Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

July 30,

April 30,

August 1,

July 30,

August 1,

2016

2016(d)

2015

2016

2015

GAAP net income (loss)

$   51,305

$ (22,679)

$ (771,940)

$   28,626

$ (757,850)

Share-based compensation

37,196

24,453

36,674

61,649

69,895

Restructuring and other related charges (a)

721

4,441

13,000

5,162

13,592

Amortization of acquired intangible assets

2,946

2,946

3,346

5,892

6,839

Litigation matters (b)

(115)

100

748,117

(15)

746,417

Other (c)

103

(2,743)

10,205

173

31,587

Non-GAAP net income, as reported

$   92,156

$     6,518

$    39,402

$ 101,487

$  110,480

Non-GAAP net income, as adjusted (d)

$     9,331

GAAP weighted average shares - diluted

514,314

508,794

516,368

513,669

516,298

Non-GAAP adjustment

12,139

13,569

16,574

10,739

17,753

Non-GAAP weighted average shares diluted (e)

526,453

522,363

532,942

524,408

534,051

GAAP diluted net income per share

$       0.10

$     (0.04)

$       (1.49)

$       0.06

$       (1.47)

Non-GAAP diluted net income per share, as reported

$       0.18

$       0.01

$        0.07

$       0.19

$        0.21

Non-GAAP diluted net income per share, as adjusted (d)

$       0.02

GAAP gross profit:

$ 338,796

$ 281,612

$  248,773

$ 620,408

$  621,908

Share-based compensation

2,832

1,802

2,012

4,634

3,559

Restructuring and other related charges (a)

-

-

-

-

-

Amortization of acquired intangible assets

485

485

778

970

1,703

Litigation matters (b)

-

-

81,390

-

79,690

Non-GAAP gross profit

$ 342,113

$ 283,899

$  332,953

$ 626,012

$  706,860

GAAP gross margin

54.1%

52.1%

35.0%

53.2%

43.3%

Share-based compensation

0.4%

0.3%

0.3%

0.3%

0.3%

Restructuring and other related charges (a)

0.0%

0.0%

0.0%

0.0%

0.0%

Amortization of acquired intangible assets

0.1%

0.1%

0.1%

0.1%

0.1%

Litigation matters (b)

0.0%

0.0%

11.5%

0.0%

5.6%

Non-GAAP gross margin

54.6%

52.5%

46.9%

53.6%

49.3%

GAAP research and development:

$ 228,562

$ 241,271

$  297,321

$ 469,833

$  577,435

Share-based compensation

(28,581)

(24,396)

(27,807)

(52,977)

(52,588)

Restructuring and other related charges (a)

329

(813)

(11,680)

(484)

(11,680)

Litigation matters (b)

-

-

(5,000)

-

(5,000)

Other (c)

(174)

49

(134)

(125)

(134)

Non-GAAP research and development

$ 200,136

$ 216,111

$  252,700

$ 416,247

$  508,033

GAAP selling and marketing:

$   31,094

$   31,379

$    30,841

$   62,473

$    67,015

Share-based compensation

(3,315)

(2,942)

(2,707)

(6,257)

(5,284)

Restructuring and other related charges (a)

(27)

1

-

(26)

-

Other (c)

71

(304)

-

(233)

-

Non-GAAP selling and marketing

$   27,823

$   28,134

$    28,134

$   55,957

$    61,731

GAAP general and administrative:

$   37,173

$   35,623

$    36,563

$   72,796

$    77,590

Share-based compensation

(2,468)

4,687

(4,148)

2,219

(8,464)

Restructuring and other related charges (a)

(1,023)

(3,629)

(1,320)

(4,652)

(1,912)

Litigation matters (b)

115

(100)

(7,060)

15

(7,060)

Other (c)

-

(886)

(2,748)

(886)

(21,050)

Non-GAAP general and administrative

$   33,797

$   35,695

$    21,287

$   69,492

$    39,104

GAAP Carnegie Mellon University litigation settlement

$           -

$           -

$  654,667

$           -

$  654,667

Litigation matters (b)

-

-

(654,667)

-

(654,667)

Non-GAAP Carnegie Mellon University litigation settlement

$           -

$           -

$            -

$           -

$            -

GAAP provision (benefit) for income taxes

$   (5,515)

$   (4,955)

$      5,543

$ (10,470)

$      9,872

Other (c)

-

3,884

(7,323)

1,071

(10,403)

Non-GAAP provision (benefit) for income taxes, as reported

$   (5,515)

$   (1,071)

$     (1,780)

$   (9,399)

$        (531)

Non-GAAP provision (benefit) for income taxes, as adjusted (d)

$   (3,884)

(a) 

Restructuring and other related charges include costs that qualify under U.S. GAAP as restructuring costs and other incremental charges that are a direct result of restructuring. Examples of other incremental charges include impairment of equipment specifically identified as part of the restructuring action. 

(b) 

The amounts recorded represent charges recognized for pending litigation proceedings.

(c) 

Other costs for each of the three months ended July 30, 2016, April 30, 2016 and August 1, 2015, and the six months ended July 30, 2016 and August 1, 2015 include expenses related to retention bonuses offered to employees expected to remain through the ramp down of certain operations related to the mobile business, as well as the closure of certain design center operations in Europe.  Other costs for the three months ended April 30, 2016 and August 1, 2015, and the six months ended July 30, 2016 and August 1, 2015 also include costs for the surety bonds related to the litigation with CMU that was settled in February 2016. In addition, other costs for the six months ended August 1, 2015 include a payment of $15.4 million due to Dr. Sehat Sutardja, the Company's former Chief Executive Officer (see "Note 14 – Related Party Transactions" in the Notes to the Consolidated Financial Statements set forth in the Company's Annual Report on Form 10-K for fiscal 2016). The related tax effect of the payment to Dr. Sutardja is also included in other costs for the three months ended April 30, 2016, and the six months ended July 30, 2016 and August 1, 2015. The tax effect of certain restructuring charges in the three and six months ended August 1, 2015 is also included in other costs for those periods.

(d) 

For the three months ended April 30, 2016, the Company made a correction to the non-GAAP benefit for income taxes of $1,071 thousand that it previously reported in its fiscal 2017 first quarter earnings announcement on Wednesday, July 27, 2016. As a result, the Company now reports non-GAAP net income, as adjusted of $9,331 thousand, non-GAAP earnings per share, as adjusted of $0.02 per share, and non-GAAP benefit for income taxes, as adjusted of $3,884 thousand for the three months ended April 30, 2016. 

(e) 

For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the potential benefits of share-based compensation costs expected to be incurred in future periods but not yet recognized in the financial statements and to also include the dilutive/anti-dilutive effects of common stock options and restricted stock units, as applicable. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.