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8-K - FORM 8-K - CYPRESS SEMICONDUCTOR CORP /DE/d472748d8k.htm

Exhibit 99.1

Contacts:

Brad W. Buss

EVP Finance & Administration and CFO

(408) 943-2754

Joseph L. McCarthy

Director, Corporate Communications

(408) 943-2902

FOR IMMEDIATE RELEASE

Cypress Reports Fourth-Quarter and Year-End 2012 Results

SAN JOSE, Calif., January 24, 2013 — Cypress Semiconductor Corp. (NASDAQ: CY) today announced its fourth-quarter 2012 and fiscal year results, which included the following highlights and remarks from its president and CEO, T.J. Rodgers.

 

   

Revenue and earnings exceeded the preliminary results issued on January 8

 

   

Ramtron acquisition completed in the fourth quarter

 

   

The divestiture of Cypress Envirosystems was completed

 

   

3.2 million shares repurchased in the fourth quarter; diluted share count at 7-year low

 

   

Dividend yield was 4.2% with favorable tax treatment conditions

Fellow shareholders:

Our revenue and earnings for the quarter are given below and compared with those of the prior quarter and prior year:

(In thousands, except per-share data)

 

     NON-GAAP     GAAP  
     Q4 2012     Q3 2012     Q4 2011     Q4 2012     Q3 2012     Q4 2011  

Revenue

   $ 180,283      $ 203,015      $ 242,373      $ 180,283      $ 203,015      $ 242,373   

Gross margin

     51.3     57.1     56.1     46.4     54.2     53.6

Pretax margin

     4.4     16.7     23.2     (12.2 %)      6.8     12.0

Net income (loss)

   $ 7,974      $ 32,322      $ 56,819      ($ 24,205   $ 14,332      $ 31,661   

Diluted EPS (loss per share)

   $ 0.05      $ 0.20      $ 0.32      ($ 0.17   $ 0.09      $ 0.18   

We did not perform well in 2012, including the fourth quarter. Yes, the economy is lackluster, but our performance was not good even in that environment. Our revenue was at the higher end of our preliminary financial announcement on January 8, 2013, but it decreased 11% sequentially—well below our expectations at the beginning of the fourth quarter. All divisions decreased sequentially and on a year-on-year basis. We are now cutting the company down structurally from four divisions to three to rapidly reduce our operating expenses. Our goal is to re-establish the drop-through earnings leverage that has characterized Cypress since the SunPower spinout.

Our fourth-quarter book-to-bill of 0.88 was up sequentially in every division for the first time all year. We now expect our first quarter, due to the seasonality of our business, to be the revenue bottom of the current semiconductor slump, with revenue growth thereafter.

BUSINESS REVIEW

+ Our non-GAAP4 consolidated gross margin for the fourth quarter was 51.3%, down 5.8 percentage points from the previous quarter due mainly to product mix, factory absorption, and Ramtron charges and inventory reserves. Our GAAP fourth-quarter consolidated gross margin was 46.4%.

+ Net inventory at the end of the fourth quarter was $126.1 million, up $36.8 million from the third quarter. The inventory acquired from Ramtron (plus the related purchase accounting fair value adjustment) totaled $44.7 million. Excluding the Ramtron acquisition, inventory decreased 9% sequentially, and distributor inventory dollars on hand decreased 16% sequentially.


+ Cash and investments for the fourth quarter totaled $117.2 million, a decrease of $102.2 million from the prior quarter. During the quarter, we used $102.2 million to complete the acquisition of Ramtron, $32.3 million to repurchase 3.2 million shares, and paid our regular quarterly dividend of $16.1 million. Since we announced our $400-million stock repurchase program in September 2011, we have repurchased 23.1 million shares through December 30, 2012, and have approximately $88.4 million remaining under the authorized repurchase program.

Our divisional revenue and gross margins are detailed below:

BUSINESS UNIT SUMMARY FINANCIALS (UNAUDITED)

THREE MONTHS ENDED

December 30, 2012

 

     PSD1     DCD1     MPD1     Core
Semi2
    Emerging
Tech.3
    Consolidated  

REVENUE ($M)

     85.1        16.5        77.4        179.0        1.3        180.3   

Percentage of total revenues

     47.2     9.2     42.9     99.3     0.7     100.0

GROSS MARGIN (%)

            

On a non-GAAP4 basis

     47.6     48.0     58.6     52.4     -109.4     51.3

On a GAAP basis

     43.6     43.9     53.7     48.0     -173.7     46.4

THREE MONTHS ENDED

September 30, 2012

 

     PSD1     DCD1     MPD1     Core
Semi2
    Emerging
Tech.3
    Consolidated  

REVENUE ($M)

     93.6        18.8        88.3        200.7        2.3        203.0   

Percentage of total revenues

     46.1     9.3     43.5     98.9     1.1     100.0

GROSS MARGIN (%)

            

On a non-GAAP4 basis

     53.5     50.0     64.0     57.8     -2.7     57.1

On a GAAP basis

     50.6     47.1     61.1     54.9     -5.5     54.2

TWELVE MONTHS ENDED

December 30, 2012

 

     PSD1     DCD1     MPD1     Core
Semi2
    Emerging
Tech.3
    Consolidated  

REVENUE ($M)

     356.4        75.6        330.5        762.5        7.2        769.7   

Percentage of total revenues

     46.3     9.8     43.0     99.1     0.9     100.0

GROSS MARGIN (%)

            

On a non-GAAP4 basis

     52.4     51.0     62.2     56.5     -65.6     55.4

On a GAAP basis

     48.0     44.1     58.7     52.2     -84.0     51.0

TWELVE MONTHS ENDED

January 1, 2012

 

     PSD1     DCD1     MPD1     Core
Semi2
    Emerging
Tech.3
    Consolidated  

REVENUE ($M)

     482.9        112.7        394.8        990.4        4.8        995.2   

Percentage of total revenues

     48.5     11.3     39.7     99.5     0.5     100

GROSS MARGIN (%)

            

On a non-GAAP4 basis

     57.2     54.4     59.4     57.8     -34.5     57.3

On a GAAP basis

     54.8     52.0     57.0     55.4     -36.7     54.9

 

1. PSD, Programmable System Division; DCD, Data Communications Division; MPD, Memory Products Division.
2. “Core Semiconductor” includes PSD, DCD and MPD and excludes “Emerging Technology.”
3. “Emerging Technology” includes businesses outside our core semiconductor businesses outlined in footnote 2. Includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry-support business. Cypress Envirosystems Inc. was sold in Q4 2012. The non-GAAP results include Cypress Envirosystems expenses for all periods prior to Q4 2012. The GAAP results include Cypress Envirosystems expenses for all periods presented.

 

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4. Refer to “Reconciliation of GAAP to Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial Measures” following this press release for a detailed discussion of management’s use of non-GAAP financial measures, as well as reconciliations of all non-GAAP financial measures presented in this press release to the most directly comparable GAAP financial measures.

FOURTH-QUARTER 2012 HIGHLIGHTS

+ Cypress introduced the fully qualified low-power version of PSoC® 5LP programmable system-on-chip family, which operates on a meager four milliamperes of total current (at 25 MHz). The new ARM® Cortex™-M3-based family provides exceptional processor performance, along with significant programmable analog and digital resources. PSoC 5LP also allows designers to reduce power consumption by customizing each peripheral Component. Components are free “Virtual Chips” used to integrate multiple ICs and system interfaces into one PSoC device.

+ Cypress’s online PSoC World developers conference attracted 4,677 attendees worldwide. Presented with Cypress partners, including ARM, Arrow Electronics, Macnica, TED, and Axios, PSoC World featured presentations from industry visionaries, hands-on tutorials for system and embedded designs with live Q&A, and an outside expert panel evaluating the PSoC architecture. All of the content is available at www.PSoCWorld.com.

+ Cypress introduced PSoC Designer™ 5.3, a new version of its integrated development environment for the PSoC 1 Programmable System-on-Chip architecture. The update includes more than 30 new or enhanced User Modules—free “Virtual Chips” used to integrate multiple ICs into a single PSoC 1 device.

+ Cypress introduced its TrueTouch® Gen4X touchscreen controllers, which deliver 3X the noise-immunity of leading touchscreen controllers. The robust noise-immunity provides uninterrupted tracking of finger movements and smoother navigation in the presence of noisy chargers, displays, and RF signals. These controllers are already designed into both in-cell displays and smartphones in the rapidly growing Chinese market.

+ Cypress announced that Fujitsu selected its TrueTouch Gen4 solution to implement the touchscreen in the new Arrows V F-04E smartphone. The Fujitsu phone uses the Android operating system and runs on the 4G LTE network.

+ Cypress introduced CapSense® and CapSense Plus™ controllers with Cypress’s new QuietZone™ technology, which is the first capacitive sensing technology to provide a Signal-to-Noise Ratio (SNR) greater than 100:1. The new devices offer industry-leading features, including the ultra-low power consumption (down to 50 microwatts per channel), high-accuracy proximity detection and the water-tolerance needed by customers in the consumer, white goods, and small home-appliance markets. Cypress is the No. 1 supplier of capacitive-sensing solutions with a market share greater than 4X that of the nearest competitor.

+ Cypress announced that startup Leap Motion Inc. selected Cypress’s EZ-USB® FX3™ solution for its 3D motion sensing and control system. The breakthrough Leap Motion controller enables a user to operate a computer using free-form hand movements and intuitive gestures. FX3 rapidly transfers data from the system’s image sensors to a central processor, enabling an unparalleled 3D human interface.

+ Cypress announced two design wins for its proprietary 2.4-GHz wireless radio technologies: I-Rocks Technology’s wireless keyboard with a built-in trackpad, and ITON Technology’s RF module, which provides a turnkey solution for wireless mice, using a Cypress radio-on-chip.

+ Micron Technology and Cypress subsidiary AgigA Tech signed an agreement to develop and provide nonvolatile dual in-line memory module (nvDIMM) products, pin-compatible with the ubiquitous, super-high volume PC DIMM memory. Using Agiga Tech’s proprietary technology, these nvDIMMs provide performance, cost, and data security advantages for high-performance computing and storage platforms.

+ Cypress officially completed its merger with Ramtron International on November 20, 2012, and is now actively supporting Ramtron’s Ferroelectric Random Access Memory (F-RAM) products. The merger effectively gives Cypress the world’s broadest portfolio of fast-write nonvolatile memories, including F-RAMs and Cypress’s nonvolatile static random access memories (nvSRAMs). Ramtron’s F-RAMs are the industry’s lowest-power fast-write nonvolatile memories, and dominate the serial nvSRAM market.

+ 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 December 27, 2012. The dividend was paid on January 17, 2013.

 

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ABOUT CYPRESS

Cypress delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC 1, PSoC 3, and PSoC 5 programmable system-on-chip families and derivatives, CapSense touch sensing and TrueTouch solutions for touchscreens. Cypress is the world leader in USB controllers, including the high-performance West Bridge® solution that enhances connectivity and performance in multimedia handsets, PCs and tablets. Cypress is also the world leader in SRAM memories. Cypress serves numerous markets, including consumer, mobile handsets, computation, data communications, automotive, industrial, and military. Cypress trades on the NASDAQ Global Select Market under the ticker symbol CY. Visit Cypress online at 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 Q1 2013 and the remainder of fiscal year 2013 and beyond are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as “believe,” “expect,” “future,” “plan,” “intend” and similar expressions to identify such forward-looking statements that include, but are not limited to, statements related to the semiconductor market, the strength and growth of our proprietary and programmable products, our expectations regarding our Q1 2013 revenue and earnings, margins, profit and cash flow; the results of our return on capital strategies and cost-saving measures, including our dividend and stock repurchase programs; our expectations regarding the demand for our products and how our products are expected to perform, as well as our future design win activity and market share gains. 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 a variety of uncertainties and risk factors, including, but not limited to, our ability to close and successfully integrate Ramtron into our operations, the state of and future of the global economy, business conditions and growth trends in the semiconductor market, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, whether our product and design wins result in increased sales, our ability to manage our business to have strong earnings, reduce operating expenses and cash flow leverage, factory utilization, 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 Technology Division, and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Statements made in this release that are not historical in nature and that refer to Cypress plans and expectations for the future, including, but not limited to, the Company’s future financial performance and results of operations, design-win penetration, cost-management strategies, competitive position and product offerings, set forth above are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially due a variety of factors, including but not limited to the risks identified in this press release as well as in our filings with the Securities and Exchange Commission. All forward-looking statements included in this release are based upon information available to Cypress as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statement. We use words such as “anticipates,” “believes,” “expects,” “future,” “look forward,” “planning,” “intends” and similar expressions to identify such forward-looking statements.

Cypress, the Cypress logo, TrueTouch, PSoC, EZ-USB, CapSense, and West Bridge are registered trademarks, and PSoC Creator, FX3, PRoC, and WirelessUSB are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.

 

Page 4


CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     December 30,
2012
    January 1,
2012
 

ASSETS

    

Cash, cash equivalents and short-term investments

   $ 117,209      $ 166,330   

Accounts receivable, net

     82,920        103,524   

Inventories (a) (b)

     126,106        92,304   

Property, plant and equipment, net

     276,852        284,979   

Goodwill and other intangible assets, net

     112,081        40,462   

Other assets

     113,065        122,491   
  

 

 

   

 

 

 

Total assets

   $ 828,233      $ 810,090   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Accounts payable

   $ 66,522      $ 52,868   

Deferred margin on sales to distributors

     131,192        150,568   

Income tax liabilities

     45,793        43,239   

Other liabilities

     176,358        165,573   

Long-term revolving credit facility

     232,000        —    
  

 

 

   

 

 

 

Total liabilities

     651,865        412,248   
  

 

 

   

 

 

 

Total Cypress stockholders’ equity

     184,214        400,267   

Noncontrolling interest

     (7,846     (2,425
  

 

 

   

 

 

 

Total equity

     176,368        397,842   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 828,233      $ 810,090   
  

 

 

   

 

 

 

 

(a) Included in this amount is approximately $44.7 million of net inventory, which has a fair market component of approximately $23.3 million, resulting from the acquisition of Ramtron.
(b) Inventories include $2.8 million and $4.6 million of capitalized inventories related to stock-based compensation expense, as of December 30, 2012 and January 1, 2012, respectively.


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 30,
2012
    September 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
 

Revenues

   $ 180,283      $ 203,015      $ 242,373      $ 769,687      $ 995,204   

Cost of revenues

     96,595        92,959        112,521        377,393        448,602   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     83,688        110,056        129,852        392,294        546,602   

Operating expenses:

          

Research and development

     46,636        46,908        46,561        189,458        189,970   

Selling, general and administrative

     51,994        47,328        55,388        211,771        227,976   

Amortization of acquisition-related intangibles

     1,833        707        731        4,002        2,892   

Restructuring charges

     2,975        66        932        4,258        6,336   

Gain (loss) on divestiture

     —         —         —         —         (34,291
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses, net

     103,438        95,009        103,612        409,489        392,883   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (19,750     15,047        26,240        (17,195     153,719   

Interest and other income (expense), net

     (2,175     (1,330     2,789        (3,170     1,859   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (21,925     13,717        29,029        (20,365     155,578   

Income tax provision (benefit)

     2,544        (241     (2,353     5,285        (11,379
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss), net of taxes

     (24,469     13,958        31,382        (25,650     166,957   

Adjust for net loss attributable to noncontrolling interest

     264        374        279        1,294        882   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Cypress

   $ (24,205   $ 14,332      $ 31,661      $ (24,356   $ 167,839   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Cypress:

          

Basic

   $ (0.17   $ 0.10      $ 0.21      $ (0.16   $ 1.02   

Diluted

   $ (0.17   $ 0.09      $ 0.18      $ (0.16   $ 0.90   

Cash dividend declared per share

   $ 0.11      $ 0.11      $ 0.09      $ 0.44      $ 0.27   

Shares used in net income (loss) per share calculation:

          

Basic

     143,605        147,673        154,045        149,266        164,495   

Diluted

     143,605        160,300        172,079        149,266        186,895   


CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)

(In thousands)

(Unaudited)

 

     Three Months Ended December 30, 2012  
     PSD (b)     MPD (b)     DCD (b)     Core Semi (c)     Emerging
Technologies (d)
    Consolidated  

GAAP gross margin

   $ 37,078      $ 41,607      $ 7,239        85,924      $ (2,236   $ 83,688   

Stock-based compensation expense

     1,234        1,123        239        2,596        19        2,615   

Changes in value of deferred compensation plan

     (32     (29     (6     (67     —          (67

Impairment of assets and other

     2,247        2,044        435        4,726        33        4,759   

Gain (loss) on divestiture

     —          —         —         —         776        776   

Acquisition-related expense

     —          646        —         646        —          646   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 40,527      $ 45,391      $ 7,907      $ 93,825      $ (1,408   $ 92,417   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended September 30, 2012  
     PSD (b)     MPD (b)     DCD (b)     Core Semi (c)     Emerging
Technologies (d)
    Consolidated  

GAAP gross margin

   $ 47,406      $ 53,915      $ 8,863      $ 110,184      $ (128   $ 110,056   

Stock-based compensation expense

     2,087        1,968        419        4,474        52        4,526   

Changes in value of deferred compensation plan

     101        94        20        215        2        217   

Impairment of assets and other

     521        491        105        1,117        12        1,129   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 50,115      $ 56,468      $ 9,407      $ 115,990      $ (62   $ 115,928   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended January 1, 2012  
     PSD (b)     MPD (b)     DCD (b)     Core Semi (c)     Emerging
Technologies (d)
    Consolidated  

GAAP gross margin

   $ 70,835      $ 50,755      $ 8,864      $ 130,454      $ (602   $ 129,852   

Stock-based compensation expense

     3,006        2,046        427        5,479        25        5,504   

Changes in value of deferred compensation plan

     135        92        19        246        1        247   

Impairment of assets

     163        111        23        297        1        298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 74,139      $ 53,004      $ 9,333      $ 136,476      $ (575   $ 135,901   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Twelve Months Ended December 30, 2012  
     PSD (b)     MPD (b)     DCD (b)     Core Semi (c)     Emerging
Technologies (d)
    Consolidated  

GAAP gross margin

   $ 170,905      $ 194,076      $ 33,332      $ 398,313      $ (6,019   $ 392,294   

Stock-based compensation expense

     8,806        8,075        1,880        18,761        179        18,940   

Changes in value of deferred compensation plan

     166        165        38        369        3        372   

Impairment of assets and other

     2,768        2,535        540        5,843        359        6,202   

Patent license fee

     4,283        —         2,817        7,100        —          7,100   

Gain (loss) on divestiture

     —          —         —         —         776        776   

Acquisition-related expense

     —          646        —         646        —          646   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 186,928      $ 205,497      $ 38,607      $ 431,032      $ (4,702   $ 426,330   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Twelve Months Ended January 1, 2012  
     PSD (b)     MPD (b)     DCD (b)     Core Semi (c)     Emerging
Technologies  (d)
    Consolidated  

GAAP gross margin

   $ 264,790      $ 225,006      $ 58,567      $ 548,363      $ (1,761   $ 546,602   

Stock-based compensation expense

     11,409        9,475        2,737        23,621        109        23,730   

Changes in value of deferred compensation plan

     (61     (35     (13     (109     (2     (111

Impairment of assets

     137        83        14        234        1        235   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 276,275      $ 234,529      $ 61,305      $ 572,109      $ (1,653   $ 570,456   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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) PSD - Programmable Systems Division; DCD - Data Communications Division; MPD - Memory Products Division.
(c) “Core Semi” – Includes PSD, DCD and MPD and excludes “Emerging Technologies.”
(d) “Emerging Technologies” – Activities outside our core semiconductor businesses outlined in footnote (c) Includes majority-owned subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry-support business. Cypress Envirosystems Inc. was sold in Q4 2012. The non-GAAP results include Cypress Envirosystems expenses for all periods prior to Q4 2012. The GAAP results include Cypress Envirosystems expenses for all periods presented.


CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)

(In thousands, except per-share data)

(Unaudited)

 

    Three Months Ended     Twelve Months Ended  
    December  30,
2012
    September  30,
2012
    January  1,
2012
    December  30,
2012
    January  1,
2012
 

GAAP research and development expenses

  $ 46,636      $ 46,908      $ 46,561      $ 189,458      $ 189,970   

Stock-based compensation expense

    (3,805     (5,062     (5,989     (21,260     (24,297

Changes in value of deferred compensation plan

    155        (389     (524     (568     114   

Gain (loss) on divestiture

    (307     —          —          (307     —     

Acquisition-related expense

    (926     —          —          (926     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP research and development expenses

  $ 41,753      $ 41,457      $ 40,048      $ 166,397      $ 165,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP selling, general and administrative expenses

  $ 51,994      $ 47,328      $ 55,388      $ 211,771      $ 227,976   

Stock-based compensation expense

    (4,967     (6,513     (13,876     (38,256     (52,754

Acquisition-related expense

    (5,503     (547     —          (8,053     —     

Changes in value of deferred compensation plan

    306        (945     (1,084     (1,710     460   

Building donation

    —          —          —          —          (4,125

Impairment of assets and other

    —          —          (105     47        (3,811

Gain (loss) on divestiture

    (664     —          —          (664     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP selling, general and administrative expenses

  $ 41,166      $ 39,323      $ 40,323      $ 163,135      $ 167,746   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP operating income (loss)

  $ (19,750   $ 15,047      $ 26,240      $ (17,195   $ 153,719   

Stock-based compensation expense

    11,387        16,101        25,369        78,455        100,781   

Acquisition-related expense

    8,682        1,254        731        13,401        2,892   

Changes in value of deferred compensation plan

    (529     1,551        1,854        2,649        (685

Patent license fee

    —          —          —          7,100        —     

Gain (loss) on divestiture

    1,746        —          —          1,746        (34,291

Restructuring charges

    2,976        66        932        4,259        6,336   

Building donation

    —          —          —          —          4,125   

Impairment of assets and other

    4,986        1,129        404        6,383        4,045   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

  $ 9,498      $ 35,148      $ 55,530      $ 96,798      $ 236,922   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP net income (loss) attributable to Cypress

  $ (24,205   $ 14,332      $ 31,661      $ (24,356   $ 167,839   

Stock-based compensation expense

    11,387        16,101        25,369        78,455        100,781   

Acquisition-related expense

    8,682        1,254        731        13,401        2,892   

Changes in value of deferred compensation plan

    (527     48        (150     (504     177   

Patent license fee

    —          —          —          7,100        —     

Gain (loss) on divestiture

    3,288        —          —          3,288        (34,291

Restructuring charges

    2,976        66        932        4,259        6,336   

Building donation

    —          —          —          —          4,125   

Impairment of assets and other

    5,088        1,129        404        8,554        4,047   

Investment-related gain (loss)

    (1,121     1,638        —          (532     —     

Tax effects

    2,406        (2,246     (2,128     1,459        (14,373
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to Cypress

  $ 7,974      $ 32,322      $ 56,819      $ 91,124      $ 237,533   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP net income (loss) per share attributable to Cypress - diluted

  $ (0.17   $ 0.09      $ 0.18      $ (0.16   $ 0.90   

Stock-based compensation expense

    0.07        0.10        0.15        0.47        0.53   

Acquisition-related expense

    0.06        0.01        —          0.08        0.02   

Patent license fee

    —          —          —          0.04        —     

Gain (loss) on divestiture

    0.02        —          —          0.02        (0.18

Restructuring charges

    0.02        —          0.01        0.03        0.04   

Building donation

    —          —          —          —          0.02   

Impairment of assets and other

    0.03        0.01        —          0.05        0.02   

Investment-related gain (loss)

    (0.01     0.01        —          —          —     

Tax effects

    0.02        (0.02     (0.01     0.01        (0.08

Non-GAAP share count adjustment

    0.01        —          (0.01     0.01        (0.02
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per share attributable to Cypress - diluted

  $ 0.05      $ 0.20      $ 0.32      $ 0.55      $ 1.25   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Refer to the accompanying “Notes to Non-GAAP Financial Measures” for a detailed discussion of management’s use of non-GAAP financial measures.


CYPRESS SEMICONDUCTOR CORPORATION

SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

 

     Three Months Ended     Twelve Months Ended  
     December  30,
2012
    September  30,
2012
    January  1,
2012
    December  30
2012
    January  1,
2012
 

Selected Cash Flow Data (Preliminary):

          

Net cash provided by operating activities

   $ 18,727      $ 58,065      $ 65,481      $ 136,422      $ 283,808   

Net cash provided by (used in) investing activities

   $ (106,198   $ 30,510      $ 1,731      $ (123,672   $ 69,100   

Net cash provided by (used in) financing activities

   $ (11,656   $ (44,508   $ (31,755   $ (49,265   $ (516,374

Other Supplemental Data (Preliminary):

          

Capital expenditures

   $ 7,809      $ 5,488      $ 8,758      $ 33,013      $ 80,556   

Depreciation

   $ 11,419      $ 11,790      $ 9,872      $ 45,559      $ 48,632   

Payment of dividend

   $ 16,057      $ 16,660      $ 13,786      $ 63,227      $ 29,048   

Dividend paid per share

   $ 0.11      $ 0.11      $ 0.09      $ 0.44      $ 0.27   

Dividend yield per share (a) (b)

     4.2     4.1     2.2     4.2     2.2

 

(a) Dividend yield per share is calculated based on the annualized dividend paid per share divided by the common stock share price at the end of the period.
(b) Actual dividend paid for fiscal year 2011 consists of $0.09 paid per share in the third and fourth quarter of 2011.


CYPRESS SEMICONDUCTOR CORPORATION

CONSOLIDATED DILUTED EPS CALCULATION

(In thousands, except per-share data)

(Unaudited)

 

    Three Months Ended     Twelve Months Ended  
    December 30,
2012
    September 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
 
    GAAP     Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP     GAAP     Non-GAAP  

Net income (loss) attributable to Cypress

  $ (24,205   $ 7,974      $ 14,332      $ 32,322      $ 31,661      $ 56,819      $ (24,356   $ 91,124      $ 167,839      $ 237,533   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding (basic)

    143,605        143,605        147,673        147,673        154,045        154,045        149,266        149,266        164,495        164,495   

Effect of dilutive securities:

                   

Stock options, unvested restricted stock and other

    —         13,723        12,627        13,902        18,034        21,416        —         16,063        22,400        26,192   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding for diluted computation

    143,605        157,328        160,300        161,575        172,079        175,461        149,266        165,329        186,895        190,687   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Cypress - basic

  $ (0.17   $ 0.06      $ 0.10      $ 0.22      $ 0.21      $ 0.37      $ (0.16   $ 0.61      $ 1.02      $ 1.44   

Net income (loss) per share attributable to Cypress - diluted

  $ (0.17   $ 0.05      $ 0.09      $ 0.20      $ 0.18      $ 0.32      $ (0.16   $ 0.55      $ 0.90      $ 1.25   
    December 30,
2012
    September 30,
2012
    Januray 1,
2012
    December 30,
2012
    January 1,
2012
 

Average stock price for the period ended

   
$9.99
  
    $11.72        $17.68        $12.94        $19.23   

Common stock outstanding at period end (in thousands) Outstanding as of January 1, 2012 includes unvested restricted stock awards of approximately 0.9 million shares. Unvested restricted stock awards as of December 30, 2012 and September 30, 2012 were not material.

   
144,222
  
    145,668        154,172        144,222        154,172   


Notes to Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in details below. 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. Non-GAAP financial measures used by Cypress include:

 

   

Gross margin;

 

   

Research and development expenses;

 

   

Selling, general and administrative expenses;

 

   

Operating income (loss);

 

   

Net income (loss); and

 

   

Diluted net income (loss) per share.

Cypress uses each of these non-GAAP financial measures for internal managerial purposes, when providing its financial results and business outlook to the public, and to facilitate period-to-period comparisons. Management believes that these non-GAAP measures provide meaningful supplemental information regarding Cypress’s operational and financial performance of current and historical results. 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.

Cypress believes that providing these non-GAAP financial measures, in addition to the GAAP financial results, are useful to investors because they allow investors to see Cypress’s results “through the eyes” of management as these non-GAAP financial measures reflect Cypress’s internal measurement processes. Management believes that these non-GAAP financial measures enable investors to better assess changes in each key element of Cypress’s operating results across different reporting periods on a consistent basis. Thus, management believes that each of these non-GAAP financial measures provides investors with another method for assessing Cypress’s operating results in a manner that is focused on the performance of its ongoing operations.

There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. In addition, non-GAAP financial measures may be limited in value because they exclude certain items that may have a material impact upon Cypress’s reported financial results. Management compensates for these limitations by providing investors with reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. 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. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the accompanying press release.

As presented in the “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

 

   

Stock-based compensation expense.

Stock-based compensation expense relates primarily to the equity awards such as stock options and restricted stock. Stock-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Cypress’s control. As a result, management excludes this item from Cypress’s internal operating forecasts and models. Management believes that non-GAAP measures adjusted for stock-based compensation provide investors with a basis to measure Cypress’s core performance against the performance of other companies without the variability created by stock-based compensation as a result of the variety of equity awards used by companies and the varying methodologies and subjective assumptions used in determining such non-cash expense.


   

Changes in value of Cypress’s key employee deferred compensation plan.

Cypress sponsors a voluntary deferred compensation plan which provides certain key employees with the option to defer the receipt of compensation in order to accumulate funds for retirement. The amounts are held in a trust and Cypress does not make contributions to the deferred compensation plan or guarantee returns on the investment. Changes in the value of the investments under the plan are excluded from the non-GAAP measures. Management believes that such non-cash item is not related to the ongoing core business and operating performance of Cypress, as the investment contributions are made by the employees themselves.

 

   

Restructuring charges.

Restructuring charges primarily relate to activities engaged by management to make changes related to its infrastructure in an effort to reduce costs. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities and such costs have not historically occurred in each year. Although Cypress has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges from Cypress’s non-GAAP financial measures as it enhances the ability of investors to compare Cypress’s period-over-period operating results from continuing operations.

 

   

Acquisition-related expense.

Acquisition-related expense primarily includes: (1) amortization of intangibles, which include acquired intangibles such as purchased technology, patents and trademarks, (2) costs such as advisory, legal, accounting and other professional or consulting fees related to acquisitions, (3) severance expense incurred in connection with acquisition-related headcount reduction efforts, and (4) earn-out compensation expense, which include compensation resulting from the achievement of milestones established in accordance with the terms of the acquisitions. In most cases, these acquisition-related charges are not factored into management’s evaluation of potential acquisitions or Cypress’s performance after completion of acquisitions, because they are not related to Cypress’s core operating performance. Adjustments of these items provide investors with a basis to compare Cypress against the performance of other companies without the variability caused by purchase accounting.

 

   

Investment-related gains/losses.

Investment-related gains/losses primarily include: (1) impairment loss related to Cypress’s investment when it determines the decline in fair value is other-than-temporary in nature, and (2) gains/losses related to the sales of its debt and equity investments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and operating performance of Cypress, and in most cases, such transactions have not historically occurred in every quarter. As such, management believes that it is appropriate to exclude investment-related gains/losses from Cypress’s non-GAAP financial measures, as it enhances the ability of investors to compare Cypress’s period-over-period operating results.

 

   

Impairment of assets.

Cypress wrote down the book value of certain assets to their estimated fair value as management determined these assets will be donated, sold or will have no future benefit. Cypress excludes these items because the expense is not reflective of its ongoing operating results. Excluding this data allows investors to better compare Cypress’s period-over-period performance without such expense.

 

   

Tax effects.

Cypress adjusts for the income tax effect that resulted from the non-GAAP adjustments as described above. Additionally, Cypress also excludes the impact of items that are related to historical activities in nature and not reflective of the ongoing operating results of Cypress.

 

   

Gain/losses on divestitures.

Cypress recognizes gains and losses from the exiting or sale of certain non-strategic businesses that no longer align with Cypress’s long-term operating plan. Cypress excludes these items from its non-GAAP financial measures primarily because it is not reflective of the ongoing operating performance of Cypress’s business and can distort the period-over-period comparison.

 

   

Building donation.

Cypress committed to donate an unused building to a charitable entity. Cypress excludes these items because the expense is not reflective of its ongoing operating results. Excluding this data allows investors to better compare Cypress’s period-over-period performance without such expense.