Cypress Semiconductor Corp. (NASDAQ:CY) today announced that
non-GAAP1 revenue for the 2010 fourth quarter was $226.6 million,
down 2.3% from $231.9 million for the prior quarter, and up 16.8%
from $194.0 million for the year-ago period. GAAP revenue for the
2010 fourth quarter—which included a reduction of $6.3 million due
to the accounting treatment for settling a long-standing civil
antitrust lawsuit on SRAMs—was $220.3 million.
Cypress recorded GAAP net income of $9.1 million in the 2010
fourth quarter, or diluted earnings per share of $0.05. This
compares with last quarter’s diluted earnings per share of $0.18
and a diluted earnings per share in the year-ago fourth quarter of
$0.02.
Non-GAAP1 net income for the 2010 fourth quarter—excluding
stock-based compensation, acquisition-related charges, the SRAM
legal settlement, restructuring and other special charges and
credits—totaled $50.6 million, or diluted earnings per share of
$0.25. That compares with non-GAAP1 diluted earnings per share of
$0.28 for the prior quarter and diluted net earnings per share of
$0.16 for the year-ago fourth quarter.
For the fiscal year 2010, Cypress posted total non-GAAP1 revenue
of $883.8 million, an increase of 32.3% from fiscal year 2009
revenue of $667.8 million. On a GAAP basis, Cypress posted total
revenue of $877.5 million, an increase of 31.4% from fiscal 2009
revenue of $667.8 million.
On a non-GAAP1 basis, Cypress’s fiscal year 2010 diluted
earnings per share was $0.94, compared with diluted earnings per
share of $0.10 in 2009. On a GAAP basis, Cypress’s fiscal year 2010
diluted net earnings per share was $0.40, compared with a diluted
net loss per share of $1.03 in 2009.
Cypress President and CEO T.J. Rodgers said, “Cypress’s
fourth-quarter revenue decreased 2% sequentially, beating
seasonally down trends. The strength came from our CCD division
which grew 10% sequentially due to very strong TrueTouch
touchscreen revenues, which drove our overall mobile handset
revenues up 27%. Gross margins and cash flow remained strong during
the quarter and we continued to keep our expenses under tight
control.
“It was a very good year for Cypress and its shareholders,”
Rodgers said. “Our 2010 revenue grew 32% year-over-year, rebounding
strongly from a tough 2009. Diluted earnings per share increased by
more than a factor of nine, and our stock price appreciation of 76%
exceeded all major indexes by a wide margin. Our flagship PSoC and
TrueTouch products achieved record revenue and design wins. Our
SRAM revenue, which grew 43% for the year, continues to generate
strong profits and cash flow.
“Bookings for our PSoC-powered touchscreen controllers and
optical finger navigation businesses extend into Q2,” Rodgers said.
“Our Q4 book-to-bill was 1.35, due to strong new design wins and
bookings for our touchscreen products. We also expect Q1 revenue to
exceed normal negative seasonal trends.”
BUSINESS REVIEW
+ Non-GAAP1 consolidated gross margin for the fourth quarter was
59.1%, down 1.1 percentage points from the previous quarter, as
expected, due to product mix.
+ Fourth-quarter net inventory increased $12.9 million
quarter-on-quarter, as we increased our die bank profiles to
support significant new designs and higher than previously expected
revenues. Net inventory increased 11.6% on a year-over-year
basis.
+ Cash and investments totaled $458.0 million, or $2.69 per
basic share and did not include $43.9 million invested in our yield
enhancement program which was invested over the end of the quarter
and matured in mid-January, returning $47.0 million in cash.
+ The company repurchased 1.9 million shares at an average cost
of $17.40 per share during Q4. The amount remaining at the end of
Q4 on the stock repurchase program is $567 million.
Additional fourth-quarter and annual data and comparisons
relevant to Cypress’s business units are presented below:
BUSINESS UNIT SUMMARY FINANCIALS
(UNAUDITED)
THREE MONTHS ENDED
January 2, 2011
CCD2 DCD2
MID2
CoreSemi4
EmergingTech.3
Consolidated GAAP REVENUE ($M) 100.9
25.4 90.1 216.4
3.9 220.3 Percentage of total revenues 45.8%
11.5% 40.9% 98.2% 1.8% 100.0%
NON-GAAP REVENUE ($M)
100.9 25.4 96.4 222.7 3.9 226.6 Percentage of total revenues 44.5%
11.2% 42.6% 98.3% 1.7% 100.0%
GROSS MARGIN (%) On a
GAAP basis 59.5% 66.9% 50.2% 56.5% 21.1% 55.9% On a non-GAAP1 basis
61.5% 68.9% 55.5% 59.8% 23.2% 59.1%
THREE MONTHS ENDED
October 3, 2010
CCD2 DCD2
MID2
CoreSemi4
EmergingTech.3
Consolidated GAAP AND NON-GAAP REVENUE
($M) 91.9 28.9 105.0 225.8 6.1 231.9 Percentage of total
revenues 39.6% 12.5% 45.3% 97.4% 2.6% 100.0%
GROSS MARGIN
(%) On a GAAP basis 59.1% 71.6% 55.1% 58.8% 30.3% 58.1% On a
non-GAAP1 basis 61.2% 73.7% 57.3% 61.0% 32.4% 60.2%
TWELVE MONTHS ENDED
January 2, 2011
CCD2 DCD2
MID2
CoreSemi4
EmergingTech.3
Consolidated GAAP REVENUE ($M) 343.2
110.6 405.9 859.7 17.8 877.5 Percentage of total revenues 39.1%
12.6% 46.3% 98.0% 2.0% 100.0%
NON-GAAP REVENUE ($M)
343.2 110.6 412.2 866.0 17.8 883.8 Percentage of total revenues
38.8% 12.5% 46.7% 98.0% 2.0% 100.0%
GROSS MARGIN (%)
On a GAAP basis 57.7% 68.8% 52.1% 56.5% 19.9% 55.7% On a non-GAAP1
basis 60.3% 71.4% 55.4% 59.4% 22.4% 58.7%
TWELVE MONTHS
ENDED
January 3, 2010
CCD2 DCD2
MID2
CoreSemi4
EmergingTech.3
Consolidated GAAP AND NON-GAAP REVENUE
($M) 274.9 96.6 288.2 659.7 8.1 667.8 Percentage of total
revenues 41.1% 14.5% 43.2% 98.8% 1.2% 100.0%
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%
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 Technology” – Businesses outside our core
semiconductor businesses outlined in footnote 4. Includes
subsidiaries Cypress Envirosystems and AgigA Tech, as well as the
ONS (Optical Navigation System) Business Unit, the China Business
Unit and our foundry-support business. 4. “Core
Semiconductor” – Includes CCD, DCD and MID and excludes “Emerging
Technology.”
FOURTH-QUARTER 2010 HIGHLIGHTS
+ Our TrueTouch touchscreen solutions—which allow the ability to
read 10 touches at once—continued to register robust design wins
and set new design win records during the quarter: Samsung
Electronics selected TrueTouch to drive its new Wave 2 and Galaxy 5
smartphones. Acer used TrueTouch its dual-screen ICONIA notebook
computer, the industry’s first 10-finger touchscreen based on a
multichip solution for screens up to 14 inches. Tokyo-based KDDI
designed TrueTouch into the popular, new IS03 Android smartphone
manufactured by Sharp Communication Systems Group. HTC selected
TrueTouch for its HTC 7 Surround and HTC 7 Mozart mobile
smartphones, which are based on the Windows® Phone 7 Series
recently introduced by Microsoft.
+ Cypress announced that it will more than triple its
manufacturing capacity in 2011 to meet the rapidly expanding demand
for its TrueTouch™ touchscreen controllers and next-generation PSoC
products. The expansion, which will be complete in the third
quarter, is already underway. TrueTouch offers the industry’s
fastest, most accurate touchscreen user experience.
+ Cypress announced production availability of a new,
high-performance single-chip TrueTouch solution for large
multitouch touchscreens up to 11.6 inches. The solution opens up
increased market opportunities for Cypress in the fast-growing
tablet PC market and other large touchscreen markets.
+ The Acer ICONIA, a notebook computer with dual 14-inch
touchscreens powered by Cypress’s TrueTouch technology, was named
top product at the tenth annual “Last Gadget Standing” competition
at this year’s Consumer Electronics Show (CES 2011). The Barnes
& Noble Color Nook e-reader, which also features TrueTouch, was
the “People’s Choice Award” winner.
+ Cypress shipped its 750 millionth PSoC programmable
system-on-chip in the third quarter, marking one of the
fastest-ever embedded product ramps. PSoC began commercial
shipments in 2002. Powerful new PSoC 3 and PSoC 5 solutions
dramatically improve the analog performance and processing power of
PSoC 1, expanding Cypress’s addressed market from $1.6 billion to
more than $15 billion.
+ PSoC played a pivotal role in the recent rescue of 33 Chilean
miners. A PSoC-enabled camera, which provided the first images of
the trapped miners, was designed by Cypress customer Central
California Video Engineering & Manufacturing. A single PSoC
chip replaced a two-inch-wide circuit board in the superslim
camera, enabling it to be dropped down a borehole to the
miners.
+ Epson selected Cypress’s CapSense® capacitive touch solution
to control buttons and LED prompts on four new printer models,
including the Artisan 725, Epson Stylus Photo PX720WD, Epson Stylus
Photo TX720WD, and Epson Stylus Photo PX660. Cypress is a
world-leader in capacitive touch sensing, having replaced more than
3.5 billion mechanical buttons.
+ Pioneer chose Cypress’s CapSense solution to implement the
capacitive touch-sensing controls in its SD8200 family of cordless
digital phones. A single CapSense device controls 22 capacitive
buttons on the phones and illuminates the buttons when
selected.
+ Cypress announced that Microsoft’s new Arc Touch Mouse has a
CapSense-driven touch scroll strip to navigate documents and web
pages, rather than a traditional mechanical scroll wheel.
+ Cypress announced that it has entered into a definitive
agreement with ON Semiconductor (Nasdaq:ONNN) under which ON will
acquire Cypress’s CMOS image sensor business unit for approximately
$31.4 million in cash, pending the completion of various closing
conditions and regulatory approvals. The companies expect the
transaction to close before the end of the first quarter of
2011.
+ Cypress announced that Macy’s is replacing about 117,000
traditional incandescent light bulbs in 86 stores nationwide with
Cypress-powered LED lamps from lighting designer MSi that use about
73 percent less energy.
+ Cypress introduced the industry’s first radiation-hardened
72-MBit QDR II SRAMs. The new SRAMs employ Cypress’s patented
RadStop™ technology, which enables uncompromised functionality in
the face of radiation doses of up to 300 kRads. The SRAMs operate
at speeds up to 250 MHz with throughput of up to 36 gigabits per
second, and are designed for aerospace and military
applications.
+ Cypress announced two new 65 nm Quad Data Rate™ (QDRII™ and
QDRII+) and Double Data Rate (DDRII and DDRII+) SRAMs at 36-Mbit
and 18-Mbit densities. Cypress offers the industry’s broadest
portfolio of 65-nm synchronous SRAMs, which includes densities up
to 144 Mbits and speeds up to 550 MHz.
+ AgigA Tech announced that its AGIGARAM™ Non-Volatile System
(NVS) has been named the Most Innovative New Product of 2010 in the
Hardware and General Technology category at the 23rd CONNECT Awards
hosted by CONNECT, a San Diego-based nonprofit dedicated to
creating and sustaining innovative technology.
+ Cypress announced that it has registered more than 20,000
users in its Cypress Developer Community™, an online environment
with forums, videos and blogs that enables Cypress customers to
share design techniques about PSoC® and other Cypress products. The
site is located at www.cypress.com/go/community.
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 first
quarter of fiscal year 2011 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 strong profits and cash flow we expect
from our SRAM products, our future revenue expectations based on
our touchscreen business, the intent and timing of our
manufacturing expansion, the strength and growth of our proprietary
and programmable products, including TrueTouch and PSoC families,
and our expectations regarding product and design wins. 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, our
ability to enter into new markets with our portfolio of products,
whether our products perform as expected, whether the demand for
our proprietary and programmable products, including especially our
TrueTouch and PSoC products, is fully realized, whether our product
and design wins result in increased sales, customer acceptance of
Cypress and its subsidiaries’ products, seasonality in the markets
we serve, our ability to achieve lower operating expenses and
maintain a solid balance sheet, our ability to manage our factory
utilization and expansion, the strength or softness of the markets
we serve and whether those markets achieve expected growth, 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, PowerPSoC, West
Bridge and QDR are registered trademarks of Cypress Semiconductor
Corp. Programmable System-on-Chip, TrueTouch, CapSense, RadStop,
Cypress Developer Community, QDRII, and Quad Data Rate are
trademarks of Cypress Semiconductor Corp. AGIGARAM is a trademark
of AgigA Tech Corp. Windows is a registered trademark of Microsoft
Corp. All other trademarks or registered trademarks are the
property of their respective owners.
CYPRESS SEMICONDUCTOR CORPORATIONCONDENSED CONSOLIDATED
BALANCE SHEETS(In thousands)(Unaudited)
January 2,2011 January
3,2010 ASSETS Cash, cash
equivalents and short-term investments (a) $ 434,261 $ 299,642
Accounts receivable, net 117,726 86,959 Inventories, net (b)
101,763 91,198 Property, plant and equipment, net 260,122 272,620
Goodwill and other intangible assets, net 44,335 46,968 Other
assets 114,594 115,121 Total assets $
1,072,801 $ 912,508
LIABILITIES AND
EQUITY Accounts payable $ 66,977 $ 61,712 Deferred
income 131,757 75,881 Income tax liabilities 65,461 46,362 Other
accrued liabilities 112,873 98,169
Total liabilities 377,068 282,124 Total Cypress stockholders'
equity 698,293 631,587 Noncontrolling interest (2,560 )
(1,203 ) Total equity 695,733 630,384
Total liabilities and equity $ 1,072,801 $ 912,508
(a)
Cash, cash equivalents and short-term
investments do not include $24 million and $33 million of auction
rate securities which are classified as long-term investments in
"Other assets" as of January 2, 2011 and January 3, 2010,
respectively.
(b)
Net inventories included approximately $5
million and $12 million as of January 2, 2011 and January 3, 2010,
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 of
capitalized inventories related to stock compensation expense, as
of January 2, 2011 and January 3, 2010.
CYPRESS SEMICONDUCTOR CORPORATIONCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONSON A GAAP
BASIS(In thousands, except per-share
data)(Unaudited)
Three Months Ended Twelve
Months Ended January 2,2011 October
3,2010 January 3,2010 January
2,2011 January 3,2010
Revenues (b) $ 220,314 $ 231,923 $ 193,974 $ 877,532 $ 667,786 Cost
of revenues 97,256 97,241 99,054
388,359 397,204 Gross margin (a)
123,058 134,682 94,920 489,173 270,582 Operating expenses: Research
and development (a) 47,909 45,753 39,685 176,816 181,189 Selling,
general and administrative (a) 58,679 54,384 50,702 218,490 219,602
Amortization of acquisition-related intangibles 812 717 817 3,028
3,804 Restructuring charges (credits) (283 ) 3,103
772 2,975 15,242
Total operating expenses, net 107,117 103,957
91,976 401,309 419,837
Operating income (loss) 15,941 30,725 2,944 87,864 (149,255
) Interest and other income, net (a) 2,246
5,357 1,577 7,168 4,685
Income (loss) before income taxes 18,187 36,082 4,521 95,032
(144,570 ) Income tax provision 9,134 1,709
1,669 19,290 5,854
Income (loss), net of taxes 9,053 34,373 2,852 75,742
(150,424 ) Noncontrolling interest, net of taxes (375 )
(145 ) (383 ) (866 ) (946 ) Net income
(loss) 8,678 34,228 2,469 74,876 (151,370 ) Less: net loss
attributable to noncontrolling interest 375
145 383 866 946
Net income (loss) attributable to Cypress $ 9,053 $ 34,373
$ 2,852 $ 75,742 $ (150,424 ) Net
income (loss) per share attributable to Cypress: Basic $ 0.05 $
0.22 $ 0.02 $ 0.47 $ (1.03 ) Diluted $ 0.05 $ 0.18 $ 0.02 $ 0.40 $
(1.03 ) Shares used in net income (loss) per share calculation:
Basic 165,873 158,901 154,798 161,114 145,611 Diluted
197,556 186,718 184,297
191,377 145,611
(a) Includes the following credit (expense) related to Cypress's
deferred compensation plan: Gross margin $ (196 ) $
(327 ) $ (57 ) $ (370 ) $ (516 ) Research and development $ (580 )
$ (738 ) $ (63 ) $ (959 ) $ (1,454 ) Selling, general and
administrative $ (913 ) $ (1,457 ) $ (417 ) $ (1,726 ) $ (3,168 )
Interest and other income, net $ 1,690 $ 2,305
$ 1,000 $ 2,653 $ 5,150
(b) Includes a reduction of $6.3 million related to the SRAM legal
settlement in the fourth quarter of fiscal 2010.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES (a)(In thousands)(Unaudited)
Three Months Ended January 2, 2011 CCD
(b) DCD (b) MID (b)
Core Semi (c)
EmergingTechnologies (d)
Consolidated GAAP gross margin $ 60,018 $
16,992 $ 45,222 $ 122,232 $ 826 $ 123,058 Stock-based compensation
expense 1,952 491 1,863 4,306 76 4,382 SRAM legal settlement - -
6,250 6,250 - 6,250 Impairment of assets 133 34
127 294 5 299
Non-GAAP gross
margin $ 62,103 $ 17,517 $ 53,462 $
133,082 $ 907 $ 133,989
Three
Months Ended October 3, 2010 CCD (b) DCD (b)
MID (b)
Core Semi (c)
EmergingTechnologies (d)
Consolidated GAAP gross margin $ 54,270 $ 20,726 $
57,852 $ 132,848 $ 1,834 $ 134,682 Stock-based compensation expense
and other 1,990 627 2,275 4,892
132 5,024
Non-GAAP gross margin $ 56,260
$ 21,353 $ 60,127 $ 137,740 $ 1,966
$ 139,706
Three Months Ended January 3,
2010 CCD (b) DCD (b) MID (b)
Core Semi (c)
EmergingTechnologies (d)
Consolidated GAAP gross margin $ 44,286 $ 15,768 $
38,819 $ 98,873 $ (3,953 ) $ 94,920 Stock-based compensation
expense 2,967 927 3,058 6,952 86 7,038 License royalty -
- - - 2,610 2,610
Non-GAAP gross margin $ 47,253 $ 16,695 $
41,877 $ 105,825 $ (1,257 ) $ 104,568
Twelve Months Ended January 2, 2011 CCD (b)
DCD (b) MID (b)
Core Semi (c)
EmergingTechnologies (d)
Consolidated GAAP gross margin $ 198,145 $ 76,150 $
211,340 $ 485,635 $ 3,538 $ 489,173 Stock-based compensation
expense 8,645 2,879 10,735 22,259 457 22,716 SRAM legal settlement
- - 6,250 6,250 - 6,250 Impairment of assets and other 99
23 88 210 3 213
Non-GAAP gross margin $ 206,889 $ 79,052 $
228,413 $ 514,354 $ 3,998 $ 518,352
Twelve Months Ended January 3, 2010 CCD
(b) DCD (b) MID (b)
Core Semi (c)
EmergingTechnologies (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 License royalty - - -
- 2,614 2,614 Acquisition-related expense - - 559 559 - 559 Changes
in value of deferred compensation plan - - -
- 5 5
Non-GAAP gross margin $
142,132 $ 61,130 $ 117,189 $ 320,451 $
(5,893 ) $ 314,558
(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” – Activities
outside our core semiconductor businesses outlined in footnote (c).
Includes wholly owned subsidiaries Cypress Envirosystems, AgigA
Tech and other.
CYPRESS SEMICONDUCTOR CORPORATIONRECONCILIATION OF GAAP
FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)(In
thousands, except per-share data)(Unaudited)
Three Months Ended Twelve Months Ended January
2,2011 October 3,2010
January 3,2010 January 2,2011
January 3,2010 GAAP revenue $ 220,314 $
231,923 $ 193,974 $ 877,532 $ 667,786 SRAM legal settlement
6,250 - - 6,250
-
Non-GAAP revenue $ 226,564 $ 231,923
$ 193,974 $ 883,782 $ 667,786
GAAP research and development expenses $ 47,909 $ 45,753 $
39,685 $ 176,816 $ 181,189 Stock-based compensation expense (5,792
) (5,332 ) (6,498 ) (21,541 ) (37,537 ) Acquisition-related expense
- - (8 ) (2 ) (75 ) Gain on sale of long-term asset - - 2,437 -
2,437 Changes in value of deferred compensation plan (183 )
(91 ) 27 (214 ) (135 )
Non-GAAP research and development expenses $ 41,934 $
40,330 $ 35,643 $ 155,059 $ 145,879
GAAP selling, general and administrative expenses $
58,679 $ 54,384 $ 50,702 $ 218,490 $ 219,602 Stock-based
compensation expense (11,422 ) (11,568 ) (11,677 ) (47,202 )
(63,477 ) Acquisition-related expense 7 5 (12 ) - (52 ) Changes in
value of deferred compensation plan (29 ) (15 ) 2 (37 ) (46 ) SRAM
legal settlement (1,000 ) - - (1,000 ) - Impairment of assets
(4,927 ) - - (5,293 )
-
Non-GAAP selling, general and administrative
expenses $ 41,308 $ 42,806 $ 39,015 $
164,958 $ 156,027
GAAP operating income
(loss) $ 15,941 $ 30,725 $ 2,944 $ 87,864 $ (149,255 )
Stock-based compensation expense 21,596 21,924 25,213 91,459
141,812 License royalty - - 2,610 - 2,614 Acquisition-related
expense 805 712 837 3,028 4,490 Gain on sale of long-term asset - -
(2,437 ) - (2,440 ) Changes in value of deferred compensation plan
212 107 (29 ) 252 186 Restructuring charges (283 ) 3,103 774 2,975
15,242 SRAM legal settlement 7,250 - - 7,250 - Impairment of assets
and other 5,226 - -
5,506 -
Non-GAAP operating
income $ 50,747 $ 56,571 $ 29,912 $
198,334 $ 12,649
GAAP net income (loss)
attributable to Cypress $ 9,053 $ 34,373 $ 2,852 $ 75,742 $
(150,424 ) Stock-based compensation expense 21,596 21,924 25,213
91,459 141,812 License royalty - - 2,610 - 2,614
Acquisition-related expense 805 712 837 3,028 4,490 Gain on sale of
long-term asset - - (2,437 ) - (2,440 ) Changes in value of
deferred compensation plan 212 107 (29 ) 252 186 Restructuring
charges (283 ) 3,103 774 2,975 15,242 Investment-related
gains/losses 400 (3,894 ) 487 (3,158 ) 3,257 SRAM legal settlement
7,250 - - 7,250 - Impairment of assets and other 5,226 - - 5,506 -
Tax effects 6,343 (2,951 ) 1,438
3,105 3,006
Non-GAAP net income
attributable to Cypress $ 50,602 $ 53,374
$ 31,745 $ 186,159 $ 17,743
GAAP net
income (loss) per share attributable to Cypress - diluted $
0.05 $ 0.18 $ 0.02 $ 0.40 $ (1.03 ) Stock-based compensation
expense 0.11 0.11 0.14 0.45 0.97 License royalty - - 0.01 - 0.02
Acquisition-related expense - - - 0.01 0.03 Gain on sale of
long-term asset - - (0.01 ) - (0.02 ) Restructuring charges - 0.02
- 0.01 0.10 Investment-related gains/losses - (0.02 ) - (0.02 )
0.02 SRAM legal settlement 0.04 - - 0.04 - Impairment of assets and
other 0.02 - - 0.03 - Tax effects 0.03 (0.01 ) 0.01 0.02 0.02
Non-GAAP share count adjustment - -
(0.01 ) - (0.01 )
Non-GAAP net
income per share attributable to Cypress - diluted $ 0.25
$ 0.28 $ 0.16 $ 0.94
$ 0.10
(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 CORPORATIONCONSOLIDATED
DILUTED EPS CALCULATION(In thousands, except per-share
data)(Unaudited)
Three Months Ended
Twelve Months Ended January 2,2011
October 3,2010 January 3,2010
January 2,2011 January 3,2010
GAAP Non-GAAP GAAP
Non-GAAP GAAP Non-GAAP
GAAP Non-GAAP GAAP
Non-GAAP Net income (loss) attributable to Cypress
$ 9,053 $
50,602 $ 34,373
$ 53,374 $
2,852 $ 31,745
$ 75,742 $
186,159 $ (150,424
) $ 17,743
Weighted-average common shares outstanding (basic) 165,873 165,873
158,901 158,901 154,798 154,798 161,114 161,114 145,611 145,611
Effect of dilutive securities: Stock options, unvested restricted
stock and other 31,683 36,377 27,817
34,204 29,499 38,854 30,263 36,832
- 37,637 Weighted-average common shares
outstanding for diluted computation 197,556 202,250
186,718 193,105 184,297 193,652
191,377 197,946 145,611 183,248
Net income (loss) per share attributable to Cypress - basic $ 0.05
$ 0.31 $ 0.22 $ 0.34 $ 0.02 $ 0.21 $ 0.47 $ 1.16 $ (1.03 ) $ 0.12
Net income (loss) per share attributable to Cypress - diluted $
0.05 $ 0.25 $ 0.18 $ 0.28 $ 0.02 $ 0.16 $ 0.40 $ 0.94 $ (1.03 ) $
0.10
January 2,2011 October 3,2010
January 3,2010 January 2,2011
January 3,2010 Average stock price for the
period ended $15.51 $11.19 $9.80 $12.48 $8.33 Common stock
outstanding at period end (in thousands) 170,363 162,954 159,382
170,363 159,382
Includes unvested restricted stock awards
of approximately 1.9 million shares at January 2, 2011 and October
3, 2010 and 2.4 million shares at January 3, 2010,
respectively.
CYPRESS SEMICONDUCTOR CORPORATIONSUPPLEMENTAL
FINANCIAL DATA(In thousands)(Unaudited)
Three Months Ended Twelve Months Ended January
2,2011 October 3,2010
January 3,2010 January 2,2011
January 3,2010
Selected Cash
Flow Data (Preliminary):
Net cash provided by operating activities $ 76,347 $ 109,405 $
75,275 $ 269,906 $ 89,303 Net cash provided by (used in) investing
activities $ (96,099 ) $ 3,059 $ (5,424 ) $ (150,734 ) $ (43,126 )
Net cash provided by (used in) financing activities $ (30,645 ) $
12,320 $ (17,407 ) $ (99,547 ) $ (7,368 )
Other
Supplemental Data (Preliminary):
Capital expenditures $ 13,666 $ 10,715 $ 7,545 $ 50,786 $ 25,823
Depreciation $ 12,402 $ 12,049 $ 12,370
$ 47,859 $ 50,870
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.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,
and (2) 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 its 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.
- SRAM legal settlement.Cypress has
settled the SRAM civil antitrust lawsuits. Cypress excludes these
items because the legal settlements are not reflective of its
ongoing operating results. Excluding this data allows investors to
better compare Cypress’s period-over-period performance without
such expense.
- License royalty.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 sales of long-term
assets.Cypress recognizes gains resulting from the sale of certain
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.
- 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.
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