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): February 15, 2006
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
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
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 February 15, 2006, Cypress Semiconductor Corporation (the Company) completed the sale of the assets and intellectual property associated with certain products in the Companys network search engine product line to NetLogic Microsystems, Inc. (NetLogic), in accordance with the definitive agreement dated January 25, 2006, as amended on February 15, 2006.
NetLogic acquired the Ayama 10000, Ayama 20000, and NSE70000 Network Search Engine families as well as the Sahasra 50000 Algorithmic Search Engine family (the Disposed Products). The Company retained and continues to support the custom TCAM1 and TCAM2 products in its network search engine product family.
At the closing of the transaction, NetLogic issued to the Company approximately 1.5 million shares of NetLogics common stock, which were valued at approximately $52.7 million based on the closing price on February 15, 2006. In addition, within 60 days after the close, NetLogic will issue to the Company an additional 0.2 million shares of its common stock upon the Companys furnishing to NetLogic certain financial statements regarding the Disposed Products. If certain revenue milestones associated with the Disposed Products are achieved in a twelve-month period after the close of the transaction, NetLogic will pay the Company up to an additional $10.0 million in cash and up to an additional $10.0 million in NetLogics common stock.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information
Page | ||||
Unaudited pro forma condensed consolidated financial statements: |
||||
- Statement of Operations for the year ended January 2, 2005 | 3 | |||
- Statement of Operations for the nine months ended October 2, 2005 | 4 | |||
- Balance Sheet as of October 2, 2005 | 5 | |||
- Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements | 6 |
(d) Exhibits
10.1 | Agreement for the Purchase and Sale of Assets, dated January 25, 2006, and Amendment No. 1, dated February 15, 2006, by and between Cypress Semiconductor Corporation and NetLogic Microsystems, Inc. |
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CYPRESS SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share amounts)
For the Year Ended January 2, 2005 |
||||||||||||
As Reported |
Pro Forma Adjustments |
Pro Forma |
||||||||||
Revenues |
$ | 948,438 | $ | (6,210 | )a | $ | 942,228 | |||||
Costs and expenses: |
||||||||||||
Cost of revenues |
492,058 | (1,775 | )a | 490,283 | ||||||||
Research and development |
261,629 | (7,759 | )a | 253,870 | ||||||||
Selling, general and administrative |
141,799 | (1,780 | )a | 140,019 | ||||||||
Restructuring credits |
(164 | ) | | (164 | ) | |||||||
Amortization of intangible assets |
38,898 | (3,041 | )a | 35,857 | ||||||||
In-process research and development charge |
15,600 | | 15,600 | |||||||||
Total costs and expenses |
949,820 | (14,355 | ) | 935,465 | ||||||||
Operating income (loss) |
(1,382 | ) | 8,145 | 6,763 | ||||||||
Interest income |
11,115 | | 11,115 | |||||||||
Interest expense |
(11,354 | ) | | (11,354 | ) | |||||||
Other expense, net |
(256 | ) | | (256 | ) | |||||||
Income (loss) before income taxes |
(1,877 | ) | 8,145 | 6,268 | ||||||||
Benefit from income taxes |
26,575 | | 26,575 | |||||||||
Net income |
$ | 24,698 | $ | 8,145 | $ | 32,843 | ||||||
Net income per share: |
||||||||||||
Basic |
$ | 0.20 | | $ | 0.26 | |||||||
Diluted |
$ | 0.17 | | $ | 0.23 | |||||||
Shares used in per-share calculation: |
||||||||||||
Basic |
124,580 | | 124,580 | |||||||||
Diluted |
134,130 | | 134,130 |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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CYPRESS SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share amounts)
For the Nine Months Ended October 2, 2005 |
||||||||||||
As Reported |
Pro Forma Adjustments |
Pro Forma |
||||||||||
Revenues |
$ | 647,922 | $ | (6,617 | )a | $ | 641,305 | |||||
Costs and expenses: |
||||||||||||
Cost of revenues |
387,878 | (3,942 | )a | 383,936 | ||||||||
Research and development |
171,151 | (5,951 | )a | 165,200 | ||||||||
Selling, general and administrative |
115,245 | (1,539 | )a | 113,706 | ||||||||
Restructuring costs |
28,407 | | 28,407 | |||||||||
Amortization of intangible assets |
22,017 | (2,280 | )a | 19,737 | ||||||||
In-process research and development charge |
12,300 | | 12,300 | |||||||||
Total costs and expenses |
736,998 | (13,712 | ) | 723,286 | ||||||||
Operating loss |
(89,076 | ) | 7,095 | (81,981 | ) | |||||||
Interest income |
8,196 | | 8,196 | |||||||||
Interest expense |
(6,293 | ) | | (6,293 | ) | |||||||
Other income, net |
(3,124 | ) | | (3,124 | ) | |||||||
Loss before income taxes |
(90,297 | ) | 7,095 | (83,202 | ) | |||||||
Benefit from income taxes |
302 | | 302 | |||||||||
Net loss |
$ | (89,995 | ) | $ | 7,095 | $ | (82,900 | ) | ||||
Net loss per share: |
||||||||||||
Basic and diluted |
$ | (0.68 | ) | | $ | (0.63 | ) | |||||
Shares used in per-share calculation: |
||||||||||||
Basic and diluted |
132,254 | | 132,254 |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
4
CYPRESS SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except per-share amounts)
As of October 2, 2005 |
||||||||||||
As Reported |
Pro Forma Adjustments |
Pro Forma |
||||||||||
ASSETS | ||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 102,637 | $ | (1,295 | )b | $ | 101,342 | |||||
Short-term investments |
107,175 | 52,677 | c | 159,852 | ||||||||
Total cash, cash equivalents and short-term investments |
209,812 | 51,382 | 261,194 | |||||||||
Accounts receivable, net |
137,831 | | 137,831 | |||||||||
Inventories |
77,053 | (1,712 | )d | 75,341 | ||||||||
Other current assets |
97,723 | (280 | )d | 97,443 | ||||||||
Total current assets |
522,419 | 49,390 | 571,809 | |||||||||
Property, plant and equipment, net |
443,582 | (63 | )d | 443,519 | ||||||||
Goodwill |
403,308 | (44,048 | )e | 359,260 | ||||||||
Intangible assets, net |
51,536 | (2,178 | )d | 49,358 | ||||||||
Other assets |
132,399 | | 132,399 | |||||||||
Total assets |
$ | 1,553,244 | $ | 3,101 | $ | 1,556,345 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 68,360 | $ | | $ | 68,360 | ||||||
Accrued compensation and employee benefits |
36,432 | (386 | )b | 36,046 | ||||||||
Other current liabilities |
72,228 | (909 | )b | 73,483 | ||||||||
1,400 | f | |||||||||||
764 | g | |||||||||||
Deferred income on sales to distributors |
28,462 | | 28,462 | |||||||||
Income taxes payable |
1,488 | | 1,488 | |||||||||
Total current liabilities |
206,970 | 869 | 207,839 | |||||||||
Convertible subordinated notes |
599,997 | | 599,997 | |||||||||
Deferred income taxes and other tax liabilities |
72,470 | | 72,470 | |||||||||
Other long-term liabilities |
37,795 | | 37,795 | |||||||||
Total liabilities |
917,232 | 869 | 918,101 | |||||||||
Commitments and contingencies |
||||||||||||
Stockholders equity: |
||||||||||||
Preferred stock |
| | | |||||||||
Common stock |
1,424 | | 1,424 | |||||||||
Additional paid-in-capital |
1,161,004 | (42 | )h | 1,160,962 | ||||||||
Deferred stock compensation |
(594 | ) | 42 | h | (552 | ) | ||||||
Accumulated other comprehensive income |
741 | | 741 | |||||||||
Accumulated deficit |
(451,028 | ) | 2,232 | i | (448,796 | ) | ||||||
711,547 | 2,232 | 713,779 | ||||||||||
Less: shares of common stock held in treasury, at cost |
(75,535 | ) | | (75,535 | ) | |||||||
Total stockholders equity |
636,012 | 2,232 | 638,244 | |||||||||
Total liabilities and stockholders equity |
$ | 1,553,244 | $ | 3,101 | $ | 1,556,345 | ||||||
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 February 15, 2006, Cypress Semiconductor Corporation (the Company) completed the sale of the assets and intellectual property associated with certain products in the Companys network search engine product line to NetLogic Microsystems, Inc. (NetLogic). The products sold to NetLogic included the Ayama 10000, Ayama 20000, and NSE70000 Network Search Engine families as well as the Sahasra 50000 Algorithmic Search Engine family (the Disposed Products). The Company retained and continues to support the custom TCAM1 and TCAM2 products in its network search engine product family.
At the closing of the transaction, NetLogic issued to the Company approximately 1.5 million shares of NetLogics common stock, which were valued at approximately $52.7 million based on the closing price on February 15, 2006. Within 60 days after the close, NetLogic will issue to the Company an additional 0.2 million shares of its common stock upon the Companys furnishing to NetLogic certain financial statements regarding the Disposed Products.
In addition, if certain revenue milestones associated with the Disposed Products are achieved in the twelve-month period after the close of the transaction, NetLogic will pay the Company up to an additional $10.0 million in cash and up to an additional $10.0 million in NetLogics common stock.
NOTE 2 PRO FORMA INFORMATION
The accompanying unaudited pro forma condensed statements of operations are represented as if the transaction described in Note 1 had occurred on December 29, 2003 (the beginning of fiscal 2004). The unaudited pro forma condensed balance sheet is presented as if the transaction had occurred on October 2, 2005.
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 finalization of its financial statements for the first quarter ended April 2, 2006.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have actually occurred if the transaction had been consummated as of the dates indicated, nor are they necessarily indicative of future operating results or financial position.
The pro forma adjustments are as follows:
a. | Following the close of the transaction, the Company will no longer have revenues and related costs associated with the Disposed Products. These adjustments are recorded to eliminate the net 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. | To settle the liabilities relating to employees who have been either terminated or transferred to NetLogic. |
c. | To record the value of the NetLogic shares of common stock received at the close of the transaction. |
d. | To eliminate the assets sold to NetLogic. |
e. | To eliminate an estimate of the goodwill relating to the Disposed Products in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. |
f. | To accrue for the estimated transaction expenses associated with the sale. |
g. | To accrue for the severance payments to employees who have been either terminated or transferred to NetLogic. |
h. | To release the unamortized balance of the deferred stock-based compensation related to employees who have been either terminated or transferred to NetLogic. |
i. | To record the preliminary gain on sale of the Disposed Products: |
6
Proceeds received from NetLogic |
$ | 52,677 | ||
Assets sold to NetLogic |
(4,233 | ) | ||
Allocation of goodwill |
(44,048 | ) | ||
Accrued transaction expense |
(1,400 | ) | ||
Accrued severance payments |
(764 | ) | ||
Gain on sale of the Disposed Products |
$ | 2,232 | ||
The gain calculation is preliminary and subject to change upon finalization of the Companys financial statements for the first quarter ended April 2, 2006.
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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: February 21, 2006 | By: | /s/ Brad W. Buss | ||
Brad W. Buss | ||||
Executive Vice President, Chief Financial Officer |
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EXHIBIT INDEX
EXHIBIT NO. |
DESCRIPTION | |
10.1 | Agreement for the Purchase and Sale of Assets, dated January 25, 2006, and Amendment No. 1, dated February 15, 2006, by and between Cypress Semiconductor and NetLogic Microsystems, Inc. |
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