CYPRESS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 28, 2014 December 29, 2013 ASSETS Cash, cash equivalents and short-term investments Accounts receivable, net Inventories, net (a) Property, plant and equipment, net Goodwill and other intangible assets, net Other assets Total assets $ $ 118,812 75,984 88,227 237,763 99,615 122,880 743,281 $ $ 104,462 81,084 100,612 258,585 106,523 113,707 764,973 LIABILITIES AND EQUITY Accounts payable Deferred margin on sales to distributors Income tax liabilities Other liabilities Long-term revolving credit facility Total liabilities Total Cypress stockholders' equity Noncontrolling interest Total equity Total liabilities and equity $ $ 42,678 95,187 21,494 155,057 227,000 541,416 208,320 (6,455) 201,865 743,281 $ $ 47,893 122,578 29,001 159,866 227,000 586,338 183,109 (4,474) 178,635 764,973 (a) Net inventories include $2.0 million and $3.2 million of capitalized inventories related to stock compensation expense, as of December 28, 2014 and December 29, 2013, respectively. CYPRESS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ON A GAAP BASIS (In thousands, except per-share data) (Unaudited) December 28, 2014 Revenues Cost of revenues Gross margin Operating expenses: Research and development Selling, general and administrative Acquisition costs Amortization of acquisition-related intangibles Restructuring charges Total operating expenses, net Operating income (loss) Interest and other income, net Income (loss) before income taxes Income tax benefit (provision) Income (loss), net of taxes Adjust for net loss attributable to noncontrolling interest Net Income (loss) attributable to Cypress Net Income (loss) per share attributable to Cypress: Basic Diluted Cash dividend per share Shares used in net income (loss) per share calculation: Basic Diluted $ $ $ $ $ Three Months Ended September 29, December 29, 2014 2013 184,097 90,395 93,702 39,677 37,746 7,253 1,305 72 86,053 7,649 (2,759) 4,890 (1,814) 3,076 426 3,502 0.02 0.02 0.11 161,864 169,148 $ $ $ $ $ 187,516 90,633 96,883 38,626 41,119 1,701 (238) 81,208 15,675 (1,890) 13,785 (1,231) 12,554 286 12,840 0.08 0.08 0.11 159,759 166,481 $ 167,776 91,328 76,448 Twelve Months Ended December 28, December 29, 2014 2013 $ $ 42,343 43,623 1,850 (469) 87,347 (10,899) (1,437) (12,336) (2,210) (14,546) 337 (14,209) $ $ $ $ (0.09) (0.09) 0.11 $ $ $ 151,580 151,580 725,497 361,820 363,677 164,560 163,488 7,253 6,683 (1,180) 340,804 22,873 (7,528) 15,345 1,173 16,518 1,418 17,936 0.11 0.11 0.44 159,031 169,122 $ $ 722,693 384,121 338,572 $ 190,906 182,671 7,833 15,357 396,767 (58,195) 348 (57,847) 7,761 (50,086) 1,845 (48,241) $ $ $ (0.31) (0.31) 0.44 148,558 148,558 CYPRESS SEMICONDUCTOR CORPORATION RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a) (In thousands, except per-share data) (Unaudited) December 28, 2014 GAAP gross margin Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Impairment of assets, restructuring and other Tax and tax-related items Non-GAAP gross margin $ $ GAAP research and development expenses Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Impairment of assets, restructuring and other Non-GAAP research and development expenses $ GAAP selling, general and administrative expenses Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Legal and other Impairment of assets, restructuring and other Non-GAAP selling, general and administrative expenses $ GAAP operating income (loss) Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Impairment of assets, restructuring and other Legal and other Non-GAAP operating income $ $ $ $ 93,702 2,759 22 (44) 96,439 GAAP net income (loss) attributable to Cypress Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Investment related losses (gains) Impairment of assets, restructuring and other Legal and other Tax related and other items Losses from equity method investment Non-GAAP net income attributable to Cypress $ GAAP net income (loss) per share attributable to Cypress - diluted Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Impairment of assets, restructuring and other Legal and other Tax related and other items Investment related losses (gains) Non-GAAP share count adjustment Losses from equity method investment Non-GAAP net income per share attributable to Cypress - diluted $ $ $ 50.9% 1.5% 0.0% 0.0% 0.0% 52.4% Three Months Ended September 28, % of 2014 Revenue $ $ 39,677 (2,553) 128 (252) 37,000 $ 46,376 (1,436) (8,602) 229 (1,330) (72) 35,165 $ 7,649 6,748 8,622 (402) 328 1,330 24,275 $ 4,890 6,748 8,622 (1,048) 1,330 327 (618) 1,495 1,403 23,149 GAAP pretax profit Stock-based compensation expense Acquisition costs and related amortization Changes in value of deferred compensation plan Legal and other Impairment of assets, restructuring and other Tax related and other items Investment related losses Losses from equity method investment Non-GAAP pretax profit % of Revenue $ $ $ 2.7% 3.7% 4.7% -0.6% 0.7% 0.2% -0.3% 0.8% 0.7% 12.6% 96,883 3,766 4 (303) 100,350 $ $ 41,119 (6,427) (24) 64 34,732 $ 15,675 12,282 1,701 41 (374) 29,325 $ 13,785 12,282 1,701 288 (374) (967) 1,386 28,101 3,503 6,748 8,622 (1,048) 1,495 327 1,330 (324) 1,403 22,056 $ 0.02 0.04 0.05 (0.01) 0.01 0.01 0.01 0.13 $ $ $ 38,626 (2,089) (13) (231) 36,293 $ $ 51.7% 2.0% 0.0% 0.0% -0.2% 0.0% 53.5% December 29, 2013 $ $ $ 7.4% 6.5% 0.9% 0.2% 0.0% -0.1% -0.5% 0.0% 0.7% 15.1% 76,448 3,088 5,562 136 269 85,503 % of Revenue 45.6% 1.8% 3.3% 0.1% 0.2% 51.0% December 29, 2014 $ $ 42,344 (7,356) (282) 1,368 36,074 $ 43,623 (10,432) (148) (607) 32,436 $ $ (10,899) 20,877 7,558 1,026 (1,324) 17,238 $ $ (793) (482) 147,098 $ $ $ $ 22,873 50,170 14,244 3,075 5,067 1,330 96,759 12,840 12,282 1,701 288 (374) (1,585) 1,386 26,538 $ (14,209) 20,877 7,558 (535) 930 (1,324) 1,063 632 14,992 $ 0.08 0.07 0.01 (0.01) 0.01 0.16 $ (0.09) 0.13 0.05 (0.01) (0.01) 0.01 0.01 0.09 $ (a) Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures. (b) Adjusted for impact of investment in equity method investee. See footnote disclosures related thereto in our 10Q filed on August 6, 2014. 164,560 (16,187) $ $ (12,336) 20,877 7,558 1,026 (1,324) (633) 632 15,800 $ 50.1% 1.8% 0.0% 0.1% 0.6% 52.6% 176,244 (20,774) (14,330) (1,855) (1,330) (97) 137,858 $ $ 363,677 13,209 (86) 427 4,489 381,716 Twelve Months Ended % of December 29, Revenue 2013 -7.4% 12.4% 4.5% 0.6% 0.0% -0.8% -0.4% 0.0% 0.4% 9.3% 15,345 50,170 14,244 61 1,330 3,737 (263) 1,495 5,068 91,187 $ $ $ $ 2.1% 6.9% 2.0% 0.0% 0.2% 0.5% 0.0% 0.2% 0.7% 12.6% 338,572 12,789 24,805 854 241 377,261 $ 182,671 (34,187) (1,168) (3,795) 143,521 (58,195) 73,020 34,056 6,393 17,152 72,426 0.11 0.30 0.08 0.02 0.01 (0.04) 0.01 0.03 0.52 $ (48,241) (b) 73,020 11,514 22 39,694 $ $ 46.8% 1.8% 3.4% 0.2% 0.0% 52.2% 190,906 (26,042) (252) (1,744) (1,104) 161,764 (57,847) 73,020 34,056 22 17,152 (2,267) 1,877 (b) 66,013 17,936 50,170 14,244 61 1,495 3,737 1,330 (6,750) 5,068 87,291 % of Revenue (14,665) 1,877 (b) 63,221 (0.32) 0.45 0.21 0.01 0.10 (0.08) (0.01) 0.02 0.01 (b) 0.39 -8.0% 10.1% 4.7% 0.0% 0.0% 2.4% -0.3% 0.0% 0.3% 9.2% CYPRESS SEMICONDUCTOR CORPORATION SUPPLEMENTAL FINANCIAL DATA (In thousands) (Unaudited) December 28, 2014 Selected Cash Flow Data (Preliminary): Net cash provided by operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Other Supplemental Data (Preliminary): Capital expenditures Depreciation Payment of dividend Dividend paid per share Dividend yield per share (a) Three Months Ended September 28, December 29, 2014 2013 Twelve Months Ended December 28, December 29, 2014 2013 $ $ $ 25,514 (13,736) (13,126) $ $ $ 8,322 (11,173) 6,501 $ $ $ 20,171 569 (11,276) $ $ $ 103,336 (42,156) (43,453) $ $ $ 66,696 1,139 (45,024) $ $ $ $ 3,769 10,013 17,728 0.11 3.0% $ $ $ $ 5,800 10,093 17,413 0.11 4.4% $ $ $ $ 8,750 9,436 16,578 0.11 4.3% $ $ $ $ 20,947 39,724 69,248 0.11 3.0% $ $ $ $ 36,627 39,572 64,819 0.44 4.3% (a) Dividend yield per share is calculated based on annualized dividend paid per share divided by the common stock share price at the end of the period. CYPRESS SEMICONDUCTOR CORPORATION CONSOLIDATED DILUTED EPS CALCULATION (In thousands, except per-share data) (Unaudited) Three Months Ended September 28, 2014 GAAP Non-GAAP December 29, 2014 GAAP Non-GAAP Net income (loss) attributable to Cypress $ Weighted-average common shares outstanding (basic) Effect of dilutive securities: Stock options, unvested restricted stock and other Weighted-average common shares outstanding for diluted computation Net income (loss) per share attributable to Cypress - basic Net income (loss) per share attributable to Cypress - diluted Average stock price for the period ended Common stock outstanding at period end (in thousands) $ $ 3,502 $ 22,056 $ 12,840 $ 26,538 Twelve Months Ended December 28, December 29, 2014 2013 GAAP Non-GAAP GAAP Non-GAAP December 29, 2013 GAAP Non-GAAP $ (14,209) $ 14,992 $ 17,936 $ 87,291 $ (48,241) $ 63,221 161,864 161,864 159,759 159,759 151,580 151,580 159,031 159,031 148,558 148,558 7,284 169,148 8,892 170,756 6,722 166,481 8,460 168,219 151,580 14,224 165,804 10,091 169,122 9,331 168,362 148,558 12,954 161,512 0.02 0.02 $ $ 0.14 0.13 $ $ 0.08 0.08 $ $ 0.17 0.16 $ $ (0.09) (0.09) $ $ 0.10 0.09 $ $ 0.11 0.11 $ $ 0.55 0.52 $ $ (0.32) (0.32) $ $ December 28, 2014 September 28, 2014 December 29, 2013 December 28, 2014 December 29, 2013 $10.77 163,013 $10.54 161,178 $9.45 153,214 $10.18 163,013 $10.59 153,214 0.43 0.39 NOTES TO NON-GAAP FINANCIAL MEASURES To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses the following non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures: • • • • • • Gross margin Research and development expenses Selling, general and administrative expenses Operating income (loss) Net income (loss) Diluted net income (loss) per share The non-GAAP measures set forth above exclude charges primarily related to stock-based compensation, which represented 72% of total adjustments for the year ended December 28, 2014, 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.