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Cypress Reports Fourth Quarter and Year End 2019 Results

Cypress Semiconductor Corporation (NASDAQ: CY) today announced its fourth quarter and fiscal year 2019 results with the following highlights:

  • Fiscal year revenue of $2.21 billion, down 6.1% year-over-year after adjusting for the divestiture of our NAND business, which was completed on April 1, 2019
  • Record Automotive revenue of $829.4 million representing 38% of total fiscal year 2019 revenue
  • Fourth quarter revenue was $559.6 million and GAAP and non-GAAP gross margins were 38.0% and 47.1%, respectively
  • Fourth quarter GAAP and non-GAAP operating margins were 5.9% and 21.1%, respectively
  • Fourth quarter GAAP and non-GAAP diluted EPS were $0.05 and $0.28, respectively

"We continue to see strong adoption of our connect and compute products across the automotive and IoT end-markets, which drove record MCD revenue in fiscal year 2019 in a challenging environment," said Hassane El-Khoury, Cypress’ president and chief executive officer. "We ended the year strongly in the fourth quarter with our automotive revenue achieving a quarterly record and our IoT business up 18% compared to the fourth quarter of 2018. Our focus on maximizing profitability and cashflow continues to pay off as evidenced by our record cash from operations of $479 million in 2019."

As announced on June 3, 2019, Infineon Technologies AG and Cypress 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 proposed transaction has received antitrust clearances from authorities in the United States, the European Union, The Philippines, Taiwan, South Korea, and Japan. The parties require approval for the proposed transaction from the Committee on Foreign Investment in the United States (CFIUS) and from China’s State Administration for Market Regulation (SAMR). 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

 

 

Q4 2019

 

Q3 2019

 

Q4 2018

 

Q4 2019

 

Q3 2019

 

Q4 2018

Revenue

 

$

559,568

 

 

$

574,521

 

 

$

604,474

 

 

$

559,568

 

 

$

574,521

 

 

$

604,474

 

Gross margin

 

38.0

%

 

37.7

%

 

37.3

%

 

47.1

%

 

46.9

%

 

47.8

%

Operating margin

 

5.9

%

 

7.9

%

 

0.5

%

 

21.1

%

 

21.8

%

 

24.5

%

Net income

 

$

20,760

 

 

$

12,683

 

 

$

267,114

 

 

$

108,394

 

 

$

115,794

 

 

$

130,990

 

Diluted EPS

 

$

0.05

 

 

$

0.03

 

 

$

0.72

 

 

$

0.28

 

 

$

0.30

 

 

$

0.35

 

Year-to-date revenue and earnings are shown below with comparable periods:

(In thousands, except percentages and per-share data)

 

 

GAAP

 

NON-GAAP1

 

 

FY 2019

 

FY 2018

 

FY 2019

 

FY 2018

Revenue

 

$

2,205,314

 

 

$

2,483,840

 

 

$

2,205,314

 

 

$

2,483,840

 

Gross margin

 

37.6

%

 

37.5

%

 

47.1

%

 

46.8

%

Operating margin

 

5.6

%

 

6.6

%

 

21.1

%

 

22.8

%

Net income

 

$

40,428

 

 

$

354,592

 

 

$

423,531

 

 

$

508,975

 

Diluted EPS

 

$

0.11

 

 

$

0.95

 

 

$

1.09

 

 

$

1.36

 

1. See the "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables ("Non-GAAP Results" tables) included below.

REVENUE SUMMARY

(In thousands, except percentages)

(Unaudited)

 

Three Months Ended

 

 

 

December 29,
2019

 

September 29,
2019

 

December 30,
2018

 

Sequential
Change

 

Year-over-year
Change

Business Unit1

 

 

 

 

 

 

 

 

 

MCD

$

401,292

 

$

410,748

 

$

355,793

 

(2.3)%

 

12.8%

MPD2

158,276

 

163,773

 

248,681

 

(3.4)%

 

(36.4)%

Total

$

559,568

 

$

574,521

 

$

604,474

 

(2.6)%

 

(7.4)%

 

Three Months Ended

 

December 29, 2019

 

September 29, 2019

 

December 30, 2018

End Use

 

 

 

 

 

IoT

40.0%

 

42.6%

 

31.5%

Automotive

39.3%

 

36.5%

 

35.5%

Legacy

20.7%

 

20.9%

 

33.0%

Total

100%

 

100%

 

100%

1. 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.
2.

MPD revenue for the three months ended December 29, 2019 and September 29, 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 (loss) 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 Results 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; the impact of floods, earthquakes, volcanoes, global health pandemics, and other major natural events beyond our control; 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 and the Cypress logo 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 29, 2019

 

December 30, 2018

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

415,462

 

 

$

285,720

 

Accounts receivable, net

 

301,755

 

 

324,274

 

Inventories

 

297,904

 

 

292,093

 

Assets held for sale

 

 

 

13,510

 

Property, plant and equipment, net

 

258,748

 

 

282,986

 

Goodwill and other intangible assets, net

 

1,656,933

 

 

1,864,340

 

Other assets

 

625,312

 

 

630,292

 

Total assets

 

$

3,556,114

 

 

$

3,693,215

 

LIABILITIES AND EQUITY

 

 

 

 

Accounts payable

 

$

151,393

 

 

$

210,715

 

Income tax liabilities

 

54,941

 

 

53,469

 

Revenue reserves, deferred margin and other liabilities

 

523,102

 

 

430,814

 

Current portion of long-term debt

 

13,615

 

 

6,943

 

Revolving credit facility and long-term debt

 

712,808

 

 

874,235

 

Total liabilities

 

1,455,859

 

 

1,576,176

 

Total Cypress stockholders' equity

 

2,100,255

 

 

2,115,734

 

Non-controlling interest

 

 

 

1,305

 

Total equity

 

2,100,255

 

 

2,117,039

 

Total liabilities and equity

 

$

3,556,114

 

 

$

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

 

Twelve Months Ended

 

 

December 29,
2019

 

September 29,
2019

 

December 30,
2018

 

December 29,
2019

 

December 30,
2018

Revenues

 

$

559,568

 

 

$

574,521

 

 

$

604,474

 

 

$

2,205,314

 

 

$

2,483,840

 

Cost of revenues

 

347,150

 

 

358,080

 

 

379,264

 

 

1,375,289

 

 

1,552,385

 

Gross profit

 

212,418

 

 

216,441

 

 

225,210

 

 

830,025

 

 

931,455

 

Research and development

 

91,219

 

 

89,253

 

 

82,379

 

 

362,716

 

 

363,996

 

Selling, general and administrative

 

88,463

 

 

81,963

 

 

140,091

 

 

344,046

 

 

403,031

 

Total operating expenses

 

179,682

 

 

171,216

 

 

222,470

 

 

706,762

 

 

767,027

 

Operating income

 

32,736

 

 

45,225

 

 

2,740

 

 

123,263

 

 

164,428

 

Interest and other expense, net

 

(8,409

)

 

(14,922

)

 

(20,489

)

 

(44,577

)

 

(67,845

)

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

 

24,327

 

 

30,303

 

 

(17,749

)

 

78,686

 

 

96,583

 

Income tax benefit (provision)

 

(5,044

)

 

(16,247

)

 

331,447

 

 

(2,372

)

 

315,618

 

Share in gain/loss, net and impairment of equity method investees

 

1,477

 

 

(1,383

)

 

(46,497

)

 

(35,901

)

 

(57,370

)

Net income

 

20,760

 

 

12,673

 

 

267,201

 

 

40,413

 

 

354,831

 

Net loss (income) attributable to non-controlling interest

 

 

 

10

 

 

(87

)

 

15

 

 

(239

)

Net income attributable to Cypress

 

$

20,760

 

 

$

12,683

 

 

$

267,114

 

 

$

40,428

 

 

$

354,592

 

Net income per share attributable to Cypress:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.03

 

 

$

0.74

 

 

$

0.11

 

 

$

0.99

 

Diluted

 

$

0.05

 

 

$

0.03

 

 

$

0.72

 

 

$

0.11

 

 

$

0.95

 

Cash dividend declared per share

 

$

0.11

 

 

$

0.11

 

 

$

0.11

 

 

$

0.44

 

 

$

0.44

 

Shares used in net income per share calculation:

 

 

 

 

 

 

 

 

 

 

Basic

 

370,846

 

 

369,241

 

 

361,616

 

 

367,308

 

 

359,324

 

Diluted

 

390,952

 

 

388,243

 

 

369,638

 

 

384,670

 

 

372,178

 

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 Q4 2019

 

 

Cost of
revenues

 

Research and
development

 

Selling,
general and
administrative

 

Interest and
other expense,
net

GAAP [i]

 

$

347,150

 

 

$

91,219

 

 

$

88,463

 

 

$

(6,932

)

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

 

4,035

 

 

7,010

 

 

19,171

 

 

 

[2] Changes in value of deferred compensation plan

 

213

 

 

1,318

 

 

1,271

 

 

(2,747

)

[3] Gain on sale of NAND business to joint venture

 

(120

)

 

 

 

 

 

 

[4] Share in gain/loss, net of equity method investees

 

 

 

 

 

 

 

(1,477

)

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

 

 

 

 

 

 

 

3,025

 

[6] Amortization of debt issuance costs

 

 

 

 

 

 

 

496

 

[8] Amortization of acquisition-related intangible assets and other

 

47,085

 

 

 

 

4,309

 

 

 

[9] Restructuring charges and other

 

(22

)

 

(493

)

 

10

 

 

 

[10] Merger-related expenses

 

 

 

 

 

1,302

 

 

 

Non - GAAP [ii]

 

$

295,959

 

 

$

83,384

 

 

$

62,400

 

 

$

(7,635

)

Impact of reconciling items [ii - i]

 

$

(51,191

)

 

$

(7,835

)

 

$

(26,063

)

 

$

(703

)

Table B: 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 C: GAAP to Non-GAAP reconciling items: Three Months Ended Q4 2018

 

 

Cost of
revenues

 

Research and
development

 

Selling,
general and
administrative

 

Interest and
other expense,
net

GAAP [i]

 

$

379,264

 

 

$

82,379

 

 

$

140,091

 

 

$

(66,986

)

[1] Stock based compensation

 

3,842

 

 

6,395

 

 

9,166

 

 

 

[2] Changes in value of deferred compensation plan

 

(468

)

 

(2,377

)

 

(2,726

)

 

5,401

 

[3] Loss on assets held for sale¹

 

10,869

 

 

 

 

65,722

 

 

 

[4] Share in net loss and impairment of equity method investees²

 

 

 

 

 

 

 

46,496

 

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

 

 

 

 

 

 

 

3,338

 

[6] Amortization of debt issuance costs

 

 

 

 

 

 

 

908

 

[7] Amortization of intangible assets

 

49,583

 

 

 

 

4,310

 

 

 

[8] Litigation settlement and other

 

 

 

(309

)

 

(159

)

 

159

 

[9] Restructuring charges

 

135

 

 

944

 

 

437

 

 

 

Non - GAAP [ii]

 

$

315,303

 

 

$

77,726

 

 

$

63,341

 

 

$

(10,684

)

Impact of reconciling items [ii - i]

 

$

(63,961

)

 

$

(4,653

)

 

$

(76,750

)

 

$

56,302

 

1.

Relates to our entry into a definitive agreement to divest the NAND business

2.

Includes $41.5 million impairment charge recorded for the investment in Deca Technologies, Inc.

Table D: GAAP to Non-GAAP reconciling items: Twelve Months Ended Q4 2019

 

 

 

Cost of
revenues

 

Research and
development

 

Selling,
general and
administrative

 

Interest and
other expense,
net

GAAP [i]

 

$

1,375,289

 

 

$

362,716

 

 

$

344,046

 

 

$

(80,478

)

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

 

15,443

 

 

33,702

 

 

56,837

 

 

 

[2] Changes in value of deferred compensation plan

 

807

 

 

4,116

 

 

4,120

 

 

(7,989

)

[3] Loss (gain) from sale of NAND business to joint venture

 

1,897

 

 

 

 

1,515

 

 

(1,887

)

[4] Share in gain/loss, net and impairment of equity method investees1

 

 

 

 

 

 

 

35,901

 

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

 

 

 

 

 

 

 

12,770

 

[6] Amortization of debt issuance costs

 

 

 

 

 

 

 

2,980

 

[7] Loss on extinguishment of debt

 

 

 

 

 

 

 

6,402

 

[8] Amortization of acquisition-related intangible assets and other

 

189,679

 

 

 

 

17,233

 

 

 

[9] Restructuring charges and other

 

880

 

 

1,160

 

 

918

 

 

 

[10] Merger-related expenses

 

 

 

 

 

12,754

 

 

 

[11] Other income and expenses

 

 

 

337

 

 

861

 

 

(433

)

Non - GAAP [ii]

 

$

1,166,583

 

 

$

323,401

 

 

$

249,808

 

 

$

(32,734

)

Impact of reconciling items [ii - i]

 

$

(208,706

)

 

$

(39,315

)

 

$

(94,238

)

 

$

47,744

 

1. Includes a $29.5 million impairment charge recorded for the investment in Deca Technologies, Inc.

...

Table E: GAAP to Non-GAAP reconciling items: Twelve Months Ended Q4 2018

 

 

Cost of
revenues

 

Research and
development

 

Selling,
general and
administrative

 

Interest and
other expense,
net

GAAP [i]

 

$

1,552,385

 

 

$

363,996

 

 

$

403,031

 

 

$

(125,215

)

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

 

16,531

 

 

35,115

 

 

44,319

 

 

 

[2] Changes in value of deferred compensation plan

 

(169

)

 

(971

)

 

(1,036

)

 

2,904

 

[3] Share in gain/loss, net and impairment of equity method investees¹

 

 

 

 

 

 

 

57,369

 

[4] Amortization of intangible assets

 

200,024

 

 

 

 

18,125

 

 

 

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

 

 

 

 

 

 

 

17,966

 

[6] Amortization of debt issuance cost

 

 

 

 

 

 

 

1,981

 

[7] Settlement and other charges

 

 

 

(309

)

 

(645

)

 

(1,111

)

[8] Restructuring charges

 

3,271

 

 

1,785

 

 

11,785

 

 

 

[9] Loss on extinguishment of Spansion convertible notes

 

 

 

 

 

 

 

3,258

 

[10] Loss on assets held for sale²

 

10,869

 

 

 

 

65,722

 

 

 

[11] Gain on sale on cost method investment

 

 

 

 

 

(1,521

)

 

 

Non - GAAP [ii]

 

$

1,321,859

 

 

$

328,376

 

 

$

266,282

 

 

$

(42,848

)

Impact of reconciling items [ii - i]

 

$

(230,526

)

 

$

(35,620

)

 

$

(136,749

)

 

$

82,367