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Cypress Reports Second-Quarter 2013 Results

Stocks in this article: CY

ABOUT CYPRESS

Cypress delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC 1, PSoC 3, PSoC 4, and PSoC 5 programmable system-on-chip families. Cypress is a world leader in capacitive user interface solutions including CapSense touch sensing, TrueTouch touchscreens, and trackpad solutions for notebook PCs and peripherals. Cypress is the world leader in USB controllers, which enhance connectivity and performance in a wide range of consumer and industrial products. Cypress is also the world leader in SRAM and nonvolatile RAM memories. Cypress serves numerous major 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 Q3 2013 and the remainder of fiscal year 2013 and beyond are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as “believe,” “expect,” “future,” “plan,” “intend” and similar expressions to identify such forward-looking statements that include, but are not limited to, statements related to the semiconductor market, the strength and growth of our proprietary and programmable products, our expectations regarding our Q3 2013 revenue and earnings leverage, margins, profit, cash flow and cost-saving measures; and our expectations regarding the demand for our products and how our products are expected to perform, as well as our future design win activity and market share gains. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this release. Our actual results may differ materially due 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, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, whether our product and design wins and kit sales result in increased sales, our ability to manage our business to have strong earnings, reduce operating expenses, factory utilization, the strength or softness of the markets we serve, our ability to maintain and improve our gross margins and realize our bookings, the seasonality of the markets we serve, the financial performance of our subsidiaries and Emerging Technology Division, and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, PSoC, TrueTouch, EZ-USB, and CapSense are registered trademarks, and PSoC Components, PSoC Creator, PSoC Designer, FX3, and S8 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)
               
June 30,   December 30,
2013   2012
 
ASSETS
 
Cash, cash equivalents and short-term investments $ 101,987 $ 117,210
Accounts receivable, net 114,792 82,920
Inventories, net (a) 98,580 127,596
Property, plant and equipment, net 262,586 274,427
Goodwill and other intangible assets, net 110,812 113,410
Other assets   120,866       116,066  
Total assets $ 809,623     $ 831,629  
 
LIABILITIES AND EQUITY
 
Accounts payable $ 58,468 $ 58,704
Deferred margin on sales to distributors 158,409 131,192
Income tax liabilities 31,433 47,454
Other liabilities 169,197 185,418
Long-term revolving credit facility   227,000       232,000  
Total liabilities   644,507       654,768  
Total Cypress stockholders' equity 170,234 180,900
Noncontrolling interest   (5,118 )     (4,039 )
Total equity   165,116       176,861  
Total liabilities and equity $ 809,623     $ 831,629  

 

(a)   Net inventories include $3.6 million and $2.8 million of capitalized inventories related to stock compensation expense, as of June 30, 2013 and December 30, 2012, respectively.
 
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ON A GAAP BASIS
(In thousands, except per-share data)
(Unaudited)
                     
Three Months Ended
June 30,   March 31,   July 1,
2013 2013 2012
 
Revenues $ 193,466 $ 172,728 $ 201,300
Cost of revenues   102,041     93,682     94,531
Gross margin 91,425 79,046 106,769
Operating expenses:
Research and development 48,804 49,330 47,946
Selling, general and administrative 48,073 45,442 51,955
Amortization of acquisition-related intangibles 1,987 2,009 731
Restructuring charges 693 11,440 989
               
Total operating expenses, net   99,557     108,221     101,621
Operating income (loss) (8,132 ) (29,175 ) 5,148
Interest and other income, net   2,119     483     1
Income (loss) before income taxes (6,013 ) (28,692 ) 5,149
Income tax provision (benefit)   (9,343 )   146     517
Income (loss), net of taxes 3,330 (28,838 ) 4,632
Adjust for net loss attributable to noncontrolling interest   436     643     345
Net Income (loss) attributable to Cypress $ 3,766   $ (28,195 ) $ 4,977
 
Net Income (loss) per share attributable to Cypress:
Basic $ 0.03 $ (0.19 ) $ 0.03
Diluted $ 0.02 $ (0.19 ) $ 0.03
Cash dividend per share $ 0.11 $ 0.11 $ 0.11
Shares used in net income (loss) per share calculation:
Basic 147,287 145,689 151,765
Diluted   156,262       145,689       164,605
 
 
CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)
(In thousands, except per-share data)
(Unaudited)
   
Three Months Ended
June 30,   March 31,   July 1,
2013 2013 2012
 
GAAP gross margin $ 91,425 $ 79,046 $ 106,769
Stock-based compensation expense 3,279 3,618 7,759
Acquisition-related expense 1,321 122 -
Changes in value of deferred compensation plan 31 422 (40 )
Impairment of assets and other 6,681 4,307 314
Restructuring charges  

-

    -     -  
Non-GAAP gross margin $ 102,737   $ 87,515   $ 114,802  
 
GAAP research and development expenses $ 48,804 $ 49,330 $ 47,946
Stock-based compensation expense (6,913 ) (4,967 ) (5,480 )
Acquisition-related expense (26 ) (207 ) -
Changes in value of deferred compensation plan (99 ) (815 ) 89
Impairment of assets and other   -     (1,394 )   -  
Non-GAAP research and development expenses $ 41,766   $ 41,947   $ 42,555  
 
GAAP selling, general and administrative expenses $ 48,073 $ 45,442 $ 51,955
Stock-based compensation expense (10,203 ) (3,852 ) (8,991 )
Acquisition-related expense (98 ) (556 ) (2,003 )
Changes in value of deferred compensation plan (145 ) (1,861 ) 183
Impairment of assets and other   (160 )   (177 )   -  
Non-GAAP selling, general and administrative expenses $ 37,467   $ 38,996   $ 41,144  

 

 

GAAP operating income (loss) $ (8,132 ) $ (29,175 ) $ 5,148
Stock-based compensation expense 20,395 12,437 22,230
Acquisition-related expense 3,432 2,894 2,734
Changes in value of deferred compensation plan 275 3,098 (311 )
Impairment of assets and other 6,841 5,878 315
Restructuring charges   693     11,440     989  
Non-GAAP operating income $ 23,504   $ 6,572   $ 31,105  
 
GAAP net income (loss) attributable to Cypress $ 3,766 $ (28,195 ) $ 4,977
Stock-based compensation expense 20,395 12,437 22,230
Acquisition-related expense 3,432 2,894 2,734
Changes in value of deferred compensation plan (21 ) 674 530
Impairment of assets and other 5,763 5,525 315
Restructuring charges 693 11,440 989
Tax and tax-related items   (12,393 )   (196 )   (1,477 )
Non-GAAP net income attributable to Cypress $ 21,635   $ 4,579   $ 30,298  
                 
GAAP net income (loss) per share attributable to Cypress - diluted $ 0.02 $ (0.19 ) $ 0.03
Stock-based compensation expense 0.13 0.08 0.14
Acquisition-related expense 0.02

0.02

0.02
Changes in value of deferred compensation plan - 0.01 -
Impairment of assets and other 0.04 0.04 -
Restructuring charges 0.01

0.07

0.01
Tax and tax-related items (0.08 ) - (0.01 )
Non-GAAP share count adjustment   -     -     (0.01 )

Non-GAAP net income per share attributable to Cypress - diluted

$ 0.14     $ 0.03     $ 0.18  

 

(a)   Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures.
 
CYPRESS SEMICONDUCTOR CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
         

Three Months Ended

Six Months Ended
June 30,   March 31,   July 1, June 30,   July 1,
2013 2013 2012 2013 2012

Selected Cash Flow Data (Preliminary):

Net cash provided by operating activities $ 30,355 $ 8,265 $ 43,303 $ 38,620 $ 59,630
Net cash provided by (used in) investing activities $ 3,545 $ (895 ) $ (49,477 ) $ 2,650 $ (47,984 )
Net cash provided by (used in) financing activities $ (20,502 ) $ (13,354 ) $ 63,152 $ (33,856 ) $ 6,899
 

Other Supplemental Data (Preliminary):

Capital expenditures $ 7,771 $ 9,298 $ 9,741 $ 17,069 $ 19,716
Depreciation $ 10,036 $ 10,355 $ 11,668 $ 20,391 $ 22,350
Payment of dividend $ 16,138 $ 15,845 $ 16,716 $ 31,983 $ 30,510
Dividend paid per share $ 0.11 $ 0.11 $ 0.11 $ 0.22 $ 0.22
Dividend yield per share (a)   4.1 %     4.0 %     3.3 %   4.1 %     3.3 %

 

(a)   Dividend yield per share is calculated based on annualized dividend paid per share divided by the common stock share price at the end of the period.
 
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED DILUTED EPS CALCULATION
(In thousands, except per-share data)
(Unaudited)
   
Three Months Ended
June 30,   March 31,   July 1,
2013 2013 2012
GAAP   Non-GAAP GAAP   Non-GAAP GAAP   Non-GAAP
 
Net income (loss) attributable to Cypress $ 3,766 $ 21,635 $ (28,195 ) $ 4,579 $ 4,977 $ 30,298
 
Weighted-average common shares outstanding (basic) 147,287 147,287 145,689 145,689 151,765 151,765
Effect of dilutive securities:
Stock options, unvested restricted stock and other   8,975   12,500   -     12,569   12,840   16,075
Weighted-average common shares outstanding for diluted computation   156,262   159,787   145,689     158,258   164,605   167,840
 
Net income (loss) per share attributable to Cypress - basic $ 0.03 $ 0.15 $ (0.19 ) $ 0.03 $ 0.03 $ 0.20
Net income (loss) per share attributable to Cypress - diluted $ 0.02 $ 0.14 $ (0.19 ) $ 0.03 $ 0.03 $ 0.18
                                   
 
                                   
June 30, March 31, July 1,
2013 2013 2012
 
Average stock price for the period ended

$10.72

$10.50

$13.69

 
Common stock outstanding at period end (in thousands) 147,972 146,866 151,470
                                   

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.

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