- Closed $5 billion merger with Spansion Inc. on March 12, earlier than anticipated
- Revenue of $209.1 million that included 18 days of Spansion results, with revenue of $173.9 million for existing Cypress business in line with guidance
- Non-GAAP loss per share of ($0.45) that included $107 million adjustment for aged and excess inventory acquired through merger
- $8.4 million in annualized synergies already realized
- Declared dividend of $36 million to combined shareholders at a current yield of 3.4%
Fellow shareholders:
Our revenue and earnings for the quarter are given below, compared with those of the prior quarter and prior year:
(In thousands, except per-share data)
NON-GAAP* GAAP
Q1 2015 Q4 2014 Q1 2014 Q1 2015 Q4 2014 Q1 2014
-------- -------- -------- --------- -------- --------
Revenue $209,137 $184,097 $170,283 $209,137 $184,097 $170,283
Gross margin (1.3%) 52.4% 50.3% (19.9%) 50.9% 45.6%
Pretax margin (42.0%) 12.6% 7.3% (120.2%) 2.7% (7.5%)
Net income
(loss) $(87,857) $22,056 $11,975 $(229,788) $3,503 $(7,934)
Diluted EPS
(loss) $(0.45) $0.13 $0.07 $(1.17) $0.02 $(0.05)
* For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."
We are pleased to have closed our merger with Spansion earlier than expected, and we are encouraged by the strategic opportunities ahead of us. Our post-merger company, which we internally refer to as New Cypress, is the No. 1 provider of SRAMs and the No. 1 provider of NOR Flash memories. This has helped to position us as the No. 3 provider of automotive MCUs and memories with $500 million in revenue and preferred supplier status to the Top 25 global automotive manufacturers. We are making excellent progress on integration -- for example, we have completed more than half of the headcount reductions we planned for the year and we have already achieved $8.4 million in annualized synergies in the first quarter.
We remain committed to expanding gross and operating margins as the embedded memory leader and through our continued focus on automotive and industrial markets.
BUSINESS REVIEW
+ Our consolidated non-GAAP financials include 18 days of Spansion results due to the merger closing on March 12, 2015. On a standalone basis, Cypress's first-quarter non-GAAP results would have been 50.8% gross margin (53.1% excluding the Emerging Technologies Division) and $0.10 earnings per share.
+ Net inventory at the end of the first quarter was $389.0 million, up 341% from the fourth quarter. The increase is primarily related to inventories acquired from Spansion, which totaled approximately $305 million, including the fair value adjustment mandated by purchase accounting.
+ Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock as of the close of business on March 26, 2015. This dividend was paid on April 16, 2015.
NET SALES SUMMARY
(In thousands, except percentages)
(Unaudited)
THREE MONTHS ENDED
---------------------------------
Year-
over-
Mar. 29, Dec. 28, Mar. 30, Sequential Year
Business Unit 2015 2014 2014 Change Change
--------------- --------- ----------- --------- ---------- ----------
PSD(1) $56,717 $70,433 $69,347 (19%) (18%)
MPD(1) $91,533 $88,803 $81,323 3% 13%
DCD(1) $18,565 $17,709 $15,590 5% 19%
ETD(2) $7,077 $7,152 $4,023 (1%) 76%
Legacy
Spansion(3) $35,245 - - - -
--------- ----------- --------- ---------- ----------
Total $209,137 $184,097 $170,283 14% 23%
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Geographic
---------------
China and ROW 49% 60% 62% (18%) (21%)
Americas 19% 16% 15% 19% 27%
Europe 16% 14% 14% 14% 14%
Japan 16% 10% 9% 60% 78%
--------- ----------- --------- ---------- ----------
Total 100% 100% 100% 0% 0%
--------- ----------- --------- ---------- ----------
Channel
---------------
Distribution 74% 71% 68% 4% 9%
Direct 26% 29% 32% (10%) (19%)
--------- ----------- --------- ---------- ----------
Total 100% 100% 100% 0% 0%
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