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CYPRESS SEMICONDUCTOR CORP /DE/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) The Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties, which are discussed in the "Forward-Looking Statements" section under Part I of this Quarterly Report on Form 10-Q. EXECUTIVE SUMMARY Overview Cypress Semiconductor Corporation ("Cypress") delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include our 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. Cypress is also a significant participant in Universal Serial Bus (USB) controllers, which enhance connectivity and performance in a wide range of consumer and industrial products. Cypress is also the world leader in static random access memory (SRAM) and nonvolatile RAM memories. Cypress serves numerous major markets, including consumer, mobile handsets, computation, data communications, automotive, industrial, and military. We evaluate our reportable business segments in accordance with the accounting guidance. We operate in the following four reportable business segments: Business Segments Description MPD: Memory Products Division MPD focuses on static random access memory (SRAM), nonvolatile RAMs and general-purpose programmable clocks. DCD: Data Communications Division DCD focuses on USB controllers and WirelessUSB™ peripheral controllers, also offering module solutions including Trackpads and Ovation™ Optical Navigation Sensors. PSD: Programmable Systems Division PSD focuses primarily on our PSoC® programmable system-on-chip and PSoC-based products. This business segment focuses on (1) the PSoC platform family of devices including PSoC 1, PSoC 3, PSoC 4 and PSoC 5, and all derivatives, (2) PSoC-based user interface products such as CapSense® touch-sensing and TrueTouch® touchscreen products, and (3) automotive products. ETD: Emerging Technologies Division Our "startup" division includes AgigA Tech Inc. and Deca Technologies Inc., both majority-owned subsidiaries of Cypress. ETD also includes our foundry business and other development-stage activities. As stated in the Shareholder Letter contained in our 2013 Annual Report, our primary focus has been to resume revenue growth and increase profitability. For revenue growth, our revenue model is based on three underlying trends: increasing our SRAM market share and expanding our memory portfolio by introducing new products, a return to growth of our TrueTouch and PSoC revenue, and significant revenue growth from companies in our ETD. For profitability, we monitor our operating expenses closely to maintain our operating leverage as driven by various company-wide initiatives, including our World Wide Cost program to continuously reduce cost line items as well as a Human Resource effort to flatten our worldwide organization to reduce cost and efficiency. In order to achieve our goals on revenue growth and profitability, Cypress will continue to pursue the following strategies: • Drive profitability. Cypress has implemented and maintained a tight, corporate wide focus on gross margin and operating expenses. We are committed to maintaining our current strong operating expense management in 2014 even with revenue growth, continued new product development, and investments in our Emerging Technologies Division. • Drive programmability, extend leadership and drive PSoC proliferation. We continue to define, design and develop new programmable products and solutions that offer our customers increased flexibility and efficiency, higher performance, and higher levels of integration with a focus on analog functionality. We continue to drive PSoC adoption in large market segments. • Focus on large and growing markets. We continue to pursue business opportunities in large and growing markets. 24-------------------------------------------------------------------------------- Tables of Contents • Collaborate with customers to build system-level solutions. We work closely with customers from initial product design through manufacturing and delivery in order to optimize our customers' design efforts, helping them achieve product differentiation, improve time-to-market and develop whole product solutions. • Leverage flexible manufacturing. Our manufacturing strategy combines capacity from leading foundries with output from our internal manufacturing facilities allowing us to meet rapid swings in customer demand while lessening the burden of high fixed costs. • Identify and exit legacy or non-strategic, underperforming businesses. We continue to monitor and, if necessary, exit certain business units that are inconsistent with our future initiatives and long-term plans so that we can focus our resources and efforts on our core programmable and proprietary business model. • Pursue complementary strategic relationships. We continue to assess opportunities to develop strategic relationships through acquisitions, investments, licensing and joint development projects. We also continue to make significant investments in current ventures as well as new ventures. As we continue to implement our strategies, there are many internal and external factors that could impact our ability to meet any or all of our objectives. Some of these factors are discussed under Item 1A in our Annual Report on Form 10-K for the year ended December 29, 2013. Results of Operations Revenues Our total revenues decreased approximately 0.6% in the three-month period ended September 28, 2014 and approximately 2.4% in the nine-month period ended September 28, 2014 compared to the same periods in the prior year. The decrease in revenues in the three- and nine-month periods ended September 28, 2014 compared to the same periods a year ago was driven by a decrease in our overall unit sales volume, which decreased by approximately 2% and 4% year-over-year, respectively. The decrease in the unit sales volume was primarily attributed to our PSD products where we experienced weakness in our end customers' handset/mobile business demand. The overall average selling price of our products for the three and nine months ended September 28, 2014 remained relatively stable at $1.12 and $1.10, respectively, and are the same average prices for the three and nine months ended in the same periods one year ago. We have experienced, and expect to continue to experience, moderate pricing pressure in certain product lines, primarily due to competitive conditions. We have in the past been able to, and expect in the future to be able to, moderate average selling price declines in our product lines by introducing new products with more features and higher prices. We may be unable to maintain average selling prices for our products as a result of increased pricing pressure in the future, which could adversely affect our operating results. The following table summarizes our consolidated revenues by segments: Three Months Ended Nine Months Ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 (Inthousands) Programmable Systems Division $ 68,750 $ 78,135 $ 212,773 $ 224,961 Memory Products Division 92,179 88,743 259,084 259,098 Data Communications Division 19,091 18,884 52,670 62,927 Emerging Technologies Division 7,496 2,961 16,873 7,931 Total revenue $ 187,516 $ 188,723 $ 541,400 $ 554,917 Programmable Systems Division: Revenues from the Programmable Systems Division decreased by $9.4 million in the third quarter of fiscal 2014 and $12.2 million in the first three quarters of 2014, or approximately 12.0% and 5.4% compared to the same prior-year periods primarily attributable to a decrease in sales as we experienced weakness in our end customers' handset/mobile business demand. The decrease was partially offset by an increase in sales of PSD products to industrial and automotive customers where we experienced a ramp in volume from recent design wins. Memory Products Division: 25-------------------------------------------------------------------------------- Tables of Contents Revenues from the Memory Products Division decreased by approximately $3.4 million, or 3.9%, in the third quarter of fiscal 2014 and was flat in the first three quarters of 2014 compared to the same prior-year period. The decline in the third quarter is primarily attributable to a decline in worldwide SRAM market, partially offset by an increase in revenue of our Non Volatile RAM products. Data Communications Division: Revenues from the Data Communications Division increased by $0.2 million in the third quarter of fiscal 2014 and decreased $10.3 million in the first three quarters of 2014, or approximately 1.1%, and 16.3%, respectively, compared to the same prior-year period. The decrease for the nine months ended September 28, 2014 was primarily due to the decreases in sales of our legacy USB-related products. Emerging Technologies Division: Revenues from the Emerging Technologies Division increased by $4.5 million in the third quarter of fiscal 2014 and $8.9 million in the first three quarters of 2014, or 153.2% and 113%, respectively, compared to the same prior-year period primarily due to the overall increase in demand as certain of our Emerging Technologies companies begin to ramp production with new customer design wins. Cost of Revenues/Gross Margins Three Months Ended Nine Months Ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 (In thousands) Cost of revenues $ 90,633 $ 97,070 $ 271,425 $ 292,793 Gross margin 51.7 % 48.6 % 49.9 % 47.2 % In the third quarter and the first three quarters of fiscal 2014, gross margin increased by 3.1% and 2.7% percentage points, respectively, primarily due to product and customer mix and reduced impact of fair value adjustments related to acquired Ramtron inventory. Research and Development ("R&D") Expenses Three Months Ended Nine Months Ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 (In thousands) R&D expenses $ 38,626 $ 50,429 $ 124,883 $ 148,563 As a percentage of revenues 20.6 % 26.7 % 23.1 % 26.8 % R&D expenditures decreased by $11.8 million in the third quarter of fiscal 2014 compared to the same prior-year period. The decrease was primarily attributable to a $4.8 million decrease in stock-based compensation, a $2.1 million decrease in consulting fees and other outside services, a $1.8 million decrease in variable bonus-related expense, a $0.5 million decrease in deferred compensation expense, a $0.5 million decrease in purchased technology and expensed assets and other individually minor items, partially offset by a $0.9 million increase in headcount-related expenses. R&D expenditures decreased by $23.7 million in the first three quarters of fiscal 2014 compared to the same prior-year period. The decrease was primarily attributable to a decrease in consulting fees and other outside services of $6.7 million, a $4.8 million decrease in stock-based compensation, a $3.2 million decrease in variable bonus-related expenses, a $1.1 million decrease in purchased technology and expensed assets, a $0.5 million decrease in deferred compensation expense and other individually minor items. As a percentage of revenues, R&D expenses were lower in the first three quarters of fiscal 2014 driven by a company-wide effort to reduce overall operating expenses. 26-------------------------------------------------------------------------------- Tables of Contents Selling, General and Administrative ("SG&A") Expenses Three Months Ended Nine Months Ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 (In thousands) SG&A expenses $ 41,119 $ 45,533 $ 125,787 $ 139,049 As a percentage of revenues 21.9 % 24.1 % 23.2 % 25.1 % SG&A expenses decreased by $4.4 million in the third quarter of fiscal 2014 compared to the same prior-year period. The decrease was primarily attributable to a $3.3 million decrease in stock-based compensation expense, a decrease in deferred compensation of $1.2 million, a $1.1 million decrease in headcount-related expenses which was driven by a company-wide effort to reduce costs, and a $0.9 million decrease in variable bonus-related expenses. These decreases were partially offset by an increase in professional and other outside services of $2.6 million. SG&A expenses decreased by $13.3 million in the first three quarters of fiscal 2014 compared to the same prior-year period. The decrease was primarily attributable to a $8.5 million decrease in headcount-related expenses which was driven by a company-wide effort to reduce costs, a $4.4 million decrease in stock-based compensation expense, and a $2.2 million decrease in variable bonus-related expense. These decreases were partially offset by an increase in professional services of $5.1 million. As a percentage of revenues, SG&A expenses were lower in the first three quarters of fiscal 2014 driven by a company-wide effort to reduce overall operating expenses. Restructuring During fiscal 2013, we implemented a restructuring plan to reduce operating expenses as part of our 2013 corporate priorities. The plan included the termination of employees and the disposal of certain equipment located in our Bloomington, Minnesota facility. For the nine months ended September 29, 2013, we recorded restructuring charges of $15.2 million related to the Fiscal 2013 Restructuring Plan of which $6.7 million was related to property, plant and equipment, $8.0 million was related to personnel costs and $0.5 million was mainly related to the amounts payable upon the termination of agreements with certain distributor representatives. The benefit recorded for the nine months ended September 28, 2014 primarily resulted from the gain on the sale of a previously restructured asset of approximately $0.6 million. The determination of when we accrue for severance and benefits costs, and which accounting standard applies, depends on whether the termination benefits are provided under a one-time benefit arrangement or under an on-going benefit arrangement. The following table summarizes the restructuring activities recorded for the periods presented: Three Months Ended Nine Months Ended September 28, September 29, September 28, September 29, 2014 2013 2014 2013 (In thousands) Personnel costs $ - $ 3,568 $ (154 ) $ 8,627 Impairment of property, plant and equipment - - - 6,698 Other (238 ) 125 (519 ) 501 Gain on sale of held-for-sale assets - - (579 ) - Total restructuring charges (benefit) $ (238 ) $ 3,693 $ (1,252 ) $ 15,826 A summary of the restructuring activities related to personnel costs, which are primarily in the U.S. is summarized as follows: 27-------------------------------------------------------------------------------- Tables of Contents (In thousands) Balance as of December 29 2013 $ 4,158 Release (154 ) Cash payments (1,311 ) Balance as of March 30, 2014 2,693 Cash payments (896 ) Balance as of June 29, 2014 1,797 Release (238 )Balance as of September 28, 2014 1,371 The restructuring liability as of September 28, 2014 related primarily to personnel costs and is expected to be paid out within the next twelve months. Income Taxes Our income tax expense was $1.2 million for the three months ended September 28, 2014, and tax benefit was $0.8 million for the three months ended September 29, 2013. Our income tax benefit was $3.0 million and $10.0 million for the nine months ended September 28, 2014 and September 29, 2013, respectively. The tax expense for the third quarter was related to non-U.S. taxes on income earned in foreign jurisdictions, and the tax benefit for the first nine months of fiscal 2014 was primarily attributable to a release of previously accrued taxes and interest for the resolution of a foreign examination and expired statutes of limitations in domestic and foreign jurisdictions, offset by non-U.S. taxes on income earned in foreign jurisdictions. The tax benefit for the third quarter and first nine months of fiscal 2013 was primarily attributable to a release of previously accrued taxes and interest for the resolution of a foreign examination and expired statutes of limitations in domestic and foreign jurisdictions, offset by non-U.S. taxes on income earned in foreign jurisdictions. LIQUIDITY AND CAPITAL RESOURCES The following table summarizes information regarding our cash and investments and working capital: As of December 29, September 28, 2014 2013 (In thousands) Cash and cash equivalents $ 105,084 $ 86,009 Short-term investments 15,293 18,453 Total cash, cash equivalents and short-term investments $ 120,377 $ 104,462 Total current assets $ 344,114 $ 319,713 Total current liabilities 304,623 305,842 Working capital $ 39,491 $ 13,871 Key Components of Cash Flows Nine Months Ended September 28, 2014 September 29, 2013 (In thousands) Net cash provided by operating activities $ 77,822 $ 46,525 Net cash provided by (used in) investing activities $ (28,420 ) $ 570 Net cash used in financing activities $ (30,327 ) $ (33,748 ) Nine Months Ended September 28, 2014 During the nine months ended September 28, 2014, cash and cash equivalents increased by approximately $19.1 million primarily due to the cash we generated from our operating activities of approximately $77.8 million This increase was partially 28-------------------------------------------------------------------------------- Tables of Contents offset by the $30.3 million of cash we used in our financing activities, principally related to our dividend payment of $51.5 million and $28.4 million of cash used in our investing activities. Operating Activities The $77.8 million in cash generated from our operating activities during the nine months ended September 28, 2014 was primarily due to $73.4 million in net non-cash adjustments to our net income, an increase in deferred margin on sales to distributors, and decreases in inventories and other assets, partially offset by an increase in accounts receivable, and a decrease in accounts payable and other liabilities. The key changes in our working capital as of September 28, 2014 compared to December 29, 2013 were as follows: • Accounts receivable increased by $24.8 million primarily due to an increase in distributor shipments in the latter-half of our third quarter. • Inventories decreased by $11.8 million compared to December 29, 2013 due in part to reduced wafer starts to manage our production and an increase in distributor shipments in the latter-half of the quarter. • Deferred margin on sales to distributors increased by $12.1 million due to inventory mix in the distribution channel. • Accounts payable and other accrued liabilities decreased by $14.4 million primarily due to timing of accounts payable invoices. Investing Activities During the nine months ended September 28, 2014, we used approximately $28.4 million of cash from our investing activities primarily due to $14.4 million the sales or maturities of investments and proceeds from the sale of restructured equipment totaling $3.2 million, partially offset by $17.2 million of cash used for property and equipment expenditures, $18.4 million cash paid as an additional investment in certain equity securities and $11.4 million cash used for the purchase of investments. Financing Activities During the nine months ended September 28, 2014, we used approximately $30.3 million of cash from our financing activities primarily related to a $51.5 million dividend payment and $5.5 million used to repay equipment leases and loan. These decreases were partially offset by net proceeds from the issuance of common shares under our employee stock plans of $26.7 million. Liquidity and Contractual Obligations Stock Buyback Program On September 20, 2011, our Board of Directors authorized a $400 million stock buyback program. For the three months ended September 28, 2014, repurchases made under this program were immaterial. As of September 28, 2014, the total remaining dollar value of the shares that may be repurchased under the program was approximately $83.3 million. Yield Enhancement Program During the nine months ended September 28, 2014, we entered into two separate short-term yield enhanced structured agreements by paying $9.7 million in cash for each agreement. Both agreements had an average maturity of 41 days or less and matured in the third quarter of 2014. Upon maturity, we received cash of $9.9 million and $9.8 million from each agreement and recognized an aggregate income of $0.3 million during the three months ended September 28, 2014. Such income was recorded as interest and other income in our statement of operations for the three months ended September 28, 2014. 29-------------------------------------------------------------------------------- Tables of Contents Contractual Obligations The following table summarizes our contractual obligations as of September 28, 2014: Total 2014 2015 and 2016 2017 and 2018 After 2018 (In thousands) Purchase obligations (1) $ 74,881 $ 71,360 $ 3,521 $ - $ - Equipment loan 6,633 715 5,918 - - Operating lease commitments 14,940 1,593 9,297 3,476 574 Capital lease commitments 10,903 785 9,519 599 - Senior Secured Revolving Credit Facility 227,000 - - 227,000 - Patent license fee commitments (2) 5,880 - 5,880 - - Total contractual obligations $ 340,237 $ 74,453 $ 34,135 $ 231,075 $ 574 (1) Purchase obligations primarily include non-cancelable purchase orders for materials, services, manufacturing equipment, building improvements and supplies in the ordinary course of business. Purchase obligations are defined as enforceable agreements that are legally binding on us and that specify all significant terms, including quantity, price and timing.(2) On April 30, 2012, we entered into a patent license agreement whereby we paid a total patent license fee of $14.0 million in fiscal 2012 and committed to pay another $5.9 million on or before April 30, 2016 representing fees for future purchases of patents and patent related services. As of September 28, 2014, our unrecognized tax benefits were $12.1 million, which were classified as long-term liabilities. We believe it is possible that we may recognize approximately $1.0 million to $1.5 million of our existing unrecognized tax benefits within the next twelve months as a result of the lapse of statutes of limitations and the resolution of agreements with domestic and various foreign tax authorities. Equity Investment Commitments As disclosed in Note 8, we have committed to purchase additional preferred stock from a company that operates in the area of advanced battery storage. During the three months ended September 28, 2014, we purchased $4.0 million of preferred stock which was recorded as part of our investments in non-marketable securities. Subject to the attainment of certain milestones, we may purchase additional preferred stock of this company. On September 29, 2014, the Company, through its wholly-owned subsidiary, entered into an investment agreement with Hua Hong Semiconductor Limited (HHSL). HHSL is the parent company of Grace Semiconductor Manufacturing Corporation, which is one of our strategic foundry partners. Under the investment agreement, the Company agreed to buy $10.0 million worth of HHSL's ordinary shares in connection with their initial public offering ("IPO"). In October 2014, the Company purchased approximately 6.9 million shares of HHSL's ordinary shares at the IPO price for $10.0 million pursuant to the investment agreement. Capital Resources and Financial Condition Our long-term strategy is to maintain a minimum amount of cash and cash equivalents for operational purposes and to invest the remaining amount of our cash in interest-bearing and highly liquid cash equivalents and debt securities, payments of regularly scheduled cash dividends, the repayment of our short-term debt, and the purchase of our stock through our stock buyback program. As of September 28, 2014, in addition to $105.1 million in cash and cash equivalents, we had $15.3 million invested in short-term investments for a total cash, cash equivalents and short-term investment position of $120.4 million that is available for use in our current operations. As of September 28, 2014, approximately 16% of our cash, cash equivalents and available-for-sale investments are held in offshore funds. While these amounts are primarily invested in U.S. dollars, a portion is held in foreign currencies. All offshore balances are exposed to local political, banking, currency control and other risks. In addition, these amounts, if repatriated may be subject to tax and other transfer restrictions. We believe that liquidity provided by existing cash, cash equivalents and available-for-sale investments and our borrowing arrangements will provide sufficient capital to meet our requirements for at least the next twelve months. However, should prevailing economic conditions and/or financial, business and other factors beyond our control adversely affect the estimates of our future cash requirements; we could be required to fund our cash requirements by alternative financing. There 30-------------------------------------------------------------------------------- Tables of Contents can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all. In addition we may choose at any time to raise additional capital or debt to strengthen our financial position, facilitate growth, enter into strategic initiatives including the acquisition of other companies and provide us with additional flexibility to take advantage of other business opportunities that arise. 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 primarily related to stock-based compensation, which represent approximately 60% to 85% of total adjustments for the four most recent quarters, as well as restructuring charges, acquisition-related expenses 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. Three Months Ended September 28, 2014 September 29, 2013 (In thousands, except per share amounts) Non-GAAP gross margin $ 100,350 $ 101,507 Non-GAAP research and development expenses $ 36,293 $ 41,978 Non-GAAP selling, general and administrative expenses $ 34,732 $ 34,416 Non-GAAP operating income $ 29,325 $ 25,113 Non-GAAP net income attributable to Cypress $ 26,538 $ 21,544 Non-GAAP net income per share attributable to Cypress-diluted $ 0.16 $ 0.14 CYPRESS SEMICONDUCTOR CORPORATION RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (In thousands, except per-share data) (Unaudited) Three Months Ended September 28, 2014 % of Revenue September 29, 2013 % of Revenue GAAP gross margin $ 96,883 51.7 % $ 91,653 48.6 % Stock-based compensation expense 3,766 2.0 % 2,804 1.5 % Acquisition-related expenses - - % 265 0.1 % Changes in value of deferred compensation plan 4 - % 6,849 3.6 % Impairment of assets and other (303 ) (0.2 )% (64 ) - % Tax and tax-related items - - % - - % Non-GAAP gross margin $ 100,350 53.5 % $ 101,507 53.8 % 31-------------------------------------------------------------------------------- Tables of Contents GAAP research and development expenses $ 38,626 $ 50,429 Stock-based compensation expense (2,089 ) (6,806 ) Acquisition-related expenses - (19 ) Changes in value of deferred compensation plan (13 ) (548 ) Impairment of assets and other (231 ) (1,078 ) Non-GAAP research and development expenses $ 36,293 $ 41,978 GAAP selling, general and administrative expenses $ 41,119 $ 45,533 Stock-based compensation expense (6,427 ) (9,701 ) Acquisition-related expenses - (366 ) Changes in value of deferred compensation plan (24 ) (1,181 ) Impairment of assets and other 64 131 Non-GAAP selling, general and administrative expenses $ 34,732 $ 34,416 GAAP operating income (loss) $ 15,675 $ (9,989 ) Stock-based compensation expense 12,282 19,311 Acquisition-related expenses 1,701 9,221 Changes in value of deferred compensation plan 41 1,994 Impairment of assets and other (136 ) 883 Restructuring charges (238 ) 3,693 Tax and tax-related items $ - $ - Non-GAAP operating income $ 29,325 $ 25,113 GAAP pretax profit $ 15,171 8.1 % $ (9,562 ) (5.1 )% Stock-based compensation expense 12,282 6.5 % $ 19,311 10.2 % Acquisition-related expenses 1,701 0.9 % $ 9,221 4.9 % Changes in value of deferred compensation plan 288 0.2 % $ (97 ) - % Impairment of assets and other (137 ) (0.1 )% $ 883 0.4 % Restructuring charges (238 ) (0.1 )% $ 3,693 2.1 % Tax and tax-related items (966 ) (0.5 )% $ 231 - % Investment-related gains/losses 1,386 0.7 % $ - - % Non-GAAP pretax profit $ 29,487 15.7 % $ 23,680 12.5 % GAAP net income (loss) attributable to Cypress $ 12,840 $ (8,829 ) Stock-based compensation 12,282 19,311 Acquisition-related expenses 1,701 9,221 Changes in value of deferred compensation plan 288 (97 ) Impairment of assets and other (136 ) 883 Restructuring charges (238 ) 3,693 Tax and tax-related items (1,585 ) (2,638 ) Losses from equity method investment 1,386 - Non-GAAP net income attributable to Cypress $ 26,538 $ 21,544 GAAP net income (loss) per share attributable to Cypress-diluted 0.08 $ (0.06 ) Stock-based compensation expense 0.07 0.12 Acquisition-related expenses 0.01 0.02 Impairment of assets and other - 0.05 Restructuring charges - 0.02 Tax and tax-related items (0.01 ) (0.02 ) Losses from equity method investment 0.01 - Non-GAAP share count adjustment - 0.01 Non-GAAP net income attributable to Cypress-diluted $ 0.16 $ 0.14 32-------------------------------------------------------------------------------- Tables of Contents |