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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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