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 Cypress Reports Second Quarter 2017 Results
   Thursday, July 27, 2017 4:05:14 PM ET

--GAAP and non-GAAP margin were 39.8% and 40.9%, respectively

--GAAP and non-GAAP diluted EPS increased 50% and 62% sequentially, respectively

--Achieved record revenue for automotive, IoT wireless connectivity and USB-C solutions

Cypress Semiconductor Corporation (CY ) today announced its second quarter 2017 results.

"Cypress set another revenue record in the second quarter, supported by record revenue in each of our three key growth vectors: automotive, IoT wireless connectivity and USB-C," said Hassane El-Khoury, Cypress president and chief executive officer. "We remain laser-focused on driving revenue and earnings growth by investing in high-growth end-markets, expanding gross margins and broadening our customer base.

"It’s now been a year since we embarked upon our Cypress 3.0 strategy, focused on selling embedded solutions into markets that are growing faster than the overall semiconductor industry," El-Khoury continued. "Our team has continued its strong execution of this strategy. It has been well-received by our customers, partners and employees, and it has begun to generate consistent growth in our top and bottom lines. This is a very exciting time for Cypress."

Revenue and earnings for the quarter are given below, compared with those of the prior quarter:

(In thousands, except per-share data)
                                                                         
                                                                GAAP                                                                        NON-GAAP(1)
                                          -------------------------------------------------                     -------------------------------------------------------------------
                                              Q2 2017         Q1 2017                            Q2 2017                  Q1 2017
                                          --------------                     --------------                     --------------                     --------------------------------
Revenue                                    $ 593,776                          $ 531,874                          $ 593,776                          $ 531,874
Margin                                          39.8 %                             37.4 %                             40.9 %                             39.3 %
Pretax profit margin                            (3.1 )%                            (7.7 )%                            13.1 %                              9.2 %
Net income (loss)                          $ (22,904 )                        $ (45,782 )                        $  74,703                          $  45,887
Diluted EPS (loss)                         $   (0.07 )                        $   (0.14 )                        $    0.21                          $    0.13
                                                                                                                                                               

-- See "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" tables ("Non-GAAP Results" tables) included below.

BUSINESS REVIEW

+ At the Computex trade show in Taipei, Cypress announced additions to its USB-C and Internet of Things (IoT) wireless connectivity portfolios. Cypress’ new, highly integrated EZ-PD(TM) CCG3PA USB-C controller is optimized to streamline the design of power adapters, mobile chargers, car chargers and power banks. Cypress also demonstrated EZ-PD CCG5, the industry’s first two-port USB-C controller that supports designs with Intel’s Thunderbolt(TM) 3, earmarked to support the ramp of USB-C in notebook and desktop PCs, as well as docking stations. Cypress introduced the new CYW4373 combo solution that delivers advanced wireless coexistence combining 802.11ac high-performance Wi-Fi(R), Bluetooth(R) and Bluetooth Low Energy (BLE), and it incorporates a USB 2.0 hub. The solution is ideal for smart home products and network peripherals such as home appliances and printers, and it is supported in Cypress’ easy-to-use WICED(R) Studio IoT development platform.

+ GAAP and non-GAAP margins for the second quarter of 2017 were 39.8% and 40.9%, respectively, above the midpoint of guidance and in line with the Company’s margin-enhancing initiatives.

+ Cypress paid a cash dividend of $36.3 million, or $0.11 per share, to holders of record of the Company’s common stock as of the close of business on June 29, 2017. The dividend was equivalent to a 3.2% annualized yield as of June 30, 2017. This dividend was paid on July 20, 2017.

 
                                                                                     REVENUE SUMMARY
                                                                           (In thousands, except percentages)
                                                                                       (Unaudited)
 
                                                                                  Three Months Ended
                                   ------------------------------------------------------------------------------------------------------------------------------------------------------
                                               July 2, 2017                          April 2, 2017                          Sequential
                                                                                                                                                                    Change
                                   ---------------------------------   -------------------- ---------------------------------   -------------------- ----------------------------------
Business Unit                                                             
-------------                      ---------------------------------                        ---------------------------------                        ----------------------------------
MCD                                     $ 360,533                                                $ 317,901                                                       13                    %
MPD                                     $ 233,243                             $ 213,973                                     9                    %
                                   ------ ------- --------------------                      ------ ------- --------------------                      -------------- --------------------
Total                                   $ 593,776                             $ 531,874                                    12                    %
                                   ====== ======= ====================                      ====== ======= ====================                      ============== ====================
                                                                                                                                                      
Geographic
-------------
China & ROW                                    55                    %                                  55                    %                      --                    %
Americas                                       12                    %                                  11                    %                                   9                    %
Europe                                         12                    %                                  13                    %                                  (8                   )%
Japan                                          21                    %                                  21                    %                      --                    %
                                   -----------------------------------                      -----------------------------------                      -------------- --------------------
Total                                         100                    %                                 100                    %                      --                    %
                                   ===================================                      ===================================                      ============== ====================
                                                                                                                                                      
Channel
-------------
Distribution                                   74                    %                                  71                    %                                   4                    %
Direct                                         26                    %                                  29                    %                                 (10                   )%
                                   -----------------------------------                      -----------------------------------                      -------------- --------------------
Total                                         100                    %                                 100                    %                      --                    %
                                   ===================================                      ===================================                      ============== ====================
                                                                                                                                                                     

THIRD QUARTER 2017 FINANCIAL OUTLOOK

For the third quarter of 2017, Cypress estimates financial results as follows:

             
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
              GAAP                   Non-GAAP
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Revenue                                              $585 million to $615 million
-------------------- -------------------- -------------------- ------------------------------------------------------------------------------------
Margin %                     40.0% - 41.0%            41.0% - 42.0%
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Diluted EPS               $(0.05) to $(0.00)         $0.21 to $0.25
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                 

A reconciliation of GAAP forward-looking estimates to non-GAAP forward-looking estimates may be found in the tables at the end of this earnings report.

The timing and amount of certain material items, including restructuring charges, asset impairments, changes in value of deferred compensation assets and liabilities, impact of stock-based compensation from modification of equity awards, and the tax impact of non-GAAP adjustments, which are needed to estimate GAAP financial measures are either inherently unpredictable or outside the control of the Company, and may have a significant impact on the Company’s financial results. Accordingly, Cypress cannot provide a full quantitative reconciliation for such non-GAAP financial measures included as part of the third quarter 2017 financial outlook to the most directly comparable GAAP measure without unreasonable effort and additional adjustments may be reflected in our non-GAAP results for the third quarter of 2017. Cypress has qualitatively described below, under the section "Non-GAAP Financial Measures," the anticipated differences between the non-GAAP financial measures and the most directly comparable GAAP measures.

CONFERENCE CALL AND WEBCAST INFORMATION

Cypress will host its quarterly conference call on July 27, 2017 at 1:30 p.m. Pacific Daylight Time to discuss its second quarter 2017 results and provide an outlook for the third quarter of 2017.

All interested parties may dial 517-308-9119 and provide the passcode "Cypress" to listen to the call. The event will be broadcast over the Internet and may be accessed through Cypress’ website at www.cypress.com/investors. The archived presentation will be available for two weeks immediately following the event.

FOLLOW CYPRESS ONLINE

Join the Cypress Developer Community, read our Core & Code blog, follow us on Twitter, Facebook and LinkedIn, and watch Cypress videos on our Video Library or YouTube.

ABOUT CYPRESS

Cypress is a leader in advanced embedded system solutions for the world’s most innovative automotive, industrial, home automation and appliances, consumer electronics and medical products. Cypress’ programmable systems-on-chip, general-purpose microcontrollers, analog ICs, wireless and USB-based connectivity solutions and reliable, high-performance memories help engineers design differentiated products and get them to market first. Cypress is committed to providing customers with support and engineering resources that enable innovators and out-of-the-box thinkers to disrupt markets and create new product categories. To learn more, go to www.cypress.com.

NON-GAAP FINANCIAL MEASURES

To supplement its condensed consolidated unaudited financial results presented in accordance with GAAP, Cypress uses the non-GAAP financial measures listed below, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in more detail below.

-- Revenue;

-- Margin;

-- Margin %;

-- Research and development expenses;

-- Selling, general and administrative expenses;

-- Provision (benefit) for income taxes;

-- Pretax profit margin %;

-- Operating income (loss);

-- Net income (loss); and

-- Diluted earnings (loss) per share.

Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company’s operations which, when viewed in conjunction with Cypress’ GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company’s business and operations.

The Company presents non-GAAP financial measures because management uses these measures to analyze and assess the Company’s financial results and to manage the business.

There are limitations in using non-GAAP financial measures including those discussed below. Moreover, the Company’s non-GAAP measures may be calculated differently than the non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement and should be viewed in conjunction with GAAP financial measures.

As presented in the "Non-GAAP Results" tables in this press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related charges: Acquisition-related charges are not factored into management’s evaluation of Cypress’ long-term performance after the completion of acquisitions. However, a limitation of non-GAAP measures that exclude acquisition-related charges is that these charges may represent payments that reduce the cash available to the Company for other purposes. Acquisition-related expenses primarily include:

-- Amortization of purchased intangibles, including purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements;

-- Amortization of step-up in value of inventory recorded as part of purchase price accounting; and

-- One-time charges associated with the completion of an acquisition including items such as contract termination costs, severance and other acquisition-related restructuring costs; costs incurred in connection with integration activities; and legal and accounting costs.

Share-based compensation expense: Share-based compensation expense relates primarily to employee stock options, restricted stock units, performance stock units and the employee stock purchase plan. Share-based compensation expense is a non-cash expense that is affected by changes in market factors including the price of Cypress’ common shares, which are not within the control of management. In addition, the valuation of share-based compensation is subjective, and the expense recognized by Cypress may be significantly different than the expense recognized by other companies for similar equity awards, which makes it difficult to assess Cypress’ results compared to its competitors. Accordingly, management excludes this item from its internal operating forecasts and models. However, a limitation of non-GAAP measures that exclude share-based compensation expense is that they do not reflect the full costs of compensating employees.

Other adjustments: These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and ongoing operating performance of Cypress. Excluding these items, which can vary significantly from quarter to quarter, allows management to better compare Cypress’ period-over-period performance. However, limitations of non-GAAP measures that exclude these items include that these adjustments are often subjective and may not be comparable to similarly titled non-GAAP financial measures used by other companies. Other adjustments primarily include:

-- Revenue from an intellectual property license,

-- Changes in value of deferred compensation plan assets and liabilities,

-- Investment-related gains or losses, including equity method investments,

-- Restructuring and related costs,

-- Debt issuance costs, including imputed interest related to the equity component of convertible debt,

-- Asset impairments,

-- Tax effects of non-GAAP adjustments,

-- Certain other expenses and benefits, and

-- Diluted weighted average shares non-GAAP adjustment - for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits related to share-based compensation expense.

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," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "future," "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 our estimated non-GAAP revenue, non-GAAP margin, non-GAAP operating expenses, non-GAAP EPS, net interest expense, tax expense, capital expenditures and depreciation for the third quarter of fiscal 2017; the expected benefits of our acquisition of Broadcom’s wireless IoT business, including revenue growth and margin improvement; sources of revenue for the third quarter; the expected impact of our lean inventory initiative on fab utilization, inventory levels, cash flow, pricing and profitability; estimates of certain GAAP to non-GAAP reconciling items for the third quarter; the demand environment for semiconductors; the expected impact of our margin improvement plan; the impact of seasonality on revenue; cross-selling opportunities in the automotive business; our ability to meet our targeted range of inventory; the expected synergies related to our merger with Spansion; expected or anticipated uses of cash flow, including to pay dividends, repurchase shares of common stock, or pay down our existing indebtedness; and plans to reduce excess inventory. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this press release. Our actual results may differ materially due to a variety of risks and uncertainties, including, but not limited to: global economic and market conditions; business conditions and growth trends in the semiconductor market; our ability to compete effectively; the volatility in supply and demand conditions for our products, including but not limited to the impact of seasonality on supply and demand; our ability to develop, introduce and sell new products and technologies; potential problems relating to our manufacturing activities; the impact of acquisitions, including but not limited to the continuing integration of Spansion and the acquisition of Broadcom’s wireless IoT business; our ability to attract and retain key personnel; the unpredictability and expense of legal proceedings; and other risks and uncertainties described in the "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections 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 and WICED are registered trademarks and EZ-PD is a trademark of Cypress Semiconductor Corporation. All other trademarks are property of their owners.

 
                                                                                CYPRESS SEMICONDUCTOR CORPORATION
                                                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                         (In thousands)
                                                                                           (Unaudited)
 
                                                                              July 2, 2017                                    January 1, 2017
                                                                             ----------------------------------------------------                     ------------------------------------------
                                                                                                                                                       
ASSETS
Cash, cash equivalents and short-term investments                                               $   108,771                                                              $              121,144
Accounts receivable, net                                                                            336,547                                                                             333,037
Inventories                                                                                         311,774                                                                             287,776
Property, plant and equipment, net                                                                  289,458                                                                             297,266
Goodwill and other intangible assets, net                                                         2,244,900                                                                           2,344,033
Other assets                                                                     452,660                                       488,615
                                                                             -------------------- --------- --------------------                      -------------------- --------------------
Total assets                                                                                    $ 3,744,110                                           $            3,871,871
                                                                             ==================== ========= ====================                      ==================== ====================
LIABILITIES AND EQUITY
Accounts payable                                                                                $   214,222                                                              $              241,424
Income tax liabilities                                                                               55,110                                                                              49,552
Revenue reserves, deferred margin and other liabilities                                             460,938                                                                             493,164
Revolving credit facility and long-term debt                                   1,168,851                                     1,194,979
                                                                             -------------------- --------- --------------------                      -------------------- --------------------
Total liabilities                                                              1,899,121                                     1,979,119
                                                                             -------------------- --------- --------------------                      -------------------- --------------------
Total Cypress stockholders’ equity                                                                1,843,935                                                                           1,891,828
Non-controlling interest                                                           1,054                                           924
                                                                             -------------------- --------- --------------------                      -------------------- --------------------
Total equity                                                                   1,844,989                                     1,892,752
                                                                             -------------------- --------- --------------------                      -------------------- --------------------
Total liabilities and equity                                                                    $ 3,744,110                                           $            3,871,871
                                                                             ==================== ========= ====================                      ==================== ====================
                                                                                                                                                                            
 
                                                                                      CYPRESS SEMICONDUCTOR CORPORATION
                                                                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                               ON A GAAP BASIS
                                                                                    (In thousands, except per-share data)
                                                                                                 (Unaudited)
 
                                                                                                                   Three Months Ended
                                                                                   -------------------------------------------------------------------------------------------------------------------------
                                                                                                      July 2, 2017                                        April 2, 2017
                                                                                   --------------------------------------------------                     --------------------------------------------------
Revenues                                                                                              $ 593,776                                                              $ 531,874
Costs and expenses:
   Cost of revenues                                                                                     357,594                                                                332,814
   Research and development                                                                              89,736                                                                 88,481
   Selling, general and administrative                                                                   81,243                                                                 73,847
   Amortization of intangible assets                                                                     49,354                                                                 48,249
   Costs and settlement charges related to shareholder matter                                            12,043                                                                  2,267
   Restructuring costs                                                                   898                            2,572  
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------
Total costs and expenses                                                             590,868                          548,230  
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------
Operating income (loss)                                                                                   2,908                                                                (16,356 )
Interest and other expense, net                                                      (16,407 )                                           (19,359 )
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------
Loss before income taxes and non-controlling interest                                                   (13,499 )                                                              (35,715 )
Income tax provision                                                                                     (4,504 )                                                               (4,927 )
Equity in net loss of equity method investees                                         (4,835 )                                            (5,076 )
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------
Net loss                                                                                                (22,838 )                                                              (45,718 )
Net gain attributable to non-controlling interests                                       (66 )                                               (64 )
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------
Net loss attributable to Cypress                                                                      $ (22,904 )                                                            $ (45,782 )
                                                                                   ==================== ======= ====================                      ==================== ======= ====================
Net loss per share attributable to Cypress:
Basic                                                                                                 $   (0.07 )                                                            $   (0.14 )
Diluted                                                                                               $   (0.07 )                                                            $   (0.14 )
Cash dividend declared per share                                                                      $    0.11                                                              $    0.11
Shares used in net loss per share calculation:
Basic                                                                                                   329,860                                                                326,964
Diluted                                                                                                 329,860                                                                326,964
                                                                                                                                                                                        
 
                                                                                                                                                                                                                                     CYPRESS SEMICONDUCTOR CORPORATION
                                                                                                                                                                                                                                     RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
                                                                                                                                                                                                                                     MEASURES
                                                                                                                                                                                                                                     (In thousands, except per-share data)
                                                                                                                                                                                                                                     (Unaudited)
 
 
Table A: GAAP to Non-GAAP reconciling
items: Three Months Ended Q2 2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                                     Costs and                                                                                                                                                                       
                                                                                                                                                                                                                                                                                                                                 settlement
                                                                                                                                                                     Research                                                                      SG&A and                                                                      charges related                                                               Amortization of                                                               Interest and                                                                  Income tax
                                                                                       Cost of                                                                       and                                                                           Restructuring                                                                 to shareholder                                                                Intangible                                                                    other                                                                         (provision)
                                                                                       revenues                                                                      development                                                                   costs                                                                         matter                                                     assets                                                                        expense, net                                                                  benefit
                                                                                       ------------------------------------------------------                        ------------------------------------------------------                        ------------------------------------------------------                        ------------------------------------------------------   -------------------- ------------------------------------------------------                        ------------------------------------------------------                        ------------------------------------------------------
GAAP [i]                                                                                                  $        357,594                                                              $         89,736                                                              $         82,141                                                              $         12,043                                                              $         49,354                                                              $        (21,242 )                                                            $         (4,504 )
[1] Stock based compensation                                                                                         4,833                                                                        11,274                                                                        14,226                                                                --                                                                --                                                                --                                                                --
[2] Changes in value of deferred compensation plan                                                                     137                                                                           563                                                                           896                                                                --                                                                --                                                                        (1,584 )                                                              --
[3] Merger, integration, related costs and adjustments related to                                                    1,336                                                                           (96 )                                                                       1,193                                                                --                                                                --                                                                --                                                                --
assets held for sale
[4] Inventory step-up related to acquisition accounting                                                                167                                                                --                                                                --                                                                --                                                                --                                                                --                                                                --
[5] Losses from equity method investments                                                                   --                                                                --                                                                --                                                                --                                                                --                                                                         4,835                                                                --
[6] Settlement charges                                                                                      --                                                                --                                                                                                                                                       3,500                                                                --                                                                --                                                                --
[7] Imputed interest on convertible debt, equity component                                                  --                                                                --                                                                --                                                                --                                                                --                                                                         3,507                                                                --
amortization on convertible debt and others
[8] Amortization of debt issuance costs                                                                     --                                                                --                                                                --                                                                --                                                                --                                                                           920                                                                --
[9] Amortization of intangible assets                                                                                                                                                     --                                                                --                                                                --                                                                        49,354                                                                --                                                                --
[10] Restructuring costs                                                                                    --                                                                --                                                                           898                                                                --                                                                --                                                                --                                                                --
[11] Tax impact                                                                          --                          --                          --                          --       --                                     227                                   1,421  
                                                                                       -------------------- -------------- --------------------                      -------------------- -------------- --------------------                      -------------------- -------------- --------------------                      -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------                      -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Non - GAAP [ii]                                                                                           $        351,121                                           $         77,995                                           $         64,928                                           $          8,543                        $ --                                           $        (13,337 )                                                            $         (3,083 )
                                                                                       ==================== ============== ====================                      ==================== ============== ====================                      ==================== ============== ====================                      ==================== ============== ==================== ==================== ==================== ============== ====================                      ==================== ============== ====================                      ==================== ============== ====================
Impact of reconciling items [ii - i]                                                                      $         (6,473 )                                                            $        (11,741 )                                                            $        (17,213 )                                                            $         (3,500 )                                                            $        (49,354 )                                                            $          7,905                                                              $          1,421
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Table B: GAAP to Non-GAAP reconciling
items: Three Months Ended Q1 2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Cost of                                Research                               SG&A and                               Costs and settlement                          Amortization                                  Interest and                           Income tax
                                                                                       revenues                                                  and                                                       Restructuring                                             charges related to                                               of Intangible                                                    other                                                     (provision)
                                                                                                                                                 development                                               costs                                                     shareholder matter                                               assets                                                           expense, net                                              benefit
                                                                                       ----------------------------------                        ----------------------------------                        ----------------------------------   -------------------- -----------------------------------------   -------------------- -----------------------------------------   -------------------- ----------------------------------                        ----------------------------------
GAAP [i]                                                                                     $ 332,814                                                 $  88,481                                                 $  76,419                              $          2,267                              $         48,249                              $ (24,435 )                                               $  (4,927 )
[1] Stock based compensation                                                                     5,331                                                    11,771                                                     8,835                                                   --                                                   --                                            --                                            --
[2] Changes in value of deferred compensation plan                                                 166                                                       597                                                     1,008                                                   --                                                   --                                                    (1,558 )                                          --
[3] Merger, integration, related costs and adjustments related to                                1,350                                            --                                                    (1,479 )                                                 --                                                   --                                            --                                            --
assets held for sale
[4] Inventory step-up related to acquisition accounting                                          2,864                                            --                                            --                                                   --                                                   --                                            --                                            --
[5] Losses from equity method investments                                               --                                            --                                            --                                                   --                                                   --                                                     5,076                                            --
[6] Imputed interest on convertible debt, equity component                              --                                            --                                            --                                                   --                                                   --                                                     3,489                                            --
amortization on convertible debt and others
[7] Amortization of debt issuance costs                                                 --                                            --                                            --                                                   --                                                   --                                                       858                                            --
[8] Amortization of intangible assets                                                   --                                            --                                            --                                                   --                                                           48,249                                            --                                            --
[9] Restructuring costs                                                                 --                                                                                                               2,572                                                   --                                                   --                                            --                                            --
[10] Tax impact                                                                         --                         --                         --             --             --                 415                                  2,125  
                                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------ -------------------- ------------------------------------------- -------------------- ------------------------------------------- -------------------- ------------------------------------                      ------------------------------------
Non - GAAP [ii]                                                                              $ 323,103                              $  76,113                              $  65,483           $          2,267           $ --           $ (16,155 )                                               $  (2,802 )
                                                                                       ======= ======= ====================                      ======= ======= ====================                      ======= ======= ==================== ==================== ======= ============== ==================== ==================== ======= ============== ==================== ==================== ======= ======= ====================                      ======= ======= ====================
Impact of reconciling items [ii - i]                                                         $  (9,711 )                                               $ (12,368 )                                               $ (10,936 )                                               $ --                                                 $        (48,249 )                                               $   8,280                                                 $   2,125
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                 
Table C: Margin %
--------------------------------------
                                                                                                     Q2’17                                                                                                       Q1’17
                                                            ---------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------
                                                                          GAAP                                                Non-GAAP                                                GAAP                                                Non-GAAP
                                                            ---------------------------------                     ---------------------------------                     ---------------------------------                     ---------------------------------
Revenue [i]                                                   $ 593,776                                             $ 593,776                                             $ 531,874                                             $ 531,874
Cost of revenues (See Table A, B) [ii]                          357,594                            351,121                            332,814                            323,103  
                                                            --------------------------------                      --------------------------------                      --------------------------------                      --------------------------------
Margin [iii] [ii - i]                                         $ 236,182                          $ 242,655                          $ 199,060                          $ 208,771  
                                                            === ======= ====================                      === ======= ====================                      === ======= ====================                      === ======= ====================
Margin % [iii / i]                                                 39.8                    %                             40.9                    %                             37.4                    %                             39.3                    %
                                                                                                                                                                                                                                           
Table D: Operating income (loss)                                                                                     
----------------------------------------------------------------
                                                                                                            Q2’17                                                                     Q1’17
                                                                                      -------------------------------------------------                     ---------------------------------------------------------
GAAP operating income (loss) [i]                                                                         $  2,908                                                              $        (16,356 )
Impact of reconciling items on Cost of revenues (see Table A, B)                                            6,473                                                                         9,711
Impact of reconciling items on R&D (see Table A, B)                                                        11,741                                                                        12,368
Impact of reconciling items on SG&A (see Table A, B)                                                       17,213                                                                        10,936
Settlement charges (Table A)                                                                                3,500                                                                --
Impact of Amortization of Intangible Assets (see Table A, B)                            49,354                                  48,249  
                                                                                      -------------------- ------ --------------------                      -------------------- -------------- --------------------
Non-GAAP operating income [ii]                                                                           $ 91,189                                           $         64,908  
                                                                                      ==================== ====== ====================                      ==================== ============== ====================
Impact of reconciling items [ii - i]                                                                     $ 88,281                                                              $         81,264
                                                                                                                                                                                                 
Table E: Pre-tax profit                                                                                              
-------------------------------------------------------------
                                                                                                                               Q2’17                                                                  Q1’17
                                                                                                        --------------------------------------------------                     --------------------------------------------------
GAAP Pre-tax loss                                                                                                          $ (18,334 )                                                            $ (40,791 )
Impact of reconciling items on Operating income (see Table D)                                                                 88,281                                                                 81,264
Interest and other expense, net (see Table A, B)                                                            7,905                            8,280  
                                                                                                        -------------------- ------- --------------------                      -------------------- ------- --------------------
Non-GAAP Pre-tax income                                                                                                    $  77,852                                           $  48,753  
                                                                                                        ==================== ======= ====================                      ==================== ======= ====================
                                                                                                                                                                                                             
Table F: Net income (loss)                                                                                           
-------------------------------------------------------------
                                                                                                                               Q2’17                                                                  Q1’17
                                                                                                        --------------------------------------------------                     --------------------------------------------------
GAAP Net loss                                                                                                              $ (22,904 )                                                            $ (45,782 )
Impact of reconciling items on Operating income (see Table D)                                                                 88,281                                                                 81,264
Interest and other expense, net (see Table A, B)                                                                               7,905                                                                  8,280
Income tax benefit (provision) (see Table A, B)                                                             1,421                            2,125  
                                                                                                        -------------------- ------- --------------------                      -------------------- ------- --------------------
Non-GAAP Net income                                                                                                        $  74,703                                           $  45,887  
                                                                                                        ==================== ======= ====================                      ==================== ======= ====================
                                                                                                                                                                                                             
Table G: Pretax profit margin %                                                         
----------------------------------------
                                                                                    Q2’17                                                                         Q1’17
                                                              ------------------------------------------------                     ------------------------------------------------------------------
                                                                  GAAP                             Non-GAAP                            GAAP                                      Non-GAAP
                                                              -------------                     --------------                     -------------                     --------------------------------
Revenue [i]                                                   $ 593,776                          $ 593,776                         $ 531,874                          $ 531,874
Pre-tax (loss) profit (see Table E) [ii]                      $ (18,334 )                        $  77,852                         $ (40,791 )                        $  48,753
Pre-tax profit margin % [ii / i]                                   (3.1 )%                            13.1 %                            (7.7 )%                             9.2 %
                                                                                                                                                                                 
Table H: Weighted-average shares, diluted                                                         
---------------------------------------------------
                                                                                             Q2’17                                                                   Q1’17
                                                                         ---------------------------------------------                     ---------------------------------------------------------
                                                                              GAAP                           Non-GAAP                           GAAP              Non-GAAP
                                                                         --------------                      --------                      -------------- -------------------- --------------------
Weighted-average common shares outstanding, basic                               329,860                       329,860                             326,964                                   326,964
Effect of dilutive securities:
Stock options, unvested restricted stock and other                       --                        15,822                      --                                    14,852
Impact of convertible bond                                               --                        18,208                      --                                    17,304
                                                                         --------------                      --------                      --------------                      --------------------
Weighted-average common shares outstanding, diluted                             329,860                       363,890                             326,964                                   359,120
                                                                         ==============                      ========                      ==============                      ====================
                                                                                                                                                                                
Table I: Net income (loss) Per Share                                                                                                                                                                                       
-------------------------------------------------------------
                                                                                                                                             Q2’17                                                                                                                                     Q1’17
                                                                                   -------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------
                                                                                                          GAAP                                                                 Non-GAAP                                                                 GAAP                                                             Non-GAAP
                                                                                   --------------------------------------------------                     --------------------------------------------------                     --------------------------------------------------                     ------------------------------------------
Net income [i] (loss) (see Table F)                                                                   $ (22,904 )                                                            $  74,703                                                              $ (45,782 )                                                            $               45,887
Weighted-average common shares outstanding (see Table H) [ii]                        329,860                          363,890                          326,964                                       359,120
                                                                                   -------------------- ------- --------------------                      -------------------- ------- --------------------                      -------------------- ------- --------------------                      -------------------- --------------------
Non-GAAP earnings per share - Diluted [i/ii]                                                          $   (0.07 )                                                            $    0.21                                           $   (0.14 )                                                            $                 0.13
                                                                                   ==================== ======= ====================                      ==================== ======= ====================                      ==================== ======= ====================                      ==================== ====================
                                                                                                                                                                                                                                                                                                                              
 
                                                         CYPRESS SEMICONDUCTOR CORPORATION
                                                            SUPPLEMENTAL FINANCIAL DATA
                                                                  (In thousands)
                                                                    (Unaudited)
                                                                         
                                                                                                    Three Months Ended
                                                                         -------------------------------------------------------------------------
                                                                            July 2, 2017                                   April 2, 2017
                                                                         ------------------                     ----------------------------------
Selected Cash Flow Data (Preliminary):
---------------------------------------------------
Net cash provided by operating activities                                   $  32,447                              $  25,721
Net cash (used in) provided by investing activities                         $ (14,992 )                            $  21,650
Net cash used in financing activities                                       $ (30,184 )                            $ (46,043 )
Other Supplemental Data (Preliminary):
---------------------------------------------------
Capital expenditures                                                        $  15,577                              $  13,772
Depreciation                                                                $  16,045                              $  16,157
Payment of dividend                                                         $  36,217                              $  35,537
Dividend paid per share                                                     $    0.11                              $    0.11
                                                                                                                              
 
                                                                                                                     CYPRESS SEMICONDUCTOR CORPORATION
                                                                                                      RECONCILIATION OF GAAP FORWARDING LOOKING ESTIMATES TO NON-GAAP
                                                                                                                         FORWARD LOOKING ESTIMATES
                                                                                                                                                                                            
                                                                                                                                                                                                                                                      Forward looking
                                                Forward looking                                                                                                                                                                                       Non-GAAP
                                                GAAP estimate                                                                                                                                                                                         estimate
                                                (A)                                                                                                  Adjustments (B)                                                                                  (C)=(A)+(B)
                                                ------------------                      -----------------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                        Amortization of     Share-based      Restructuring                 Other
                                                                                        intangibles                            compensation                                                                         items
                                                                                                                               expense
Margin %                                             40.0% - 41.0%                       -- %                            0.9    %                              --    %                           0.4   %                             41.0% - 42.0%
Diluted earnings per share                      $(0.05) to $(0.00)                            $    0.14                           $ 0.08                                 $ --                             $ 0.02                                $0.21 to $0.25
                                                                                                                                                                                                                                                       

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SOURCE: Cypress Semiconductor Corporation

Cypress Semiconductor Corporation 
Thad Trent, 408-943-2925 
EVP Finance & Administration and CFO 
or 
Joseph L. McCarthy, 408-943-2902 
Director, Corporate Communications


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