ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
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Quarter Ended | |||||||||||||
March 30,
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December 31,
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March 31,
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Revenues | $ | 1,377.6 | $ | 1,377.5 | $ | 1,436.7 | |||||||
Cost of revenues (exclusive of amortization shown below) | 860.2 | 861.0 | 933.6 | ||||||||||
Gross profit | 517.4 | 516.5 | 503.1 | ||||||||||
Gross margin | 37.6 | % | 37.5 |
% |
35.0 | % | |||||||
Operating expenses: | |||||||||||||
Research and development | 155.2 | 158.0 | 140.1 | ||||||||||
Selling and marketing | 77.8 | 81.0 | 77.5 | ||||||||||
General and administrative | 70.9 | 71.1 | 68.4 | ||||||||||
Amortization of acquisition-related intangible assets | 27.4 | 28.8 | 29.1 | ||||||||||
Restructuring, asset impairments and other, net | 0.4 | 4.7 | 0.5 | ||||||||||
Intangible asset impairment | — | 5.4 | 4.4 | ||||||||||
Total operating expenses | 331.7 | 349.0 | 320.0 | ||||||||||
Operating income | 185.7 | 167.5 | 183.1 | ||||||||||
Other income (expense), net: | |||||||||||||
Interest expense | (31.5 | ) | (33.2 | ) | (38.4 | ) | |||||||
Interest income | 0.9 | 1.2 | 0.6 | ||||||||||
Loss on debt refinancing and prepayment | — | (14.3 | ) | (26.2 | ) | ||||||||
Licensing income | 3.8 | 2.2 | — | ||||||||||
Other expense | (2.0 | ) | (2.4 | ) | (4.1 | ) | |||||||
Other income (expense), net | (28.8 | ) | (46.5 | ) | (68.1 | ) | |||||||
Income before income taxes | 156.9 | 121.0 | 115.0 | ||||||||||
Income tax benefit (provision) | (16.4 | ) | 410.0 | (36.3 | ) | ||||||||
Net income | 140.5 | 531.0 | 78.7 | ||||||||||
Less: Net income attributable to non-controlling interest | (0.9 | ) | (1.1 | ) | (0.5 | ) | |||||||
Net income attributable to ON Semiconductor Corporation | $ | 139.6 | $ | 529.9 | $ | 78.2 | |||||||
Net income per common share attributable to ON Semiconductor Corporation: | |||||||||||||
Basic | $ | 0.33 | $ | 1.25 | $ | 0.19 | |||||||
Diluted | $ | 0.31 | $ | 1.22 | $ | 0.18 | |||||||
Weighted average common shares outstanding: | |||||||||||||
Basic | 425.9 | 424.3 | 419.8 | ||||||||||
Diluted | 444.2 | 433.3 | 425.8 | ||||||||||
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
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March 30,
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December 31,
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March 31,
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Assets | |||||||||||||
Cash and cash equivalents | $ | 924.9 | $ | 949.2 | $ | 728.9 | |||||||
Receivables, net | 696.9 | 701.5 | 678.2 | ||||||||||
Inventories | 1,160.0 | 1,089.5 | 1,011.4 | ||||||||||
Other current assets | 185.2 | 193.0 | 190.6 | ||||||||||
Total current assets | 2,967.0 | 2,933.2 | 2,609.1 | ||||||||||
Property, plant and equipment, net | 2,336.4 | 2,279.1 | 2,156.1 | ||||||||||
Goodwill | 916.9 | 916.9 | 924.7 | ||||||||||
Intangible assets, net | 600.9 | 628.3 | 730.5 | ||||||||||
Deferred tax assets | 333.3 | 339.1 | 143.9 | ||||||||||
Other assets | 108.6 | 98.5 | 73.1 | ||||||||||
Total assets | $ | 7,263.1 | $ | 7,195.1 | $ | 6,637.4 | |||||||
Liabilities, Non-Controlling Interest and Stockholders’ Equity | |||||||||||||
Accounts payable | $ | 612.0 | $ | 548.0 | $ | 464.0 | |||||||
Accrued expenses | 585.8 | 612.8 | 475.2 | ||||||||||
Current portion of long-term debt | 747.2 | 248.1 | 272.8 | ||||||||||
Total current liabilities | 1,945.0 | 1,408.9 | 1,212.0 | ||||||||||
Long-term debt | 2,084.4 | 2,703.7 | 2,986.8 | ||||||||||
Deferred tax liabilities | 57.1 | 55.1 | 246.0 | ||||||||||
Other long-term liabilities | 225.1 | 226.4 | 194.3 | ||||||||||
Total liabilities | 4,311.6 | 4,394.1 | 4,639.1 | ||||||||||
ON Semiconductor Corporation stockholders’ equity: | |||||||||||||
Common stock | 5.5 | 5.5 | 5.5 | ||||||||||
Additional paid-in capital | 3,615.5 | 3,593.5 | 3,510.6 | ||||||||||
Accumulated other comprehensive loss | (34.4 | ) | (40.6 | ) | (43.1 | ) | |||||||
Accumulated earnings (deficit) | 491.7 | 351.5 | (381.0 | ) | |||||||||
Less: Treasury stock, at cost | (1,149.9 | ) | (1,131.1 | ) | (1,116.0 | ) | |||||||
Total ON Semiconductor Corporation stockholders’ equity | 2,928.4 | 2,778.8 | 1,976.0 | ||||||||||
Non-controlling interest in consolidated subsidiary | 23.1 | 22.2 | 22.3 | ||||||||||
Total stockholders' equity | 2,951.5 | 2,801.0 | 1,998.3 | ||||||||||
Total liabilities and stockholders' equity | $ | 7,263.1 | $ | 7,195.1 | $ | 6,637.4 | |||||||
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
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Quarter Ended | |||||||||||||
March 30,
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December 31,
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March 31,
|
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Net income | $ | 140.5 | $ | 531.0 | $ | 78.7 | |||||||
Adjusted for: | |||||||||||||
Licensing income | (3.8 | ) | (2.2 | ) | — | ||||||||
R&D costs related to licensing income | 2.8 | 3.7 | — | ||||||||||
Restructuring, asset impairments and other, net | 0.4 | 4.7 | 0.5 | ||||||||||
Intangible asset impairment | — | 5.4 | 4.4 | ||||||||||
Interest expense | 31.5 | 33.2 | 38.4 | ||||||||||
Interest income | (0.9 | ) | (1.2 | ) | (0.6 | ) | |||||||
Loss on debt refinancing and prepayment | — | 14.3 | 26.2 | ||||||||||
Income tax (benefit) provision | 16.4 | (410.0 | ) | 36.3 | |||||||||
Net income attributable to non-controlling interest | (0.9 | ) | (1.1 | ) | (0.5 | ) | |||||||
Depreciation and amortization | 119.9 | 123.4 | 114.3 | ||||||||||
Amortization of fair market value step-up of inventory | — | — | 9.8 | ||||||||||
Sell-through to sell-in adjustment | — | — | (59.0 | ) | |||||||||
Adjustment to contingent consideration | (2.1 | ) | (0.2 | ) | 1.5 | ||||||||
Actuarial losses on pension plans and other pension benefits | — | 1.9 | — | ||||||||||
Third party acquisition and divestiture related costs | 0.4 | 1.0 | 1.0 | ||||||||||
Adjusted EBITDA | 304.2 | 303.9 | 251.0 | ||||||||||
Increase (decrease): | |||||||||||||
Licensing income | 3.8 | 2.2 | — | ||||||||||
R&D costs related to licensing income | (2.8 | ) | (3.7 | ) | — | ||||||||
Restructuring, asset impairments and other, net | (0.4 | ) | (4.7 | ) | (0.5 | ) | |||||||
Interest expense | (31.5 | ) | (33.2 | ) | (38.4 | ) | |||||||
Interest income | 0.9 | 1.2 | 0.6 | ||||||||||
Income tax benefit (provision) | (16.4 | ) | 410.0 | (36.3 | ) | ||||||||
Net income attributable to non-controlling interest | 0.9 | 1.1 | 0.5 | ||||||||||
Amortization of fair market value step-up of inventory | — | — | (9.8 | ) | |||||||||
Sell-through to sell-in adjustment | — | — | 59.0 | ||||||||||
Adjustment to contingent consideration | 2.1 | 0.2 | (1.5 | ) | |||||||||
Actuarial losses on pension plans and other pension benefits | — | (1.9 | ) | — | |||||||||
Third party acquisition and divestiture related costs | (0.4 | ) | (1.0 | ) | (1.0 | ) | |||||||
Loss on sale or disposal of fixed assets | 1.3 | 1.1 | 2.9 | ||||||||||
Amortization of debt discount and issuance costs | 3.3 | 3.8 | 4.5 | ||||||||||
Payments for term debt modification | — | (1.4 | ) | (2.4 | ) | ||||||||
Write-down of excess inventories | 9.4 | 10.2 | 14.2 | ||||||||||
Non-cash share-based compensation expense | 18.4 | 17.1 | 15.1 | ||||||||||
Non-cash interest on convertible notes | 8.7 | 8.9 | 4.7 | ||||||||||
Non-cash asset impairment charges | — | 0.6 | — | ||||||||||
Change in deferred taxes | 7.5 | (444.4 | ) | 36.2 | |||||||||
Other | (1.2 | ) | (0.4 | ) | 1.5 | ||||||||
Changes in operating assets and liabilities | (81.3 | ) | (45.3 | ) | (91.8 | ) | |||||||
Net cash provided by operating activities | $ | 226.5 | $ | 224.3 | $ | 208.5 | |||||||
Cash flows from investing activities: | |||||||||||||
Purchases of property, plant and equipment | $ | (99.5 | ) | $ | (175.7 | ) | $ | (52.7 | ) | ||||
Proceeds from sales of property, plant and equipment | 5.6 | 12.2 | 0.2 | ||||||||||
Deposits utilized for purchases of property, plant and equipment | (11.6 | ) | (6.1 | ) | (0.2 | ) | |||||||
Purchase of business, net of cash acquired | — | — | (0.8 | ) | |||||||||
Purchases of held-to-maturity securities | — | — | (1.6 | ) | |||||||||
Other | — | (1.0 | ) | — | |||||||||
Net cash used in investing activities | $ | (105.5 | ) | $ | (170.6 | ) | $ | (55.1 | ) | ||||
Cash flows from financing activities: | |||||||||||||
Proceeds from issuance of common stock under the ESPP | $ | — | $ | 12.2 | $ | 5.9 | |||||||
Proceeds from exercise of stock options | 3.6 | 7.1 | 7.5 | ||||||||||
Payments of tax withholding for restricted shares | (18.8 | ) | (3.1 | ) | (13.0 | ) | |||||||
Repurchase of common stock | — | — | (25.0 | ) | |||||||||
Proceeds from debt issuance | 5.3 | 405.0 | 689.8 | ||||||||||
Payments of debt issuance and other financing costs | — | — | (0.8 | ) | |||||||||
Repayment of long-term debt | (135.9 | ) | (419.8 | ) | (1,054.4 | ) | |||||||
Purchases of convertible note hedges | — | — | (144.7 | ) | |||||||||
Proceeds from issuance of warrants | — | — | 85.2 | ||||||||||
Payment of capital lease obligations | (1.1 | ) | (1.2 | ) | (5.4 | ) | |||||||
Payment of contingent consideration | — | (3.9 | ) | — | |||||||||
Dividend to non-controlling shareholder of consolidated subsidiary | — | (1.9 | ) | — | |||||||||
Net cash used in financing activities | $ | (146.9 | ) | $ | (5.6 | ) | $ | (454.9 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | 1.6 | $ | (0.1 | ) | $ | 2.3 | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (24.3 | ) | $ | 48.0 | $ | (299.2 | ) | |||||
Cash, cash equivalents and restricted cash, beginning of period | $ | 966.6 | $ | 918.6 | $ | 1,045.8 | |||||||
Cash, cash equivalents and restricted cash, end of period | $ | 942.3 | $ | 966.6 | $ | 746.6 | |||||||
NON-GAAP MEASURES |
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Quarter Ended | ||||||||||||||||
March 30
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December 31,
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March 31,
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Reconciliation of GAAP revenue to non-GAAP revenue: | ||||||||||||||||
GAAP revenue | $ | 1,377.6 | $ | 1,377.5 | $ | 1,436.7 | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | — | (155.1 | ) | |||||||||||
Total special items | — | — | (155.1 | ) | ||||||||||||
Non-GAAP revenue | $ | 1,377.6 | $ | 1,377.5 | $ | 1,281.6 | ||||||||||
Reconciliation of GAAP gross profit to non-GAAP gross profit: | ||||||||||||||||
GAAP gross profit | $ | 517.4 | $ | 516.5 | $ | 503.1 | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | — | (59.0 | ) | |||||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | — | 9.8 | ||||||||||||
Total special items | — | — | (49.2 | ) | ||||||||||||
Non-GAAP gross profit | $ | 517.4 | $ | 516.5 | $ | 453.9 | ||||||||||
Reconciliation of GAAP gross margin to non-GAAP gross margin: | ||||||||||||||||
GAAP gross margin | 37.6 | % | 37.5 | % | 35.0 | % | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | % | — | % |
(0.3 |
)% | |||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | % | — | % | 0.7 | % | |||||||||
Total special items | — | % | — | % | 0.4 | % | ||||||||||
Non-GAAP gross margin | 37.6 | % | 37.5 | % | 35.4 | % | ||||||||||
Reconciliation of GAAP operating expenses to non-GAAP operating expenses: | ||||||||||||||||
GAAP operating expenses | $ | 331.7 | $ | 349.0 | $ | 320.0 | ||||||||||
Special items: | ||||||||||||||||
a) | Amortization of acquisition-related intangible assets | (27.4 | ) | (28.8 | ) | (29.1 | ) | |||||||||
b) | Restructuring, asset impairments and other, net | (0.4 | ) | (4.7 | ) | (0.5 | ) | |||||||||
c) | Intangible asset impairment | — | (5.4 | ) | (4.4 | ) | ||||||||||
d) | Third party acquisition and divestiture related costs | (0.4 | ) | (1.0 | ) | (1.0 | ) | |||||||||
e) | R&D costs related to licensing income | (2.8 | ) | (3.7 | ) | — | ||||||||||
Total special items | (31.0 | ) | (43.6 | ) | (35.0 | ) | ||||||||||
Non-GAAP operating expenses | $ | 300.7 | $ | 305.4 | $ | 285.0 | ||||||||||
Reconciliation of GAAP operating income to non-GAAP operating income: | ||||||||||||||||
GAAP operating income | $ | 185.7 | $ | 167.5 | $ | 183.1 | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | — | (59.0 | ) | |||||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | — | 9.8 | ||||||||||||
c) | Amortization of acquisition-related intangible assets | 27.4 | 28.8 | 29.1 | ||||||||||||
d) | Restructuring, asset impairments and other, net | 0.4 | 4.7 | 0.5 | ||||||||||||
f) | Intangible asset impairment | — | 5.4 | 4.4 | ||||||||||||
g) | Third party acquisition and divestiture related costs | 0.4 | 1.0 | 1.0 | ||||||||||||
h) | R&D costs related to licensing income | 2.8 | 3.7 | — | ||||||||||||
Total special items | 31.0 | 43.6 | (14.2 | ) | ||||||||||||
Non-GAAP operating income | $ | 216.7 | $ | 211.1 | $ | 168.9 | ||||||||||
Reconciliation of GAAP operating margin to non-GAAP operating margin (operating income / revenues) : | ||||||||||||||||
GAAP operating margin | 13.5 | % | 12.2 | % | 12.7 | % | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | % | — | % | (2.7 | )% | |||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | % | — | % | 0.7 | % | |||||||||
c) | Amortization of acquisition-related intangible assets | 2.0 | % | 2.1 | % | 2.0 | % | |||||||||
d) | Restructuring, asset impairments and other, net | — | % | 0.3 | % | — | % | |||||||||
f) | Intangible asset impairment | — | % | 0.4 | % | 0.3 | % | |||||||||
g) | Third party acquisition and divestiture related costs | — | % | 0.1 | % | 0.1 | % | |||||||||
h) | R&D costs related to licensing income | 0.2 | % | 0.3 | % | — | % | |||||||||
Total special items | 2.2 | % | 3.2 | % | 0.4 | % | ||||||||||
Non-GAAP operating margin | 15.7 | % | 15.3 | % | 13.2 | % | ||||||||||
Reconciliation of GAAP income before income taxes to non-GAAP income before income taxes: | ||||||||||||||||
GAAP income before income taxes | $ | 156.9 | $ | 121.0 | $ | 115.0 | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | — | (59.0 | ) | |||||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | — | 9.8 | ||||||||||||
c) | Amortization of acquisition-related intangible assets | 27.4 | 28.8 | 29.1 | ||||||||||||
d) | Restructuring, asset impairments and other, net | 0.4 | 4.7 | 0.5 | ||||||||||||
e) | Intangible asset impairment | — | 5.4 | 4.4 | ||||||||||||
f) | Third party acquisition and divestiture related costs | 0.4 | 1.0 | 1.0 | ||||||||||||
g) | R&D costs related to licensing income | 2.8 | 3.7 | — | ||||||||||||
h) | Actuarial losses on pension plans and other pension benefits | — | 1.9 | — | ||||||||||||
i) | Loss on debt refinancing and prepayment | — | 14.3 | 26.2 | ||||||||||||
j) | Non-cash interest on convertible notes | 8.7 | 8.9 | 4.7 | ||||||||||||
k) | Adjustment to contingent consideration | (2.1 | ) | (0.2 | ) | 1.5 | ||||||||||
l) | Licensing income | (3.8 | ) | (2.2 | ) | — | ||||||||||
Total special items | 33.8 | 66.3 | 18.2 | |||||||||||||
Non-GAAP income before income taxes | $ | 190.7 | $ | 187.3 | $ | 133.2 | ||||||||||
Reconciliation of GAAP net income to non-GAAP net income: | ||||||||||||||||
GAAP net income attributable to ON Semiconductor Corporation | $ | 139.6 | $ | 529.9 | $ | 78.2 | ||||||||||
Special items: | ||||||||||||||||
a) | Sell-through to sell-in adjustment | — | — | (59.0 | ) | |||||||||||
b) | Expensing of appraised inventory at fair market value step-up | — | — | 9.8 | ||||||||||||
c) | Amortization of acquisition-related intangible assets | 27.4 | 28.8 | 29.1 | ||||||||||||
d) | Restructuring, asset impairments and other, net | 0.4 | 4.7 | 0.5 | ||||||||||||
e) | Intangible asset impairment | — | 5.4 | 4.4 | ||||||||||||
f) | Third party acquisition and divestiture related costs | 0.4 | 1.0 | 1.0 | ||||||||||||
g) | R&D costs related to licensing income | 2.8 | 3.7 | — | ||||||||||||
h) | Actuarial losses on pension plans and other pension benefits | — | 1.9 | — | ||||||||||||
i) | Loss on debt refinancing and prepayment | — | 14.3 | 26.2 | ||||||||||||
j) | Non-cash interest on convertible notes | 8.7 | 8.9 | 4.7 | ||||||||||||
k) | Adjustment to contingent consideration | (2.1 | ) | (0.2 | ) | 1.5 | ||||||||||
l) | Licensing income | (3.8 | ) | (2.2 | ) | — | ||||||||||
m) | Adjustment of income taxes | (2.7 | ) | (428.9 | ) | 17.9 | ||||||||||
Total special items | 31.1 | (362.6 | ) | 36.1 | ||||||||||||
Non-GAAP net income attributable to ON Semiconductor Corporation | $ | 170.7 | $ | 167.3 | $ | 114.3 | ||||||||||
Adjustment of income taxes: | ||||||||||||||||
Tax adjustment for Special Items (1) | $ | (7.1 | ) | $ | (23.2 | ) | $ | (6.4 | ) | |||||||
Other non-GAAP tax adjustment (2) | 4.4 | 44.2 | 24.3 | |||||||||||||
Non-cash impact of U.S. tax reform (3) | — | (449.9 | ) | — | ||||||||||||
Total | $ | (2.7 | ) | $ | (428.9 | ) | $ | 17.9 | ||||||||
Reconciliation of GAAP diluted share count to non-GAAP diluted share count: | ||||||||||||||||
GAAP diluted share count | 444.2 | 433.3 | 425.8 | |||||||||||||
Special items: | ||||||||||||||||
a) | Dilutive share count attributable to convertible notes | (12.6 | ) | (3.4 | ) | — | ||||||||||
Total special items | (12.6 | ) | (3.4 | ) | — | |||||||||||
Non-GAAP diluted share count | 431.6 | 429.9 | 425.8 | |||||||||||||
Non-GAAP diluted earnings per share: | ||||||||||||||||
Non-GAAP net income attributable to ON Semiconductor Corporation | $ | 170.7 | $ | 167.3 | $ | 114.3 | ||||||||||
Non-GAAP diluted share count | 431.6 | 429.9 | 425.8 | |||||||||||||
Non-GAAP diluted earnings per share | $ | 0.40 | $ | 0.39 | $ | 0.27 | ||||||||||
Reconciliation of net cash provided by operating activities to free cash flow: | ||||||||||||||||
Net cash provided by operating activities | $ | 226.5 | $ | 224.3 | $ | 208.5 | ||||||||||
Special items: | ||||||||||||||||
a) | Purchases of property, plant and equipment | (99.5 | ) | (175.7 | ) | (52.7 | ) | |||||||||
Total special items | (99.5 | ) | (175.7 | ) | (52.7 | ) | ||||||||||
Free cash flow | $ | 127.0 | $ | 48.6 | $ | 155.8 | ||||||||||
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(1) | Tax impact of non-GAAP Special Items (a)-(l), calculated using the federal statutory rate of 21%, 35%, and 35% for the quarters ended March 30, 2018, December 31, 2017, and March 31, 2017, respectively. | |
(2) | The income tax adjustment primarily represents 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, and non-cash expense (benefit) related to uncertain tax positions. | |
(3) | Non-cash tax impacts of U.S. tax reform legislation, H.R.1, commonly referred to as the Tax Cuts and Jobs Act. | |