­­Cypress Reports Second Quarter 2015 Results

Jul 23, 2015, 08:00 ET from Cypress Semiconductor Corp.

SAN JOSE, Calif., July 23, 2015 /PRNewswire/ -- Cypress Semiconductor Corp. (NASDAQ: CY) today announced its second quarter 2015 results, which included the remarks below from its president and CEO, T.J. Rodgers. Highlights for the quarter included (financial highlights are non-GAAP):

  • Revenue of $491.0 million, at the high end of guidance
  • Gross margin of 41.0%, in line with expectations
  • Earnings per share of $0.15—the highest quarterly earnings in more than two years for the combined pro forma company
  • Annualized synergies achieved ahead of schedule: $51.6 million
  • Divestiture of mobile touchscreen business for $100 million announced
  • Dividend of $36.7 million ($0.11 per share, equivalent to 3.7% annualized yield) declared and paid with favorable tax treatment

Fellow shareholders: 

Our revenue and earnings for the quarter are given below, compared with those of the prior quarter and prior year*:

(In thousands, except per-share data)

NON-GAAP**

GAAP

Q2 2015

Q1 2015

 Q2 2014

Q2 2015

Q1 2015

 Q2 2014

Revenue

$491,028***

$209,137

$183,601

$484,778

$209,137

$183,601

Gross margin

41.0%

-1.3%

54.0%

28.5%

-17.0%

51.9%

Pretax margin

11.4%

-42.0%

14.9%

-18.1%

-120.2%

5.2%

Net income (loss)

$52,870

$(87,906)

$26,723

$(90,051)

$(246,798)

$9,527

Diluted EPS (loss)

$0.15

$(0.45)

$0.16

$(0.27)

$(1.26)

$0.06

* The results for the second quarter of 2015 include Spansion operations for the full quarter, while prior periods presented do not, as the Spansion merger was completed on March 12, 2015.

** For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."

*** Non-GAAP revenue includes $6.25 million of Samsung intellectual property licensing revenue, not included in GAAP revenue as a result of the effects of purchase accounting for the merger.

We are pleased to announce strong financial results for the second quarter of 2015, our first full quarter as a combined company. Our non-GAAP earnings per share of $0.15 represents a record relative to the last 10 quarters of the Cypress and Spansion pro forma combination. Our sales force is actively cross-selling products from our expanded product portfolio. As a result, we have begun to see an increase in new opportunities at top-tier customers, particularly in the automotive market.

We have continued to make excellent progress on integration.  We have exited 19 of the 27 sites planned for closure, reduced our combined headcount by 833 people and achieved $51.6 million in annualized synergies in the second quarter—ahead of our plan to achieve $160 million in synergies.

The combined Cypress-Spansion sales force ramped up its effort to cross-sell products from Cypress's expanded product portfolio during the second quarter, securing multiple key design wins and design opportunities at a pace that exceeded internal projections. Cross-selling is a key part of Cypress's stated goal to take advantage of product and business synergies to grow both our top and bottom lines. The effort was augmented by training more than 600 Cypress sales personnel and distribution partners at multiple regional Sales Conferences.

As one cross-selling result, a Tier 1 auto maker selected not only the Traveo™ automotive MCU, the HyperRAM™ and HyperFlash™ memories, and an analog Power Management IC (PMIC)—former Spansion products—but also a Cypress PSoC® programmable system-on-chip, for the infotainment cluster of its next-generation models. This win is particularly noteworthy in that former Spansion products opened the door for Cypress's longtime flagship PSoC products. This is a dynamic we expect will repeat itself as customers become more familiar with the synergies of our new product portfolio.

BUSINESS REVIEW

  • Our non-GAAP consolidated gross margin for the second quarter was 41.0%, meeting our expectations at this point in the merger. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 41.6%.
  • Net inventory at the end of the second quarter was $300.9 million, down $88 million from the first quarter ($52 million excluding the impact of fair value inventory adjustment from the merger), as a result of our 2015 lean inventory initiative.
  • Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock as of the close of business on June 25, 2015. This dividend was paid on July 16, 2015.

NET SALES SUMMARY

(In thousands, except percentages)

(Unaudited)

THREE MONTHS ENDED

Jun. 28,

   Mar. 29,

Jun. 29,

Sequential

Year-over-

Business Unit

2015

2015

2014

Change

Year Change

PSD1

$202,806

$74,812

$74,676

171%

172%

MPD1,3

$261,407

$108,683

$85,582

141%

205%

DCD1

$19,087

$18,565

$17,989

3%

6%

ETD2

$7,728

$7,077

$5,354

9%

44%

Total

$491,028

$209,137

$183,601

135%

167%

Geographic

China and ROW

41%

49%

62%

-16%

-34%

Americas

11%

19%

17%

-42%

-35%

Europe

14%

16%

13%

-13%

8%

Japan

34%

16%

8%

113%

325%

Total

100%

100%

100%

0%

0%

Channel

Distribution

72%

74%

68%

-3%

6%

Direct

28%

26%

32%

8%

-13%

Total

100%

100%

100%

0%

0%

1.

PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division.

2.

ETD, Emerging Technologies Division includes businesses outside our core semiconductor businesses named in Footnote 1. ETD includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.

3.

Our second quarter 2015 net sales includes $6.25 million of legacy Spansion non-GAAP licensing revenue in MPD, APAC region and direct channel.

SECOND QUARTER 2015 HIGHLIGHTS

  • Cypress began sampling the newest member of its family of power management integrated circuits (PMICs) targeting Energy Harvesting applications for the Internet of Things. The new Cypress PMICs, designed and developed by Spansion, are optimized for energy harvesting from ambient light, heat or vibrations to eliminate the need for batteries in wireless sensor nodes (WSNs) that monitor physical and environmental conditions in smart homes, buildings and factories.
  • Cypress expanded its Spansion-designed NOR HyperFlash product line with the qualification of a new 256Mb memory. The 3-V HyperFlash device is the latest addition to the industry's first flash memory family that supports the high-bandwidth, low-pin-count HyperBus™ interface. Running at frequencies up to 166 MHz, HyperFlash products can achieve Double-Data-Rate (DDR) read bandwidths as high as 333 MBps.
  • Cypress's Energy Harvesting PMICs and Programmable System-on-Chip Bluetooth® Low Energy (PSoC 4 BLE) products won UBM Canon's EE Times and EDN Annual Creativity in Electronics (ACE) Awards. The ACE Awards are judged by a blue-ribbon panel of industry experts, consisting of the leading voices of academia, industry executives and content experts.
  • Cypress introduced two reference design kits (RDKs) based on its Programmable Radio-on-Chip Bluetooth Low Energy (PRoC™ BLE) solution for Bluetooth Smart applications; the kits provide feature-rich, production-ready implementations of RF remote controls with long battery life, the latest industry trend. The CY5672 RDK provides a remote control with a trackpad, motion-sensing and voice recognition, and the CY5682 RDK provides a touch mouse that works with all major operating systems.
  • Cypress and Arrow Electronics announced the winners of their joint design contest, which challenged engineers to design solutions for the IoT using Cypress's PSoC 4 BLE, the industry's most-integrated programmable one-chip Bluetooth Smart solution. A data collection and logging system that displays the battery usage for an electric bicycle earned the top prize.
  • Cypress is the leader in the new USB Power Delivery field with its EZ-PD™ CCG1 and EZ-PD CCG2 USB Type-C controllers, which has passed the USB Implementers' Forum (USB-IF) certification test. The new super-slim 2.4-mm USB Type-C connector—which transmits multiple data protocols and delivers up to 100 W of power—is rapidly being adopted. For example, a USB Type-C connector is the sole data and power connector on the newest Apple® MacBook® computer.
  • Leading Japanese electronics publication Semiconductor Industry News honored the EZ-PD CCG1 and EZ-PD CCG2 USB Type-C controllers as part of the publication's 21st annual "Semiconductor of the Year" awards. The publication's editors chose the Cypress solutions for the "Award for Excellence" because of their high quality and ability to meet the accelerating demand of the USB Type-C market.
  • Cypress announced two complete silicon and software solutions for USB Type-C adapter dongles based on its EZ-PD CCG1 controller. The first solution enables dongle connectivity to a DisplayPort (DP) or Mini DisplayPort (mDP) receptacle, allowing emerging Type-C notebooks and monitors to work with older products. The second solution enables connectivity to HDMI/DVI/VGA receptacles and older displays. In addition, Cypress expanded its USB Type-C design support with the new CY4501 CCG1 Development Kit (DVK), which enables designers to add USB Type-C connectivity to any system.
  • Cypress introduced the industry's only 4Mb serial Ferroelectric Random Access Memories (F-RAMs™), which are the highest-density products of their kind available. Cypress F-RAMs are ideal solutions for applications that require continuous or frequent high-speed reading and writing of data with absolute data security. The 4Mb serial F-RAM family records mission-critical data in medical, industrial and automotive applications.
  • Cypress announced availability of the industry's highest-density synchronous SRAMs with on-chip Error-Correcting Code (ECC). On-chip ECC makes these SRAMs 1,000 times more reliable than standard SRAMs and eliminates the need for additional error-correction chips in medical and other mission-critical systems. Cypress will continue to expand the family this year with additional densities.
  • Cypress subsidiary Deca Technologies announced that it has shipped a cumulative 500 million units of wafer-level chip scale packages (WLCSP) since the subsidiary company's launch.

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ABOUT CYPRESS

Cypress (NASDAQ: CY) delivers high-performance, high-quality solutions at the heart of today's most advanced embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices. With a broad, differentiated product portfolio that includes NOR flash memories, F-RAM™ and SRAM, Traveo™ microcontrollers, the industry's only PSoC® programmable system-on-chip solutions, analog and PMIC Power Management ICs, CapSense® capacitive touch-sensing controllers, and Wireless BLE Bluetooth Low-Energy and USB connectivity solutions, Cypress is committed to providing its customers worldwide with consistent innovation, best-in-class support and exceptional system value. To learn more, go to 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 future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "continue" or other wording indicating future results or expectations to identify such forward-looking statements that include, but are not limited to, statements related to the expected timing and costs related to the integration of the company with Spansion as a result of our recent merger; our ability to execute on planned synergies related to the merger with Spansion; the semiconductor market; the strength and growth of our proprietary and programmable products; our expectations regarding our revenue growth and earnings leverage;  as well as our expectations regarding the demand for our products and how our products are expected to perform. 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, our ability to effectively integrate our company with Spansion in a timely manner, our ability to attract and retain key personnel, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, our ability to manage our business to have strong earnings and significant revenue growth and reduce operating expenses, our ability to effectively implement third party wafer processes, 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 Technologies Division, and other risks described in "Risk Factors" in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, Spansion, the Spansion logo, and combinations thereof, PSoC and CapSense are registered trademarks and HyperRAM, HyperFlash, HyperBus, EZ-PD, PRoC, F-RAM and Traveo 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 28,

December 28,

2015

2014

ASSETS

  Cash, cash equivalents and short-term investments

$      133,387

$      118,812

  Accounts receivable, net

261,373

75,984

  Inventories, net (a)

300,922

88,227

  Property, plant and equipment, net

544,144

237,763

  Goodwill and other intangible assets, net

2,592,976

99,615

  Other assets

278,499

122,880

     Total assets

$   4,111,301

$      743,281

LIABILITIES AND EQUITY

  Accounts payable 

$      145,287

$        42,678

  Deferred margin on sales to distributors

133,654

95,187

  Income tax liabilities

39,998

21,494

  Other liabilities

529,179

155,057

  Long-term revolving credit facility

449,000

227,000

     Total liabilities

1,297,118

541,416

  Total Cypress stockholders' equity

2,821,357

207,757

  Noncontrolling interest

(7,174)

(5,892)

     Total equity

2,814,183

201,865

        Total liabilities and equity

$   4,111,301

$      743,281

(a)  Net inventories include $3.0 million and $2.0 million of capitalized inventories related to stock compensation expense, as of June 28, 2015 and December 28, 2014, respectively.

 

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

ON A GAAP BASIS

(In thousands, except per-share data)

(Unaudited)

 Three Months Ended 

June 28,

March 29,

June 29,

2015

2015

2014

Revenues

$     484,778

$      209,137

$        183,601

Cost of revenues

346,705

244,789

88,231

Gross margin

138,073

(35,652)

95,370

Operating expenses:

Research and development 

81,227

50,522

40,927

Selling, general and administrative 

86,011

76,450

42,059

Acquisition costs and amortization of acquisition-related intangibles

41,758

7,397

1,800

Restructuring charges 

10,039

75,715

-

       Total operating expenses, net

219,035

210,084

84,786

Operating income (loss)

(80,962)

(245,736)

10,584

Interest and other income (loss), net 

(6,794)

(5,708)

(1,128)

Income (loss) before income taxes

(87,756)

(251,444)

9,456

Income tax provision (benefit)

2,934

(4,003)

299

Income (loss), net of taxes

(90,690)

(247,441)

9,157

Adjust for net loss attributable to noncontrolling interest

639

643

370

Net income (loss) attributable to Cypress

$      (90,051)

$    (246,798)

$            9,527

Net income (loss) per share attributable to Cypress:

Basic

$          (0.27)

$          (1.26)

$              0.06

Diluted

$          (0.27)

$          (1.26)

$              0.06

Cash dividend declared per share

$           0.11

$            0.11

$              0.11

Shares used in net income (loss) per share calculation:

Basic

333,334

196,471

157,936

Diluted

333,334

196,471

164,460

 

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 28,

% of

March 29,

% of

June 29,

% of

2015

Revenue

2015

Revenue

2014

Revenue

GAAP Revenues 

$          484,778

$       209,137

$          183,601

 Revenue from intellectual property license (b) 

6,250

-

-

Non-GAAP Revenues

$          491,028

$       209,137

$          183,601

GAAP gross margin (loss)

$          138,073

28.5%

$        (35,652)

-17.0%

$            95,370

51.9%

 Stock-based compensation expense 

3,802

0.8%

4,219

2.0%

4,433

2.4%

 Ramtron acquisition costs and related amortization 

-

0.0%

-

0.0%

(109)

-0.1%

 Changes in value of deferred compensation plan  

46

0.0%

189

0.1%

248

0.1%

 Impairment of assets, restructuring and other charges 

325

0.1%

120

0.1%

187

0.1%

 Effect of Non-GAAP revenue from intellectual property license 

6,250

0.7%

-

0.0%

-

0.0%

 Spansion merger costs and related amortization 

52,800

10.9%

28,464

13.6%

(925)

-0.5%

Non-GAAP gross margin (loss)

$          201,296

41.0%

$          (2,660)

-1.2%

$            99,204

53.9%

GAAP research and development expenses

$            81,227

$         50,522

$            40,927

 Stock-based compensation expense 

(7,007)

(5,750)

(4,362)

 Changes in value of deferred compensation plan  

(153)

(617)

(483)

 Impairment of assets, restructuring and other charges 

(96)

(62)

-

 Spansion merger costs and related amortization 

(827)

(130)

-

Non-GAAP research and development expenses

$            73,144

$         43,963

$            36,082

GAAP selling, general and administrative expenses

$            86,011

$         76,450

$            42,059

 Stock-based compensation expense 

(16,859)

(8,827)

(5,523)

 Ramtron acquisition costs and related amortization 

-

-

(385)

 Changes in value of deferred compensation plan 

(276)

(1,110)

(1,097)

 Impairment of assets, restructuring and other charges 

(36)

-

(877)

 Legal and other 

-

(654)

-

 Spansion merger costs and related amortization 

(1,634)

(25,580)

-

Non-GAAP selling, general and administrative expenses

$            67,206

$         40,279

$            34,177

GAAP operating income (loss)

$          (80,962)

$      (245,736)

$            10,584

 Stock-based compensation expense 

27,667

18,797

14,318

 Ramtron acquisition costs and related amortization 

1,305

1,305

2,077

 Changes in value of deferred compensation plan  

474

1,916

1,828

 Impairment of assets, restructuring and other charges 

-

182

138

 Legal and other 

458

654

-

 Effect of Non-GAAP revenue from intellectual property license 

6,250

-

-

 Spansion merger costs and related amortization 

105,754

135,982

-

Non-GAAP operating income (loss)

$            60,946

$        (86,900)

$            28,945

GAAP pretax profit (loss)

(87,756)

-18.1%

$      (251,444)

-120.2%

$              9,456

5.2%

 Stock-based compensation expense 

27,667

5.7%

18,797

9.0%

14,318

7.8%

 Ramtron acquisition costs and related amortization 

1,305

0.3%

1,305

0.6%

2,076

1.1%

 Changes in value of deferred compensation plan  

(54)

0.0%

1,241

0.6%

75

0.0%

 Impairment of assets, restructuring and other charges 

-

0.0%

455

0.2%

1,080

0.6%

 Legal and other 

458

0.1%

654

0.3%

-

0.0%

 Effect of Non-GAAP revenue from intellectual property license 

6,250

1.1%

-

0.0%

-

0.0%

 Investment related losses (gains) 

(1,670)

-0.3%

2,728

1.3%

1,367

0.7%

 Tax related, interest income, interest expense and other expenses 

2,586

0.5%

869

0.4%

(925)

-0.5%

 Losses from equity method investment 

1,459

0.3%

1,559

0.7%

-

0.0%

 Spansion merger costs and related amortization 

105,754

21.8%

135,982

65.0%

-

-

Non-GAAP pretax profit (loss)

$            55,999

11.4%

$        (87,854)

-42.1%

$            27,447

14.9%

GAAP net income (loss) attributable to Cypress

$          (90,051)

$      (246,798)

$              9,527

 Stock-based compensation expense 

27,667

18,797

14,318

 Ramtron acquisition costs and related amortization 

1,305

1,305

2,075

 Changes in value of deferred compensation plan  

(53)

1,241

75

 Impairment of assets, restructuring and other charges 

-

455

1,080

 Legal and other 

458

654

-

 Effect of Non-GAAP revenue from intellectual property license 

6,250

-

-

 Investment related losses (gains) 

(1,670)

2,728

1,367

 Tax related, interest income, interest expense and other expenses 

1,751

(3,829)

(1,719)

 Losses from equity method investment 

1,459

1,559

-

 Spansion merger costs and related amortization 

105,754

135,982

-

Non-GAAP net income (loss) attributable to Cypress

$            52,870

$        (87,906)

$            26,723

GAAP net income (loss) per share attributable to Cypress - diluted

$              (0.27)

$            (1.26)

$                0.06

 Stock-based compensation expense 

0.08

0.10

0.09

 Ramtron acquisition costs and related amortization 

-

0.01

0.01

 Changes in value of deferred compensation plan  

-

0.01

-

 Impairment of assets, restructuring and other charges 

-

-

0.01

 Effect of Non-GAAP revenue from intellectual property license 

0.02

 Investment related losses (gains) 

(0.01)

0.01

0.01

 Tax related, interest income, interest expense and other expenses 

0.01

(0.02)

(0.01)

 Losses from equity method investment 

-

0.01

-

 Non-GAAP share count adjustment 

-

-

(0.01)

 Spansion merger costs and related amortization 

0.32

0.69

-

Non-GAAP net income (loss) per share attributable to Cypress - diluted

$                0.15

$            (0.45)

$                0.16

(a) Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures.

(b) Non-GAAP revenue includes $6.25 million of Samsung intellectual property licensing revenue, not included in GAAP revenue as a result of the effects of purchase accounting for the Spansion merger.

 

CYPRESS SEMICONDUCTOR CORPORATION

SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

Three Months Ended 

Six Months Ended 

June 28,

March 29,

June 29,

June 28,

June 29,

2015

2015

2014

2015

2014

Selected Cash Flow Data (Preliminary):

 Net cash provided (used) by operating activities 

$        (65,620)

$         12,292

$         45,307

$      (53,327)

$       69,500

 Net cash used by investing activities 

$        (24,584)

$      (110,664)

$        (20,148)

$    (133,912)

$      (17,247)

 Net cash provided (used) in financing activities 

$         66,763

$       142,217

$        (27,372)

$     208,979

$      (36,828)

Other Supplemental Data (Preliminary):

 Capital expenditures 

$         18,735

$           6,496

$           5,767

$       25,231

$       11,378

 Depreciation 

$         36,486

$         13,902

$         10,133

$       50,388

$       19,618

 Payment of dividend 

$         36,402

$         17,931

$         17,412

$       54,333

$       34,107

 Dividend paid per share 

$            0.11

$            0.11

$            0.11

$           0.22

$           0.22

 Dividend yield per share (a) 

3.7%

3.1%

4.1%

3.7%

4.1%

(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 28,

March 29,

June 29,

2015

2015

2014

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

 Net income (loss) attributable to Cypress 

$  (90,051)

$        52,870

$ (246,798)

$ (87,906)

$     9,527

$   26,723

 Weighted-average common shares outstanding (basic) 

333,334

333,334

196,471

196,471

157,936

157,936

 Effect of dilutive securities: 

 Stock options, unvested restricted stock and other 

-

13,764

-

-

6,524

8,761

 Impact of convertible bond 

-

15,668

-

-

-

-

 Weighted-average common shares outstanding for diluted computation

333,334

362,766

196,471

196,471

164,460

166,697

 Net income (loss) per share attributable to Cypress - basic 

$      (0.27)

$            0.16

$      (1.26)

$     (0.45)

$       0.06

$       0.17

 Net income (loss) per share attributable to Cypress - diluted 

$      (0.27)

$            0.15

$      (1.26)

$     (0.45)

$       0.06

$       0.16

June 28,

March 29,

June 29,

2015

2015

2014

Average stock price for the period ended

$13.24

$14.72

$10.13

Common stock outstanding at period end (in thousands)

334,088

331,015

158,299

 

NOTES TO NON-GAAP FINANCIAL MEASURES

To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses the following non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures:

  • Gross margin
  • Research and development expenses
  • Selling, general and administrative expenses
  • Operating income (loss)
  • Net income (loss)
  • Diluted net income (loss) per share

The non-GAAP measures set forth above exclude charges related to our merger with Spansion, stock-based compensation, and other adjustments.  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.  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.  Pursuant to the requirements of Regulation G and to make clear to our investors the adjustments we make to GAAP measures, we have provided a reconciliation of the non-GAAP measures to the most directly comparable GAAP financial measures. 

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SOURCE Cypress Semiconductor Corp.



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