Cypress Reports Second-Quarter 2012 Results

  Cypress Reports Second-Quarter 2012 Results

Business Wire

SAN JOSE, Calif. -- July 19, 2012

Cypress Semiconductor Corp. (NASDAQ:CY) today announced the results of the
second quarter of 2012, which included the following highlights and remarks
from its president and CEO, T.J. Rodgers.

  *Revenue increased 9% sequentially
  *Non-GAAP EPS increased 50%, showing good leverage
  *TrueTouch^® revenue increased 21% sequentially
  *$430 million revolving line of credit closed in June

Fellow shareholders:

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

(In thousands, except per-share data)

           NON-GAAP                          GAAP
            Q2 2012   Q1 2012   Q2 2011      Q2 2012   Q1 2012    Q2 2011
                                                                      
Revenue     $201,300   $185,089   $254,978     $201,300   $185,089    $254,978
                                                                      
Gross       57.0%      55.7%      57.2%        53.0%      49.6%       54.5%
margin
                                                                      
Pretax      15.3%      11.3%      24.8%        2.6%       -9.4%       10.3%
margin
                                                                      
Net         $30,298    $20,530    $62,993      $4,977     $(19,460)   $40,823
income
                                                                      
Diluted     $0.18      $0.12      $0.32        $0.03      $(0.13)     $0.21
EPS
                                                                      

We are proud of the fact that we maintained our gross margin at 57.0% in
Q2’12, a quarter in which our revenue of $201 million was down more than 20%
from the $255 million and 57.2% gross margin reported in the year-ago quarter.
This result is attributable to our companywide cost-reduction effort.

Our revenue came in at the low end of our guidance, growing 9% sequentially.
All divisions grew, led by our Programmable Systems (PSoC^®) Division, or PSD.
PSD revenue grew 18% – driven by TrueTouch, which grew 21% sequentially as our
new TSG4 product began to gain share in the market, in part due to new
customers and applications, such as eReaders. GAAP EPS grew 123% sequentially,
and non-GAAP EPS grew 50% sequentially, driven by increased gross margins and
tight operating expense control.

Increasing global macroeconomic concerns, combined with short lead times, put
downward pressure on distributor and customer bookings across all geographies
and divisions.Our book-to-bill was 0.87 in Q2, down from 1.33 in Q1, below
our seasonal average. Nonetheless, we are still 77% booked for Q3, in line
with historical averages, and we expect approximately flat revenue with
increased earnings due to product mix and continuing cost controls.

Macroeconomic issues combined with some customer pushouts are limiting our
growth prospects for Q3. We expect our revenue to be flat and our EPS to
improve due to product mix and cost controls.

                               BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the second quarter was 57.0%, up
1.3 percentage points from the previous quarter due to product and customer
mix, solid manufacturing execution and our cost-reduction programs. On a GAAP
basis, our second-quarter consolidated gross margin was 53.0%.

+ Net inventory dollars in Q2 decreased 7% sequentially; inventory days
decreased to 96. Distributor weeks of inventory on hand decreased slightly to
6.2 weeks.

+ Cash and investments for the second quarter totaled $210.8 million, an
increase of $102.1 million from the prior quarter. The balance includes
proceeds of $103 million in incremental borrowings. During the quarter we used
$19.9 million to repurchase 1.5 million shares. Since we announced our $400
million stock repurchase program in September 2011, we have repurchased 12.7
million shares through July 1, 2012 and have approximately $202.3 million
remaining under the authorized repurchase program.

Our divisional revenue and gross margins are detailed below:


BUSINESS UNIT SUMMARY FINANCIALS (UNAUDITED)

THREE MONTHS ENDED
July 1, 2012

                 PSD^1   MPD^1   DCD^1   Core    Emerging   Consolidated
                                             Semi^2   Tech.^3
REVENUE ($M)      96.1     83.0     20.4     199.5    1.8         201.3
Percentage of     47.8 %   41.2 %   10.1 %   99.1%    0.9%        100.0%
total revenues
                                                                  
GROSS MARGIN
(%)
On a non-GAAP^4   54.1 %   64.2 %   53.9 %   58.3%    -77.7%      57.0%
basis
On a GAAP basis   50.3 %   60.3 %   50.0 %   54.4%    -98.6%      53.0%
                                                                  
THREE MONTHS ENDED

April 1, 2012

                  PSD^1    MPD^1    DCD^1    Core     Emerging    Consolidated
                                             Semi^2   Tech.^3
REVENUE ($M)      81.5     81.9     20.0     183.4    1.7         185.1
Percentage of     44.0 %   44.3 %   10.8 %   99.1%    0.9%        100.0%
total revenues
                                                                  
GROSS MARGIN
(%)
On a non-GAAP^4   54.3 %   61.6 %   51.6 %   57.3%    -104.7%^5   55.7%
basis
On a GAAP basis   46.7 %   59.2 %   35.2 %   51.1%    -107.0%^5   49.6%
                                                                           

1.  PSD – Programmable Systems Division; DCD – Data Communications Division;
     MPD – Memory Products Division.

2.   “Core Semiconductor” – Includes PSD, DCD and MPD and excludes “Emerging
     Technology.”

     “Emerging Technology” – Businesses outside our core semiconductor
3.   businesses outlined in footnote 2. Includes subsidiaries Cypress
     Envirosystems Inc., AgigA Tech Inc., and Deca Technologies Inc., and our
     foundry-support business.

     Refer to “Reconciliation of GAAP Financial Measures to Non-GAAP Financial
     Measures” and “Notes to Non-GAAP Financial Measures” following this press
4.   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.

     The dramatic decline in ETD gross margin is due to the reclassification
5.   of the factory expenses of Deca Technologies Inc. from the R&D line to
     the cost of goods sold line as its revenue ramp commences.
     

                        SECOND-QUARTER 2012 HIGHLIGHTS

+ Cypress rolled out its Design Win Replication (DWR) program. The purpose of
the program is to identify particular market segments where Cypress products
(particularly PSoC) have been successful and to replicate those successes
worldwide. Two examples of past DWR successes are Cypress’s CapSense^®
capacitive button technology and TrueTouch touchscreen technology, both of
which are now successful standalone businesses. PSoC’s configurability allows
us to enter new markets quickly. The DWR business process is designed to
support “hot” new markets and provide them with ready-to-manufacture solutions
and full engineering support.

A typical DWR solution starts with a PSoC chip for which special
solution-specific “Components” have been created. A Component is a virtual
chip inside PSoC, which uses a fraction of the chip’s resources to integrate a
function that would typically be performed using a separate IC in a system
design. In the design phase, Components reside in PSoC Creator™ design
software, represented as icons that are dragged and dropped to design
system-level solutions. When the PSoC Creator design is subsequently used to
program a PSoC chip, all of the circuit blocks, interconnections and firmware
required to implement virtual chips are automatically created and connected in
a PSoC one-chip system. Examples of PSoC Components in the PSoC Creator
library include a family of analog-to-digital converters, a family of serial
communication interfaces (I^2C, UART, SPI, etc.) and a complete ARM Cortex M3
microcontroller, including all of its memories. Designing with Components in
PSoC Creator design software is very much like designing with ordinary ICs on
a printed circuit board in the old paradigm.

The DWR solutions for PSoC take the PSoC Creator design environment to the
next level. Special application-specific Components are created to solve a
specialized system-level problem such as the Power Monitor required for all
electronic systems. These systems may have 25 or more power supplies that each
must be regulated to varying supply voltages with tight precision; for
example, 1.200 ± 0.050 volts. In addition to precise supply voltage control,
the power supplies must be monitored for brown outs and glitches. Finally,
when large systems (such as routers, servers, etc.) are turned on and off, the
power supplies must turn on not only in a specified sequence but also with a
tightly controlled rate. The usual solution for the Power Monitor is a board
full of discrete ICs. All of those ICs are available as Components in PSoC.
The new, application-specific Component in the DWR paradigm is the Voltage
Sequencer Component, which performs all of the Power Monitor functions
described above on 16 separate power supplies. To design using the Voltage
Sequencer Component, its icon is simply dragged and dropped into a design in
PSoC Creator and the function is automatically programmed into a PSoC chip.
The Voltage Sequencer Component then is further configured in Creator software
by entering specific power supply requirements into a graphical user
interface. The entire Power Monitor design process can be done by an expert
designer in less than one hour, compared with the conventional design process,
which takes weeks or months. We have found that our PSoC 3 chip has an
overwhelming advantage in the Power Monitor market—hence we created the DWR
program to take it to customers worldwide in a single campaign.

The second DWR solution released in the quarter was for a PSoC-based Fan
Controller that manages up to 16 fans. Cooling is another critical function in
large systems that require sophisticated fan control. Typically, the speed of
a fan can be controlled precisely by an electronic circuit. The engineering
state of the art is to measure the temperature that must be controlled and run
the fan at the exact rpm required to control that temperature. The Fan
Controller DWR solution allows for quick design of a precisely controlled
16-fan system, enough to support a relatively large electronic system.

+ Longcheer, a new Cypress TrueTouch customer and the market leader in China’s
mobile phone design industry, selected Cypress’s TrueTouch single-layer
capacitive touchscreen solution for a new smartphone customized for China
Unicom, one of China’s major mobile telecom carriers. Cypress’s single-layer
sensor provides high-performance touchscreen accuracy and responsiveness with
the low cost of a true single-layer sensor panel, significantly reducing the
cost of the most expensive component of the touchscreen.

+ IDS Imaging Development Systems, a global leader in medical- and
machine-vision cameras, selected Cypress's EZ-USB^® FX3™ controller as the
high-speed USB 3.0 interface for its uEye^® CP Camera series. The fast-growing
USB 3.0 interface delivers 5-Gbps speed, 10 times greater than the preceding
USB 2.0 standard.

+ Cypress, Nuvation Research Corp. and Arrow Electronics introduced a new
SuperSpeed interface board for Altera FPGAs. This board enables users to
prototype a simpler, uncompressed, cost-effective alternative to traditional
slower interfaces such as USB 2.0 and Gigabit Ethernet. The board utilizes
Cypress's EZ-USB FX3 controller to accelerate the development of high-quality
streaming video, imaging and data acquisition applications.

+ Cypress announced that Traxxas, one of the leading providers of ready-to-run
(RTR) radio-controlled hobby vehicles, selected Cypress’s WirelessUSB™-LP
2.4-GHz radio-on-chip for its new XO-1 radio controlled supercar. The XO-1 is
capable of going from 0 to 100 mph in just 4.9 seconds. The WirelessUSB-LP
device was selected for its long range, low latency and best-in-class
interference immunity in noisy environments.

+ BORND, a leading PC peripheral manufacturer, selected Cypress’s 2.4-GHz
WirelessUSB-NL radio-on-chip for its next-generation E220 wireless mouse.
WirelessUSB-NL’s low power consumption enables two AA batteries to power the
E220 mouse for up to three years.

+ Cypress announced that over 50,000 users have now registered for the Cypress
Developer Community™, an online forum where customers interact to create
content and answer questions along with Cypress engineers. The developer
community (www.developer.cypress.com) includes a growing collection of more
than 140 videos and 12 blogs written by technical experts.

+ Cypress announced that it has negotiated a highly flexible five-year senior
secured revolving credit facility. The facility enables the company to borrow
up to $430 million on a revolving basis for working capital, acquisitions,
stock repurchases and other general corporate purposes.

+ 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 at the close of business on June 28, 2012. The dividend will be
paid today, July 19, 2012.

+ Cypress announced that it submitted a proposal to Ramtron International
Corporation (NASDAQ:RMTR) to acquire all of its outstanding stock for $2.48
per share in cash. Cypress later commenced a tender offer to acquire all of
the outstanding common stock of Ramtron for $2.68 per share in cash, a 48%
premium over Ramtron’s closing price before Cypress’s first offer. The
all-cash tender offer, which is not conditioned on due diligence or financing,
provides Ramtron’s stockholders with immediate liquidity at a substantial
premium in a very volatile market.

+ Cypress announced that it has defeated GSI’s attempt to invalidate one of
the patents Cypress asserted against GSI Technology, Inc. in both the
International Trade Commission’s patent infringement case and the Minnesota
federal district court case filed by Cypress. The U.S. Patent and Trademark
Office (PTO) has completed its re-examination of Cypress’s U.S. Patent No.
7,142,477 and confirmed its validity. In addition, the PTO also expanded the
scope of the patent by allowing 64 new claims added by Cypress during the
re-examination.

+ Cypress named semiconductor industry veteran Kazuyoshi Yamada Country
Manager of its Cypress Japan subsidiary. Yamada has served in senior
semiconductor leadership roles at NEC and Renesas, where he ran the embedded
systems and memory design businesses. He replaces Hitoshi Yoshizawa, who
retired after a distinguished career of 40 years. Cypress’s revenue from Japan
grew over 80 percent under Dr. Yoshizawa’s leadership.

                                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 Q3 of fiscal year 2012 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 Q312
leadtimes, revenue growth, earnings, profit and cash flow; the results of our
return on capital strategies, including our dividend and stock repurchase
programs; our expectations regarding the demand for our products and how are
products are expected to perform as well as the benefits we can bring to
Ramtron’s customers. 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
enter into and close on a transaction with Ramtron, our ability to use our
operating leverage to increase cash flow and generate a high return on equity,
the state of and future of the global economy, business conditions and growth
trends in the semiconductor market, our ability to enter into new markets and
penetrate existing markets with our portfolio of products, 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, restrained 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 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.

Cypress, the Cypress logo, TrueTouch, PSoC, EZ-USB, CapSense and West Bridge
are registered trademarks, and PSoC Creator, FX3 and WirelessUSB 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)
                                                           
                                  July 1,                   January 1,
                                  2012                      2012
                                                            
ASSETS
                                                            
Cash, cash equivalents and        $    210,804              $    166,330
short-term investments
Accounts receivable, net               126,190                   103,524
Inventories (a)                        91,376                    92,304
Property, plant and                    276,063                   284,979
equipment, net
Goodwill and other                     37,922                    40,462
intangible assets, net
Other assets                          139,052                 122,491   
Total assets                      $    881,407             $    810,090   
                                                            
LIABILITIES AND EQUITY
                                                            
Accounts payable                  $    55,901               $    52,868
Deferred margin on sales to            148,570                   150,568
distributors
Income tax liabilities                 44,372                    43,239
Other liabilities                      184,896                   165,573
Long-term revolving credit            153,000                 -         
facility
Total liabilities                     586,739                 412,248   
Total Cypress stockholders'            299,318                   400,267
equity
Noncontrolling interest               (4,650     )             (2,425    )
Total equity                          294,668                 397,842   
Total liabilities and equity      $    881,407             $    810,090   
                                                            
(a) Inventories include $4.3 million and $4.6 million of capitalized
inventories related to stock-based compensation expense, as of July 1, 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
                                         July 1,    April 1,     July 3,
                                         2012        2012          2011
                                                                   
Revenues                                 $ 201,300   $ 185,089     $ 254,978
Cost of revenues                          94,531     93,308      115,958 
Gross margin                               106,769     91,781        139,020
Operating expenses:
Research and development                   47,946      47,968        49,278
Selling, general and administrative        51,955      60,494        58,482
Amortization of acquisition-related        731         731           731
intangibles
Restructuring charges                     989        228         3,798   
Total operating expenses, net             101,621    109,421     112,289 
Operating income (loss)                    5,148       (17,640 )     26,731
Interest and other income (expense),      1          334         (522    )
net
Income (loss) before income taxes          5,149      (17,306 )     26,209
Income tax provision (benefit)            517        2,465       (14,433 )
Income (loss), net of taxes                4,632       (19,771 )     40,642
Adjust for net loss attributable to       345        311         181     
noncontrolling interest
Net income (loss) attributable to        $ 4,977     $ (19,460 )   $ 40,823  
Cypress
                                                                   
Net income (loss) per share
attributable to Cypress:
Basic                                    $ 0.03      $ (0.13   )   $ 0.24
Diluted                                  $ 0.03      $ (0.13   )   $ 0.21
Cash dividend declared per share         $ 0.11      $ 0.11        $ 0.09
Shares used in net income (loss) per
share calculation:
Basic                                      151,765     154,022       168,723
Diluted                                   164,605   154,022    192,276 
                                                                             


CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)
(In thousands)
(Unaudited)
              
              Three Months Ended July 1, 2012
                                                      Core Semi     Emerging
               PSD (b)     MPD (b)     DCD (b)     (c)          Technologies  Consolidated
                                                                    (d)
GAAP gross     $ 48,315     $ 50,049     $ 10,209     $ 108,573     $  (1,804  )   $  106,769
margin
Stock-based
compensation     3,705        3,197        787          7,689          70             7,759
expense
Changes in
value of
deferred         (19    )     (16    )     (4     )     (39     )      (1      )      (40     )
compensation
plan
Impairment
of assets       -          -          -          -            314          314     
and other
Non-GAAP       $ 52,001    $ 53,230    $ 10,992    $ 116,223    $  (1,421  )   $  114,802 
gross margin
                                                                         
               Three Months Ended April 1, 2012
                                                      Core Semi     Emerging
               PSD (b)      MPD (b)      DCD (b)      (c)           Technologies   Consolidated
                                                                    (d)
GAAP gross     $ 38,105     $ 48,505     $ 7,021      $ 93,631      $  (1,850  )   $  91,781
margin
Stock-based
compensation     1,779        1,787        435          4,001          38             4,039
expense
Changes in
value of
deferred         116          116          28           260            2              262
compensation
plan
Patent          4,283      -          2,817      7,100        -            7,100   
license fee
Non-GAAP       $ 44,283    $ 50,408    $ 10,301    $ 104,992    $  (1,810  )   $  103,182 
gross margin
                                                                         
               Three Months Ended July 3, 2011
                                                      Core Semi     Emerging
               PSD (b)      MPD (b)      DCD (b)      (c)           Technologies   Consolidated
                                                                    (d)
GAAP gross     $ 67,496     $ 55,297     $ 16,681     $ 139,474     $  (454    )   $  139,020
margin
Stock-based
compensation     3,266        2,565        848          6,679          35             6,714
expense
Changes in
value of
deferred        (1     )    (1     )    -          (2      )     -            (2      )
compensation
plan
Non-GAAP       $ 70,761    $ 57,861    $ 17,529    $ 146,151    $  (419    )   $  145,732 
gross margin
                                                                         
                                                                                   

(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.”
      “Emerging Technologies” – Activities outside our core semiconductor
(d)   businesses outlined in footnote (c). Includes majority-owned
      subsidiaries Cypress Envirosystems Inc., AgigA Tech Inc. and Deca
      Technologies Inc.


CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)
(In thousands, except per-share data)
(Unaudited)

                                       
                                        Three Months Ended
                                        July 1,     April 1,     July 3,
                                        2012         2012          2011
                                                                   
GAAP research and development           $ 47,946     $ 47,968      $ 49,278
expenses
Stock-based compensation expense          (5,480 )     (6,913  )     (6,941  )
Changes in value of deferred             89         (423    )    (57     )
compensation plan
Non-GAAP research and development       $ 42,555    $ 40,632     $ 42,280  
expenses
                                                                   
GAAP selling, general and               $ 51,955     $ 60,494      $ 58,482
administrative expenses
Stock-based compensation expense          (8,991 )     (17,785 )     (16,085 )
Acquisition-related expenses              (2,003 )     -             -
Changes in value of deferred              183          (1,254  )     3
compensation plan
Loss on sale of asset                     -            -             (1,901  )
Impairment of assets and other           -          47          178     
Non-GAAP selling, general and           $ 41,144    $ 41,502     $ 40,677  
administrative expenses
                                        
GAAP operating income (loss)            $ 5,148      $ (17,640 )   $ 26,731
Stock-based compensation expense          22,230       28,737        29,740
Patent license fee                        -            7,100         -
Changes in value of deferred              (312   )     1,939         52
compensation plan
Acquisition-related expense               2,734        731           731
Restructuring charges                     989          228           3,798
Loss on sale of asset                     -            -             1,901
Impairment of assets and other           315        (47     )    (178    )
Non-GAAP operating income               $ 31,105    $ 21,048     $ 62,775  
                                                                   
GAAP net income (loss) attributable     $ 4,977      $ (19,460 )   $ 40,823
to Cypress
Stock-based compensation expense          22,230       28,737        29,740
Patent license fee                        -            7,100         -
Impairment of assets and other            315          2,022         (178    )
Acquisition-related expense               2,734        731           731
Restructuring charges                     989          228           3,798
Changes in value of deferred              530          (555    )     52
compensation plan
Loss on sale of asset                     -            -             1,901
Investment-related losses (gains)         -            -             (24     )
Gain (loss) on foreign currency           (1,049 )     -             -
transaction
Tax effects                              (428   )   1,727      (13,850 )
Non-GAAP net income attributable to     $ 30,298   $ 20,530    $ 62,993  
Cypress
                                                               
GAAP net income (loss) per share        $ 0.03       $ (0.13   )   $ 0.21
attributable to Cypress - diluted
Stock-based compensation expense          0.14         0.17          0.15
Patent license fee                        -            0.04          -
Impairment of assets and other            -            0.01          -
Acquisition-related expense               0.02         0.01          -
Restructuring charges                     0.01         -             0.02
Loss on sale of asset                     -            -             0.01
Gain (loss) on foreign currency           (0.01  )     -             -
transaction
Tax effects                               -            0.01          (0.07   )
Non-GAAP share count adjustment          -         0.01       -       
Non-GAAP net income per share           $ 0.18     $ 0.12      $ 0.32    
attributable to Cypress - diluted
                                                                   

(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                         Six Months Ended
                 July 1,      April 1,     July 3,        July 1,      July 3,
                 2012          2012          2011           2012          2011
Selected Cash
Flow Data
(Preliminary):
Net cash
provided by      $ 43,303      $ 16,327      $ 76,870       $ 59,630      $ 112,213
operating
activities
Net cash
provided by
(used in)        $ (49,477 )   $ 1,493       $ 46,624       $ (47,984 )   $ 77,335
investing
activities
Net cash
provided by
(used in)        $ 63,152      $ (56,253 )   $ 37,061       $ 6,899       $ (172,578 )
financing
activities
                                                                          
Other
Supplemental
Data
(Preliminary):
Capital          $ 9,741       $ 9,975       $ 34,282       $ 19,716      $ 53,591
expenditures
Depreciation     $ 11,668    $ 10,682    $ 13,493       $ 22,350    $ 25,866   


CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED DILUTED EPS CALCULATION
(In thousands, except per-share data)
(Unaudited)
                  
                   Three Months Ended
                   July 1,                 April 1,                  July 3,
                   2012                      2012                        2011
                   GAAP       Non-GAAP      GAAP         Non-GAAP      GAAP       Non-GAAP
                                                                                     
Net income
(loss)             $ 4,977     $ 30,298      $ (19,460 )   $ 20,530      $ 40,823    $ 62,993
attributable to
Cypress
                                                                                     
Weighted-average
common shares        151,765     151,765       154,022       154,022       168,723     168,723
outstanding
(basic)
Effect of
dilutive
securities:
Stock options,
unvested            12,840     16,075       -           20,549       23,553     27,571
restricted stock
and other
Weighted-average
common shares
outstanding for     164,605    167,840      154,022     174,571      192,276    196,294
diluted
computation
                                                                                     
Net income
(loss) per share   $ 0.03      $ 0.20        $ (0.13   )   $ 0.13        $ 0.24      $ 0.37
attributable to
Cypress - basic
Net income
(loss) per share
attributable to    $ 0.03      $ 0.18        $ (0.13   )   $ 0.12        $ 0.21      $ 0.32
Cypress -
diluted
                                                                           
                                                                                     
                                                                         
                   July 1,                   April 1,                    July 3,
                   2012                      2012                        2011
                                                                         
Average stock
price for the      $13.69                    $17.19                      $20.71
period ended
                                                                         
Common stock
outstanding at     151,470                   151,690                     171,241
period end (in
thousands)
Outstanding as
of July 3, 2011
included
unvested
restricted stock                                                   
awards of
approximately
1.0 million
shares.
                                                                         

                     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.

 •  Gains on divestitures.

Cypress recognizes gains resulting from the exiting 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.

 •  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, and
(3)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.

Contact:

Cypress Semiconductor Corp.
Brad W. Buss, 408-943-2754
EVP Finance & Administration and CFO
or
Joseph L. McCarthy, 408-943-2902
Director Corporate Communications
 
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