Cypress Reports Fourth Quarter and Year-End 2016 Results

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

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

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

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

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

(In thousands, except per-share data)

GAAP

NON-GAAP1

Q4 2016

Q3 2016

Q4 2016

Q3 2016

Revenue

$

530,172

$

523,845

$

530,172

$

530,095

Margin

38.1%

37.9%

40.1%

40.5%

Pretax profit margin

(13.5)%

2.4%

10.8%

10.7%

Net income (loss)

$

(72,367)

$

9,411

$

53,823

$

53,467

Diluted EPS (loss)

$

(0.22)

$

0.03

$

0.15

$

0.15

See “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables included below.

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

GAAP

NON-GAAP1

FY 20163

FY 20152

FY 20163

FY 20152

Revenue

$

1,923,108

$

1,607,853

$

1,941,858

$

1,626,603

Margin

35.6%

24.9%

39.0%

35.3%

Pretax profit margin

(35.6)%

(22.6)%

9.4%

4.8%

Net income (loss)

$

(686,251)

$

(378,867)

$

170,471

$

70,532

Diluted EPS (loss)

$

(2.15)

$

(1.25)

$

0.49

$

0.21

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

BUSINESS REVIEW

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

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

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

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

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

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

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

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

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

REVENUE SUMMARY

(In thousands, except percentages)

(Unaudited)

Three Months Ended

Three Months Ended

(GAAP)1

(Non-GAAP)4

January 1,
2017

October 2,
2016

Sequential
Change

January 1,
2017

October 2,
2016

Sequential
Change

Business Unit

MCD1,3

$

294,893

$

284,242

4%

$

294,893

$

290,492

2%

MPD

235,279

239,603

(2)%

235,279

239,603

(2)%

Total

$

530,172

$

523,845

1%

$

530,172

$

530,095

0%

Geographic2

China & ROW1

57%

55%

4%

57%

56%

2%

Americas

11%

12%

(8)%

11%

12%

(8)%

Europe

11%

12%

(8)%

11%

12%

(8)%

Japan

21%

21%

0%

21%

20%

5%

Total

100%

100%

0%

100%

100%

0%

Channel

Distribution

74%

74%

0%

74%

73%

1%

Direct1

26%

26%

0%

26%

27%

(4)%

Total

100%

100%

0%

100%

100%

0%

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

Twelve Months Ended

Twelve Months Ended

(GAAP)1,2,3

(Non-GAAP)6

January 1,
2017

January 3,
2016

Sequential
Change

January 1,
2017

January 3,
2016

Sequential
Change

Business Unit

MCD2,5

$

994,482

$

731,279

36%

$

1,013,232

$

750,029

35%

MPD

928,626

876,574

6%

928,626

876,574

6%

Total

$

1,923,108

$

1,607,853

20%

$

1,941,858

$

1,626,603

19%

Geographic4

China & ROW2

53%

44%

20%

53%

44%

20%

Americas

12%

14%

(14)%

12%

15%

(20)%

Europe

13%

13%

0%

13%

13%

0%

Japan

22%

29%

(24)%

22%

28%

(21)%

Total

100%

100%

0%

100%

100%

0%

Channel

Distribution

73%

71%

3%

72%

70%

3%

Direct2

27%

29%

(7)%

28%

30%

(7)%

Total

100%

100%

0%

100%

100%

0%

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

FIRST QUARTER 2017 FINANCIAL OUTLOOK

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

GAAP

Non-GAAP

Revenue

$495 million to $525 million

Margin %

37% + / – 50 bps

39% + / – 50 bps

Diluted EPS

$(0.22) to $(0.18)

$0.09 to $0.13

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

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

CONFERENCE CALL AND WEBCAST INFORMATION

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

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

FOLLOW CYPRESS ONLINE

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

ABOUT CYPRESS

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

NON-GAAP FINANCIAL MEASURES

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

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

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

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

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

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

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

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

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

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

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

FORWARD-LOOKING STATEMENTS

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

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

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

January 1, 2017

January 3, 2016

ASSETS

Cash, cash equivalents and short-term investments

$

121,144

$

227,561

Accounts receivable, net

333,037

292,736

Inventories

287,776

243,595

Property, plant and equipment, net

297,266

425,003

Goodwill and other intangible assets, net

2,344,033

2,528,077

Other assets

488,615

287,289

Total assets

$

3,871,871

$

4,004,261

LIABILITIES AND EQUITY

Accounts payable

$

241,424

$

143,383

Income tax liabilities

49,552

54,999

Revenue reserves, deferred margin and other liabilities

493,164

419,535

Revolving credit facility and long-term debt

1,194,979

673,659

Total liabilities

1,979,119

1,291,576

Total Cypress stockholders’ equity

1,891,828

2,720,848

Non-controlling interest

924

(8,163)

Total equity

1,892,752

2,712,685

Total liabilities and equity

$

3,871,871

$

4,004,261

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

ON A GAAP BASIS

(In thousands, except per-share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

January 1, 2017

October 2, 2016

January 3, 2016

January 1, 2017

January 3, 2016

Revenues

$

530,172

$

523,845

$

450,128

$

1,923,108

$

1,607,853

Costs and expenses:

Cost of revenues

328,220

325,225

306,881

1,237,974

1,207,850

Research and development

92,188

95,411

73,682

331,737

281,391

Selling, general and administrative

76,839

84,209

85,385

317,383

323,570

Amortization of intangible assets

52,104

54,849

33,959

174,745

108,335

Restructuring charges

17,237

7,970

1,406

26,131

90,084

Impairment of acquisition-related intangible assets

33,944

Impairment related to assets held for sale

1,960

35,259

37,219

Loss (gain) related to investment in Deca Technologies

(112,774)

(112,774)

(Gain) on divestiture of TrueTouch® Mobile business

(66,472)

Goodwill impairment charge

488,504

Total costs and expenses

568,548

490,149

501,313

2,534,863

1,944,758

Operating income (loss)

(38,376)

33,696

(51,185)

(611,755)

(336,905)

Interest and other expense, net

(24,389)

(16,924)

(3,556)

(54,879)

(20,125)

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

(62,765)

16,772

(54,741)

(666,634)

(357,030)

Income tax provision

(790)

(3,304)

(15,726)

(2,616)

(16,960)

Equity in net loss of equity method investees

(8,766)

(4,233)

(2,330)

(17,644)

(7,148)

Net income (loss)

(72,321)

9,235

(72,797)

(686,894)

(381,138)

Net (gain) loss attributable to non-controlling interests

(46)

176

467

643

2,271

Net income (loss) attributable to Cypress

$

(72,367)

$

9,411

$

(72,330)

$

(686,251)

$

(378,867)

Net income (loss) per share attributable to Cypress:

Basic

$

(0.22)

$

0.03

$

(0.22)

$

(2.15)

$

(1.25)

Diluted

$

(0.22)

$

0.03

$

(0.22)

$

(2.15)

$

(1.25)

Cash dividend declared per share

$

0.11

$

0.11

$

0.11

$

0.44

$

0.44

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

Basic

322,800

321,276

334,447

319,522

302,036

Diluted

322,800

343,718

334,447

319,522

302,036

CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per-share data)

(Unaudited)

Table A: Revenue

Three Months Ended (a)

Twelve Months Ended (b)

Q4’16

Q3’16

Q4’15

Q4’16

Q4’15

GAAP revenue

$

530,172

$

523,845

$

450,128

$

1,923,108

$

1,607,853

Add: Revenue from Intellectual Property License

6,250

6,250

18,750

18,750

Non-GAAP revenue

$

530,172

$

530,095

$

456,378

$

1,941,858

$

1,626,603

(a)

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

(b)

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

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

Cost of
revenues

Research and
development

SG&A

Amortization
of Intangible
assets

Impairment related to assets held for sale

Interest and
other expense,
net

Income tax
provision

GAAP [i]

$

328,220

$

92,188

$

94,076

$

52,104

$

1,960

$

(33,155)

$

(790)

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

6,589

16,687

12,292

[2] Changes in value of deferred compensation plan

42

147

292

(641)

[3] Merger, integration and related costs

2,614

476

5,136

[4] Inventory Step-up related to acquisition accounting

1,381

[5] Losses from equity method investments

8,766

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

3,482

[7] Amortization of debt issuance costs

976

[8] Amortization of Intangible assets

52,104

[9] Impairment related to assets held for sale

1,960

[10] Restructuring costs, including executive severance

17,237

[11] Tax impact of Non-GAAP adjustments

(908)

(2,442)

Non – GAAP [ii]

$

317,594

$

74,878

$

59,119

$

$

$

(21,480)

$

(3,232)

Impact of reconciling items [ii – i]

$

(10,626)

$

(17,310)

$

(34,957)

$

(52,104)

$

(1,960)

$

11,675

$

(2,442)

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

Cost of revenues

Research and development

SG&A

Amortization of Intangible assets

Impairment related to assets held for sale

(Gain) related to investment in Deca Technologies

Interest and other expense, net

Income tax provision

GAAP [i]

$

325,225

$

95,411

$

92,179

$

54,849

$

35,259

$

(112,774)

$

21,157

$

(3,304)

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

4,852

12,581

9,880

[2] Changes in value of deferred compensation plan

113

365

785

(1,207)

[3] Merger, integration and related costs

192

1,937

10,390

[4] Inventory Step-up related to acquisition accounting

4,742

[5] Losses from equity method investments

4,233

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

2,926

[7] Amortization of debt issuance costs

950

[8] Amortization of Intangible assets

54,849

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

(112,774)

[10] Impairment related to assets held for sale

35,259

[11] Restructuring costs, including executive severance

7,970

[12] Tax impact of Non-GAAP adjustments

(179)

(55)

(4)

Non – GAAP [ii]

$

315,326

$

80,528

$

63,333

$

$

$

$

14,310

$

(3,308)

Impact of reconciling items [ii – i]

$

(9,899)

$

(14,883)

$

(28,846)

$

(54,849)

$

(35,259)

$

112,774

$

(6,847)

$

(4)

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

Cost of revenues

Research and development

SG&A

Amortization of Intangible assets

Interest and other expense, net

Income tax (provision) benefit

GAAP [i]

$

306,881

$

73,682

$

86,791

$

33,959

$

(5,886)

$

(15,726)

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

3,321

6,270

12,519

[2] Changes in value of deferred compensation plan

53

102

313

(785)

[3] Merger, integration and related costs

19,330

981

9,351

[4] Inventory Step-up related to acquisition accounting

9,231

[5] Losses from equity method investments

2,330

[6] Amortization of Intangible assets

33,959

[7] Imputed interest on Convertible debt and others

726

[8] Restructuring costs, including executive severance

1,406

[9] Tax impact of Non-GAAP adjustments

(153)

12,653

Non – GAAP [ii]

$

274,946

$

66,329

$

63,202

$

$

(3,768)

$

(3,073)

Impact of reconciling items [ii – i]

$

(31,935)

$

(7,353)

$

(23,589)

$

(33,959)

$

2,118

$

12,653

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

Cost of revenues

Research and development

SG&A

Goodwill impairment charge

(Gain) related to investment in Deca Technologies

Amortization of Intangible assets

Impairment related to assets held for sale

Impairment of acquisition related intangibles

Interest and other expense, net

Income tax provision

GAAP [i]

$

1,237,974

$

331,737

$

343,514

488,504

(112,774)

$

174,745

37,219

$

33,944

$

(72,523)

$

(2,616)

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

21,366

41,528

42,374

[2] Changes in value of deferred compensation plan

288

884

1,889

(2,326)

[3] Merger, integration and related costs

17,927

3,106

28,819

[4] Inventory Step-up related to acquisition accounting

13,264

[5] Losses from equity method investments

17,644

[6] Amortization of Intangible assets

174,745

[7] Imputed interest on Convertible debt and others

8,306

[8] Amortization of debt issuance costs

1,961

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

(112,774)

[10] Impairment related to assets held for sale

37,219

[11] Goodwill impairment charge

488,504

[12] Impairment of acquisition related intangibles

33,944

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

30,631

[14] Tax impact of Non-GAAP adjustments

(640)

(10,687)

Non – GAAP [ii]

$

1,185,129

$

286,219

$

239,801

$

$

$

$

$

$

(47,578)

$

(13,303)

Impact of reconciling items [ii – i]

$

(52,845)

$

(45,518)

$

(103,713)

$

(488,504)

$

112,774

$

(174,745)

$

(37,219)

$

(33,944)

$

24,945

$

(10,687)

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

Cost of revenues

Research and development

SG&A

Gain on Divestiture

Amortization of Intangible assets

Interest and other expense, net

Income tax (provision) benefit

GAAP [i]

1,207,850

281,391

413,654

(66,472)

108,335

(27,273)

(16,960)

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

15,699

26,373

51,457

[2] Changes in value of deferred compensation plan

(38)

(233)

(260)

1,353

[3] Merger, integration and related costs

54,733

2,681

39,939

[4] Inventory Step-up related to acquisition accounting

84,297

[5] Losses from equity method investments

7,148

[6] Amortization of Intangible assets

108,335

[7] Imputed interest on Convertible debt and others

8,256

[8] Gain on divestiture

(66,472)

[9] Restructuring and other charges

73

326

91,320

[10] Tax impact of Non-GAAP adjustments

(1,344)

7,006

Non – GAAP [ii]

$

1,053,086

$

252,244

$

231,198

$

$

$

(11,860)

$

(9,954)

Impact of reconciling items [ii – i]

$

(154,764)

$

(29,147)

$

(182,456)

$

66,472

$

(108,335)

$

15,413

$

7,006

Table G: Operating income (loss)

Three Months Ended

Twelve Months Ended

Q4’16

Q3’16

Q4’15

Q4’16

Q4’15

GAAP operating income (loss) [i]

$

(38,376)

$

33,696

$

(51,185)

$

(611,755)

$

(336,905)

Impact of reconciling items on Revenue (see Table A)

6,250

6,250

18,750

18,750

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

10,626

9,899

31,935

52,845

154,764

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

17,310

14,883

7,353

45,518

29,147

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

34,957

28,846

23,589

103,713

182,456

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

52,104

54,849

33,959

174,745

108,335

Impact of Goodwill impairment charge (see Table E)

488,504

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

1,960

35,259

37,219

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

33,944

Gain from divestiture transaction (see Table F)

(66,472)

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

(112,774)

(112,774)

Non-GAAP operating income [ii]

$

78,581

$

70,908

$

51,901

$

230,709

$

90,075

Impact of reconciling items [ii – i]

$

116,957

$

37,212

$

103,086

$

842,464

$

426,980

Table H: Pre-tax profit

Three Months Ended

Twelve Months Ended

Q4’16

Q3’16

Q4’15

Q4’16

Q4’15

GAAP Pre-tax profit

$

(71,531)

$

12,539

$

(57,071)

$

(684,278)

$

(364,178)

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

116,957

37,212

103,086

842,464

426,980

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

11,675

6,847

2,118

24,945

15,413

Non-GAAP Pre-tax income

$

57,101

$

56,598

$

48,133

$

183,131

$

78,215

Table I: Net income (loss)

Three Months Ended

Twelve Months Ended

Q4’16

Q3’16

Q4’15

Q4’16

Q4’15

GAAP Net income (loss)

$

(72,367)

$

9,411

$

(72,330)

$

(686,251)

$

(378,867)

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

116,957

37,212

103,086

842,464

426,980

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

11,675

6,847

2,118

24,945

15,413

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

(2,442)

(4)

12,653

(10,687)

7,006

Non-GAAP Net income

$

53,823

$

53,467

$

45,527

$

170,471

$

70,532

Table J: Margin %

Three Months Ended

Q4’16

Q3’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenue (See Table A) [i]

$

530,172

$

530,172

$

523,845

$

530,095

$

450,128

$

456,378

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

328,220

317,594

325,225

315,326

306,881

274,946

Margin [iii] [ii – i]

$

201,952

$

212,578

$

198,620

$

214,769

$

143,247

$

181,432

Margin % [iii / i]

38.1

%

40.1

%

37.9

%

40.5

%

31.8

%

39.8

%

Table K: Margin %

Twelve Months Ended

Q4’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenue (See Table A) [i]

$

1,923,108

$

1,941,858

$

1,607,853

$

1,626,603

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

1,237,974

1,185,129

1,207,850

1,053,086

Margin [iii] [ii – i]

$

685,135

$

756,730

$

400,003

$

573,517

Margin % [iii / i]

35.6

%

39.0

%

24.9

%

35.3

%

Table L: Pretax profit margin %

Three Months Ended

Q4’16

Q3’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenue (See Table A) [i]

$

530,172

$

530,172

$

523,845

$

530,095

$

450,128

$

456,378

Pre-tax profit (see Table H) [ii]

$

(71,531)

$

57,101

$

12,539

$

56,598

(57,071)

48,133

Pre-tax profit margin % [ii / i]

(13.5)%

10.8

%

2.4

%

10.7

%

(12.7)%

10.5

%

Table M: Pretax profit margin %

Twelve Months Ended

Q4’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenue (See Table A) [i]

$

1,923,108

$

1,941,858

$

1,607,853

$

1,626,603

Pre-tax profit (see Table H) [ii]

$

(684,278)

$

183,131

$

(364,178)

$

78,215

Pre-tax profit margin % [ii / i]

(35.6)%

9.4

%

(22.6)%

4.8

%

Table N: Weighted-average shares, diluted

Three Months Ended

Q4’16

Q3’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Weighted-average common shares outstanding, basic

322,800

322,800

321,276

321,276

334,447

334,447

Effect of dilutive securities:

Stock options, unvested restricted stock and other

17,199

7,017

14,008

15,363

Impact of convertible bond

15,138

15,425

15,425

12,419

Weighted-average common shares outstanding, diluted

322,800

355,137

343,718

350,709

334,447

362,229

Table O: Weighted-average shares, diluted

Twelve Months Ended

Q4’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

Weighted-average common shares outstanding, basic

319,522

319,522

302,036

302,036

Effect of dilutive securities:

Stock options, unvested restricted stock and other

15,370

21,223

Impact of convertible bond

15,138

12,419

Weighted-average common shares outstanding, diluted

319,522

350,030

302,036

335,678

Table P: Net income (loss) Per Share

Three Months Ended

Q4’16

Q3’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Net income (loss) (see Table I)

$

(72,367)

$

53,823

$

9,411

$

53,467

$

(72,330)

$

45,527

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

322,800

355,137

343,718

350,709

334,447

362,229

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

$

(0.22)

$

0.15

$

0.03

$

0.15

$

(0.22)

$

0.13

Table Q: Net income (loss) Per Share

Twelve Months Ended

Q4’16

Q4’15

GAAP

Non-GAAP

GAAP

Non-GAAP

Net income (loss) (see Table I)

$

(686,251)

$

170,471

$

(378,867)

$

70,532

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

319,522

350,030

302,036

335,678

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

$

(2.15)

$

0.49

$

(1.25)

$

0.21

CYPRESS SEMICONDUCTOR CORPORATION

SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

Three Months Ended

Twelve Months Ended

January 1, 2017

October 2, 2016

January 3, 2016

January 1, 2017

January 3, 2016

Selected Cash Flow Data (Preliminary):

Net cash provided by operating activities

$

89,787

$

105,130

$

42,094

$

217,419

$

8,801

Net cash used in investing activities

$

(19,008)

$

(560,248)

$

(24,351)

$

(613,438)

$

(79,088)

Net cash (used in) provided by financing activities

$

(37,262)

$

353,441

$

15,188

$

289,502

$

193,240

Other Supplemental Data (Preliminary):

Capital expenditures

$

11,889

$

19,695

$

9,227

$

57,398

$

47,206

Depreciation

$

16,057

$

19,454

$

39,443

$

89,464

$

126,496

Payment of dividend

$

35,350

$

35,240

$

36,914

$

141,410

$

127,995

Dividend paid per share

$

0.11

$

0.11

$

0.11

$

0.44

$

0.44

CYPRESS SEMICONDUCTOR CORPORATION

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

Forward looking GAAP estimate (A)

Adjustments (B)

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

Amortization of intangibles

Share-based compensation expense

Restructuring

Other items

Margin %

37% +/- 50 bps

%

1.3

%

%

0.4

%

39% +/- 50 bps

Diluted earnings per share

$(0.22) to $(0.18)

$

0.15

$

0.11

$

0.03

$

0.02

$0.09 to $0.13

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cypress-reports-fourth-quarter-and-year-end-2016-results-300401589.html

SOURCE Cypress

Related Links

http://www.cypress.com

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