Cypress Reports Third-Quarter 2012 Results

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Cypress Reports Third-Quarter 2012 Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Cypress Semiconductor Corp. (NAS: CY) today announced its third-quarter 2012 results, which included the following highlights and remarks from its president and CEO, T.J. Rodgers.

  • Revenue and earnings came in at high end of guidance
  • EPS grew sequentially: Non-GAAP EPS increased 11%; GAAP EPS increased 200%
  • Cash from operations totaled $58 million, a 34% sequential increase
  • Cypress repurchased 7.3 million shares, or 5% of outstanding shares
  • Dividend yield was 4.1%, and offered tax-deferred treatment

Fellow shareholders:


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

(In thousands, except per-share data)

  

NON-GAAP

  

GAAP

Q3 2012

  

Q2 2012

  

Q3 2011

Q3 2012

  

Q2 2012

  

Q3 2011

 

Revenue

$203,015

$201,300

$264,743

$203,015

$201,300

$264,743

           

Gross margin

57.1%

57.0%

57.9%

54.2%

53.0%

56.3%

 

Pretax margin

16.7%

15.3

%

26.7%

6.8%

2.6%

16.5%

 

Net income

$32,322

$30,298

$69,237

$14,332

$4,977

$39,981

 

Diluted EPS

$0.20

$0.18

$0.37

$0.09

$0.03

$0.22

 

We had a good quarter in tough times. Our gross and pretax margins held up, due to our continued efforts on expense control. But the world economy—and thus the semiconductor industry and our business—were below seasonal norms. The combination of historically low lead times and increasing global macroeconomic concerns, which have now impacted China, has driven our distributors and customers to lower bookings across all geographies and end markets. At the end of Q3, our book-to-bill was 0.81, down from 0.87 in Q2, with all divisions and major product lines below unity. As such, our revenue will be down next quarter, but our margins will again be reasonable. We continue to enjoy strong design win activity and market share gains, but each of those wins tends to bring in less revenue than during better times.

BUSINESS REVIEW

+ Non-GAAP1 consolidated gross margin for Q3 was 57.1%, up slightly from the previous quarter.

+ Net inventory at the end of Q3 was $89.3 million, down 2% from Q2. This was equivalent to 93 days, down three days from the prior quarter. We expect inventory to decrease slightly in Q4. Distributor weeks of inventory, which includes in-transit inventory, increased from 6.2 weeks to 7.0 weeks.

+ Cash and investments for Q3 totaled $219 million, an increase of $8.6 million from Q2. During Q3, we repurchased 7.3 million shares for $81.6 million, or an average of $11.20 per share. From September 2011, when we announced our $400 million stock-repurchase program, through September 30, 2012, we repurchased 19.9 million shares. We have approximately $120.7 million remaining under the authorized repurchase program.

+ Long-term debt under our revolving credit facility increased by $45 million to $198 million as we finished the preparations to fund the cash payments required under the Ramtron tender offer.

Our divisional revenue and gross margins are detailed below:

            

BUSINESS UNIT SUMMARY FINANCIALS (UNAUDITED)

 
 

THREE MONTHS ENDED

September 30, 2012

 

Core

Emerging

PSD1

MPD1

DCD1

Semi2

Tech.3

Consolidated

REVENUE ($M)

93.6

88.3

18.8

200.7

2.3

203.0

Percentage of total revenues

46.1

%

43.5

%

9.3

%

98.9

%

1.1

%

100.0

%

 

GROSS MARGIN (%)

On a non-GAAP4 basis

53.5

%

64.0

%

50.0

%

57.8

%

-2.7

%

57.1

%

On a GAAP basis

50.6

%

61.1

%

47.1

%

54.9

%

-5.5

%

54.2

%

 

THREE MONTHS ENDED

July 1, 2012

 

Core

Emerging

PSD1

MPD1

DCD1

Semi2

Tech.3

Consolidated

REVENUE ($M)

96.1

83.0

20.4

199.5

1.8

201.3

Percentage of total revenues

47.8

%

41.2

%

10.1

%

99.1

%

0.9

%

100.0

%

 

GROSS MARGIN (%)

On a non-GAAP4 basis

54.1

%

64.2

%

53.9

%

58.3

%

-77.7

%

57.0

%

On a GAAP basis

50.3

%

60.3

%

50.0

%

54.4

%

-98.6

%

53.0

%

 
 
1.PSD - Programmable Systems Division; DCD - Data Communications Division; MPD - Memory Products Division.
 
2."Core Semiconductor" - Includes PSD, DCD and MPD and excludes "Emerging Technology."
 
3."Emerging Technology" - Businesses outside our core semiconductor businesses outlined in footnote 2. Includes subsidiaries Cypress Envirosystems Inc., AgigA Tech Inc., Deca Technologies Inc., and our foundry-support business.
 
4.Refer to "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" and "Notes to Non-GAAP Financial Measures" following this press release for a detailed discussion of management's use of non-GAAP financial measures, as well as reconciliations of all non-GAAP financial measures presented in this press release to the most directly comparable GAAP financial measures.
 

THIRD-QUARTER 2012 HIGHLIGHTS

+ Cypress shipped its one-billionth capacitive touch-sensing unit. These shipments include TrueTouch® touchscreen controllers, CapSense® controllers for mechanical button and slider replacement, and trackpad units for cursor navigation in laptop computers. These units have shipped into a variety of end products, such as high-volume mobile handsets, tablets, automotive applications, consumer electronics, white goods, and industrial products. Cypress holds 47 touch-related patents and has 200 more in process.

+ Tesla Motors selected Cypress's TrueTouch automotive touchscreen solution for the infotainment system in the Model S, the world's first premium electrically powered sedan. The 17-inch touchscreen in the Model S is the largest in an automobile to date, and it is the first to integrate all functional controls.

+ Pantech, the number two cell phone provider in Korea, selected the Gen4 TrueTouch touchscreen controller for its flagship Vega R3 smartphone.

+ Cypress introduced the PSoC Creator™ 2.1 Integrated Design Environment (IDE) for its PSoC 3 and PSoC 5 programmable system-on-chip families. Creator 2.1 enables the concurrent hardware and software design of PSoC systems. The software release includes more than 100 new features and enhancements that improve system performance and ease of use.

+ Cypress's PSoC® MFi (Made for iPod | iPhone | iPad) digital audio solution earned design wins with TEAC Corp. and Griffin Technology. Cypress also introduced the CY8CKIT-033 PSoC 3 MFi Digital Audio Development Kit, which streamlines customer development of MFi music products. The PSoC MFi solution turns iPhones, iPads, and iPods into portable audio recorders capable of delivering studio-quality streaming audio.

+ Cypress continued to ramp its EZ-USB® FX3™ programmable USB 3.0 peripheral controller, announcing design wins with Himax Imaging, a leading CMOS image sensor manufacturer, and YUAN, a leading Taiwanese audio/video equipment manufacturer. The new USB 3.0 standard provides 5-Gbps bandwidth and eliminates the need for compression when transferring HD video to deliver sharp, bit-perfect HD images in small-form-factor HD video products.

+ Cypress added Tokyo Electron Devices (TED) as a distribution partner in Japan. TED, which pioneered the distribution of programmable devices in Japan, has established sales networks in the industrial, communications, and consumer markets. The agreement covers the entire Cypress product line, including PSoC devices, touch-sensing solutions, SRAMs, and USB controllers.

+ Cypress introduced PRoC™-UI (Programmable Radio-on-Chip—User Interface) which combines a low-power, 2.4-GHz RF radio link with Cypress's CapSense and TrueTouch technologies to enable new classes of Human Interface Devices (HIDs), such as touch mice, remote controls with trackpads, and wireless trackpads.

+ Cypress and Ramtron International Corp. (NAS: RMTR) entered into a definitive merger agreement under which Cypress will acquire all outstanding stock of Ramtron for $3.10 per share in cash. Ramtron's F-RAM products complement Cypress's nonvolatile static random access memory (nvSRAM) portfolio, opening up new markets and applications for Cypress. The merger offers Ramtron scale advantages and helps to streamline its business operations. On October 10, 2012, we completed the tender offer and took control of Ramtron.

+ Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock at the close of business on September 27, 2012. The dividend will be paid today, October 18, 2012. The dividend represented a 4.1% yield and provided tax treatment that is deferred until the shares are sold.

+ Cypress named Hassane El-Khoury executive vice president of its Programmable Systems Division, which includes Cypress's flagship PSoC products. El-Khoury had run Cypress's automotive business since 2007, spearheading the company's expansion into the Human-Machine Interface and Body Electronics segments of the automotive marketplace. He replaced Dinesh Ramanathan, who left Cypress to become the chief executive officer of a Silicon Valley startup.

ABOUT CYPRESS

Cypress delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC 1, PSoC 3, and PSoC 5 programmable system-on-chip families and derivatives, CapSense touch sensing and TrueTouch solutions for touchscreens. Cypress is the world leader in USB controllers, including the high-performance West Bridge® solution that enhances connectivity and performance in multimedia handsets, PCs and tablets. Cypress is also the world leader in SRAM memories. Cypress serves numerous markets, including consumer, mobile handsets, computation, data communications, automotive, industrial, and military. Cypress trades on the NASDAQ Global Select Market under the ticker symbol CY. Visit Cypress online at www.cypress.com.

FORWARD-LOOKING STATEMENTS

Statements herein that are not historical facts and that refer to Cypress or its subsidiaries' plans and expectations for Q4 of fiscal year 2012 and beyond are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as "believe," "expect," "future," "plan," "intend" and similar expressions to identify such forward-looking statements that include, but are not limited to, statements related to the semiconductor market, the strength and growth of our proprietary and programmable products, our expectations regarding our book-to-bill levels in the future, our Q412 revenue, margins, profit and cash flow; the results of our return on capital strategies, including our dividend and stock repurchase programs; our expectations regarding the demand for our products and how our products are expected to perform as well as our future design win activity and market share gains. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this release. Our actual results may differ materially due a variety of uncertainties and risk factors, including but not limited to our ability to close and successfully integrate Ramtron into our operations, the state of and future of the global economy, business conditions and growth trends in the semiconductor market, whether our products perform as expected, whether the demand for our proprietary and programmable products is fully realized, whether our product and design wins result in increased sales, our ability to manage our business to have strong earnings, restrained operating expenses and cash flow leverage, factory utilization, the strength or softness of the markets we serve, our ability to maintain and improve our gross margins and realize our bookings, the financial performance of our subsidiaries and Emerging Technology Division, and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo, TrueTouch, PSoC, EZ-USB, CapSense, and West Bridge are registered trademarks, and PSoC Creator, FX3, PRoC, and WirelessUSB are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.

 
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
      
September 30,January 1,
20122012
 
ASSETS
 
Cash, cash equivalents and short-term investments$219,445$166,330
Accounts receivable, net125,202103,524
Inventories (a)89,31092,304
Property, plant and equipment, net270,243284,979
Goodwill and other intangible assets, net36,97540,462
Other assets 137,849  122,491 
Total assets$879,024 $810,090 
 
LIABILITIES AND EQUITY
 
Accounts payable$54,907$52,868
Deferred margin on sales to distributors169,551150,568
Income tax liabilities44,51043,239
Other liabilities176,071165,573
Long-term revolving credit facility 198,000  - 
Total liabilities 643,039  412,248 
Total Cypress stockholders' equity242,283400,267
Noncontrolling interest (6,
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