CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)

(In thousands, except per-share data)

(Unaudited)

Three Months Ended 

% of

March 29,

% of

June 29,

2015

Revenue

2015

Revenue

2014

Revenue

GAAP Revenues 

$          484,778

$       209,137

$          183,601

 Revenue from intellectual property license (b) 

-

-

Non-GAAP Revenues

$       209,137

$          183,601

GAAP gross margin (loss)

$          138,073

28.5%

$        (35,652)

-17.0%

$            95,370

51.9%

 Stock-based compensation expense 

3,802

0.8%

4,219

2.0%

4,433

2.4%

 Ramtron acquisition costs and related amortization 

-

0.0%

-

0.0%

(109)

-0.1%

 Changes in value of deferred compensation plan  

46

0.0%

189

0.1%

248

0.1%

 Impairment of assets, restructuring and other charges 

325

0.1%

120

0.1%

187

0.1%

 Effect of Non-GAAP revenue from intellectual property license 

6,250

0.7%

-

0.0%

-

0.0%

 Spansion merger costs and related amortization 

52,800

10.9%

28,464

13.6%

(925)

-0.5%

Non-GAAP gross margin (loss)

$          201,296

41.0%

$          (2,660)

-1.2%

$            99,204

53.9%

GAAP research and development expenses

$            81,227

$         50,522

$            40,927

 Stock-based compensation expense 

(7,007)

(5,750)

(4,362)

 Changes in value of deferred compensation plan  

(153)

(617)

(483)

 Impairment of assets, restructuring and other charges 

(96)

(62)

-

 Spansion merger costs and related amortization 

(827)

(130)

-

Non-GAAP research and development expenses

$            73,144

$         43,963

$            36,082

GAAP selling, general and administrative expenses

$            86,011

$         76,450

$            42,059

 Stock-based compensation expense 

(16,859)

(8,827)

(5,523)

 Ramtron acquisition costs and related amortization 

-

-

(385)

 Changes in value of deferred compensation plan 

(276)

(1,110)

(1,097)

 Impairment of assets, restructuring and other charges 

(36)

-

(877)

 Legal and other 

-

(654)

-

 Spansion merger costs and related amortization 

(1,634)

(25,580)

-

Non-GAAP selling, general and administrative expenses

$            67,206

$         40,279

$            34,177

GAAP operating income (loss)

$          (80,962)

$      (245,736)

$            10,584

 Stock-based compensation expense 

27,667

18,797

14,318

 Ramtron acquisition costs and related amortization 

1,305

1,305

2,077

 Changes in value of deferred compensation plan  

474

1,916

1,828

 Impairment of assets, restructuring and other charges 

-

182

138

 Legal and other 

458

654

-

 Effect of Non-GAAP revenue from intellectual property license 

6,250

-

-

 Spansion merger costs and related amortization 

105,754

135,982

-

Non-GAAP operating income (loss)

$            60,946

$        (86,900)

$            28,945

GAAP pretax profit (loss)

(87,756)

-18.1%

$      (251,444)

-120.2%

$              9,456

5.2%

 Stock-based compensation expense 

27,667

5.7%

18,797

9.0%

14,318

7.8%

 Ramtron acquisition costs and related amortization 

1,305

0.3%

1,305

0.6%

2,076

1.1%

 Changes in value of deferred compensation plan  

(54)

0.0%

1,241

0.6%

75

0.0%

 Impairment of assets, restructuring and other charges 

-

0.0%

455

0.2%

1,080

0.6%

 Legal and other 

458

0.1%

654

0.3%

-

0.0%

 Effect of Non-GAAP revenue from intellectual property license 

6,250

1.1%

-

0.0%

-

0.0%

 Investment related losses (gains) 

(1,670)

-0.3%

2,728

1.3%

1,367

0.7%

 Tax related, interest income, interest expense and other expenses 

2,586

0.5%

869

0.4%

(925)

-0.5%

 Losses from equity method investment 

1,459

0.3%

1,559

0.7%

-

0.0%

 Spansion merger costs and related amortization 

105,754

21.8%

135,982

65.0%

-

-

Non-GAAP pretax profit (loss)

$            55,999

11.4%

$        (87,854)

-42.1%

$            27,447

14.9%

GAAP net income (loss) attributable to Cypress

$          (90,051)

$      (246,798)

$              9,527

 Stock-based compensation expense 

27,667

18,797

14,318

 Ramtron acquisition costs and related amortization 

1,305

1,305

2,075

 Changes in value of deferred compensation plan  

(53)

1,241

75

 Impairment of assets, restructuring and other charges 

-

455

1,080

 Legal and other 

458

654

-

 Effect of Non-GAAP revenue from intellectual property license 

6,250

-

-

 Investment related losses (gains) 

(1,670)

2,728

1,367

 Tax related, interest income, interest expense and other expenses 

1,751

(3,829)

(1,719)

 Losses from equity method investment 

1,459

1,559

-

 Spansion merger costs and related amortization 

105,754

135,982

-

Non-GAAP net income (loss) attributable to Cypress

$            52,870

$        (87,906)

$            26,723

GAAP net income (loss) per share attributable to Cypress - diluted

$              (0.27)

$            (1.26)

$                0.06

 Stock-based compensation expense 

0.08

0.10

0.09

 Ramtron acquisition costs and related amortization 

-

0.01

0.01

 Changes in value of deferred compensation plan  

-

0.01

-

 Impairment of assets, restructuring and other charges 

-

-

0.01

 Effect of Non-GAAP revenue from intellectual property license 

0.02

 Investment related losses (gains) 

(0.01)

0.01

0.01

 Tax related, interest income, interest expense and other expenses 

0.01

(0.02)

(0.01)

 Losses from equity method investment 

-

0.01

-

 Non-GAAP share count adjustment 

-

-

(0.01)

 Spansion merger costs and related amortization 

0.32

0.69

-

Non-GAAP net income (loss) per share attributable to Cypress - diluted

$            (0.45)

$                0.16

(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) Non-GAAP revenue includes $6.25 million of Samsung intellectual property licensing revenue, not included in GAAP revenue as a result of the effects of purchase accounting for the Spansion merger.