Cypress Reports Second Quarter 2006 Results.SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif. -- Cypress Semiconductor Cypress Semiconductor is a semiconductor design and manufacturing company. It began operations in 1982 and listed publicly in 1986. Two years later, the company shifted over to the New York Stock Exchange under the symbol, (NYSE: CY). Corp. (NYSE NYSE See: New York Stock Exchange :CY): --Exceeded upper end of revenue and earnings guidance --Adjusted-GAAP semiconductor margin of 49.3%(4), a two-year high --Adjusted-GAAP EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. (1) of $0.13, up from $0.07 in Q1 --Memory and Imaging Division profitable ahead of plan --Record design wins Cypress Semiconductor Corp. (NYSE:CY) today announced that revenue for the 2006 second quarter was $265.2 million, up 6.5% from prior-quarter revenue of $249.1 million and up 20.3% from year-ago second-quarter revenue of $220.5 million. Cypress Cypress, city, United States Cypress (sī`prəs), city (1990 pop. 42,655), Orange co., S Calif. near Long Beach; inc. 1956. Forest Lawn–Cypress, a branch of the famous cemetery in Glendale, Calif. posted GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income of $5.8 million in the 2006 second quarter, or diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.04. This compares with the prior quarter's diluted earnings per share of $0.05 and a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net loss per share of $0.12 in the year-ago second quarter. On an adjusted-GAAP basis -- excluding charges for stock-based compensation, acquisition-related charges and other special charges and credits -- the 2006 second quarter resulted in a net profit of $21.9 million(5), or diluted earnings per share of $0.13(1). This compares with the prior quarter's diluted earnings per share of $0.07(1). Diluted net loss per share in the year-ago second quarter was $0.01(1). Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: gross margin on an adjusted-GAAP basis(4) for the second quarter was 44.0%, up 2.1% from the previous quarter, due to a shift in the product mix, improving ASPs and improved manufacturing efficiencies across multiple divisions and product lines. On a GAAP basis, gross margin was 42.9%, up 1.4% from the prior quarter. Cypress President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. T.J. Rodgers said, "Our revenue grew sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen for the fifth-consecutive quarter with semiconductor margins reaching a two-year high of 49.3%(4), near our 50% model. Focused ASP asp, popular name for several species of viper, one of which, the European asp (Vipera aspis), is native to S Europe. It is also a name for the Egyptian cobra (Naja haja). management and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. shift in product mix toward proprietary products drove the financial improvements. In addition to revenue growth, we have also contained both R&D and total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. to 21.0% of sales and 35.4% of sales, respectively, the lowest levels since the boom in 2000." Rodgers continued, "Even with revenue from our Consumer and Computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. Division (CCD CCD in full charge-coupled device Semiconductor device in which the individual semiconductor components are connected so that the electrical charge at the output of one device provides the input to the next device. ) declining during the second quarter due to an inventory correction CORRECTION,punishment. Chastisement by one having authority of a person who has committed some offence, for the purpose of bringing him to legal subjection. 2. It is chiefly exercised in a parental manner, by parents, or those who are placed in loco parentis. at several major customers, the other divisions improved dramatically to keep the top and bottom lines moving forward. We also expect CCD to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective sharply in the current quarter based on strong demand for PSoC PSOC Programmable System-On-Chip PSoC Partial State of Charge PSOC Preliminary System Operational Concept PSOC Probabilistic System on a Chip PSOC Programmable System on a Chip (R) products and programmable clocks. SunPower SunPower Corporation designs and manufactures high-efficiency silicon solar cells and solar panels based on an all-back-contact cell design.[1] SunPower has recently announced a number of projects around the world that utilize its patented Tracker technology. continued its robust revenue growth -- 30.2% quarter-on-quarter -- and now accounts for more than 20% of Cypress's overall revenue. We expect robust revenue and earnings growth from SunPower in the third quarter, as well. Our flexible manufacturing plan is several months ahead of plan with the qualification of the first devices manufactured by our Shanghai-based foundry A semiconductor manufacturer that makes chips for third parties. It may be a large chip maker that sells its excess manufacturing capacity or one that makes chips exclusively for other companies. partner Grace Semiconductor Manufacturing Corp."
BUSINESS UNITS
Business Unit Summary Financials
Three Months Ended
July 2, 2006
CCD(3) DCD(3) MID(3) SUNPOWER OTHER TOTAL
REVENUE ($M) $75.4 $35.8 $88.5 $54.7 $10.8 $265.2
REVENUE % 28.4 13.5 33.4 20.6 4.1 100.0
GROSS MARGIN %(4) 49.8 66.9 38.6 23.5 76.3 44.0
ADJUSTED-GAAP EPS(1) $0.02 $0.05 $0.04 $0.03 $(0.01) $0.13
GAAP EPS(2) $0.04
Three Months Ended
April 2, 2006
CCD(3) DCD(3) MID(3) SUNPOWER OTHER TOTAL
REVENUE ($M) $89.2 $32.0 $76.2 $42.0 $9.7 $249.1
REVENUE % 35.8 12.9 30.6 16.8 3.9 100.0
GROSS MARGIN %(4) 51.0 63.0 34.2 16.8 57.4 41.9
ADJUSTED-GAAP EPS(1) $0.05 $0.02 ($0.01) $0.02 ($0.01) $0.07
GAAP EPS(2) $0.05
(1) Adjusted-GAAP EPS, shown here on a fully diluted basis, excludes
stock-based compensation charges, and the amortization of
intangibles and other acquisition-related, restructuring and
special charges and credits. Adjusted-GAAP EPS by segment is
calculated using the diluted weighted average share count utilized
for the consolidated reported results. Management evaluates the
company using the same weighted average share count as utilized
for consolidated reporting purposes. See the "Reconciliation of
GAAP to adjusted-GAAP" condensed consolidated statements of
operations.
(2) There is not a directly comparable GAAP measure for the segment
adjusted-GAAP EPS as management does not allocate GAAP
reconciliation items to the segments. The most directly comparable
GAAP measure is at the consolidated results level which is
presented above.
(3) CCD is the Consumer and Computation Division; DCD is the Data
Communications Division; MID is the Memory and Imaging Division.
(4) Adjusted-GAAP gross margin percent excludes the impact of stock-
based compensation, acquisition-related and other charges and
credits. See the "Supplemental Segment and Gross Margin
Information Table" for a reconciliation of the adjusted-GAAP gross
margin to GAAP gross margin.
(5) See the "Reconciliation of GAAP to Adjusted-GAAP Condensed
Consolidated Statements of Operations" table.
Consumer and Computation Division (CCD) CCD revenue was $75.4 million in the second quarter, down 15.5% from the prior quarter, below our expectation due to inventory corrections at some major PC and consumer products customers. Divisional revenue accounted for 28.4% of second-quarter revenue. Third-quarter revenue is expected to increase strongly due to demand for Cypress's Programmable System-on-Chip See SoC. (TM) (PSoC) mixed-signal array. Demand for general-purpose gen·er·al-pur·pose adj. Designed for or suitable to more than one use; broadly useful: a general-purpose loan. general-purpose Adjective programmable clocks is also expected to increase, driven by the gaming and digital TV markets. CCD posted a gross margin of 49.8%(4) in the second quarter, down from 51.0%(4) in the first quarter. The division contributed $0.02(1) earnings per share to the company's adjusted-GAAP net income in the second quarter, compared with $0.05(1) in the first quarter. CCD's contribution to earnings per share is expected to increase in the third quarter. Second-quarter highlights for the division include: + 100 million PSoCs. Cypress has shipped more than 100 million PSoC mixed-signal arrays since the product was introduced in 2003. + 100 PSoC CapSense design wins. Cypress announced its 100th design win for the CapSense capacitive touch sensing interface, based on the popular programmable PSoC architecture. CapSense replaces mechanical buttons and sliders sliders a species of tortoise kept as pets. They have a black shell and a red stripe behind the eye. Called also Chrysemys scripta elegans, red-eared sliders. in a variety of applications, enabling a cleaner, more durable user interface. + 500 million USB USB in full Universal Serial Bus Type of serial bus that allows peripheral devices (disks, modems, printers, digitizers, data gloves, etc.) to be easily connected to a computer. controllers. Cypress has shipped more than 500 million USB controllers since ramping to volume production in 1997, including a record 130 million units in 2005. + USB fast download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. for cell phones. Cypress sampled a high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. USB 2.0 controller that enables fast downloads of music, photo and video files in mobile handsets. Using the new MoBL-USB(TM) FX2LP18 controller, users can download 10 songs in just 18 seconds, versus six minutes for conventional technology. + LED Effects Inc. selected PSoC to control special effects special effects, in motion pictures, cinematographic techniques that create illusions in the audience's minds as well as the illusions created using these techniques. in signage for casinos A list of casinos. Antigua and Barbuda
+ Taiwan-based Darfon Electronics Corp., an industry-leading manufacturer of human input devices, will use Cypress's 2.4-GHz WirelessUSB(TM) radio system on a chip and its enCoRe(TM) II (Enhanced Component Reduction) solutions in the next generation of Darfon wireless mice. + Cypress launched a USB host product that enables users to connect portable MP3 players A digital music player that supports the MP3 format, which was the audio format that started a revolution in online music downloads and distribution. All portable music players, the iPod being the most popular, support MP3 along with one or more other audio formats. , GPS (1) (General Print Server) An IBM mainframe feature that lets TN3270 clients access LPD/LPR printers via the SNA/VTAM network. See TN3270 and VTAM. (2) (Global Positioning S systems and handsets to systems in their cars. The EZ-Host(TM) product meets the demanding temperature specifications of the Automotive Electronics Council The Automotive Electronics Council is an organisation based in the USA that sets qualification standards for the supply of components in the automotive electronics industry. External links
+ Cypress shipped the industry's first motherboard Also called the "system board," it is the main printed circuit board in an electronic device, which contains sockets that accept additional boards. In a desktop computer, the motherboard contains the CPU, chipset, PCI bus slots, AGP slot, memory sockets and controller circuits for the clock generator A clock generator is a circuit that produces a timing signal (known as a clock signal and behaves as such) for use in synchronizing a circuit's operation. It can range from a simple symmetrical square wave to more complex arrangements. to support processors and chipsets from all of the industry's major PC component suppliers. Designed in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with a Cypress customer, Asustek, the Universal Clock Generator is compatible with multiple chips from Intel, Advanced Micro Devices, VIA and Silicon Integrated Systems Silicon Integrated Systems (SiS, Traditional Chinese: 矽統科技) is a company that manufactures, among other things, motherboard chipsets. The company was founded in 1987 in Hsinchu Science Park, Taiwan. -- increasing the flexibility of PC designers and manufacturers. Data Communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. Division (DCD (Document Content Description) An XML schema language from Textuality, Microsoft and IBM that is implemented as an RDF vocabulary. It supports data typing and schema reuse and is the successor to XML-Data. See XML schema, RDF and XML. ) DCD revenue was $35.8 million in the second quarter, up 11.9% from the prior quarter, ahead of expectation. Revenue was driven by demand for video communications products and CPLDs. Divisional revenue accounted for 13.5% of second-quarter revenue. DCD revenue is expected to be flat in the third quarter. DCD posted a gross margin of 66.9%(4) in the second quarter, up from 63.0%(4) in the first quarter. The division contributed $0.05(1) earnings per share on an adjusted-GAAP basis to our net income in the second quarter, compared with $0.02(1) in the first quarter. DCD contribution to EPS in the next quarter is expected to be flat. Second-quarter highlights for the division include: + Cypress sampled two cable drivers for professional video equipment that are compatible with standard- and high-definition video This article is about high-definition video technology. For television systems, see High-definition television. For the tape format, see HDV. For compression and prerecorded media, see High-definition pre-recorded media and compression. formats. The drivers combine with Cypress's HOTLink-On-Demand(TM) video SERDES See serializer/deserializer. , video equalizers and YLink(TM) protection switch to form a complete portfolio of professional video interface products. Memory and Imaging Division (MID) MID revenue was $88.5 million in the second quarter, up 16.1% from the prior quarter, exceeding our expectation. The increase in second-quarter revenue was driven by demand for SRAMs for networking and communications applications. Divisional revenue accounted for 33.4% of second-quarter revenue. SRAM See static RAM. SRAM - static random-access memory demand and overall MID revenue are expected to increase in the third quarter. MID posted a gross margin of 38.6%(4) in the second quarter, compared with 34.2%(4) in the first quarter. The division had net earnings per share of $0.04(1) on an adjusted-GAAP basis in the second quarter, compared with a net loss per share of $0.01(1) in the first quarter. MID's contribution to earnings per share is expected to continue to improve in the third quarter. Second-quarter highlights for the division include: + Non-magnetic, non-volatile With regard to computer memory, it means that the content is not lost when the power is turned off. It does not mean "not changeable," which is the usual meaning of the word, because many non-volatile chips are rewritable. See non-volatile memory. non-volatile - non-volatile storage static RAMs A fast memory technology that requires power to hold its content. Static RAM (SRAM, S-RAM) is used for high-speed registers, caches and relatively small memory banks such as a frame buffer on a display adapter. . Cypress sampled high-speed nonvolatile See non-volatile. SRAM devices that can store data for more than 20 years without battery-backup, ensuring data integrity in the event of a power outage Noun 1. power outage - equipment failure resulting when the supply of power fails; "the ice storm caused a power outage" power failure equipment failure, breakdown - a cessation of normal operation; "there was a power breakdown" . The memories are made with all-CMOS technology, avoiding the cost and reliability problems of Magnetic Random Access Memories (MRAMs). Target applications include copy machines, point-of-sale point of sale n. pl. points of sale A business or place where a product or service can be purchased. Also called point of purchase. point terminals, handheld handheld: see personal digital assistant. meters, RAID (Redundant Array of Independent Disks) A disk subsystem that is used to increase performance or provide fault tolerance or both. RAID uses two or more ordinary hard disks and a RAID disk controller. In the past, RAID has also been implemented via software only. (Redundant Repetitive. See redundancy. Array of Independent Disks) storage arrays and consumer electronics. + Cypress began volume shipments of 90-nm micropower Electrical power that comes from a company-owned generating plant. Increasingly, large enterprises are developing their own power sources as the demand for energy increases and the sources of supply decrease. SRAMs, including 1-Mbit, 4-Mbit and 8-Mbit devices that will place Cypress in a performance and cost leadership position. SunPower Corporation Revenue from Cypress's SunPower subsidiary was $54.7 million in the second quarter, up 30.2% from the prior quarter and up 233% from the second quarter of 2005, driven by higher worldwide module sales, higher ASPs and the ramp of our third solar cell solar cell, semiconductor devised to convert light to electric current. It is a specially constructed diode, usually made of silicon crystal. When light strikes the exposed active surface, it knocks electrons loose from their sites in the crystal. production line in the Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. , which came online in late Q1. SunPower, which is by far the fastest growing Cypress business, continues to deliver results ahead of plan. SunPower accounted for 20.6% of Cypress's second-quarter revenue. We expect revenue to increase in the third quarter due to higher module sales and increased production on our fourth Philippine production line. SunPower posted a gross margin of 23.5%(4) in the second quarter of 2006, compared with 16.8%(4) in the first quarter. SunPower accounted for adjusted-GAAP earnings per share of $0.03(1) in the second quarter, compared with earnings per share of $0.02(1) in the first quarter. SunPower's contribution to earnings per share is expected to increase in the third quarter. Second-quarter highlights include: + SunPower raises $198 million. SunPower completed a secondary public offering of seven million shares of its Class A common stock, raising $198 million at $29.50 per share. + SunPower signed a four-year polysilicon (POLYcrystalline SILICON) Silicon with a crystalline structure, which acts as a conductor of electricity. It is used as the gate in MOS transistors as well as an interconnect between them. Contrast with amorphous silicon. See LTPS TFT LCD. supply agreement with DC Chemical Co., Ltd. The agreement will enable DC Chemical, which currently makes precursor precursor /pre·cur·sor/ (pre´kur-ser) something that precedes. In biological processes, a substance from which another, usually more active or mature, substance is formed. In clinical medicine, a sign or symptom that heralds another. gases for polysilicon production, to expand into polysilicon manufacturing for silicon solar cells, beginning in 2008. DC Chemical is Korea's leading chemical company. + SunPower extended its five-year, $500 million silicon supply agreement with M.Setek through the year 2010. The agreement increases SunPower's access to silicon in 2008 with the potential for additional supply in 2007. + SunPower announced that its A-300 silicon solar cells will help to power the 35-story Millenium Towers in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The system, which will be integrated into the building's facade facade (fəsäd`), exterior face or wall of a building. The term implies ordered placement of its openings and other features and thus seems inapplicable to a wall without design. , is expected to produce 27.3 kilowatts of peak power. Other Developments + Qualified first "Flexible Manufacturing" products from Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. foundry partner. Cypress qualified its first devices manufactured by foundry partner Grace Semiconductor Manufacturing Corp. several months ahead of schedule. Cypress will transfer its 0.13-micron C8(TM) process technology to Shanghai-based Grace Semiconductor in the third quarter. + Bill Dunnigan Dunnigan can refer to:
(2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. fabs. Dunnigan joined Cypress from Motorola/Freescale, where he held various leadership positions over the past 26 years, including vice president and general manager of the company's High Performance Microprocessor microprocessor, integrated circuit containing the arithmetic, logic, and control circuitry required to interpret and execute instructions from a computer program. Business. Dunnigan has spent more than 20 years in manufacturing, including responsibility for several wafer fabs around the world, from 150 mm GaAs/bipolar processes to 200 mm and 300 mm advanced CMOS (Complementary Metal Oxide Semiconductor) Pronounced "c-moss." The most widely used integrated circuit design. It is found in almost every electronic product from handheld devices to mainframes. manufacturing. + Cypress celebrated its 20th anniversary as a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. on May 30 by ringing the opening bell of the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. . Cypress CEO T.J. Rodgers is now the longest-standing chief executive officer of a semiconductor company on the NYSE(6). + Cypress named Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Chu Chu or Ch'u One of the states contending for power in China, 770–221 BC. Chu emerged in the 8th century BC in the Yangtze River (Chang Jiang) valley. Vice President of Asia Sales and Operations. Chu brings more than 25 years of semiconductor sales, marketing and engineering experience to Cypress, including work at Freescale Semiconductor Freescale Semiconductor, Inc. is an American semiconductor manufacturer. It was created by the divestiture of the Semiconductor Products Sector of Motorola in 2004. Freescale focuses their integrated circuit products on the automotive, embedded and communications markets. and Advanced Micro Devices. (6) Verified ver·i·fy tr.v. ver·i·fied, ver·i·fy·ing, ver·i·fies 1. To prove the truth of by presentation of evidence or testimony; substantiate. 2. by Cypress using data from the NYSE and member companies. Conclusion Rodgers concluded, "We are 87% booked at the beginning of the third quarter. Our new product portfolio, focused on proprietary products, is producing design wins at record levels. Semiconductor industry fundamentals continue to be strong. We remain vigilant, but optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op , in our drive to post our first $1 billion-plus year since the communications boom of 2000." About Cypress Cypress solutions perform: consumer, computation, data communications, automotive, industrial, and solar. Leveraging proprietary silicon processes, Cypress's product portfolio includes a broad selection of wired and wireless USB The wireless version of the universal serial bus (USB). Using ultra-wideband (UWB) technology, wireless USB is designed to provide the same 480 Mbits/sec data rate as USB 2.0 within two meters (6.6 ft.) or 110 Mbps within 10 meters (33 ft.). devices, CMOS image sensors A CMOS-based chip that records the intensities of light as variable charges similar to a CCD chip. Although initially used in less expensive digital cameras, the quality of CMOS sensors has improved steadily. CMOS sensors have advantages over CCDs. , timing solutions, specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. memories, high-bandwidth synchronous Refers to events that are synchronized, or coordinated, in time. For example, the interval between transmitting A and B is the same as between B and C, and completing the current operation before the next one is started are considered synchronous operations. Contrast with asynchronous. and micropower memory products, optical solutions and reconfigurable mixed-signal arrays. Cypress trades on the NYSE under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors CY. Visit us at www.cypress.com. Statements herein that are not historical facts and that refer to Cypress or its subsidiaries' plans and expectations for the third quarter of 2006, revenue for 2006, and the future are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. We use words such as "anticipates," "believes," "expects," "future," "look forward," "planning," "intends" and similar expressions to identify forward-looking statements that include, but are not limited to, statements related to demand for our PSoC, general purpose clock and SRAM products, Cypress and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. Grace's ability to ship and qualify products and transfer technology to Grace as proposed in Q3 and Q4, SunPower's production levels and module sales, our prices, growth, our ability to secure raw materials, shipments, new products, profit and revenue. Such statements reflect our current expectations which are based on information and data available to our management as of the date of the release. Our actual results may differ materially due a variety of uncertainties and risk factors, including but not limited to the business and economic conditions and growth trends in the semiconductor and solar power industries, the state of the global economy, the actions of our competition, our ability to develop and roll-out new products, our ability to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on our flexible manufacturing plan, customer acceptance of Cypress and its subsidiaries' products, factory utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be , seasonality in the markets we serve, our ability to improve our gross margins and realize our bookings, the financial and operational performance of our subsidiaries, including SunPower's ability to ramp production and obtain a sufficient amount of polysilicon, and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements. To supplement the consolidated financial results prepared under GAAP, Cypress uses adjusted-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to acquisitions, including amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , in-process research and development and stock-based compensation, employee loan reserves, off-balance sheet lease guarantee accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. , restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. on investments, gains or losses on investments and other non-recurring costs. Management does not consider these charges part of the day-to-day day-to-day adj. 1. Occurring on a routine or daily basis: the day-to-day movements of the stock market. 2. business or reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of the core operational activities of the Company as they result from corporate transactions outside the ordinary course of business. Management uses these adjusted-GAAP measures internally to make strategic decisions, forecast future results and evaluate the Company's current performance. Most analysts covering Cypress use the adjusted-GAAP measures as well. Given management's use of these adjusted-GAAP measures, Cypress believes these measures are important to investors in understanding the Company's current and future operating results as seen through the eyes of management. In addition, management believes these adjusted-GAAP measures are useful to investors in enabling them to better assess changes in Cypress' core business across different time periods. These adjusted-GAAP measures are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with, or an alternative for, GAAP and may be different from adjusted-GAAP measures used by other companies. Cypress, PSoC, MoBL and the Cypress logo are registered trademarks of Cypress Semiconductor Corporation. Programmable System-on-Chip, Programmable Radio-on-a-Chip Radio-on-a-chip or RoC systems are single-chip devices that incorporate a receiver, an amplifier, and power management into a single chip, which can thus be embedded into very small or even portable electronics. , MoBL-USB, EZ-USB LP, WirelessUSB, YLink, C8, Hotlink-On-Demand, EZ-Host and enCoRe are trademarks of Cypress Semiconductor Corporation. SunPower is a registered trademark of SunPower Corporation. All other trademarks or registered trademarks are the property of their respective owners.
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share data)
(Unaudited)
----------- -----------
July 2, January 1,
2006 2006
---------- ----------
ASSETS
Cash, cash equivalents and investments (a) $ 680,734 $ 393,788
Accounts receivable, net 177,830 151,213
Inventories 95,871 73,573
Property and equipment, net 474,142 464,656
Goodwill and other intangible assets 406,033 459,496
Other assets 179,574 155,148
----------- -----------
Total assets $2,014,184 $1,697,874
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 186,818 $ 164,066
Deferred income 54,938 29,404
Convertible subordinated notes 598,997 599,997
Income tax liabilities 57,541 59,590
Other liabilities 48,369 49,378
----------- -----------
Total liabilities 946,663 902,435
Minority interest 113,270 38,304
Stockholders' equity (b) 954,251 757,135
----------- -----------
Total liabilities and stockholders'
equity $2,014,184 $1,697,874
=========== ===========
(a) Cash, cash equivalents and investments included restricted cash
totaling $63.4 million and $63.5 million as of July 2, 2006 and
January 1, 2006, respectively.
(b) Common stock, $.01 par value, 650,000 and 650,000 shares
authorized; 140,941 and 137,036 shares outstanding as of July 2,
2006 and January 1, 2006, respectively.
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ON A GAAP BASIS)
(In thousands, except per-share data)
(Unaudited)
-----------------------------
THREE MONTHS ENDED
-----------------------------
July 2, July 3, April 2,
2006 2005 2006
--------- -------- ---------
Revenues $265,236 $220,506 $249,137
Cost of revenues (a) 151,343 129,556 145,725
--------- --------- ---------
Gross margin 113,893 90,950 103,412
Operating expenses:
Research and development (a) 61,598 57,043 62,666
Selling, general and administrative (a) 43,563 36,791 44,920
Amortization of intangibles 3,937 7,113 4,450
Restructuring costs (credits)(a) (113) 4,986 602
Gain on sale of NSE assets - - (5,998)
--------- --------- ---------
Total operating costs 108,985 105,933 106,640
--------- --------- ---------
Operating income (loss) 4,908 (14,983) (3,228)
Net interest income (expense) and other 3,197 (792) 12,009
--------- --------- ---------
Income (loss) before income tax and
minority interest 8,105 (15,775) 8,781
Income tax (provision) benefit (1,119) 521 (1,663)
Minority interest, net of tax (1,139) - (37)
--------- --------- ---------
Net income (loss) $ 5,847 $(15,254) $ 7,081
========= ========= =========
Basic net income (loss) per share $ 0.04 $ (0.12) $ 0.05
Diluted net income (loss) per share $ 0.04 $ (0.12) $ 0.05
Shares used in per-share calculation:
Basic 139,989 132,081 138,330
Diluted 145,306 132,081 144,915
(a) includes the following stock-based
compensation expense:
Cost of revenues $ 2,877 $ 6 $ 917
Research and development 4,354 489 4,716
Selling, general and
administrative 4,758 75 5,072
Restructuring - 3,043 -
(a) Prior to January 2, 2006, Cypress accounted for stock-based
compensation expense under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), and the
related interpretation. In accordance with APB 25, Cypress
historically used the intrinsic value method to account for stock-
based compensation expense. As of January 2, 2006, Cypress
accounts for stock-based compensation expense under Statement of
Financial Accounting Standards No. 123R, "Share-Based Payment"
("SFAS 123R"). As Cypress adopted the modified prospective
application method under SFAS 123R, results for prior periods have
not been restated.
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ON AN ADJUSTED-GAAP BASIS)
(In thousands, except per-share data)
(Unaudited)
-----------------------------
THREE MONTHS ENDED
-----------------------------
July 2, July 3, April 2,
2006 2005 2006
--------- --------- ---------
Revenues $265,236 $220,506 $249,137
Costs of revenues 148,494 129,417 144,815
--------- --------- ---------
Gross margin 116,742 91,089 104,322
Operating expenses:
Research and development 55,618 55,139 56,169
Selling, general and administrative 38,354 36,553 39,397
--------- --------- ---------
Total operating costs 93,972 91,692 95,566
--------- --------- ---------
Operating income (loss) 22,770 (603) 8,756
Net interest income (expense) and other 3,218 (516) 2,823
--------- --------- ---------
Income (loss) before income tax and
minority interest 25,988 (1,119) 11,579
Income tax provision (2,566) (690) (1,149)
Minority interest, net of tax (1,526) - (410)
--------- --------- ---------
Net income (loss) $ 21,896 $ (1,809) $ 10,020
========= ========= =========
Basic net income (loss) per share $ 0.16 $ (0.01) $ 0.07
Diluted net income (loss) per share $ 0.13 $ (0.01) $ 0.07
Shares used in per-share calculation:
Basic 139,989 132,081 138,330
Diluted 178,910 132,081 178,724
-- A reconciliation of GAAP to adjusted-GAAP is presented on the
following page.
-- Cypress' adjusted-GAAP measures are not in accordance with, or an
alternative for, generally accepted accounting principles and may
be different from those used by other companies.
CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP TO ADJUSTED-GAAP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share data)
(Unaudited)
-----------------------------------
THREE MONTHS ENDED
------------------------------------
July 2, 2006
-----------------------------------
GAAP Adjustments Adjusted-
GAAP
--------- ------------ ----------
Revenues $265,236 $ - $ 265,236
Cost of revenues 151,343 (2,849)(a) 148,494
--------- ------------ ----------
Gross margin 113,893 2,849 116,742
Operating expenses:
Research and development 61,598 (5,980)(b) 55,618
Selling, general and
administrative 43,563 (5,209)(c) 38,354
Amortization of intangibles 3,937 (3,937)(d) -
Restructuring costs (credits) (113) 113 (e) -
Gain on sale of NSE assets - - -
--------- ------------ ----------
Total operating costs 108,985 (15,013) 93,972
--------- ------------ ----------
Operating Income (loss) 4,908 17,862 22,770
Net interest income (expense) and
other 3,197 21 (f) 3,218
--------- ------------ ----------
Income (loss) before income
tax and minority interest 8,105 17,883 25,988
Income tax (provision) benefit (1,119) (1,447)(p) (2,566)
Minority interest, net of tax (1,139) (387)(q) (1,526)
--------- ------------ ----------
Net income (loss) $ 5,847 $ 16,049 $ 21,896
========= ============ ==========
Basic net income (loss) per share $ 0.04 $ 0.16
Diluted net income (loss) per
share $ 0.04 $ 0.13
Shares used in per-share
calculation:
Basic 139,989 139,989
Diluted 145,306 178,910
-----------------------------------
THREE MONTHS ENDED
------------------------------------
July 3, 2005
-----------------------------------
GAAP Adjustments Adjusted-
GAAP
--------- ------------ ----------
Revenues $220,506 $ - $ 220,506
Cost of revenues 129,556 (139)(g) 129,417
--------- ------------ ----------
Gross margin 90,950 139 91,089
Operating expenses:
Research and development 57,043 (1,904)(h) 55,139
Selling, general and
administrative 36,791 (238)(i) 36,553
Amortization of intangibles 7,113 (7,113)(d) -
Restructuring costs (credits) 4,986 (4,986)(e) -
Gain on sale of NSE assets - - -
--------- ------------ ----------
Total operating costs 105,933 (14,241) 91,692
--------- ------------ ----------
Operating Income (loss) (14,983) 14,380 (603)
Net interest income (expense) and
other (792) 276 (j) (516)
--------- ------------ ----------
Income (loss) before income
tax and minority interest (15,775) 14,656 (1,119)
Income tax (provision) benefit 521 (1,211)(p) (690)
Minority interest, net of tax - - -
--------- ------------ ----------
Net income (loss) $(15,254) $ 13,445 $ (1,809)
========= ============ ==========
Basic net income (loss) per share $ (0.12) $ (0.01)
Diluted net income (loss) per
share $ (0.12) $ (0.01)
Shares used in per-share
calculation:
Basic 132,081 132,081
Diluted 132,081 132,081
-----------------------------------
THREE MONTHS ENDED
------------------------------------
April 2, 2006
-----------------------------------
GAAP Adjustments Adjusted-
GAAP
--------- ------------ ----------
Revenues $249,137 $ - $ 249,137
Cost of revenues 145,725 (910)(k) 144,815
--------- ------------ ----------
Gross margin 103,412 910 104,322
Operating expenses:
Research and development 62,666 (6,497)(l) 56,169
Selling, general and
administrative 44,920 (5,523)(m) 39,397
Amortization of intangibles 4,450 (4,450)(d) -
Restructuring costs (credits) 602 (602)(e) -
Gain on sale of NSE assets (5,998) 5,998 (n) -
--------- ------------ ----------
Total operating costs 106,640 (11,074) 95,566
--------- ------------ ----------
Operating Income (loss) (3,228) 11,984 8,756
Net interest income (expense) and
other 12,009 (9,186)(o) 2,823
--------- ------------ ----------
Income (loss) before income
tax and minority interest 8,781 2,798 11,579
Income tax (provision) benefit (1,663) 514 (p) (1,149)
Minority interest, net of tax (37) (373)(q) (410)
--------- ------------ ----------
Net income (loss) $ 7,081 $ 2,939 $ 10,020
========= ============ ==========
Basic net income (loss) per share $ 0.05 $ 0.07
Diluted net income (loss) per
share $ 0.05 $ 0.07
Shares used in per-share
calculation:
Basic 138,330 138,330
Diluted 144,915 178,724
(a) Includes acquisition-related expense of $17, stock-based
compensation expense of $2,877, and a credit of $(45) related to
changes in value of the key employee deferred compensation plan
for the three months ended July 2, 2006.
(b) Includes acquisition-related expense of $1,342, stock-based
compensation expense of $4,354, synthetic lease loss accrual of
$335, and a credit of $(51) related to changes in value of the key
employee deferred compensation plan for the three months ended
July 2, 2006.
(c) Includes acquisition-related expense of $325, stock-based
compensation expense of $4,758, synthetic lease loss accrual of
$165, and a credit of $(39) related to changes in value of the key
employee deferred compensation plan for the three months ended
July 2, 2006.
(d) Includes amortization of intangibles of $3,937 for the three
months ended July 2, 2006, $7,113 for the three months ended July
3, 2005, and $4,450 for the three months ended April 2, 2006.
(e) Includes restructuring credits of $(113) for the three months
ended July 2, 2006, restructuring costs of $4,986 for the three
months ended July 3, 2005, and restructuring costs of $602 for the
three months ended April 2, 2006.
(f) Includes an investment-related charge of $21 for the three months
ended July 2, 2006.
(g) Includes acquisition-related and other expense of $133 and
stock-based compensation expense of $6 for the three months ended
July 3, 2005.
(h) Includes acquisition-related and other expense of $1,211,
stock-based compensation expense of $489, and synthetic lease loss
accrual of $204 for the three months ended July 3, 2005.
(i) Includes acquisition-related and other expense of $63, stock-based
compensation expense of $75 and synthetic lease loss accrual of
$100 for the three months ended July 3, 2005.
(j) Includes investment-related impairment and other charges of $276
for the three months ended July 3, 2005.
(k) Includes acquisition-related expense of $19, stock-based
compensation expense of $917, and a credit of $(26) related to
changes in value of the key employee deferred compensation plan
for the three months ended April 2, 2006.
(l) Includes acquisition-related expense of $1,476, stock-based
compensation expense of $4,716, synthetic lease loss accrual of
$335, and a credit of $(30) related to changes in value of the key
employee deferred compensation plan for the three months ended
April 2, 2006.
(m) Includes acquisition-related expense of $308, stock-based
compensation expense of $5,072, synthetic lease loss accrual of
$165, and a credit of $(22) related to changes in value of the key
employee deferred compensation plan for the three months ended
April 2, 2006.
(n) Includes gain on sale of NSE assets of $(5,998) for the three
months ended April 2, 2006.
(o) Includes investment-related gain and other credits of $(10,028)
and investment impairment and other charges of $842 for the three
months ended April 2, 2006.
(p) Includes tax effect on adjusted-GAAP adjustments of $1,447 for the
three months ended July 2, 2006, $1,211 for the three months ended
July 3, 2005, and $(514) for the three months ended April 2, 2006.
(q) Includes minority interest adjustments of $387 for the three
months ended July 2, 2006 and $373 for the three months ended
April 2, 2006.
CYPRESS SEMICONDUCTOR CORPORATION
SUPPLEMENTAL SEGMENT AND GROSS MARGIN INFORMATION
(In thousands, except per-share and percentage data)
(Unaudited)
Segment Information:
-------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------------------
July 2, 2006
-------------------------------------------------------
CCD(a) DCD(a) MID(a) SunPower Other Total
-------- -------- -------- --------- -------- ---------
Revenues $75,420 $35,823 $88,461 $54,695 $10,837 $265,236
Adjusted-GAAP
gross margin
% 49.8% 66.9% 38.6% 23.5% 76.3% 44.0%
Adjusted-GAAP
basic net
income
(loss) per
share
contribution
(b) $ 0.02 $ 0.06 $ 0.05 $ 0.04 $ (0.01) $ 0.16
Adjusted-GAAP
diluted net
income
(loss) per
share
contribution
(b) $ 0.02 $ 0.05 $ 0.04 $ 0.03 $ (0.01) $ 0.13
Reconciliation of GAAP Consolidated Gross Margin to Adjusted-GAAP
Consolidated Gross Margin:
--------------------
THREE MONTHS ENDED
July 2, 2006
--------------
GAAP consolidated gross margin $ 113,893 42.9%
Reconciling items: (c)
Acquisition-related expense 17
Credits related to changes in value of the key
employee deferred compensation plan (45)
Stock-based compensation expense 2,877
--------------
Adjusted-GAAP consolidated gross margin $ 116,742 44.0%
==============
Reconciliation of GAAP Consolidated Gross Margin to Adjusted-GAAP
Semiconductor Gross Margin:
--------------------
THREE MONTHS ENDED
July 2, 2006
--------------
GAAP consolidated gross margin $ 113,893 42.9%
Less: GAAP SunPower gross margin (11,447)
Amortization of SunPower's intangibles (1,175)
--------------
GAAP semiconductor gross margin 101,271
Reconciling items:
Acquisition-related expense 17
Credits related to changes in value of the key
employee deferred compensation plan (45)
Stock-based compensation expense 2,643
--------------
Adjusted-GAAP semiconductor gross margin $ 103,886 49.3%
==============
(a) CCD represents our Consumer and Computation Division; DCD
represents our Data Communications Division; MID represents our
Memory and Imaging Division.
(b) Adjusted-GAAP net income (loss) per share by segment is calculated
using the diluted weighted average share count utilized for the
consolidated reported results. Management evaluates the company
utilizing the same weighted-average share count as utilized for
consolidated reporting purposes.
(c) The Company does not generally allocate GAAP reconciling items,
such as stock-based compensation expense, to the segments.
Management uses the adjusted-GAAP measures internally for
strategic decision making, forecasting future results and
evaluating the Company's current performance. These adjusted-GAAP
measures exclude the GAAP items listed within the reconciling
section and are not allocated to the segments as management does
not evaluate the Company including these GAAP measures. In
addition, the adjusted-GAAP EPS by segment is calculated utilizing
the consolidated weighted average share count used for
consolidated adjusted-GAAP EPS - see (b) above. As such, there is
not a directly comparable GAAP measure for the segment
adjusted-GAAP EPS and one is not presented. The most directly
comparable GAAP measure is at the consolidated results level which
is presented above.
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