Cypress Semiconductor Corp. (NASDAQ:CY) today announced that
revenue for the 2009 fourth quarter was $194.0 million, up 8.5%
from $178.7 million for the prior quarter, and up 17.5% from $165.1
million for the year-ago period.
Cypress recorded GAAP net income of $2.9 million in the 2009
fourth quarter, or diluted earnings per share of $0.02. This
compares with last quarter’s diluted net loss per share of $0.13
and a diluted net loss per share in the year-ago fourth quarter of
$2.88.
Non-GAAP1 net income for the 2009 fourth quarter—excluding
stock-based compensation, acquisition-related charges,
restructuring and other special charges and credits—totaled $31.7
million, or diluted earnings per share of $0.16. That compares with
non-GAAP1 diluted earnings per share of $0.10 for the prior quarter
and a diluted net loss per share of $0.08 for the year-ago fourth
quarter.
For the fiscal year 2009, Cypress posted total revenue of $667.8
million, a decrease of 12.8% from fiscal year 2008 revenue of
$765.7 million. On a GAAP basis, Cypress’s fiscal year 2009 diluted
net loss per share was $1.03, compared with a diluted net loss per
share of $1.89 in 2008. On a non-GAAP1 basis, Cypress’s fiscal year
2009 diluted earnings per share was $0.10, compared with diluted
earnings per share of $0.20 in 2008.
Cypress President and CEO T.J. Rodgers said, “We are pleased to
report a strong sequential revenue increase of 8.5% in what is
seasonally a down quarter. The growth occurred in all core
divisions. We exceeded the upper end of our guidance due to both
strong growth in our PSoC®-based touchscreen products and strength
in our high-performance SRAM business. We continue to achieve
significant design wins with our proprietary products—especially
our TrueTouch™ touchscreen products.
“Customers are providing increased booking visibility into Q1
and Q2, and our semiconductor book-to-bill ended Q4 at 1.13—a
significant milestone since we rarely have a positive book-to-bill
entering Q1 due to consumer seasonality. Lead times have not
increased and we see no signs of double ordering.
“Fiscal year 2009 was unprecedented. The semiconductor industry
and Cypress did not emerge unscathed. However, we are proud that
our focus on programmable products and our financial discipline
have allowed us to exceed our internal plan for gross profit
margin, operating expenses, net income, earnings per share and cash
flow. Our stock performance has responded by increasing 136% in
2009 and outperforming all major market indexes by at least 2x. We
enter 2010 with zero debt and $333 million in cash equivalents and
investments.
“While we can’t predict where the economy will go in 2010, we
are seeing positive signs from our customer base, increased
bookings and backlog, strong design wins, low levels of inventory
and a very rational supply chain.
“We enter 2010 with the strongest new product portfolio in the
company’s history, led by our flagship PSoC family and by strength
in our industry-leading SRAM and USB families. In addition,
investments in our Emerging Technology Division3 will begin to
realize increased revenue in the second half of 2010. Customer
acceptance of our new products remains very strong, and we are
pleased with the high-profile design wins that we are booking in
the handset market and other end markets served by our touchscreen
controllers. Our next-generation PSoC family, comprising the
revolutionary PSoC 3 and PSoC 5 embedded solutions, are off to a
strong start with robust initial design wins. Together these new
families significantly expand Cypress’s addressable market 10x from
$1.5 billion for PSoC 1 to more than $15 billion for PSoC 1, PSoC 3
and PSoC 5. The new architectures offer powerful precision analog,
as well as unparalleled programmable analog and digital
integration, allowing us to drive many years of increased
sales.”
BUSINESS REVIEW
+ Non-GAAP1 consolidated gross margin for the fourth quarter was
53.9%, up 2.0 percentage points from the previous quarter. The
increase was due mainly to increased manufacturing efficiencies and
product mix. Excluding Emerging Technologies3, our Core
Semiconductor4 non-GAAP gross margin was 55.2%, up 1.5 percentage
points sequentially.
+ On a GAAP basis, fourth-quarter consolidated gross margin was
48.9%, up 1.6 percentage points from the previous quarter. Our Core
Semiconductor4 gross margin on a GAAP basis was 51.6%.
+ Fourth-quarter net inventory increased slightly
quarter-on-quarter, as expected due to stronger than expected
revenue estimates for Q1 and included $5.6 million of stock-based
compensation capitalized in inventory. Net inventory decreased
20.6% on a year-over-year basis.
+ Cash and investments totaled $333 million, or $2.15 per basic
share.
Additional fourth-quarter and annual data and comparisons
relevant to Cypress’s business units are presented below:
BUSINESS UNIT SUMMARY
FINANCIALS (UNAUDITED)
THREE MONTHS ENDEDJanuary 3,
2010
CCD2 DCD2
MID2
Core
Semi4
Emerging
Tech.3
Consolidated REVENUE ($M) 81.7 25.6
84.3 191.6 2.4 194.0 Percentage of
total revenues 42.1% 13.2% 43.5% 98.8% 1.2% 100%
GROSS
MARGIN (%) On a GAAP basis 54.2% 61.7% 46.1% 51.6% 48.9% On a
non-GAAP1 basis 57.8% 65.3% 49.7% 55.2% 53.9%
THREE MONTHS ENDED
September 27, 2009
CCD2 DCD2
MID2
Core
Semi4
Emerging
Tech.3
Consolidated REVENUE ($M) 78.8 25.1 71.7 175.6
3.1 178.7 Percentage of total revenues 44.1% 14.0% 40.1% 98.2% 1.8%
100.0%
GROSS MARGIN (%) On a GAAP basis 49.5% 64.2%
43.4% 49.1% (53.1%) 47.3% On a non-GAAP1 basis 54.1% 68.8% 48.0%
53.7% (48.5%) 51.9%
TWELVE MONTHS ENDED
January 3, 2010
CCD2 DCD2
MID2
Core
Semi4
Emerging
Tech.3
Consolidated REVENUE ($M) 274.9 96.6 288.2
659.7 8.1 667.8 Percentage of total revenues 41.2% 14.5% 43.2%
98.8% 1.2% 100%
GROSS MARGIN (%) On a GAAP basis
45.7% 57.1% 34.2% 42.4% 40.5% On a non-GAAP1 basis 51.7% 63.3%
40.7% 48.6% 47.1%
TWELVE MONTHS ENDED
December 28, 2008
CCD2 DCD2
MID2
Core
Semi4
Emerging
Tech.3
Consolidated REVENUE ($M) 315.7 129.9 312.4
758.0 7.7 765.7 Percentage of total revenues 41.2% 17.0% 40.8%
99.0% 1.0% 100%
GROSS MARGIN (%) On a GAAP basis
43.9% 64.0% 37.3% 44.6% 14.6% 44.3% On a non-GAAP1 basis 48.7%
67.9% 41.6% 49.1% 16.0% 48.7%
1. Refer to “Reconciliation of GAAP Financial Measures to
Non-GAAP Financial Measures” and “Notes to Non-GAAP Financial
Measures” following this press release for a detailed discussion of
management’s use of non-GAAP financial measures, as well as
reconciliations of all non-GAAP financial measures presented in
this press release to the most directly comparable GAAP financial
measures.
2. CCD – Consumer and Computation Division; DCD—Data
Communications Division; MID—Memory and Imaging Division.
3. “Emerging Technologies” – Business outside our core
semiconductor businesses outlined in footnote 4. Includes wholly
owned subsidiaries Cypress Envirosystems, AGIGA Tech and other.
4. “Core Semiconductor” – Includes CCD, DCD and MID divisions
and excludes “Emerging Technologies.”
FOURTH-QUARTER 2009
HIGHLIGHTS
+ Programmable and proprietary products accounted for a record
84% of Cypress’s revenue in the fourth quarter, up from 83% of
revenue in the third quarter.
+ Cypress recorded first revenue on its PSoC 3 architecture and
shipped the first samples of its PSoC 5 architecture during the
fourth quarter. The 8-bit, 8051-based PSoC 3 product has 7.5 times
more computing power than PSoC 1. The 32-bit, ARM® Cortex™-M3-based
PSoC 5 has 25 times more computing power than PSoC 1. The Analog to
Digital Converters on PSoC 3 and PSoC 5 are 256 times more accurate
and 10- to 30-times faster than PSoC 1, and there are 10 times more
programmable logic gates available.
+ Cypress has seen wide adoption of its new PSoC 3 and PSoC 5
architectures, along with the new revolutionary PSoC Creator™
Integrated Development Environment (IDE), since introducing the new
platform in September 2009. Since then, Cypress has sold more than
2,000 PSoC 3 and PSoC 5 development kits and has had more than
3,000 downloads of the supporting PSoC Creator IDE. This has
generated hundreds of active opportunities on the new
architectures, and many major design wins that will begin ramp to
revenue in late 2010.
+ EDN Magazine named Cypress’s PSoC 3 and PSoC 5 architectures
to its “Hot 100 Products” list for 2009. EDN also named the
AGIGARAM™ nonvolatile RAM system from Cypress’s subsidiary, AGIGA
Tech, to its list of hot products.
+ Cypress’s TrueTouch touchscreen solution has been designed
into the KDDI SH003 touchscreen phone and two SoftBank phones
manufactured by Sharp Communication Systems Group, continuing the
strong penetration into Top Tier global handset OEMs. Powered by
PSoC, TrueTouch is a fully integrated touchscreen solution that
allows dozens of gestures to be programmed in software.
+ Cypress introduced a touchscreen device driver supporting
Google’s Android™ mobile handset platform. The solution gives
handset and notebook PC designers working with the Android OS or
other Linux-based operating systems a quick and easy path to
high-performance touchscreen interfaces.
+ Cypress has demonstrated a tablet-sized capacitive touchscreen
technology with 10-finger tracking capability. A video at
www.cypress.com/go/tabletvideo features a demonstration of a user
manipulating multiple pictures on the screen simultaneously. The
technology is based on Cypress’s industry-leading TrueTouch
touchscreen solution and will power touchscreens between 7 and 17
inches with full motion support. The inclusion of multi-touch
support in the Windows® 7 operating system has opened up the large
laptop, netbook and tablet PC market to touchscreen interfaces.
+ Cypress introduced a new line of low-power, 1.8-volt CapSense®
capacitive touch-sensing devices designed to extend battery life in
handheld consumer products. CapSense provides a robust user
interface with best-in-class noise immunity for thousands of
consumer electronics and white goods products.
+ Cypress introduced SmartSense™, an automatic tuning solution
for its CapSense capacitive touch-sensing devices. SmartSense
dynamically detects and adjusts a system’s capacitive-sensing
parameters, eliminating the need for manual tuning, accelerating
design cycles and ensuring that manufacturing variations do not
impact performance.
+ Cypress introduced the CY8C28xxx, an enhanced version of its
PSoC 1 device that enables more advanced mixed-signal and sensing
applications, supports faster capacitive touch-sensing interfaces,
and offers more sophisticated I2C integration. The device targets
industrial control, communications devices and white goods.
+ Cypress introduced the PSoC 3 Precision Analog Voltmeter Demo
Kit, highlighting the broad precision analog capabilities of its
new PSoC 3 architecture. The kit enables designers to use
configurable analog components, including the 20-bit Delta Sigma
ADC, in the PSoC Creator IDE to build industrial and consumer
sensors, and glucose meters among other analog applications.
Cypress also introduced two PSoC 3 evaluation kits to simplify the
design of LCD Segment Drive applications.
+ Cypress unveiled 30 new example projects for its PSoC 3
programmable system-on-chip architecture. The example
projects—downloadable for free from the Cypress Solutions Library
at www.cypress.com/solutions—demonstrate to embedded designers how
to integrate a variety of functions into designs more quickly with
easily replicated, robust intellectual property (IP) elements.
+ Cypress’s PowerPSoC® family of integrated power controllers
won the European Electronic Industry’s 2009 Elektra Award for
“Power Systems Product of the Year.” PowerPSoC is the industry’s
first single-chip solution that both drives and controls LEDs.
+ Cypress launched Turbo-MTP™ 2.0, an upgraded West Bridge® MTP
module with faster sideloading speeds. Users can transfer a movie
from a PC to their handheld device in less than 45 seconds—four
times faster than the next-best alternative. West Bridge continues
to be the only solution for MTP, which allows a handheld device to
auto-sync, eliminating the need for tedious file copying. To see a
demo of this sideloading solution with Google’s Android OS, go to
www.cypress.com/go/video.
+ Cypress Envirosystems and Adura Technologies will jointly sell
an energy-saving solution for commercial buildings that combines
Cypress Envirosystems’ Wireless Pneumatic Thermostat for
controlling heating and air conditioning systems with the Adura
LightPoint System™, which manages building lighting.
+ Cypress Envirosystems and Invensys Operations Management, a
maker of technology system software, have formed a technology
alliance to ensure interoperability between Cypress Envirosystems’
wireless monitoring and control solutions and Invensys’ Wonderware®
plant monitoring software.
+ Cypress began trading its stock on the NASDAQ on November 12,
shifting from the New York Stock Exchange.
+ Cypress raised more than $700,000 in donations for the Second
Harvest Food Bank’s annual Holiday Food and Fund Drive. Ninety-five
percent of donations that the organization receives go toward
feeding hungry people in Santa Clara and San Mateo Counties.
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® programmable system-on-chip families and derivatives such as
PowerPSoC® solutions for high-voltage and LED lighting
applications, 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. Cypress is
also a leader in high-performance memories and programmable timing
devices. 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 the
first quarter of 2010 and the future 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 state and
future of the economy, the strength and growth of our proprietary
and programmable products, especially PSoC and TrueTouch, our
expectations regarding our Q110 revenue, our expected increase in
our SRAM market share, positive signs gleaned from the ordering
patterns of our customers, expected revenue growth, the demand and
growth in the markets we serve, visibility in the markets we serve,
our expectations regarding design wins, our bookings, profit and
revenue, and our expected revenue from our Emerging Technology
Division. 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 the state of and future of the global economy, business
conditions and growth trends in the semiconductor market,
seasonality in the markets we serve, our ability to achieve lower
operating expenses and maintain a solid balance sheet, the actions
of our competitors, our ability to develop and roll out new
products, the behavior of our supply chain, our ability to manage
our business to have strong earnings and cash flow leverage,
factory utilization, whether our products perform as expected,
whether the demand for our proprietary and programmable products,
including especially our PSoC and TrueTouch products, is fully
realized, whether our design wins result in increased sales,
customer acceptance of Cypress and its subsidiaries’ products,
whether the expected growth in the markets we serve materializes,
our ability to maintain and improve our gross margins and realize
our bookings, the financial performance of our subsidiaries and
Emerging Technology Division, our ability to outgrow the market in
revenue once the economy recovers 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, PSoC, CapSense and West Bridge are
registered trademarks of Cypress Semiconductor Corp. Programmable
System-on-Chip, PSoC Creator, PowerPSoC, SmartSense, TrueTouch and
Turbo-MTP are trademarks of Cypress Semiconductor Corp. ARM is a
registered trademark and Cortex a trademark of ARM Ltd. Android is
a trademark of Google Inc. Adura LightPoint System is a trademark
of Adura Technologies. Windows is a registered trademark of
Microsoft Corp. Wonderware is a registered trademark of Invensys
plc, its subsidiaries or affiliates. All other trademarks or
registered trademarks are the property of their respective
owners.
CYPRESS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands) (Unaudited)
January 3, December 28,
2010 2008 ASSETS Cash,
cash equivalents and short-term investments (a) $ 299,642 $ 237,792
Accounts receivable, net 86,959 91,943 Inventories, net (b) (d)
91,198 114,862 Property, plant and equipment, net 272,513 296,789
Goodwill and other intangible assets 46,963 50,513 Other assets
117,020 136,833 Total assets $ 914,295
$ 928,732
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 61,712 $ 42,570 Deferred income 75,881 82,465
Convertible debt (c) - 27,023 Income tax liabilities 48,149 26,800
Other accrued liabilities 98,169 111,447 Total
liabilities 283,911 290,305 Stockholders' equity (d) 630,384
638,427 Total liabilities and stockholders' equity $
914,295 $ 928,732
(a) Cash, cash equivalents and
short-term investments do not include $33 million and $35 million
of auction rate securities, which are classified as long-term
investments in "Other assets" as of January 3, 2010 and December
28, 2008.
(b) Net inventories included
approximately $12 million and $20 million as of January 3, 2010 and
December 28, 2008, respectively related to the last-time-build
program for Cypress's Texas manufacturing facility, which ceased
operations at the end of fiscal 2008. In addition, inventories
include $6 million and $11 million of capitalized inventories
related to SFAS No.123(R) now referred to as ASC 718, as of January
3, 2010 and December 28, 2008, respectively.
(c) As adjusted due to the
implementation of FSB ASP 14-1 now referred to as ASC 470-20,
"Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement).”
(d) During the third quarter of
2009, we identified historically immaterial errors related to the
value of our raw material inventory balances located in the
Philippines. The Company has determined that these errors were not
material to any of the individual prior periods presented and
accordingly, the financial statements as of December 28, 2008 have
been recast to correct for the immaterial errors in accordance with
SAB 108.
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 January
3, September 27, December 28,
January 3, December 28, 2010
2009 2008
2010 2008 Revenues $
193,974 $ 178,719 $ 165,073 $ 667,786 $ 765,716 Cost of revenues
(c) 99,059 94,184 104,599
397,204 426,283 Gross margin (a) 94,915
84,535 60,474 270,582 339,433 Operating expenses (credits):
Research and development (a) 39,685 43,162 49,585 181,189 193,522
Selling, general and administrative (a) 50,696 55,116 50,803
219,602 248,577 Amortization of acquisition-related intangibles 817
834 1,550 3,804 5,830 Impairment of goodwill - - 351,257 - 351,257
Gains on divestitures - - - - (9,966 ) Restructuring charges
774 7,335 9,401 15,242
21,643 Total operating expenses, net
91,972 106,447 462,596
419,837 810,863 Operating income (loss) 2,943
(21,912 ) (402,122 ) (149,255 ) (471,430 ) Interest and other
income (expense), net (a) (b) 1,578 2,492
(14,505 ) 4,685 160,097
Income (loss) from continuing operations before income taxes and
minority interest 4,521 (19,420 ) (416,627 ) (144,570 ) (311,333 )
Income tax benefit (provision) (1,669 ) (236 )
2,416 (5,854 ) (7,929 ) Income (loss)
from continuing operations 2,852 (19,656 ) (414,211 ) (150,424 )
(319,262 ) Income (loss) from discontinued operations, net of taxes
and minority interest - - (809 )
- 34,386 Net income (loss) $ 2,852
$ (19,656 ) $ (415,020 ) $ (150,424 ) $ (284,876 )
Basic net income (loss) per share: Continuing operations $ 0.02 $
(0.13 ) $ (2.87 ) $ (1.03 ) $ (2.12 ) Discontinued operations
- - (0.01 ) -
0.23 Basic net income (loss) per share $ 0.02
$ (0.13 ) $ (2.88 ) $ (1.03 ) $ (1.89 ) Diluted net income
(loss) per share: Continuing operations $ 0.02 $ (0.13 ) $ (2.87 )
$ (1.03 ) $ (2.12 ) Discontinued operations -
- (0.01 ) - 0.23 Diluted
net income (loss) per share $ 0.02 $ (0.13 ) $ (2.88 ) $
(1.03 ) $ (1.89 ) Shares used in per-share calculation:
Basic 154,798 151,784 144,212 145,611 150,447 Diluted
184,297 151,784 144,212
145,611 150,447
(a) Includes the following credit (expense) related to Cypress's
deferred compensation plan:
Gross margin $ (57 ) $ (268 ) $ 562 $ (516 ) $
2,129 Research and development $ (63 ) $ (737 ) $ 1,753 $ (1,454 )
$ 3,560 Selling, general and administrative $ (417 ) $ (1,670 ) $
4,064 $ (3,168 ) $ 5,437 Interest and other income (expense), net $
1,000 $ 2,514 $ (5,935 ) $ 5,150
$ (10,643 )
(b) As adjusted due to the
implementation of FSB ASP 14-1 now referred to as ASC 470-20,
"Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement).”
(c) During the third quarter of
2009, we identified historically immaterial errors related to the
value of our raw material inventory balances located in the
Philippines. The Company has determined that these errors were not
material to any of the individual prior periods presented and
accordingly, the financial statements for three months and twelve
months ended December 28, 2008 have been recast to correct for the
immaterial errors in accordance with SAB 108.
RECONCILIATION OF GAAP
FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a) (In
thousands) (Unaudited)
Three Months
Ended January 3, 2010 Emerging CCD (b) DCD
(b) MID (b) Core Semi (c) Technologies (d)
Consolidated GAAP gross margin $ 44,286 $ 15,768 $
38,819 $ 98,873 $ (3,958 ) $ 94,915 Stock-based compensation
expense 2,967 927 3,058 6,952 86 7,038 Other (f) - -
- - 2,615 2,615
Non-GAAP gross margin $ 47,253 $ 16,695 $
41,877 $ 105,825 $ (1,257 ) $ 104,568
Three Months Ended September 27, 2009
Emerging CCD (b) DCD (b) MID (b)
Core Semi (c)
Technologies (d) Consolidated GAAP gross
margin $ 39,000 $ 16,107 $ 31,088 $ 86,195 $ (1,660 ) $ 84,535
Stock-based compensation expense 3,657 1,165 3,328 8,150 145 8,295
Other acquisition-related expense - - -
- - -
Non-GAAP gross margin $
42,657 $ 17,272 $ 34,416 $ 94,345 $
(1,515 ) $ 92,830
Three Months Ended
December 28, 2008 Emerging CCD (b) DCD (b)
MID (b) Core Semi (c) Technologies (d)
Consolidated GAAP gross margin (e) $ 24,683 $ 18,388
$ 18,112 $ 61,183 $ (709 ) $ 60,474 Stock-based compensation
expense 2,539 1,075 2,360 5,974 39 6,013 Write down of final build
inventory 2,475 - - 2,475 - 2,475 Other acquisition-related expense
12 - 1,385 1,397 1
1,398
Non-GAAP gross margin $ 29,709 $ 19,463
$ 21,857 $ 71,029 $ (669 ) $ 70,360
Twelve Months Ended January 3, 2010
Emerging CCD (b) DCD (b) MID (b)
Core Semi (c) Technologies (d) Consolidated
GAAP gross margin $ 125,701 $ 55,115 $ 98,722 $ 279,538 $
(8,956 ) $ 270,582 Stock-based compensation expense 16,431 6,015
17,908 40,354 444 40,798 Other (f) - - - - 2,614 2,614 Changes in
value of deferred compensation plan - - - - 5 5 Other
acquisition-related expense - - 559 559
- 559
Non-GAAP gross margin $
142,132 $ 61,130 $ 117,189 $ 320,451 $
(5,893 ) $ 314,558
Twelve Months Ended
December 28, 2008 Emerging CCD (b) DCD (b)
MID (b) Core Semi (c) Technologies (d)
Consolidated GAAP gross margin (e) $ 138,698 $ 83,121
$ 116,490 $ 338,309 $ 1,124 $ 339,433 Stock-based compensation
expense 11,889 4,759 11,094 27,742 208 27,950 Impairment of assets
648 292 769 1,709 25 1,734 Write down of final build inventory
2,475 - - 2,475 - 2,475 Other acquisition-related expense 15 -
1,600 1,615 - 1,615 Changes in value of deferred compensation plan
- - - - (132 ) (132 )
Non-GAAP gross margin $ 153,725 $ 88,172 $
129,953 $ 371,850 $ 1,225 $ 373,075
(a) Please refer to the accompanying "Notes to
Non-GAAP Financial Measures" for a detailed discussion of
management's use of non-GAAP financial measures. (b) CCD - Consumer
and Computation Division; DCD - Data Communications Division; MID -
Memory and Imaging Division. (c) “Core Semi” – Includes CCD, DCD
and MID divisions and excludes “Emerging Technologies.”
(d) “Emerging Technologies” –
Business outside our core semiconductor businesses outlined in
footnote (c). Includes wholly owned subsidiaries Cypress
Envirosystems, AGIGA Tech and other.
(e ) During the third quarter of
2009, we identified historically immaterial errors related to the
value of our raw material inventory balances located in the
Philippines. The Company has determined that these errors were not
material to any of the individual prior periods presented and
accordingly, the financial statements for three months and twelve
months ended December 28, 2008 have been recast to correct for the
immaterial errors in accordance with SAB 108.
(f) Includes license royalties applicable to the total Company.
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
January 3, September 27, December
28, January 3, December 28,
2010 2009 2008
2010 2008 GAAP
research and development expenses $ 39,685 $ 43,162 $ 49,585 $
181,189 $ 193,522 Stock-based compensation expense (6,498 ) (7,680
) (13,018 ) (37,537 ) (39,089 ) Other acquisition-related expense
(8 ) (16 ) (1,442 ) (75 ) (1,601 ) Gain on sale of long-term asset
2,437 - - 2,437 - Changes in value of deferred compensation plan
27 (51 ) 433 (135 )
584
Non-GAAP research and development expenses
$ 35,643 $ 35,415 $ 35,558 $ 145,879 $
153,416
GAAP selling, general and administrative
expenses $ 50,696 $ 55,116 $ 50,803 $ 219,602 $ 248,577
Stock-based compensation expense (11,677 ) (14,701 ) (10,340 )
(63,477 ) (55,306 ) Other acquisition-related expense (6 ) (22 )
(267 ) (52 ) (1,663 ) Changes in value of deferred compensation
plan 2 (4 ) (115 ) (46 ) 147 Release of allowance for uncollectible
employee loans - - 70
- 198
Non-GAAP selling, general and
administrative expenses $ 39,015 $ 40,389 $
40,151 $ 156,027 $ 191,953
GAAP
operating income (loss) $ 2,943 $ (21,912 ) $ (402,122 ) $
(149,255 ) $ (471,430 ) Stock-based compensation expense 25,213
30,676 29,371 141,812 122,345 License royalty 2,615 - - 2,614 -
Acquisition-related expense: Impairment of goodwill - - 351,257 -
351,257 Amortization of acquisition-related intangibles 817 834
1,550 3,804 5,830 Other acquisition-related expense 16 38 3,107 683
4,879 Gain on sale of long-term asset (2,437 ) - - (2,437 ) - Write
down of final build inventory - - 2,475 - 2,475 Changes in value of
deferred compensation plan (29 ) 55 (318 ) 186 (863 ) Release of
allowance for uncollectible employee loans - - (70 ) - (198 )
Impairment of assets - - - - 1,734 Gains on divestitures - - - -
(9,966 ) Restructuring charges 774 7,335
9,401 15,242 21,643
Non-GAAP operating income (loss) $ 29,912 $
17,026 $ (5,349 ) $ 12,649 $ 27,706
GAAP net income (loss) $ 2,852 $ (19,656 ) $ (415,020 ) $
(150,424 ) $ (284,876 ) Stock-based compensation expense 25,213
30,676 29,371 141,812 122,345 License royalty 2,615 - - 2,614 -
Acquisition-related expense: Impairment of goodwill - - 351,257 -
351,257 Amortization of acquisition-related intangibles 817 834
1,550 3,804 5,830 Other acquisition-related expense 16 38 3,107 683
4,879 Gain on sale of long-term asset (2,437 ) - - (2,437 ) - Write
down of final build inventory - - 2,475 - 2,475 Changes in value of
deferred compensation plan (29 ) 55 (318 ) 186 (863 ) Release of
allowance for uncollectible employee loans - - (70 ) - (198 )
Impairment of assets - - - - 1,734 Gains on divestitures - - - -
(9,966 ) Restructuring charges 774 7,335 9,401 15,242 21,643
Investment-related gains/losses 486 674 9,433 3,257 38,536 Gain on
sale of Sunpower shares - - - - (192,048 ) Tax effects 1,438 (707 )
(3,201 ) 3,006 6,285 Income (loss) from discontinued operations
- - 809 -
(34,386 )
Non-GAAP net income (loss) $ 31,745
$ 19,249 $ (11,206 ) $ 17,743 $
32,647
GAAP net income (loss) per share - basic $ 0.02 $
(0.13 ) $ (2.88 ) $ (1.03 ) $ (1.89 ) Stock-based compensation
expense 0.16 0.20 0.20 0.97 0.81 License royalty 0.02 - - 0.02 -
Acquisition-related expense: Impairment of goodwill - - 2.44 - 2.33
Amortization of acquisition-related intangibles 0.01 0.01 0.01 0.03
0.04 Other acquisition-related expense - - 0.02 - 0.03 Gain on sale
of long-term asset (0.02 ) - - (0.02 ) - Write down of final build
inventory - - 0.02 - 0.02 Changes in value of deferred compensation
plan - - - - (0.01 ) Impairment of assets - - - - 0.01 Gains on
divestitures - - - - (0.07 ) Restructuring charges 0.01 0.05 0.07
0.10 0.14 Investment-related gains/losses - - 0.07 0.02 0.26 Gain
on sale of Sunpower shares - - - - (1.28 ) Tax effects 0.01 - (0.02
) 0.02 0.04 Non-GAAP share count adjustment - - (0.02 ) 0.01 0.02
(Income) loss from discontinued operations - -
0.01 - (0.23 )
Non-GAAP net income (loss) per share - basic $ 0.21
$ 0.13 $ (0.08 ) $ 0.12 $ 0.22
GAAP net income (loss) per share - diluted $ 0.02 $ (0.13 )
$ (2.88 ) $ (1.03 ) $ (1.89 ) Stock-based compensation expense 0.14
0.20 0.20 0.97 0.74 License royalty 0.01 - - 0.02 -
Acquisition-related expense: Impairment of goodwill - - 2.44 - 2.11
Amortization of acquisition-related intangibles - 0.01 0.01 0.03
0.04 Other acquisition-related expense - - 0.02 - 0.03 Gain on sale
of long-term asset (0.01 ) - - (0.02 ) - Write down of final build
inventory - - 0.02 - 0.01 Changes in value of deferred compensation
plan - - - - (0.01 ) Impairment of assets - - - - 0.01 Gains on
divestitures - - - - (0.06 ) Restructuring charges - 0.05 0.07 0.10
0.13 Investment-related gains/losses - - 0.07 0.02 0.23 Gain on
sale of Sunpower shares - - - - (1.16 ) Tax effects 0.01 - (0.02 )
0.02 0.04 Non-GAAP share count adjustment (0.01 ) (0.03 ) (0.02 )
(0.01 ) 0.18 (Income) loss from discontinued operations -
- 0.01 -
(0.20 )
Non-GAAP net income (loss) per share - diluted $
0.16 $ 0.10 $ (0.08 ) $ 0.10
$ 0.20
(a) Please 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 CONSOLIDATED DILUTED
EPS CALCULATION (In thousands, except per-share data)
(Unaudited)
Three Months Ended Twelve
Months Ended January 3, September 27,
December 28, January 3, December
28, 2010 2009 2008 2010
2008 GAAP Non-GAAP GAAP
Non-GAAP GAAP Non-GAAP GAAP
Non-GAAP GAAP Non-GAAP
Net income (loss) from continuing operations $ 2,852 $ 31,745 $
(19,656 ) $ 19,249 $ (414,211 ) $ (11,206 ) $ (150,424 ) $ 17,743 $
(319,262 ) $ 32,647 Income (loss) from continuing operations for
diluted computation 2,852 31,745 (19,656 ) 19,249 (414,211 )
(11,206 ) (150,424 ) 17,743 (319,262 ) 32,647 Income (loss) from
discontinued operations - - - -
(809 ) - - -
34,386 - Net income (loss) for diluted computation $
2,852 $ 31,745 $ (19,656 ) $ 19,249 $ (415,020 ) $ (11,206 ) $
(150,424 ) $ 17,743 $ (284,876 ) $ 32,647 Weighted-average
common shares outstanding (basic) 154,798 154,798 151,784 151,784
144,212 144,212 145,611 145,611 150,447 150,447 Effect of dilutive
securities: Convertible debt - - - 1,922 - - - - - 1,430 Warrants -
- - 1,674 - - - 481 - 125 Stock options, unvested restricted stock
and other 29,499 38,854 - 42,585
- - - 37,156
- 14,232 Weighted-average common shares
outstanding for diluted computation 184,297 193,652
151,784 197,965 144,212
144,212 145,611 183,248 150,447
166,234 Net income (loss) per share - basic:
Continuing operations $ 0.02 $ 0.21 $ (0.13 ) $ 0.13 $ (2.87 ) $
(0.08 ) $ (1.03 ) $ 0.12 $ (2.12 ) $ 0.22 Discontinued operations
- - - - (0.01 ) -
- - 0.23 -
Net
income (loss) per share - basic $ 0.02 $ 0.21 $ (0.13 ) $ 0.13
$ (2.88 ) $ (0.08 ) $ (1.03 ) $ 0.12 $ (1.89 ) $ 0.22 Net
income (loss) per share - diluted: Continuing operations $ 0.02 $
0.16 $ (0.13 ) $ 0.10 $ (2.87 ) $ (0.08 ) $ (1.03 ) $ 0.10 $ (2.12
) $ 0.20 Discontinued operations - - -
- (0.01 ) - - -
0.23 -
Net income (loss) per share -
diluted $ 0.02 $ 0.16 $ (0.13 ) $ 0.10 $ (2.88 ) $ (0.08 ) $
(1.03 ) $ 0.10 $ (1.89 ) $ 0.20
January 3, September
27, December 28, January 3, December 28,
2010 2009 2008 2010 2008
Average stock price for the period ended $9.80 $10.20 $4.45
$8.33 $4.13 Common stock outstanding at period end (in
thousands) 159,382 155,376 136,502 159,382 136,502
Excluding unvested restricted
stock awards of approximately 2.4 million and 2.5 million shares at
January 3, 2010 and September 27, 2009, respectively. None at
December 28, 2008.
CYPRESS SEMICONDUCTOR CORPORATION SUPPLEMENTAL FINANCIAL
DATA FOR CONTINUING OPERATIONS (In thousands)
(Unaudited)
Three Months Ended Twelve Months
Ended January 3, September 27,
December 28, January 3, December 28,
2010 2009
2008 2010 2008
Selected Cash Flow Data
(Preliminary):
Net cash provided by (used in) operating activities $ 75,275 $
24,301 $ 49,456 $ 89,303 $ 110,717 Net cash provided by (used in)
investing activities $ (5,424 ) $ (29,333 ) $ 42,639 $ (43,126 ) $
337,376 Net cash provided by (used in) financing activities $
(17,407 ) $ (16,696 ) $ (138,112 ) $ (7,368 ) $ (1,051,787 )
Other Supplemental Data
(Preliminary):
Capital expenditures $ 7,545 $ 6,823 $ 8,082 $ 25,823 $ 42,132
Depreciation $ 12,370 $ 11,969 $ 14,728
$ 50,870 $ 66,415
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
investment in Cypress’s common stock 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 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.
- Investment-related
gains/losses.
Investment-related gains/losses primarily
include: (1) gain on sale of SunPower common stock, (2) impairment
loss related to Cypress’s investment when it determines the decline
in fair value is other-than-temporary in nature, and (3)
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.
License royalty represents the historical
impact of a license agreement signed in the fourth quarter of 2009.
These historical costs are excluded from Cypress’s 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.
- Gains on divestitures and
long-term assets.
Cypress recognizes gains resulting from
the exiting or sale of certain non-strategic businesses and
long-term assets 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.
During the first quarter of fiscal 2009 we
adopted FSP APB 14-1, “Accounting for Convertible Debt Instruments
that May Be Settled in Cash upon Conversion,” which specified that
Cypress that Cypress should separately account for the liability
and equity components of the instruments. The adoption required the
retrospective application of the FSP and we recorded additional
non-cash interest expense. These costs are excluded from the
non-GAAP financial measures because such non-cash expenses have not
historically occurred in every quarter, which would affect the
ability of investors to compare Cypress’s period-over-period
operating results. In addition, management does not believe that
this item is indicative of the ongoing operating performance of
Cypress’s business.
- Acquisition-related
expense.
Acquisition-related expense primarily
includes: (1) impairment of goodwill, (2) amortization of
intangibles, which include acquired intangibles such as purchased
technology, patents and trademarks, (3) a settlement loss resulted
from the cancellation of a licensing agreement with Simtek
following the acquisition, 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.
- Income (loss) from discontinued
operations.
Cypress completed the spin-off of SunPower
in the fourth quarter of fiscal 2008 and restated the financial
statements to present SunPower as discontinued operations for all
periods. Management no longer evaluates SunPower’s results and
therefore believes that it is appropriate to exclude SunPower from
Cypress’s non-GAAP financial measures, as it enhances the ability
of investors to compare Cypress’s period-over period operating
results on a stand-alone basis.
- Release of allowance for
uncollectible employee loans.
The allowance for uncollectible employee
loans is related to outstanding employee loans under Cypress’s
stock purchase assistance plan. Management releases a portion of
the allowance based on a review of the status of the outstanding
loans. Management excludes this non-cash benefit from the non-GAAP
measures because it does not relate to Cypress’s core business or
impact its operating performance. Adjustment of this item allows
investors to better compare Cypress’s period-over-period operating
results.
- Inventory reserve for last time
build inventory.
In connection with the exit of the Texas
facility, Cypress completed a last time build of a substantial
volume of inventory for certain products that were manufactured at
this facility. During the fourth quarter of 2008, Cypress
determined a demand reserve against this inventory was needed due
to the continuing deteriorating economic conditions. This item is
excluded from non-GAAP financial measures because such expense has
not historically occurred in every quarter, which would affect the
ability of investors to compare Cypress’s period-over-period
operating results. In addition management does not believe that
this item is indicative of the ongoing operating performance of
Cypress’s business.
Cypress wrote off the net book values of
certain manufacturing equipment in the first quarter of fiscal
2008. Cypress excluded this item because the non-cash expense was
not reflective of its ongoing operating results. Excluding this
data allows investors to better compare Cypress’s
period-over-period performance without such non-cash expense.
Cypress adjusts for the income tax effect
that resulted from the non-GAAP adjustments as described above.
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