Cypress Semiconductor Corp. (NASDAQ:CY) today announced
fourth-quarter 2011 and fiscal year 2011 results, which included
the following highlights and remarks from its president and CEO,
T.J. Rodgers.
- Revenue and earnings exceed
guidance
- TrueTouch® revenue exceeds top end of
$230 to $250 million annual target
- Handset revenues increased 140% year
over year
- Revenue increased 13% year over
year
- Cash flow from operations totaled
$284.2 million for 2011
Fellow shareholders:
Our revenue and earnings for the quarter are given below,
compared with the prior-quarter and prior-year results:
(In thousands, except per-share data)
NON-GAAP GAAP Q4 2011
Q3 2011 Q4 2010 Q4 2011 Q3
2011 Q4 2010 Revenue $242,372 $264,743 $226,564
$242,372 $264,743 $220,314 Gross margin 56.1% 57.9% 59.2%
53.6% 56.3% 55.9% Pretax margin 22.6% 26.8% 23.1% 11.7%
16.6% 8.3%
Net income
$56,119 $69,237 $50,389 $30,961 $39,981 $9,053 Diluted EPS
$0.32 $0.37 $0.25 $0.18 $0.22 $0.05
Our fourth-quarter revenue exceeded the high end of guidance,
decreased 8.5% sequentially and grew 10.0% year-on-year. All core
divisions and most major product lines decreased sequentially as
expected. We continue to focus on operating expense control and
even in a challenging revenue quarter our non-GAAP EPS grew 28%
year over year. Inventory decreased 17.3% sequentially, and
inventory in the supply chain remains very low.
For fiscal year 2011, Cypress posted total revenue of $995.2
million, an increase of 13.4% from fiscal year 2010 revenue of
$877.5 million. On a non-GAAP1 basis, Cypress’s fiscal year 2011
diluted earnings per share was $1.24, compared with diluted
earnings per share of $0.94 in 2010, an increase of 32%. On a GAAP
basis, Cypress’s fiscal year 2011 diluted net earnings per share
was $0.89, compared with diluted net earnings per share of $0.40 in
2010.
Booking visibility will remain limited into Q1 due to
historically low lead-times, continued inventory adjustments and
ongoing concerns over worldwide macroeconomic issues. Our
book-to-bill ratio for Q4 was 0.58, a decrease from that of Q3 and
less than the normal seasonal figure. Consequently, we expect Q1
revenue also to decrease at a rate greater than normal. The
expected decrease in revenue includes not only the seasonal factor,
but also some revenue decreases due to tablet end sales. Assuming
no further macroeconomic deterioration, we expect that bookings and
revenue will bottom out in Q1 2012 and lead to a strong second half
as many new product design wins ramp into production.
Cypress posted a very good year in 2011, especially considering
the macroeconomic cloud that has hung over the industry for the
last six plus months. The performance of our broad base of
proprietary and TrueTouch products led to a 13% revenue increase,
double the industry growth rate.
Our non-GAAP EPS increased 32.0% year over year, and our cash
flow from operations in 2011 enabled us to return $672.9 million
dollars to our shareholders by purchasing 36 million shares and
initiating a $0.36 annualized dividend per share that yielded
approximately 2.2% for the year.
BUSINESS REVIEW
+ Our non-GAAP1 consolidated gross margin for the fourth quarter
was 56.1%, down 1.8 percentage points from the previous quarter due
mainly to product mix and factory absorption. Our GAAP
fourth-quarter consolidated gross margin was 53.6%.
+ Our net inventory dollars at the end of the fourth quarter
were down 17.3% relative to Q3, and our inventory days were down by
12 days to 79 days.
+ Cash and investments for the fourth quarter totaled $166.3
million, an increase of $31.3 million from the prior quarter, and
equivalent to approximately $1.08 per outstanding share. During the
quarter, we bought back 4.0 million shares of common stock (2.3% of
total outstanding shares) for $62.8 million at an average price of
$15.82 per share. Since we announced our $400-million stock
repurchase program in September 2011, we have repurchased 5.1
million shares through January 12, 2012 and have approximately
$318.9 million left for additional repurchases.
Our divisional revenue and gross margins are detailed below:
BUSINESS UNIT SUMMARY FINANCIALS
(UNAUDITED)
THREE MONTHS ENDED
January 1, 2012
CCD 2
DCD 2
MPD 2
CoreSemi 4
Emerging Tech. 3
Consolidated
REVENUE ($M)
130.7 22.7 80.6 234.0 8.4 242.4
Percentage of total revenues 53.9% 9.3% 33.3% 96.5% 3.5% 100.0%
GROSS MARGIN (%)
On a GAAP basis 52.4% 68.6% 53.6% 54.4% 29.7% 53.6% On a non-GAAP1
basis 54.9% 71.1% 56.1% 56.9% 32.2% 56.1%
THREE MONTHS ENDEDOctober 2,
2011
CCD 2
DCD 2
MPD 2
CoreSemi 4
EmergingTech. 3
Consolidated
REVENUE ($M)
142.1 23.6 92.5 258.2 6.5 264.7 Percentage of total revenues 53.7%
8.9% 34.9% 97.6% 2.4% 100.0%
GROSS MARGIN (%)
On a GAAP basis 56.4% 64.8% 56.3% 57.1% 22.8% 56.3% On a non-GAAP1
basis 58.0% 66.5% 57.9% 58.8% 24.4% 57.9%
TWELVE MONTHS ENDEDJanuary 1,
2012
CCD 2
DCD 2
MPD 2
CoreSemi 4
Emerging Tech. 3
Consolidated
GAAP REVENUE ($M)
511.7 100.0 352.1 963.8 31.4 995.2 Percentage of total revenues
51.4% 10.0% 35.4% 96.8% 3.2% 100.0%
GROSS MARGIN (%)
On a GAAP basis
54.9%
64.6%
55.5% 56.1% 28.5% 55.3% On a non-GAAP1 basis
57.3%
67.1%
56.9% 58.2% 30.9% 57.3%
TWELVE MONTHS ENDEDJanuary 2,
2011
CCD 2
DCD 2
MPD 2
CoreSemi 4
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%
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; MPD—Memory Products 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 MPD and excludes “Emerging Technology.”
FOURTH-QUARTER 2011 HIGHLIGHTS
+ Cypress announced that its industry-leading Gen4 family of
TrueTouch touchscreen controllers is in production ahead of
schedule, and that initial production shipments have begun. Gen4
delivers industry-best performance in all measurable touch
categories, including the world's best Signal-to-Noise Ratio (SNR)
and unparalleled performance in the presence of noise sources.
Noise is the biggest challenge faced by touchscreen designers. The
unprecedented noise immunity offered by our Gen4 family enables
manufacturers to eliminate air gaps and shields in displays and
produce thinner, sleeker, less expensive cell phone designs.
+ Cypress expanded its Gen4 TrueTouch controller family, adding
a new member that targets displays up to 12 inches used in the
fast-growing tablet and ultrabook PC market. Like smaller-screen
Gen4 devices, it offers industry-best performance in all
categories, including SNR and noise immunity. Gen4 also has the
industry’s lowest active power consumption of just 3.6 milliwatts,
best tracking accuracy, and fastest screen refresh rates. It
provides full support for major mobile operating systems including
Win8 and Android.
+ NVIDIA® certified Cypress’s new single-chip TrueTouch solution
on the reference design for its NVIDIA Tegra® 3 quad-core mobile
processor. The design supports large touchscreens, including
next-generation Android 4.0 (Ice Cream Sandwich)-based tablets.
+ Cypress announced that its single-chip, large-touchscreen,
Gen4 TrueTouch controllers also enable sensor-on-lens technology
with direct lamination to the LCD. The controllers enable
manufacturers to deposit conductive Indium Tin Oxide (ITO) touch
sensor lines directly onto the cover glass, so tablets can be made
thinner, cheaper, and with fewer manufacturing steps.
+ Cypress unveiled Tx-Boost™, a breakthrough feature for its
Gen4 TrueTouch touchscreen controllers that dramatically improves
system performance without added cost. Based on Gen4’s
patent-pending, high-voltage Tx drivers, Tx-Boost delivers three
times higher Signal-to-Noise ratio without the use of digital
filters, enabling the industry’s thinnest devices while reducing
materials cost. It also reduces power consumption and increases
scan rates. Cypress accomplishes this without large, expensive, and
noisy external switching regulators needed by competitors to
generate high-voltage Tx signaling.
+ Cypress announced official USB-IF certification of its two
SuperSpeed USB 3.0 peripheral controllers, EZ-USB® FX3 and West
Bridge® Benicia™, both of which are in full production. EZ-USB FX3,
one of the first USB 3.0 peripheral controllers in the industry, is
also the only programmable USB 3.0 solution available from any
source. Its integrated, highly flexible features enable developers
to add 5-Gbps USB 3.0 connectivity to any system. West Bridge
Benicia enables mobile devices to double input/output performance,
stream high-definition video, “side-load” multimedia content at up
to 160 Mbytes per second, and reduce battery charging time by 50
percent.
+ Cypress announced that the next generation of its
revolutionary PSoC Creator™ software – the design environment for
its PSoC® 3 and PSoC 5 programmable system-on-chip families – is
available at www.cypress.com/go/psoccreator. Among hundreds of new
features in the new version, PSoC Creator 2.0 supports the
ARM-based PSoC 5 architecture and the popular Keil µVision® 4
software.
+ Cypress introduced the new CY8CKIT-025 Development Kit for its
PSoC 3 and PSoC 5 programmable system-on-chip architectures. The
new kit highlights PSoC’s unique, programmable 8- to 20-bit
Delta-Sigma ADC that allows tradeoffs between speed and
accuracy.
+ Cypress announced that Sonoma Wire Works selected the PSoC 3
solution for its new GuitarJack Model 2, which connects a musical
instrument, microphone, or audio hardware with Apple products such
as the iPod touch, iPhone or iPad.
+ Cypress unveiled a new subsidiary, Deca Technologies, part of
its Emerging Technology Division. Deca designs and manufactures
breakthrough electronic interconnect solutions—microwiring that
links ever-smaller generations of integrated circuits and packages
to small-form-factor electronic products such as smartphones. Deca
leverages the unique, cost-effective solar wafer manufacturing
technology of SunPower Corp. Its initial products include Wafer
Level Chip Scale Packaging (WLCSP) derivatives targeting the $1
billion-plus Wafer Level Packaging (WLP) market. Deca aims to
leverage its technology to integrate the dissimilar chips used in
next-generation systems.
+ Cypress announced that Avago Technologies Inc. has dropped its
lawsuit against Cypress. The lawsuit had claimed that Cypress’s
OvationONS® products infringed Avago optical navigation
patents. Cypress paid no damages and admitted to no
infringement in the case. Cypress uses its own, patented OptiCheck™
technology in OvationONS products, which enable finger navigation
in handheld devices.
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
remainder 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 semiconductor market, the strength and
growth of our proprietary and programmable products, including our
TrueTouch and PSoC product families, our expectations regarding our
Q112 revenue, bookings and earnings, our expected financial results
in the second half of fiscal 2012, the demand and growth in the
markets Cypress and its subsidiaries serve, including touchscreens,
our booking visibility, the expected performance of our products,
the production schedule for our Gen4 touchscreen controllers and
our focus on controlling operating expenses. 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 to 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, the timing and success
of our launch of Gen4 family of TrueTouch controllers, 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 our TrueTouch and
PSoC products, is fully realized, whether our product and design
wins result in increased sales, further decreases in lead-time,
additional inventory adjustments, worldwide macroeconomic issues
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, any impact
to sales due to the recent U.S. International Trade Commission
ruling in Apple Inc. v. HTC Corp. et al, the actions of our
competitors, the behavior of our supply chain, our ability to
manage our business to have strong earnings and cash flow leverage,
factory utilization, the strength or softness of the markets we
serve and whether those markets achieve expected growth, our
ability to maintain and improve our gross margins and realize our
bookings, our ability to continue to focus on fixed costs, 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, TrueTouch, PSoC, CapSense, PowerPSoC,
West Bridge, EZ-USB and QDR are registered trademarks of Cypress
Semiconductor Corp. Programmable System-on-Chip, Tx-Boost, Benicia
and PSoC Creator 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)
January 1,2012
January 2,2011 ASSETS
Cash, cash equivalents and short-term investments (a) $ 166,330 $
434,261 Accounts receivable, net 103,524 117,726 Inventories, net
(b) 92,304 101,763 Property, plant and equipment, net 284,465
260,122 Goodwill and other intangible assets, net 40,462 44,335
Other assets 122,739 114,594 Total
assets $ 809,824 $ 1,072,801
LIABILITIES
AND EQUITY Accounts payable $ 52,868 $ 59,817 Deferred
income 150,568 131,757 Income tax liabilities 43,488 65,461 Other
accrued liabilities 165,758 112,873
Total liabilities 412,682 369,908 Total Cypress stockholders'
equity 399,568 704,436 Noncontrolling interest (2,426 )
(1,543 ) Total equity 397,142 702,893
Total liabilities and equity $ 809,824 $
1,072,801 (a) Cash, cash equivalents and
short-term investments do not include $19 million and $24 million
of auction rate securities which are classified as long-term
investments in "Other assets" as of January 1, 2012 and January 2,
2011, respectively. (b) Net inventories include $4.6 million
and $6.2 million of capitalized inventories related to stock
compensation expense, as of January 1, 2012 and January 2, 2011,
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
January 1,2012
October 2,2011 January 2,2011
January 1,2012 January 2,2011
Revenues $ 242,372 $ 264,743 $ 220,314
$ 995,204 $ 877,532 Cost of revenues 112,538
115,789 97,256 448,619
388,358 Gross margin (a) 129,834 148,954 123,058 546,585 489,174
Operating expenses: Research and development 46,846 46,266 47,909
190,255 176,816 Selling, general and administrative 55,788 55,453
58,679 228,374 218,491 Amortization of acquisition-related
intangibles 731 731 812 2,892 3,028 Restructuring charges (credits)
932 871 (283 ) 6,336 2,975 Gain on divestiture - - - (34,291 ) -
Total operating expenses, net
104,297 103,321 107,117
393,566 401,310 Operating income 25,537 45,633
15,941 153,019 87,864 Interest and other income (expense), net
2,791 (1,833 ) 1,871
1,859 6,302 Income before income taxes 28,328 43,800
17,812 154,878 94,166 Income tax provision (benefit) (2,353
) 4,057 9,134 (11,379 )
19,290 Income, net of taxes 30,681 39,743 8,678 166,257 74,876
Adjust for net loss attributable to noncontrolling interest
280 238 375 882
866 Net income attributable to Cypress $ 30,961 $
39,981 $ 9,053 $ 167,139 $ 75,742 Net
income per share attributable to Cypress: Basic $ 0.20 $ 0.24 $
0.05 $ 1.02 $ 0.47 Diluted $ 0.18 $ 0.22 $ 0.05 $ 0.89 $ 0.40
Shares used in net income per share calculation:
Basic
154,045 163,867 165,873 164,495 161,114 Diluted 172,079
183,282 197,556
186,895 191,377
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES (a) (In thousands) (Unaudited)
Three Months Ended January 1, 2012 CCD (b)
DCD (b) MPD (b) Core Semi
(c)
EmergingTechnologies (d)
Consolidated GAAP gross margin $ 68,578 $
15,548 $ 43,209 $ 127,335 $ 2,499 $ 129,834 Stock-based
compensation expense 2,969 514 1,829 $ 5,312 191 $ 5,503 Changes in
value of deferred compensation plan (e) 133 23 82 238 9 247
Impairment of assets and other 162 28
100 290 10 300
Non-GAAP gross margin $ 71,842 $ 16,113
$ 45,220 $ 133,175 $
2,709 $ 135,884
Three Months
Ended October 2, 2011 CCD (b) DCD (b) MPD
(b) Core Semi (c) EmergingTechnologies (d)
Consolidated
GAAP gross margin $ 80,112 $ 15,326 $ 52,049 $ 147,487 $
1,467 $ 148,954 Stock-based compensation expense 2,685 447 1,748
4,880 122 5,002 Changes in value of deferred compensation plan (e)
(301 ) (50 ) (196 ) (547 ) (14 )
(561 )
Non-GAAP gross margin $ 82,496 $
15,723 $ 53,601 $ 151,820
$ 1,575 $ 153,395
Three Months
Ended January 2, 2011 CCD (b) DCD (b) MPD
(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 Changes in value of deferred
compensation plan (e) 88 22 82 192 4 196 SRAM legal settlement - -
6,250 6,250 - 6,250 Impairment of assets 133
34 127 294 5
299
Non-GAAP gross margin $ 62,191
$ 17,539 $ 53,544 $ 133,274
$
911
$ 134,185
Twelve Months Ended
January 1, 2012 CCD (b) DCD (b) MPD (b)
Core Semi (c) EmergingTechnologies (d)
Consolidated GAAP gross margin $ 280,942 $ 64,643 $
192,051 $ 537,636 $ 8,949 $ 546,585 Stock-based compensation
expense 12,115 2,418 8,439 22,972 758 23,730 Changes in value of
deferred compensation plan (e) (74 ) (3 ) (34 ) (111 ) - (111 )
Impairment of assets and other 133 21
75 229 8 237
Non-GAAP gross margin $ 293,116 $
67,079 $ 200,531 $ 560,726
$ 9,715 $ 570,441
Twelve
Months Ended January 2, 2011 CCD (b) DCD (b)
MPD (b) Core Semi (c) EmergingTechnologies
(d) Consolidated GAAP gross margin $ 198,145 $
76,150 $ 211,340 $ 485,635 $ 3,539 $ 489,174 Stock-based
compensation expense 8,645 2,879 10,735 22,259 457 22,716 Changes
in value of deferred compensation plan (e) 171 41 151 363 7 370
SRAM legal settlement - - 6,250 6,250 - 6,250 Impairment of assets
and other 99 23 88
210 3 213
Non-GAAP gross
margin $ 207,060 $ 79,093 $ 228,564
$ 514,717 $ 4,006 $
518,723
(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; MPD - Memory Product
Division.
(c)
“Core Semi” – Includes CCD, DCD and MPD
divisions and excludes “Emerging Technologies.”
(d)
“Emerging Technologies” – Activities
outside our core semiconductor businesses outlined in footnote (c).
Includes wholly owned subsidiaries
(e)
Consistent with current presentation, all
prior periods have been recast to reflect changes in deferred
compensation plan as a Non-GAAP adjustment.
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 1,2012
October 2,2011 January
2,2011 January 1,2012 January
2,2011 GAAP revenue $ 242,372 $ 264,743 $ 220,314
$ 995,204 $ 877,532 SRAM legal settlement - -
6,250 6,250
Non-GAAP
revenue $ 242,372 $ 264,743 $ 226,564 $
995,204 $ 883,782
GAAP research and
development expenses $ 46,846 $ 46,266 $ 47,909 $ 190,255 $
176,816 Stock-based compensation expense (5,989 ) (5,894 ) (5,792 )
(24,296 ) (21,541 ) Acquisition-related expense - - - - (2 )
Changes in value of deferred compensation plan (b) (524 )
1,204 (581 ) 114 (961 )
Non-GAAP research and development expenses $ 40,333 $
41,576 $ 41,536 $ 166,073 $ 154,312
GAAP selling, general and administrative expenses $
55,788 $ 55,453 $ 58,679 $ 228,374 $ 218,491 Stock-based
compensation expense (13,876 ) (13,939 ) (11,422 ) (52,754 )
(47,202 ) Acquisition-related expense - - 7 - - Changes in value of
deferred compensation plan (b) (1,084 ) 2,464 (913 ) 460 (1,727 )
SRAM legal settlement - - (1,000 ) - (1,000 ) Building donation - -
- (4,125 ) - Impairment of assets and other (105 )
(1,982 ) (4,927 ) (3,809 ) (5,293 )
Non-GAAP selling, general and administrative expenses $
40,723 $ 41,996 $ 40,424 $ 168,146 $
163,269 .
GAAP operating income $ 25,537 $ 45,633 $
15,941 $ 153,019 $ 87,864 Stock-based compensation expense 25,370
24,835 21,596 100,781 91,459 Gain on divestiture - - - (34,291 ) -
Acquisition-related expense 731 731 805 2,892 3,028 Changes in
value of deferred compensation plan (b) 1,854 (4,229 ) 1,689 (686 )
3,056 Restructuring charges (credits) 932 871 (283 ) 6,336 2,975
SRAM legal settlement - - 7,250 - 7,250 Building donation - - -
4,125 - Impairment of assets and other 404
1,982 5,226 4,046 5,506
Non-GAAP operating income $ 54,828 $ 69,823
$ 52,224 $ 236,222 $ 201,138
GAAP net income attributable to Cypress $ 30,961 $ 39,981 $
9,053 $ 167,139 $ 75,742 Stock-based compensation expense 25,370
24,835 21,596 100,781 91,459 Gain on divestiture - - - (34,291 ) -
Acquisition-related expense 731 731 805 2,892 3,028 Changes in
value of deferred compensation plan (b) 1,854 119 (1 ) (686 ) 403
Restructuring charges (credits) 932 871 (283 ) 6,336 2,975
Investment-related gains/losses - (1,538 ) 400 - (3,158 ) Changes
in liability of deferred compensation plan (2,005 ) - - 808 - SRAM
legal settlement - - 7,250 - 7,250 Building donation - - - 4,125 -
Impairment of assets and other 404 1,982 5,226 4,046 5,506 Tax
effects (2,128 ) 2,256 6,343
(14,315 ) 3,105
Non-GAAP net income
attributable to Cypress $ 56,119 $ 69,237
$ 50,389 $ 236,835 $ 186,310
GAAP net
income per share attributable to Cypress - diluted $ 0.18 $
0.22 $ 0.05 $ 0.89 $ 0.40 Stock-based compensation expense 0.15
0.13 0.11 0.53 0.45 Gain on divestiture - - - (0.18 ) -
Restructuring charges 0.01 0.01 - 0.03 0.01 Changes in value of
deferred compensation plan (b) 0.01 - - - - Acquisition related
expense - - - 0.02 0.01 Changes in liability of deferred
compensation plan (0.01 ) - - - - Investment-related gains/losses -
(0.01 ) - - (0.02 ) SRAM legal settlement - - 0.04 - 0.04 Building
donation - - 0.02 Impairment of assets and other - 0.01 0.02 0.02
0.03 Tax effects (0.01 ) 0.01 0.03 (0.08 ) 0.02 Non-GAAP share
count adjustment (0.01 ) - -
(0.01 ) -
Non-GAAP net income per share
attributable to Cypress - diluted $ 0.32 $ 0.37
$ 0.25 $ 1.24 $ 0.94
(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) Consistent with current
presentation, all prior periods have been recast to reflect changes
in deferred compensation plan as a Non-GAAP adjustment.
CYPRESS SEMICONDUCTOR CORPORATION SUPPLEMENTAL
FINANCIAL DATA (In thousands) (Unaudited)
Three Months Ended Twelve Months
Ended January 1,2012 October
2,2011 January 2,2011 January
1,2012 January 2,2011
Selected Cash
Flow Data (Preliminary):
Net cash provided by operating activities $ 65,922 $ 106,114 $
69,187 $ 284,249
$
262,746
Net cash provided by (used in) investing activities $ 1,731 $
(9,966 ) $ (96,099 ) $ 69,100 $ (150,734 ) Net cash provided by
(used in) financing activities $ (32,196 ) $ (312,041 ) $ (23,485 )
$ (516,815 ) $ 92,387
Other
Supplemental Data (Preliminary):
Capital expenditures $ 8,758 $ 18,207 $ 13,666 $ 80,556 $ 50,786
Depreciation $ 9,872 $ 12,894 $ 12,402
$ 48,632 $ 47,859
CYPRESS SEMICONDUCTOR CORPORATION CONSOLIDATED DILUTED
EPS CALCULATION (In thousands, except per-share data)
(Unaudited) Three
Months Ended Twelve Months Ended January
1,2012 October 2,2011
January 2,2011 January 1,2012
January 2,2011 GAAP Non-GAAP
GAAP
Non-GAAP
GAAP Non-GAAP GAAP
Non-GAAP GAAP Non-GAAP Net
income attributable to Cypress
$ 30,961
$ 56,119 $
39,981 $ 69,237
$ 9,053 $
50,389 $ 167,139
$ 236,835 $
75,742 $ 186,310
Weighted-average common shares outstanding (basic) 154,045 154,045
163,867 163,867 165,873 165,873 164,495 164,495 161,114 161,144
Effect of dilutive securities: Stock options, unvested restricted
stock and other 18,034 21,416 19,415
22,131 31,683 36,377 22,400 26,192
30,263 36,832 Weighted-average common shares
outstanding for diluted computation 172,079 175,461
183,282 185,998 197,556 202,250
186,895 190,687 191,377 197,976 Net
income per share attributable to Cypress - basic $ 0.20 $ 0.36 $
0.24 $ 0.42 $ 0.05 $ 0.30 $ 1.02 $ 1.44 $ 0.47 $ 1.16 Net income
per share attributable to Cypress - diluted $ 0.18 $ 0.32 $ 0.22 $
0.37 $ 0.05 $ 0.25 $ 0.89 $ 1.24 $ 0.40 $ 0.94
January
1,2012 October 2,2011 January
2,2011 January 1,2012 January
2,2011 Average stock price for the period ended
$17.68 $18.31 $15.51 $19.23 $12.48 Common stock outstanding
at period end (in thousands) 154,172 155,268 170,363 154,172
170,363
Includes unvested restricted stock awards
of approximately 0.9 million shares at January 1, 2012 and at
October 3, 2011, and 1.0 million shares at January 2, 2011.
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:
• 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.
- 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.
- Building donation.Cypress committed to
donate an unused building to a charitable entity. Cypress excludes
these items because the expense is not reflective of its ongoing
operating results. Excluding this data allows investors to better
compare Cypress’s period-over-period performance without such
expense.
- Acquisition-related
expense.Acquisition-related expense primarily includes:
(1) amortization of intangibles, which include acquired
intangibles such as purchased technology, patents and trademarks,
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.
- Gains and losses 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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