Cypress Reports Fourth-Quarter and Year-End 2012 Results
Cypress Reports Fourth-Quarter and Year-End 2012 Results
Business Wire
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 51.3 % 57.1 % 56.1 % 46.4 % 54.2 % 53.6 %
margin
Pretax 4.4 % 16.7 % 23.2 % (12.2 %) 6.8 % 12.0 %
margin
Net
income $7,974 $32,322 $56,819 ($24,205 ) $14,332 $31,661
(loss)
Diluted
EPS
$0.05 $0.20 $0.32 ($0.17 ) $0.09 $0.18
(loss
per
share)
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-GAAP^4 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 $88.4 million remaining under the authorized
repurchase program.
Our divisional revenue and gross margins are detailed below:
BUSINESS UNIT SUMMARY FINANCIALS (UNAUDITED)
THREE MONTHS ENDED
December 30, 2012
PSD^1 DCD^1 MPD^1 Core Emerging Consolidated
Semi^2 Tech.^3
REVENUE ($M) 85.1 16.5 77.4 179.0 1.3 180.3
Percentage of 47.2 % 9.2 % 42.9 % 99.3 % 0.7 % 100.0 %
total revenues
GROSS MARGIN
(%)
On a non-GAAP^4 47.6 % 48.0 % 58.6 % 52.4 % -109.4 % 51.3 %
basis
On a GAAP basis 43.6 % 43.9 % 53.7 % 48.0 % -173.7 % 46.4 %
THREE MONTHS ENDED
September 30, 2012
PSD^1 DCD^1 MPD^1 Core Emerging Consolidated
Semi^2 Tech.^3
REVENUE ($M) 93.6 18.8 88.3 200.7 2.3 203.0
Percentage of 46.1 % 9.3 % 43.5 % 98.9 % 1.1 % 100.0 %
total revenues
GROSS MARGIN
(%)
On a non-GAAP^4 53.5 % 50.0 % 64.0 % 57.8 % -2.7 % 57.1 %
basis
On a GAAP basis 50.6 % 47.1 % 61.1 % 54.9 % -5.5 % 54.2 %
TWELVE MONTHS ENDED
December 30, 2012
PSD^1 DCD^1 MPD^1 Core Emerging Consolidated
Semi^2 Tech.^3
REVENUE ($M) 356.4 75.6 330.5 762.5 7.2 769.7
Percentage of
total 46.3 % 9.8 % 43.0 % 99.1 % 0.9 % 100.0 %
revenues
GROSS MARGIN
(%)
On a
non-GAAP^4 52.4 % 51.0 % 62.2 % 56.5 % -65.6 % 55.4 %
basis
On a GAAP 48.0 % 44.1 % 58.7 % 52.2 % -84.0 % 51.0 %
basis
TWELVE MONTHS ENDED
January 1, 2012
PSD^1 DCD^1 MPD^1 Core Emerging Consolidated
Semi^2 Tech.^3
REVENUE ($M) 482.9 112.7 394.8 990.4 4.8 995.2
Percentage
of total 48.5 % 11.3 % 39.7 % 99.5 % 0.5 % 100 %
revenues
GROSS MARGIN
(%)
On a
non-GAAP^4 57.2 % 54.4 % 59.4 % 57.8 % -34.5 % 57.3 %
basis
On a GAAP 54.8 % 52.0 % 57.0 % 55.4 % -36.7 % 54.9 %
basis
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.”
“Emerging Technology” includes businesses outside our core semiconductor
businesses outlined in footnote 2. Includes subsidiaries AgigA Tech Inc.,
3. 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.
Refer to “Reconciliation of GAAP to Non-GAAP Financial Measures” and
“Notes to Non-GAAP Financial Measures” following this press release for a
4. 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.
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.
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 30, January 1,
2012 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
Included in this amount is approximately $44.7 million of net inventory,
(a) which has a fair market component of approximately $23.3 million,
resulting from the acquisition of Ramtron.
Inventories include $2.8 million and $4.6 million of capitalized
(b) 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 September January 1, December January 1,
30, 30, 30,
2012 2012 2012 2012 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 46,636 46,908 46,561 189,458 189,970
development
Selling, general 51,994 47,328 55,388 211,771 227,976
and administrative
Amortization of
acquisition-related 1,833 707 731 4,002 2,892
intangibles
Restructuring 2,975 66 932 4,258 6,336
charges
Gain (loss) on - - - - (34,291 )
divestiture
Total operating 103,438 95,009 103,612 409,489 392,883
expenses, net
Operating income (19,750 ) 15,047 26,240 (17,195 ) 153,719
(loss)
Interest and other
income (expense), (2,175 ) (1,330 ) 2,789 (3,170 ) 1,859
net
Income (loss) (21,925 ) 13,717 29,029 (20,365 ) 155,578
before income taxes
Income tax 2,544 (241 ) (2,353 ) 5,285 (11,379 )
provision (benefit)
Income (loss), net (24,469 ) 13,958 31,382 (25,650 ) 166,957
of taxes
Adjust for net loss
attributable to 264 374 279 1,294 882
noncontrolling
interest
Net income (loss)
attributable to $ (24,205 ) $ 14,332 $ 31,661 $ (24,356 ) $ 167,839
Cypress
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 $ 0.11 $ 0.11 $ 0.09 $ 0.44 $ 0.27
declared per share
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
Emerging
PSD (b) MPD (b) DCD (b) Core Semi Technologies Consolidated
(c) (d)
GAAP gross margin $ 37,078 $ 41,607 $ 7,239 85,924 $ (2,236 ) $ 83,688
Stock-based
compensation 1,234 1,123 239 2,596 19 2,615
expense
Changes in value of
deferred (32 ) (29 ) (6 ) (67 ) - (67 )
compensation plan
Impairment of 2,247 2,044 435 4,726 33 4,759
assets and other
Gain (loss) on - - - - 776 776
divestiture
Acquisition-related - 646 - 646 - 646
expense
Non-GAAP gross $ 40,527 $ 45,391 $ 7,907 $ 93,825 $ (1,408 ) $ 92,417
margin
Three Months Ended September 30, 2012
Emerging
PSD (b) MPD (b) DCD (b) Core Semi Technologies Consolidated
(c) (d)
GAAP gross margin $ 47,406 $ 53,915 $ 8,863 $ 110,184 $ (128 ) $ 110,056
Stock-based
compensation 2,087 1,968 419 4,474 52 4,526
expense
Changes in value of
deferred 101 94 20 215 2 217
compensation plan
Impairment of 521 491 105 1,117 12 1,129
assets and other
Non-GAAP gross $ 50,115 $ 56,468 $ 9,407 $ 115,990 $ (62 ) $ 115,928
margin
Three Months Ended January 1, 2012
Emerging
PSD (b) MPD (b) DCD (b) Core Semi Technologies Consolidated
(c) (d)
GAAP gross margin $ 70,835 $ 50,755 $ 8,864 $ 130,454 $ (602 ) $ 129,852
Stock-based
compensation 3,006 2,046 427 5,479 25 5,504
expense
Changes in value of
deferred 135 92 19 246 1 247
compensation plan
Impairment of 163 111 23 297 1 298
assets
Non-GAAP gross $ 74,139 $ 53,004 $ 9,333 $ 136,476 $ (575 ) $ 135,901
margin
Twelve Months Ended December 30, 2012
Emerging
PSD (b) MPD (b) DCD (b) Core Semi Technologies Consolidated
(c) (d)
GAAP gross margin $ 170,905 $ 194,076 $ 33,332 $ 398,313 $ (6,019 ) $ 392,294
Stock-based
compensation 8,806 8,075 1,880 18,761 179 18,940
expense
Changes in value of
deferred 166 165 38 369 3 372
compensation plan
Impairment of 2,768 2,535 540 5,843 359 6,202
assets and other
Patent license fee 4,283 - 2,817 7,100 - 7,100
Gain (loss) on - - - - 776 776
divestiture
Acquisition-related - 646 - 646 - 646
expense
Non-GAAP gross $ 186,928 $ 205,497 $ 38,607 $ 431,032 $ (4,702 ) $ 426,330
margin
Twelve Months Ended January 1, 2012
Emerging
PSD (b) MPD (b) DCD (b) Core Semi Technologies Consolidated
(c) (d)
GAAP gross margin $ 264,790 $ 225,006 $ 58,567 $ 548,363 $ (1,761 ) $ 546,602
Stock-based
compensation 11,409 9,475 2,737 23,621 109 23,730
expense
Changes in value of
deferred (61 ) (35 ) (13 ) (109 ) (2 ) (111 )
compensation plan
Impairment of 137 83 14 234 1 235
assets
Non-GAAP gross $ 276,275 $ 234,529 $ 61,305 $ 572,109 $ (1,653 ) $ 570,456
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 Twelve Months Ended
December September January 1, December January 1,
30, 30, 30,
2012 2012 2012 2012 2012
GAAP research and
development $ 46,636 $ 46,908 $ 46,561 $ 189,458 $ 189,970
expenses
Stock-based
compensation (3,805 ) (5,062 ) (5,989 ) (21,260 ) (24,297 )
expense
Changes in value of
deferred 155 (389 ) (524 ) (568 ) 114
compensation plan
Gain (loss) on (307 ) - - (307 ) -
divestiture
Acquisition-related (926 ) - - (926 ) -
expense
Non-GAAP research
and development $ 41,753 $ 41,457 $ 40,048 $ 166,397 $ 165,787
expenses
GAAP selling,
general and $ 51,994 $ 47,328 $ 55,388 $ 211,771 $ 227,976
administrative
expenses
Stock-based
compensation (4,967 ) (6,513 ) (13,876 ) (38,256 ) (52,754 )
expense
Acquisition-related (5,503 ) (547 ) - (8,053 ) -
expense
Changes in value of
deferred 306 (945 ) (1,084 ) (1,710 ) 460
compensation plan
Building donation - - - - (4,125 )
Impairment of - - (105 ) 47 (3,811 )
assets and other
Gain (loss) on (664 ) - - (664 ) -
divestiture
Non-GAAP selling,
general and $ 41,166 $ 39,323 $ 40,323 $ 163,135 $ 167,746
administrative
expenses
GAAP operating $ (19,750 ) $ 15,047 $ 26,240 $ (17,195 ) $ 153,719
income (loss)
Stock-based
compensation 11,387 16,101 25,369 78,455 100,781
expense
Acquisition-related 8,682 1,254 731 13,401 2,892
expense
Changes in value of
deferred (529 ) 1,551 1,854 2,649 (685 )
compensation plan
Patent license fee - - - 7,100 -
Gain (loss) on 1,746 - - 1,746 (34,291 )
divestiture
Restructuring 2,976 66 932 4,259 6,336
charges
Building donation - - - - 4,125
Impairment of 4,986 1,129 404 6,383 4,045
assets and other
Non-GAAP operating $ 9,498 $ 35,148 $ 55,530 $ 96,798 $ 236,922
income
GAAP net income
(loss) attributable $ (24,205 ) $ 14,332 $ 31,661 $ (24,356 ) $ 167,839
to Cypress
Stock-based
compensation 11,387 16,101 25,369 78,455 100,781
expense
Acquisition-related 8,682 1,254 731 13,401 2,892
expense
Changes in value of
deferred (527 ) 48 (150 ) (504 ) 177
compensation plan
Patent license fee - - - 7,100 -
Gain (loss) on 3,288 - - 3,288 (34,291 )
divestiture
Restructuring 2,976 66 932 4,259 6,336
charges
Building donation - - - - 4,125
Impairment of 5,088 1,129 404 8,554 4,047
assets and other
Investment-related (1,121 ) 1,638 - (532 ) -
gain (loss)
Tax effects 2,406 (2,246 ) (2,128 ) 1,459 (14,373 )
Non-GAAP net income
attributable to $ 7,974 $ 32,322 $ 56,819 $ 91,124 $ 237,533
Cypress
GAAP net income
(loss) per share $ (0.17 ) $ 0.09 $ 0.18 $ (0.16 ) $ 0.90
attributable to
Cypress - diluted
Stock-based
compensation 0.07 0.10 0.15 0.47 0.53
expense
Acquisition-related 0.06 0.01 - 0.08 0.02
expense
Patent license fee - - - 0.04 -
Gain (loss) on 0.02 - - 0.02 (0.18 )
divestiture
Restructuring 0.02 - 0.01 0.03 0.04
charges
Building donation - - - - 0.02
Impairment of 0.03 0.01 - 0.05 0.02
assets and other
Investment-related (0.01 ) 0.01 - - -
gain (loss)
Tax effects 0.02 (0.02 ) (0.01 ) 0.01 (0.08 )
Non-GAAP share 0.01 - (0.01 ) 0.01 (0.02 )
count adjustment
Non-GAAP net income
per share $ 0.05 $ 0.20 $ 0.32 $ 0.55 $ 1.25
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 Twelve Months Ended
December 30, September January 1, December 30 January 1,
30,
2012 2012 2012 2012 2012
Selected Cash
Flow Data
(Preliminary):
Net cash
provided by $ 18,727 $ 58,065 $ 65,481 $ 136,422 $ 283,808
operating
activities
Net cash
provided by
(used in) $ (106,198 ) $ 30,510 $ 1,731 $ (123,672 ) $ 69,100
investing
activities
Net cash
provided by
(used in) $ (11,656 ) $ (44,508 ) $ (31,755 ) $ (49,265 ) $ (516,374 )
financing
activities
Other
Supplemental
Data
(Preliminary):
Capital $ 7,809 $ 5,488 $ 8,758 $ 33,013 $ 80,556
expenditures
Depreciation $ 11,419 $ 11,790 $ 9,872 $ 45,559 $ 48,632
Payment of $ 16,057 $ 16,660 $ 13,786 $ 63,227 $ 29,048
dividend
Dividend paid $ 0.11 $ 0.11 $ 0.09 $ 0.44 $ 0.27
per share
Dividend yield
per share (a) 4.2 % 4.1 % 2.2 % 4.2 % 2.2 %
(b)
Dividend yield per share is calculated based on the annualized dividend
(a) 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 forth 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, September 30, January 1, December 30, January 1,
2012 2012 2012 2012 2012
GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
Net income
(loss) $ (24,205 ) $ 7,974 $ 14,332 $ 32,322 $ 31,661 $ 56,819 $ (24,356 ) $ 91,124 $ 167,839 $ 237,533
attributable to
Cypress
Weighted-average
common shares 143,605 143,605 147,673 147,673 154,045 154,045 149,266 149,266 164,495 164,495
outstanding
(basic)
Effect of
dilutive
securities:
Stock options,
unvested - 13,723 12,627 13,902 18,034 21,416 - 16,063 22,400 26,192
restricted stock
and other
Weighted-average
common shares
outstanding for 143,605 157,328 160,300 161,575 172,079 175,461 149,266 165,329 186,895 190,687
diluted
computation
Net income
(loss) per share $ (0.17 ) $ 0.06 $ 0.10 $ 0.22 $ 0.21 $ 0.37 $ (0.16 ) $ 0.61 $ 1.02 $ 1.44
attributable to
Cypress - basic
Net income
(loss) per share
attributable to $ (0.17 ) $ 0.05 $ 0.09 $ 0.20 $ 0.18 $ 0.32 $ (0.16 ) $ 0.55 $ 0.90 $ 1.25
Cypress -
diluted
December 30, September 30, January 1, December 30, January 1,
2012 2012 2012 2012 2012
Average stock
price for the $9.99 $11.72 $17.68 $12.94 $19.23
period ended
Common stock
outstanding at 144,222 145,668 154,172 144,222 154,172
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.
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.
Contact:
Cypress Semiconductor Corp.
Brad W. Buss, 408-943-2754
EVP Finance & Administration and CFO
Joseph L. McCarthy, 408-943-2902
Director, Corporate Communications
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