SAN JOSE, Calif., Oct. 22, 2015 /PRNewswire/ -- Cypress Semiconductor Corp. (NASDAQ: CY) today announced its third quarter 2015 results, which included the remarks below from its president and CEO, T.J. Rodgers. Highlights for the quarter included (financial highlights are based on non-GAAP results, unless otherwise noted):
Fellow shareholders:
Our revenue and earnings for the quarter are given below, compared with those of the prior quarter:
(In thousands, except per-share data)
NON-GAAP |
GAAP |
|||||||||
Q3 2015 |
Q2 2015 |
Q3 2015 |
Q2 2015 |
|||||||
Revenue |
$470,060 |
$491,028 |
$463,810 |
$484,778 |
||||||
Gross margin |
41.2% |
41.0% |
34.6% |
28.5% |
||||||
Pretax margin |
13.2% |
11.4% |
6.9% |
-18.1% |
||||||
Net income (loss) |
$60,040 |
$52,870 |
$30,312 |
$(90,051) |
||||||
Diluted EPS (loss) |
$0.17 |
$0.15 |
$0.09 |
$(0.27) |
||||||
Third quarter revenue declined 4.3% sequentially in a softening semiconductor market. Our pretax profit increased 10.6% quarter-on-quarter, driven in part by continued integration progress in the wake of our merger with Spansion, which led to a 7.9% reduction in operating expenses. We achieved $120.3 million in annualized synergies from the merger as of the end of the third quarter and are ahead of our three-year plan to achieve $160 million in annualized synergies.
Despite the current semiconductor industry environment, we made progress selling into fast-growing segments of the Automotive, Industrial, Home Appliance and Internet of Things (IoT) markets plus applications using the USB Type-C standard, which provides power and data from a single plug.
Our new $450 million stock buyback program, announced today, underscores our confidence in our business model and our continued commitment to return capital to our shareholders through the combination of stock buybacks and our quarterly dividend. Since 2008, Cypress has returned more than $4.2 billion in capital to shareholders.
BUSINESS REVIEW
FOURTH QUARTER 2015 FINANCIAL OUTLOOK
For the fourth quarter of 2015, Cypress estimates non-GAAP financial results as follows: net sales in the range of $430 million to $460 million, gross margin of 41%, and diluted EPS in the range of $0.11 to $0.15. These estimates exclude amortization of intangibles of approximately $32 million, equity compensation expense of approximately $25 million, and restructuring charges, depreciation or amortization related to accounting for the Spansion merger of approximately $37 million.
NET SALES SUMMARY (In thousands, except percentages) (Unaudited) |
||||||||
THREE MONTHS ENDED |
||||||||
Sept. 27, |
Jun. 28, |
Sequential |
||||||
Business Unit |
2015 |
2015 |
Change |
|||||
PSD1 |
$178,503 |
$202,806 |
-12% |
|||||
MPD1,3 |
$260,897 |
$261,407 |
-0% |
|||||
DCD1 |
$17,617 |
$19,087 |
-8% |
|||||
ETD2 |
$13,043 |
$7,728 |
69% |
|||||
Total |
$470,060 |
$491,028 |
-4% |
|||||
Geographic |
||||||||
China and ROW |
39% |
41% |
-5% |
|||||
Americas |
14% |
11% |
27% |
|||||
Europe |
14% |
14% |
0% |
|||||
Japan |
33% |
34% |
-3% |
|||||
Total |
100% |
100% |
0% |
|||||
Channel |
||||||||
Distribution |
71% |
72% |
-1% |
|||||
Direct |
29% |
28% |
4% |
|||||
Total |
100% |
100% |
0% |
|||||
1. |
PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division. |
2. |
ETD, Emerging Technologies Division includes businesses outside our core semiconductor businesses named in Footnote 1. ETD includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit. |
3. |
Our net sales for the second and third quarters of 2015 and our estimates for the fourth quarter of 2015 include $6.25 million of non-GAAP licensing revenue in MPD, APAC region and direct channel. |
THIRD QUARTER 2015 HIGHLIGHTS
FOLLOW CYPRESS ONLINE
ABOUT CYPRESS
Cypress (NASDAQ: CY) delivers high-performance, high-quality solutions at the heart of today's most advanced embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices. With a broad, differentiated product portfolio that includes NOR flash memories, F-RAM™ and SRAM, Traveo™ microcontrollers, the industry's only PSoC® programmable system-on-chip solutions, analog and PMIC Power Management ICs, CapSense® capacitive touch-sensing controllers, and Wireless BLE Bluetooth Low-Energy and USB connectivity solutions, Cypress is committed to providing its customers worldwide with consistent innovation, best-in-class support and exceptional system value. To learn more, go to www.cypress.com.
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," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "continue" or other wording indicating future results or expectations to identify such forward-looking statements that include, but are not limited to, statements related to our estimated non-GAAP revenue, non-GAAP gross margin and non-GAAP EPS in our financial outlook, the expected timing and costs related to the integration of the company with Spansion as a result of our recent merger; our ability to execute on planned synergies related to the merger with Spansion; the semiconductor market; the strength and growth of our proprietary and programmable products; our expectations regarding our revenue growth and earnings leverage; as well as our expectations regarding the demand for our products and how our products are expected to perform. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this release. Our actual results may differ materially due to a variety of uncertainties and risk factors, including, but not limited to, the risk that that future revenues, margins and earnings may not be achieved as expected; the state of and future of the global economy, business conditions and growth trends in the semiconductor market, our ability to effectively integrate our company with Spansion in a timely manner, our ability to attract and retain key personnel, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, our ability to manage our business to have strong earnings and significant revenue growth and reduce operating expenses, our ability to effectively implement third party wafer processes, the strength or softness of the markets we serve, our ability to maintain and improve our gross margins and realize our bookings, the seasonality of the markets we serve, the financial performance of our subsidiaries and Emerging Technologies Division, and other risks described in "Risk Factors" 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, Spansion, the Spansion logo, and combinations thereof, PSoC, CapSense, EZ-USB and TrueTouch are registered trademarks and EZ-PD, EZ-BLE, PRoC, GX3, F-RAM, HyperBus, HyperFlash, SecureNAND and Traveo are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.
CYPRESS SEMICONDUCTOR CORPORATION |
||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
(In thousands) |
||||
(Unaudited) |
||||
September 27, |
December 28, |
|||
2015 |
2014 |
|||
ASSETS |
||||
Cash, cash equivalents and short-term investments |
$ 194,631 |
$ 118,812 |
||
Accounts receivable, net |
293,832 |
75,984 |
||
Inventories, net (a) |
279,007 |
88,227 |
||
Property, plant and equipment, net |
459,040 |
237,763 |
||
Goodwill and other intangible assets, net |
2,565,169 |
99,615 |
||
Other assets |
290,253 |
122,880 |
||
Total assets |
$ 4,081,932 |
$ 743,281 |
||
LIABILITIES AND EQUITY |
||||
Accounts payable |
$ 145,757 |
$ 42,678 |
||
Deferred margin and allowances on sales to distributors |
120,393 |
95,187 |
||
Income tax liabilities |
60,117 |
21,494 |
||
Other liabilities |
464,366 |
155,057 |
||
Long-term revolving credit facility |
449,000 |
227,000 |
||
Total liabilities |
1,239,633 |
541,416 |
||
Total Cypress stockholders' equity |
2,849,994 |
207,757 |
||
Noncontrolling interest |
(7,695) |
(5,892) |
||
Total equity |
2,842,299 |
201,865 |
||
Total liabilities and equity |
$ 4,081,932 |
$ 743,281 |
||
(a) Inventories include $3.9 million and $2.0 million of capitalized inventories related to stock-based compensation expense, 'as of September 27, 2015 'and December 28, 2014, respectively. |
CYPRESS SEMICONDUCTOR CORPORATION |
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
ON A GAAP BASIS |
||||
(In thousands, except per-share data) |
||||
(Unaudited) |
||||
September 27, |
June 28, |
|||
2015 |
2015 |
|||
Revenues |
$ 463,810 |
$ 484,778 |
||
Cost of revenues |
303,434 |
346,705 |
||
Gross margin |
160,376 |
138,073 |
||
Operating expenses: |
||||
Research and development |
$ 75,960 |
81,227 |
||
Selling, general and administrative |
74,627 |
86,011 |
||
Acquisition costs and amortization of acquisition-related intangibles |
32,359 |
41,758 |
||
Gain on divestiture of TrueTouch business |
(66,472) |
- |
||
Restructuring charges |
2,924 |
10,039 |
||
Total operating expenses, net |
119,398 |
219,035 |
||
Operating income (loss) |
$ 40,978 |
(80,962) |
||
Interest and other income (loss), net |
(8,884) |
(6,794) |
||
Income (loss) before income taxes |
32,094 |
(87,756) |
||
Income tax provision |
2,303 |
2,934 |
||
Income (loss), net of taxes |
29,791 |
(90,690) |
||
Adjust for net loss attributable to noncontrolling interest |
521 |
639 |
||
Net Income (loss) attributable to Cypress |
$ 30,312 |
$ (90,051) |
||
Net Income (loss) per share attributable to Cypress: |
||||
Basic |
$ 0.09 |
$ (0.27) |
||
Diluted |
$ 0.09 |
$ (0.27) |
||
Cash dividend declared per share |
$ 0.11 |
$ 0.11 |
||
Shares used in net income (loss) per share calculation: |
||||
Basic |
335,299 |
333,334 |
||
Diluted |
357,657 |
333,334 |
CYPRESS SEMICONDUCTOR CORPORATION |
||||||||
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a) |
||||||||
(In thousands, except per-share data) |
||||||||
(Unaudited) |
||||||||
September 27, |
% of |
June 28, |
% of |
|||||
2015 |
Revenue |
2015 |
Revenue |
|||||
GAAP Revenues |
$ 463,810 |
$ 484,778 |
||||||
Revenue from intellectual property license (b) |
6,250 |
6,250 |
||||||
Non-GAAP Revenues |
$ 470,060 |
$ 491,028 |
||||||
GAAP gross margin |
$ 160,376 |
34.6% |
$ 138,073 |
28.5% |
||||
Stock-based compensation expense |
4,357 |
0.9% |
3,802 |
0.8% |
||||
Changes in value of deferred compensation plan |
(326) |
(0.1)% |
46 |
0.0% |
||||
Impairment of assets, restructuring and other charges |
(372) |
(0.1)% |
325 |
0.1% |
||||
Effect of Non-GAAP revenue from intellectual property license |
6,250 |
0.8% |
6,250 |
0.7% |
||||
Spansion merger costs and related amortization |
23,164 |
5.0% |
52,800 |
10.9% |
||||
Non-GAAP gross margin |
$ 193,449 |
41.2% |
$ 201,296 |
41.0% |
||||
GAAP research and development expenses |
$ 75,960 |
$ 81,227 |
||||||
Stock-based compensation expense |
(7,346) |
(7,007) |
||||||
Changes in value of deferred compensation plan |
1,105 |
(153) |
||||||
Impairment of assets, restructuring and other charges |
(81) |
(96) |
||||||
Spansion merger costs and related amortization |
(831) |
(827) |
||||||
Non-GAAP research and development expenses |
$ 68,807 |
$ 73,144 |
||||||
GAAP selling, general and administrative expenses |
$ 74,627 |
$ 86,011 |
||||||
Stock-based compensation expense |
(13,253) |
(16,859) |
||||||
Changes in value of deferred compensation plan |
1,959 |
(276) |
||||||
Impairment of assets, restructuring and other charges |
— |
(36) |
||||||
Legal and other |
(443) |
— |
||||||
Spansion merger costs and related amortization |
(2,376) |
(1,634) |
||||||
Non-GAAP selling, general and administrative expenses |
$ 60,514 |
$ 67,206 |
||||||
GAAP operating income (loss) |
$ 40,978 |
$ (80,962) |
||||||
Stock-based compensation expense |
24,956 |
27,667 |
||||||
Gain from divestiture transaction |
(66,472) |
— |
||||||
Ramtron acquisition-related expense |
1,305 |
1,305 |
||||||
Changes in value of deferred compensation plan |
(3,389) |
474 |
||||||
Impairment of assets, restructuring and other charges |
— |
— |
||||||
Legal and other |
150 |
458 |
||||||
Effect of Non-GAAP revenue from intellectual property license |
6,250 |
6,250 |
||||||
Spansion merger costs and related amortization |
60,350 |
105,754 |
||||||
Non-GAAP operating income (loss) |
$ 64,128 |
$ 60,946 |
||||||
GAAP pretax profit (loss) |
$ 32,094 |
6.9% |
$ (87,756) |
(18.1)% |
||||
Stock-based compensation expense |
24,956 |
5.4% |
27,667 |
5.7% |
||||
Gain from divestiture transaction |
(66,472) |
(14.3)% |
— |
|||||
Ramtron acquisition-related expense |
1,305 |
0.3% |
1,305 |
0.3% |
||||
Changes in value of deferred compensation plan |
(50) |
0.0% |
(54) |
0.0% |
||||
Impairment of assets, restructuring and other charges |
— |
0.0% |
— |
0.0% |
||||
Legal and other |
151 |
0.0% |
458 |
0.1% |
||||
Effect of Non-GAAP revenue from intellectual property license |
6,250 |
1.2% |
6,250 |
1.1% |
||||
Investment related losses (gains) |
2,709 |
0.6% |
(1,670) |
(0.3)% |
||||
Tax-related, interest income, interest expense and other expenses |
(1,157) |
(0.2)% |
2,586 |
0.5% |
||||
Losses from equity method investment |
1,800 |
0.4% |
1,459 |
0.3% |
||||
Spansion merger costs and related amortization |
60,350 |
13.0% |
105,754 |
21.8% |
||||
Non-GAAP pretax profit (loss) |
$ 61,936 |
13.2% |
$ 55,999 |
11.4% |
||||
GAAP net income (loss) attributable to Cypress |
$ 30,312 |
$ (90,051) |
||||||
Stock-based compensation expense |
24,956 |
27,667 |
||||||
Gain from divestiture transaction |
(66,472) |
— |
||||||
Ramtron acquisition-related expense |
1,305 |
1,305 |
||||||
Changes in value of deferred compensation plan |
(50) |
(53) |
||||||
Impairment of assets, restructuring and other charges |
— |
— |
||||||
Legal and other |
151 |
458 |
||||||
Effect of Non-GAAP revenue from intellectual property license |
6,250 |
6,250 |
||||||
Investment related losses (gains) |
2,709 |
(1,670) |
||||||
Tax-related, interest income, interest expense and other expenses |
(1,271) |
1,751 |
||||||
Losses from equity method investment |
1,800 |
1,459 |
||||||
Spansion merger costs and related amortization |
60,350 |
105,754 |
||||||
Non-GAAP net income attributable to Cypress |
$ 60,040 |
$ 52,870 |
||||||
GAAP net income (loss) per share attributable to Cypress - diluted |
$ 0.09 |
$ (0.27) |
||||||
Stock-based compensation expense |
0.07 |
0.08 |
||||||
Gain from divestiture transaction |
(0.18) |
— |
||||||
Ramtron acquisition-related expense |
— |
— |
||||||
Effect of Non-GAAP revenue from intellectual property license |
0.02 |
0.02 |
||||||
Investment related losses (gains) |
0.01 |
(0.01) |
||||||
Tax-related, interest income, interest expense and other expenses |
— |
0.01 |
||||||
Losses from equity method investment |
0.01 |
— |
||||||
Spansion merger costs and related amortization |
0.17 |
0.32 |
||||||
Non-GAAP net income per share attributable to Cypress - diluted |
$ 0.17 |
$ 0.15 |
||||||
(a) Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures. |
||||||||
(b) Non-GAAP revenue includes $6.25 million of Samsung intellectual property licensing revenue, not included in GAAP revenue as a result of the effects of purchase accounting for the Spansion merger. |
CYPRESS SEMICONDUCTOR CORPORATION |
||||
SUPPLEMENTAL FINANCIAL DATA |
||||
(In thousands) |
||||
(Unaudited) |
||||
Three Months Ended |
||||
September 27, |
June 28, |
|||
2015 |
2015 |
|||
Selected Cash Flow Data (Preliminary): |
||||
Net cash provided by (used in) operating activities |
$ 19,724 |
$ (65,620) |
||
Net cash provided by (used in) investing activities |
$ 80,574 |
$ (24,584) |
||
Net cash provided by (used in) financing activities |
$ (30,679) |
$ 66,763 |
||
Other Supplemental Data (Preliminary): |
||||
Capital expenditures |
$ 12,748 |
$ 18,735 |
||
Depreciation |
$ 36,665 |
$ 36,486 |
||
Payment of dividend |
$ 36,748 |
$ 36,402 |
||
Dividend paid per share |
$ 0.11 |
$ 0.11 |
||
Dividend yield per share (a) |
5.1% |
3.7% |
CYPRESS SEMICONDUCTOR CORPORATION |
||||||||
CONSOLIDATED DILUTED EPS CALCULATION |
||||||||
(In thousands, except per-share data) |
||||||||
(Unaudited) |
||||||||
Three Months Ended |
||||||||
September 27, |
June 28, |
|||||||
2015 |
2015 |
|||||||
GAAP |
Non-GAAP |
GAAP |
Non-GAAP |
|||||
Net income (loss) attributable to Cypress |
$ 30,312 |
$ 60,040 |
$ (90,051) |
$ 52,870 |
||||
Weighted-average common shares outstanding (basic) |
335,299 |
335,299 |
333,334 |
333,334 |
||||
Effect of dilutive securities: |
||||||||
Stock options, unvested restricted stock and other |
9,161 |
14,549 |
— |
13,764 |
||||
Impact of convertible bond |
13,197 |
13,197 |
— |
15,668 |
||||
Weighted-average common shares outstanding for diluted computation |
357,657 |
363,045 |
333,334 |
362,766 |
||||
Net income (loss) per share attributable to Cypress - basic |
$ 0.09 |
$ 0.18 |
$ (0.27) |
$ 0.16 |
||||
Net income (loss) per share attributable to Cypress - diluted |
$ 0.09 |
$ 0.17 |
$ (0.27) |
$ 0.15 |
||||
September 27, |
June 28, |
|||||||
2015 |
2015 |
|||||||
Average stock price for the period ended |
$ 10.64 |
$ 13.14 |
||||||
Common stock outstanding at period end (in thousands) |
335,590 |
334,088 |
NOTES TO NON-GAAP FINANCIAL MEASURES
To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses the following non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures:
The non-GAAP measures set forth above exclude charges related to our merger with Spansion, stock-based compensation, and other adjustments. Non-GAAP revenue includes the effect of revenue from an intellectual property license agreement. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of Cypress's operations that, when viewed in conjunction with Cypress's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting Cypress's business and operations. Management uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting and resource allocation processes. In addition, these non-GAAP financial measures facilitate management's internal comparisons to Cypress's historical operating results and comparisons to competitors' operating results. Pursuant to the requirements of Regulation G and to make clear to our investors the adjustments we make to GAAP measures, we have provided a reconciliation of the non-GAAP measures to the most directly comparable GAAP financial measures.
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SOURCE Cypress Semiconductor Corp.
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