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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
MARCH 9, 1998
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Date of Report (Date of earliest event reported)
CYPRESS SEMICONDUCTOR CORPORATION
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Exact name of Registrant as specified in its charter
DELAWARE 1-10079 94-2885898
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(State or other Jurisdiction Commission File Number I.R.S. Employer
or incorporated) identification No.)
3901 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134-1599
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(Address of principal executive offices
(408) 943-2600
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Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS
The information set forth in the Registrant's Press Release dated
March 9, 1998 is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description
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99.1 Text of Press Release dated March 9, 1998
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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 16, 1998 By: /S/ Emmanuel Hernandez
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Emmanuel Hernandez
Chief Financial Officer, Vice
President, Finance and
Administration, and Secretary
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Contact:
Manny Hernandez
VP, Finance & Administration
(408) 943-2754
FOR IMMEDIATE RELEASE
Press contact:
Joseph L. McCarthy
Director, Corporate Communications
(408) 943-2902
CYPRESS ANNOUNCES RESTRUCTURING PLAN
AND 4%-9% DECLINE IN Q1 SALES
SAN JOSE, CALIFORNIA, March 9, 1998...Cypress Semiconductor Corporation
announced today that it will restructure to take the benefit of the improved
efficiency of its new 0.35- and 0.25-micron technologies.
Cypress CEO T.J. Rodgers said, "Cypress is making three major moves to increase
efficiency. First, we are shutting down our six-inch, 0.6-micron wafer
fabrication plant, Fab 3, in Bloomington, Minnesota, and moving all its
production to Fab 4, our state-of-the-art, eight-inch, 0.35-micron fab, also in
Minnesota. Second, we are downsizing our six-inch Fab 2 facility in Round Rock,
Texas, to eliminate SRAM production and also to reduce manufacturing costs
significantly on high-margin non-SRAM products. Third, we are shutting down our
test plant in Thailand and consolidating a majority of our test manufacturing
operations into our new, fully automated Manila plant. These three changes will
significantly reduce our costs and improve our efficiency.
Rodgers continued, "This restructuring will involve the elimination of
approximately 100 manufacturing positions in Texas Fab 2, the writedown of
six-inch wafer manufacturing equipment, and the relocation of a major test area.
The total charge to earnings for severance costs, inventory adjustments, and
asset writedowns is $85.5 million."
Minnesota Fab Restructuring. Cypress has been running Fab 3 at full capacity
while ramping Fab 4 with newly purchased equipment and the company will now
use much of the equipment from Fab 3-after upgrading it from six-inch to
eight-inch-to build out Fab 4, saving money on new capital purchases.
Similarly, instead of hiring additional employees, the company transfer
current Fab 3 employees to Fab 4 where they can produce eight-inch rather
than six-inch wafers. There are 1,224 one-megabit SRAM chips on a
eight-inch, 0.35-micron wafer, but only 294 of those chips on a six-inch,
0.6-micron wafer-a dramatic efficiency improvement. There will be no staff
reduction in the Minnesota plant. The equipment in Fab 3 that cannot be
upgraded to eight-inch will be sold or scrapped. The Fab 3 clean room will be
refurbished later to become a 0.25-micron expansion of Fab 4. The charges
associated with this strategy are approximately $28.3 million.
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Texas Fab Restructuring. Cypress manufactures wafers in Fab 2 for its Datacom,
Programmable Logic, and Computer Products divisions, which are all profitable.
However, these three divisions use only 60% of the fab's capacity. In Q4 1997,
Cypress ramped Fab 2 to 100% capacity with static RAM memory chips to meet a
surge in SRAM demand. Given the improved efficiency and increased output from
our revamped Minnesota plant by midyear, we will stop making SRAMs in Texas and
realize several cost-reduction benefits: 1) a reduction in payroll, 2) the
elimination of fab equipment purchases for advanced SRAM technologies, 3) the
transfer of some new six-inch equipment (upgraded to eight-inch) to build out
Minnesota Fab 4, saving external purchases, and 4) the disposal of excess
equipment, eliminating its depreciation. The Texas fab will focus on making
high-margin, non-SRAM products with the lowest 0.6-micron wafer cost possible.
Cypress's 0.25-micron technology, which is currently working in both San Jose
R&D and Minnesota Fab 4, will be the next advanced technology to transfer to
Texas. We will install that technology in Fab 5, an eight-inch facility which
will be built in the second half of 1999 and staffed with employees from Fab 2
as well as new hires. The severance, inventory, and asset writedown charges
associated with this Texas fab strategy are $23.2 million.
Test plant consolidation. Cypress currently tests its products primarily at
three Asian sites: a semi-automated plant in Thailand, a low-cost plant in
Indonesia, and our newest, fully automated plant in Manila, the Philippines. The
company will consolidate the Thai test manufacturing operation into the Manila
plant, replacing approximately 570 subcontract workers in Thailand with only
about 250 new Cypress employees in our more-efficient Manila plant. This move
will provide significant cost savings, better logistics, and reduced cycle times
for better customer responsiveness. The charges associated with these actions
are $5.8 million.
San Jose R&D Fab 1 upgrade to eight-inch capability. Cypress's primary wafer
production centers are in Minnesota Fab 4 and, in the future, Texas Fab 5, both
eight-inch facilities. Consequently, Cypress has chosen to upgrade its R&D Wafer
Fab 1 in San Jose from six-inch to eight-inch to maintain compatibility. The
charges, which include facilities writedown and some six-inch equipment
disposal, are approximately $6.2 million.
Current quarter estimates. In Q4 1997, Cypress's revenue and EPS were $134
million and $0.00 (operating, -$0.04), respectively. In the current quarter, the
company expects revenue to drop by 4%-9% from last quarter and EPS to be a loss
in the $0.06-$0.08 range, prior to the restructuring and other charges.
Rodgers concluded, "Cypress's revenue peaked in the third and fourth quarter of
1995 in the $170 million range. Since then, an industry slump has held our
revenue below that number, despite soaring unit demand. We are now shipping at
record rates in excess of a quarter-billion units per year. In the past two
years, our manufacturing efficiencies have improved dramatically, allowing us to
close down our least efficient plants and run our company 100% at the
state-of-the-art. We have taken these tough steps-particularly the restructuring
of our Texas wafer fabrication plant-because we wanted to move to the next level
and to return to solid profitability, both for our shareholders, and for our
employees, whose compensation is partly equity-based."
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Cypress Semiconductor Corporation is an international supplier of
high-performance integrated circuits with worldwide headquarters in San Jose,
California. The company provides a broad range of products for leading computer,
networking and telecommunications companies worldwide. The company's product
line includes static RAM, PROM, and specialty memories; programmable logic
devices (PLDs); data communications products; and timing devices and USB
microcontrollers. Cypress shares are listed on the New York Stock Exchange under
the symbol CY. The company has a site on the worldwide web at
http://www.cypress.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding the restructuring and other
events and the estimated Q198 sales and earnings are "forward-looking
statements" involving risks and uncertainties, including, but not limited to,
market-acceptance risks, the effect of economic conditions and shifts in supply
and demand, the impact of competitive products and pricing, product development,
commercialization and technological difficulties, and capacity and supply
constraints. Please refer to the MD&A (Management Discussion and Analysis of
Financial Condition and Results of Operations) for a discussion of such risks in
the most recent Cypress annual report on Form 10-K, the quarterly report on Form
10-Q and the convertible debenture offering memorandum.
