UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 14, 2007
CYPRESS SEMICONDUCTOR CORPORATION
(Exact name of Registrant as specified in its charter)
| Delaware | 1– 10079 | 94-2885898 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification Number) |
198 Champion Court
San Jose, California 95134
(Address of principal executive offices) (Zip Code)
(408) 943-2600
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 2.01 | – COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS |
On March 14, 2007, Cypress Semiconductor Corporation (the “Company”) completed the sale of the automotive imaging product line and certain assets associated with the consumer imaging product line of its Image Sensor business unit to Sensata Technologies, Inc. (“Sensata”) for approximately $11.0 million in cash, pursuant to an Asset Purchase Agreement dated February 27, 2007. Sensata designs and manufactures sensors and controls for the global automotive, appliance, aircraft, industrial and HVAC markets. The Company retained the custom imaging product line of its Image Sensor business unit. The Image Sensor business unit is a component of the Company’s Memory and Imaging Division.
In connection with the transaction, the Company will provide certain transition services to Sensata for a limited time following the completion of the sale.
The Company had no material relationship with Sensata prior to February 27, 2007.
| ITEM 9.01 | – FINANCIAL STATEMENTS AND EXHIBITS |
(b) Pro forma financial information
(d) Exhibits
| 2.1 | Asset Purchase Agreement, dated February 27, 2007, by and between Sensata Technologies, Inc. and Cypress Semiconductor Corporation. |
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CYPRESS SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share amounts)
| Year Ended December 31, 2006 | ||||||||||||||
| As Reported | Pro Forma Adjustments (a) |
Pro Forma | ||||||||||||
| Revenues |
$ | 1,091,553 | $ | (3,262 | ) | $ | 1,088,291 | |||||||
| Costs and expenses (credit): |
||||||||||||||
| Cost of revenues |
631,328 | (2,507 | ) | (b) | 628,821 | |||||||||
| Research and development |
244,104 | (7,886 | ) | (b) | 236,218 | |||||||||
| Selling, general and administrative |
187,552 | (1,955 | ) | (b) | 185,597 | |||||||||
| Amortization of acquisition-related intangible assets |
15,873 | (1,700 | ) | 14,173 | ||||||||||
| Restructuring charges |
489 | — | 489 | |||||||||||
| Gain on divestitures |
(14,730 | ) | — | (14,730 | ) | |||||||||
| Total operating costs |
1,064,616 | (14,048 | ) | 1,050,568 | ||||||||||
| Operating income |
26,937 | 10,786 | 37,723 | |||||||||||
| Interest and other income, net |
25,773 | — | 25,773 | |||||||||||
| Income before income tax and minority interest |
52,710 | 10,786 | 63,496 | |||||||||||
| Income tax provision |
(6,859 | ) | — | (6,859 | ) | |||||||||
| Minority interest, net of tax |
(6,369 | ) | — | (6,369 | ) | |||||||||
| Net income |
$ | 39,482 | $ | 10,786 | $ | 50,268 | ||||||||
| Basic net income per share |
$ | 0.28 | $ | 0.36 | ||||||||||
| Diluted net income per share |
$ | 0.25 | $ | 0.31 | ||||||||||
| Shares used in per-share calculation: |
||||||||||||||
| Basic |
140,809 | 140,809 | ||||||||||||
| Diluted |
179,271 | (20 | ) | (c) | 179,251 | |||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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CYPRESS SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
| As of December 31, 2006 | ||||||||||||||
| As Reported | Pro Forma Adjustments |
Pro Forma | ||||||||||||
| ASSETS |
||||||||||||||
| Current assets: |
||||||||||||||
| Cash and cash equivalents |
$ | 413,536 | $ | 11,000 | (d) | $ | 424,363 | |||||||
| (173 | ) | (e) | ||||||||||||
| Short-term investments |
166,638 | — | 166,638 | |||||||||||
| Total cash, cash equivalents and short-term investments |
580,174 | 10,827 | 591,001 | |||||||||||
| Accounts receivable, net |
163,196 | — | 163,196 | |||||||||||
| Inventories |
119,184 | (1,077 | ) | (f) | 118,107 | |||||||||
| Other current assets |
90,074 | (118 | ) | (f) | 89,956 | |||||||||
| Total current assets |
952,628 | 9,632 | 962,260 | |||||||||||
| Property, plant and equipment, net |
572,018 | (213 | ) | (f) | 571,805 | |||||||||
| Goodwill |
360,350 | (2,280 | ) | (g) | 358,070 | |||||||||
| Intangible assets, net |
35,495 | (4,848 | ) | (f) | 30,647 | |||||||||
| Other assets |
203,034 | (147 | ) | (f) | 202,887 | |||||||||
| Total assets |
$ | 2,123,525 | $ | 2,144 | $ | 2,125,669 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||
| Current liabilities: |
||||||||||||||
| Accounts payable |
$ | 92,206 | $ | — | $ | 92,206 | ||||||||
| Accrued compensation and employee benefits |
42,402 | (173 | ) | (e) | 42,229 | |||||||||
| Other current liabilities |
88,993 | 1,300 | (h) | 91,198 | ||||||||||
| 905 | (i) | |||||||||||||
| Deferred income |
44,917 | — | 44,917 | |||||||||||
| Income taxes payable |
7,321 | — | 7,321 | |||||||||||
| Total current liabilities |
275,839 | 2,032 | 277,871 | |||||||||||
| Convertible subordinated notes |
598,996 | — | 598,996 | |||||||||||
| Deferred income taxes and other tax liabilities |
40,471 | — | 40,471 | |||||||||||
| Other long-term liabilities |
39,188 | — | 39,188 | |||||||||||
| Total liabilities |
954,494 | 2,032 | 956,526 | |||||||||||
| Minority interest |
123,472 | — | 123,472 | |||||||||||
| Stockholders’ equity: |
||||||||||||||
| Preferred stock |
— | — | — | |||||||||||
| Common stock |
1,451 | — | 1,451 | |||||||||||
| Additional paid-in capital |
1,469,159 | — | 1,469,159 | |||||||||||
| Accumulated other comprehensive income |
(1,293 | ) | — | (1,293 | ) | |||||||||
| Accumulated deficit |
(421,220 | ) | 112 | (j) | (421,108 | ) | ||||||||
| 1,048,097 | 112 | 1,048,209 | ||||||||||||
| Less: shares of common stock held in treasury, at cost |
(2,538 | ) | — | (2,538 | ) | |||||||||
| Total stockholders’ equity |
1,045,559 | 112 | 1,045,671 | |||||||||||
| Total liabilities and stockholders’ equity |
$ | 2,123,525 | $ | 2,144 | $ | 2,125,669 | ||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF TRANSACTION
On March 14, 2007, Cypress Semiconductor Corporation (the “Company”) completed the sale of the automotive imaging product line and certain assets associated with the consumer imaging product line of its Image Sensor business unit (collectively, the “Disposed Products”) to Sensata Technologies, Inc. (“Sensata”) for approximately $11.0 million in cash, pursuant to an Asset Purchase Agreement dated February 27, 2007. Sensata designs and manufactures sensors and controls for the global automotive, appliance, aircraft, industrial and HVAC markets. The Company retained the custom imaging product line of its Image Sensor business unit. The Image Sensor business unit is a component of the Company’s Memory and Imaging Division.
In connection with the transaction, the Company will provide certain transition services to Sensata for a limited time following the completion of the sale.
The Disposed Products had approximately 30 employees located in Cambridge, Massachusetts (the “Employees”). The majority of the Employees were transferred to Sensata upon completion of the sale.
NOTE 2 – PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the sale of the Disposed Products on the Company’s historical results of operations and financial position. The accompanying unaudited pro forma condensed consolidated statement of operations is represented as if the transaction described in Note 1 had occurred on January 2, 2006 (the beginning of the Company’s fiscal 2006). The unaudited pro forma condensed consolidated balance sheet is presented as if the transaction had occurred on December 31, 2006.
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements are preliminary and subject to change upon completion of a more comprehensive analysis by the Company. The Company expects to complete this analysis prior to the finalization of its financial statements for the first quarter ended April 1, 2007.
The pro forma adjustments are as follows:
| a. | These adjustments are recorded to eliminate the revenues, cost of revenues and operating expenses which the Company believes (1) are directly attributable to the Disposed Products and (2) will not continue after the completion of the transaction. |
| b. | Pro forma adjustments include the following stock-based compensation expense related to the Employees recorded under Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”: |
| (In thousands) |
||||
| Cost of revenues |
$ | (13 | ) | |
| Research and development |
(414 | ) | ||
| Selling, general and administrative |
(146 | ) | ||
| Total stock-based compensation expense |
$ | (573 | ) | |
| c. | To exclude the impact of dilutive stock options held by the Employees. |
| d. | To record the cash consideration from Sensata. |
| e. | To settle liabilities, primarily including accrued payroll and vacation, related to the Employees. |
| f. | To eliminate the assets sold to Sensata. |
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| g. | To eliminate an estimate of the goodwill relating to the Disposed Products in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Amount was determined based on the relative fair values of the Disposed Products and the remaining Image Sensor business unit retained by the Company. |
| h. | To accrue for the severance and benefit payments paid to Employees. |
| i. | To accrue for the estimated transaction and other costs associated with the sale. |
| j. | To record the gain on sale of the Disposed Products as if the transaction had consummated on December 31, 2006: |
| (In thousands) |
||||
| Proceeds from sale |
$ | 11,000 | ||
| Assets sold to Sensata: |
||||
| Inventories |
(1,077 | ) | ||
| Intangible assets |
(4,848 | ) | ||
| Other |
(478 | ) | ||
| Allocation of goodwill |
(2,280 | ) | ||
| Accrued severance and benefits payments |
(1,300 | ) | ||
| Accrued transaction and other costs |
(905 | ) | ||
| Gain on sale of the Disposed Products |
$ | 112 | ||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CYPRESS SEMICONDUCTOR CORPORATION | ||||||
| Date: March 20, 2007 | By: | /s/ Brad W. Buss | ||||
| Brad W. Buss Executive Vice President, Finance and Administration and Chief Financial Officer | ||||||
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EXHIBIT INDEX
| EXHIBIT NO. |
DESCRIPTION | |
| 2.1 | Asset Purchase Agreement, dated February 27, 2007, by and between Sensata Technologies, Inc. and Cypress Semiconductor Corporation. |
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