciling items: Nine Months Ended Q3
2019
Cost of revenues
Research and development
Selling, general and
administrative
Interest and other expense, net
GAAP [i]
$
1,028,138
$
271,498
$
255,583
$
(73,546
)
[1] Stock-based compensation
11,408
26,692
37,666
—
[2] Changes in value of deferred
compensation plan
594
2,798
2,849
(5,242
)
[3] Loss (gain) from sale of NAND business
to joint venture
2,017
—
1,515
(1,887
)
[4] Share in gain/loss, net and impairment
of equity method investees1
—
—
—
37,378
[5] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
—
—
—
9,745
[6] Amortization of debt issuance
costs
—
—
—
2,484
[7] Loss on extinguishment of debt
—
—
—
6,402
[8] Amortization of acquisition-related
intangible assets and other
142,594
—
12,924
—
[9] Restructuring charges and other
901
1,653
908
—
[10] Merger-related expenses
—
—
11,452
—
[11] Other income and expenses
—
338
861
(432
)
Non - GAAP [ii]
$
870,624
$
240,017
$
187,408
$
(25,098
)
Impact of reconciling items [ii -
i]
$
(157,514
)
$
(31,481
)
$
(68,175
)
$
48,448
1. Includes a $29.5 million impairment charge recorded for the
investment in Deca Technologies, Inc.
Table E: GAAP to
non-GAAP reconciling items: Nine Months Ended Q3
2018
Cost of revenues
Research and development
Selling, general and
administrative
Interest and other expense, net
GAAP [i]
$
1,173,121
$
281,617
$
262,940
$
(58,229
)
[1] Stock-based compensation
12,689
28,720
35,152
—
[2] Changes in value of deferred
compensation plan
299
1,406
1,690
(2,497
)
[3] Equity in gain/loss, net of equity
method investee
—
—
—
10,873
[4] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
—
—
—
14,628
[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 others
150,441
—
13,815
—
[8] Gain on sale of cost method
investment
—
—
(1,521
)
—
[9] Acquisition costs
—
—
119
—
[10] Restructuring charges and other
3,136
841
11,347
—
[11] Litigation settlement and other
—
—
(605
)
(1,270
)
Non - GAAP [ii]
$
1,006,556
$
250,650
$
202,943
$
(32,164
)
Impact of reconciling items [ii -
i]
$
(166,565
)
$
(30,967
)
$
(59,997
)
$
26,065
Table F: Non-GAAP
gross profit
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP gross profit
$
216,441
$
198,758
$
259,715
$
617,608
$
706,245
Impact of reconciling items on cost of
revenues (see Table A, B, C, D and E)
52,917
51,258
56,481
157,514
166,565
Non-GAAP gross profit
$
269,358
$
250,016
$
316,196
$
775,122
$
872,810
GAAP gross margin (GAAP gross
profit/revenue)
37.7
%
37.3
%
38.6
%
37.5
%
37.6
%
Non-GAAP gross margin (Non-GAAP gross
profit/revenue)
46.9
%
47.0
%
47.0
%
47.1
%
46.4
%
Table G: Non-GAAP
operating income
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP operating income [i]
$
45,225
$
13,486
$
75,081
$
90,527
$
161,688
Impact of reconciling items on cost of
revenues (see Table A, B, C, D and E)
52,917
51,258
56,481
157,514
166,565
Impact of reconciling items on R&D
(see Table A, B, C, D and E)
8,241
14,298
9,389
31,481
30,967
Impact of reconciling items on SG&A
(see Table A, B, C, D and E)
19,142
29,372
25,276
68,175
59,997
Non-GAAP operating income [ii]
$
125,525
$
108,414
$
166,227
$
347,697
$
419,217
Impact of reconciling items on
operating income [ii - i]
$
80,300
$
94,928
$
91,146
$
257,170
$
257,529
GAAP operating margin (GAAP operating
income / revenue)
7.9
%
2.5
%
11.2
%
5.5
%
8.6
%
Non-GAAP operating margin (Non-GAAP
operating income / revenue)
21.8
%
20.4
%
24.7
%
21.1
%
22.3
%
Table H: Non-GAAP
pre-tax profit
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP income before income taxes and
non-controlling interest ("Pre-tax income")
$
30,303
$
1,483
$
60,022
$
54,359
$
114,332
Share in gain/loss, net and impairment of
equity method investees1
(1,383
)
(32,405
)
(3,657
)
(37,378
)
(10,873
)
Impact of reconciling items on operating
income (see Table G)
80,300
94,928
91,146
257,170
257,529
Impact of reconciling items on interest
and other expense, net (see Table A, B, C, D and E)
9,231
35,362
8,045
48,448
26,065
Non-GAAP pre-tax profit
$
118,451
$
99,368
$
155,556
$
322,599
$
387,053
GAAP pre-tax profit margin (GAAP pre-tax
income/revenue)
5.3
%
0.3
%
8.9
%
3.3
%
6.1
%
Non-GAAP pre-tax profit margin (Non-GAAP
pre-tax profit/revenue)
20.6
%
18.7
%
23.1
%
19.6
%
20.6
%
1. The three months ended Q2'19 and the nine months ended Q3'19
include a $29.5 million impairment charge recorded for the
investment in Deca Technologies, Inc.
Table I: Non-GAAP
income tax expense
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP income tax provision [i]
$
16,247
$
(18,189
)
$
5,618
$
(2,672
)
$
15,829
[1] Tax impact of non-GAAP adjustments*
relating to:
[a] Stock-based compensation
5,227
6,401
5,081
15,911
16,078
[b] Changes in value of deferred
compensation plan
32
51
97
209
189
[c] Share in gain/loss, net and impairment
of equity method investees
290
6,805
768
7,849
2,283
[d] Imputed interest on convertible debt,
equity component amortization on convertible debt and others
651
688
1,424
2,046
3,072
[e] Amortization of debt issuance
costs
131
195
—
521
225
[f] Amortization of acquisition-related
intangible assets and other
10,793
10,835
11,734
32,659
34,494
[g] Restructuring charges and other
82
620
2,098
723
3,218
[h] Other (income) and expenses
6
—
—
165
—
[i] Loss on extinguishment of debt
1,344
—
—
1,344
684
[j] (Gain) loss on sale of NAND business
to joint venture
(396
)
—
—
346
—
[k] Gain on sale of cost method
investment
—
—
—
—
(319
)
[2] Merger-related expenses
639
1,766
—
2,405
—
[3] Uncertain tax positions
(6,675
)
2,621
(2,159
)
(3,757
)
(4,870
)
[4] Valuation allowance release,
utilization of NOL including excess tax benefits, and other
items**
(25,704
)
(9,662
)
(21,882
)
(50,273
)
(61,966
)
Non-GAAP income tax expense
[ii]*
$
2,667
$
2,131
$
2,779
$
7,476
$
8,917
Impact of reconciling items on income
tax provision [i - ii]
13,580
(20,320
)
2,839
(10,148
)
6,912
*Tax impact of Non-GAAP adjustments is calculated by using the
federal statutory rate of 21%.
** Other items include but are not limited to deferred tax
expense not affecting income tax payable.
Table J: Non-GAAP
net income
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP net income (loss) attributable to
Cypress
$
12,683
$
(12,729
)
$
50,695
$
19,668
$
87,478
Impact of reconciling items on operating
income (see Table G)
80,300
94,928
91,146
257,170
257,529
Impact of reconciling items on interest
and other expense, net (see Table A, B, C, D and E)
9,231
35,362
8,045
48,448
26,065
Impact of reconciling items on income tax
provision (see Table I)
13,580
(20,320
)
2,839
(10,148
)
6,912
Non-GAAP net income
$
115,794
$
97,241
$
152,725
$
315,138
$
377,984
Table K:
Weighted-average shares, diluted
Three Months Ended
Q3'19
Q2'19
Q3'18
GAAP
Non-GAAP
GAAP
Non-GAAP
GAAP
Non-GAAP
Weighted-average common shares
outstanding, basic
369,241
369,241
365,600
365,600
361,631
361,631
Effect of dilutive securities:
Stock options, unvested restricted stock
units and other
7,862
11,704
—
13,937
7,096
12,468
Convertible notes
11,140
9,480
—
5,187
5,539
3,234
Weighted-average common shares
outstanding, diluted
388,243
390,425
365,600
384,724
374,266
377,333
Table L:
Weighted-average shares, diluted
Nine Months Ended
Q3'19
Q3'18
GAAP
Non-GAAP
GAAP
Non-GAAP
Weighted-average common shares
outstanding, basic
366,444
366,444
358,560
358,560
Effect of dilutive securities:
Stock options, unvested restricted stock
and other
7,567
12,325
8,378
13,557
Convertible notes
7,622
5,573
6,126
3,852
Weighted-average common shares
outstanding, diluted
381,633
384,342
373,064
375,969
Table M: Earnings
per share
Three Months Ended
Q3'19
Q2'19
Q3'18
GAAP
Non-GAAP
GAAP
Non-GAAP
GAAP
Non-GAAP
Net income (loss) (see Table J)
[i]
$
12,683
$
115,794
$
(12,729
)
$
97,241
$
50,695
$
152,725
Weighted-average common shares
outstanding, diluted (see Table K) [ii]
388,243
390,425
365,600
384,724
374,266
377,333
Earnings (loss) per share - diluted
[i/ii]
$
0.03
$
0.30
$
(0.03
)
$
0.25
$
0.14
$
0.40
Table N: Earnings
per share
Nine Months Ended
Q3'19
Q3'18
GAAP
Non-GAAP
GAAP
Non-GAAP
Net income (see Table J) [i]
$
19,668
$
315,138
$
87,478
$
377,984
Weighted-average common shares
outstanding, diluted (see Table L) [ii]
381,633
384,342
373,064
375,969
Earnings per share - diluted
[i/ii]
$
0.05
$
0.82
$
0.23
$
1.01
Table O: Adjusted
EBITDA
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP net income (loss) attributable to
Cypress
$
12,683
$
(12,729
)
$
50,695
$
19,668
$
87,478
Interest and other expense, net
(14,922
)
(12,003
)
(15,059
)
(36,168
)
(47,356
)
Income tax (provision) benefit
(16,247
)
18,189
(5,618
)
2,672
(15,829
)
Share in gain/loss, net and impairment of
equity method investees1
(1,383
)
(32,405
)
(3,657
)
(37,378
)
(10,873
)
Net loss (income) attributable to
non-controlling interest
10
4
(52
)
15
(152
)
GAAP operating income
$
45,225
$
13,486
$
75,081
$
90,527
$
161,688
Impact of reconciling items on operating
income (see Table G)
80,300
94,928
91,146
257,170
257,529
Non-GAAP operating income
$
125,525
$
108,414
$
166,227
$
347,697
$
419,217
Depreciation
19,060
19,394
16,393
57,966
49,772
Adjusted EBITDA
$
144,585
$
127,808
$
182,620
$
405,663
$
468,989
1. The three months ended Q2'19 and the nine months ended Q3'19
include a $29.5 million impairment charge recorded for the
investment in Deca Technologies, Inc.
Table P: Free
cash flow
Three Months Ended
Nine Months Ended
Q3'19
Q2'19
Q3'18
Q3'19
Q3'18
GAAP net cash provided by operating
activities
$
64,497
$
118,923
$
187,073
$
244,668
$
329,485
Acquisition of property, plant and
equipment, net
(10,599
)
(7,490
)
(15,448
)
(28,623
)
(58,061
)
Free cash flow
$
53,898
$
111,433
$
171,625
$
216,045
$
271,424
CYPRESS SEMICONDUCTOR
CORPORATION
SUPPLEMENTAL FINANCIAL
DATA
(In thousands, except
per-share and ratio data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 29, 2019
June 30, 2019
September 30, 2018
September 29, 2019
September 30,
2018
Selected Cash Flow Data
(Preliminary):
Net cash provided by operating
activities
$
64,497
$
118,923
$
187,073
$
244,668
$
329,485
Net cash used in investing activities
$
(2,056
)
$
(6,821
)
$
(22,316
)
$
(13,253
)
$
(43,700
)
Net cash used in financing activities
$
(91,594
)
$
(25,041
)
$
(72,730
)
$
(174,108
)
$
(232,634
)
Other Supplemental Data
(Preliminary):
Capital expenditures, net
$
10,599
$
7,490
$
15,448
$
28,623
$
58,061
Depreciation
$
19,060
$
19,394
$
16,393
$
57,966
$
49,772
Payment of dividend
$
40,289
$
40,134
$
39,447
$
120,171
$
117,592
Dividend paid per share
$
0.11
$
0.11
$
0.11
$
0.33
$
0.33
Total debt (principal amount)
$
856,102
$
908,339
$
936,518
$
856,102
$
936,518
Leverage ratio¹
0.90
0.88
1.20
0.90
1.20
Cash Income Tax
$
2,667
$
2,131
$
2,779
$
7,476
$
8,917
- Total debt (principal amount) less cash / Last 12 months
Adjusted EBITDA
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191024005810/en/
Thad Trent EVP Finance & Administration and CFO (408)
943-2925
Ann Minooka Vice President, Corporate Communications (408)
456-1962
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