First quarter revenue declined 6.8% sequentially consistent with normal seasonality and with our guidance. Our gross margin was 36.9%, above guidance but below our long-term goal, primarily because we continue to run our wafer fabs at a rate lower than actual demand to burn off excess inventory, and because of inefficiencies in ex-Fujitsu manufacturing, which is being integrated now. We achieved $150.4 million in annualized synergies related to the Spansion integration—ahead of our accelerated plan to achieve $180 million by the end of this year.  Due to our strong performance on synergies, our operating expenses decreased to $124.9 million, the lowest level in six years for the combined company or the pro forma company, prior to the merger. This resulted in earnings per share of $0.07, a penny above the midpoint of our guidance, and will represent the bottom for 2016, both in revenue and EPS, barring some unforeseen event.

Design activity for our PSoC and MCU portfolios remained strong during the quarter. Key customer engagement was driven in part by the introduction of our first two families of 40-nm, ARM-based microcontrollers, one for automotive-grade applications, the other for high-volume consumer applications. Since the merger, Cypress has introduced 2,472 new products, which are automotive and commercial derivatives of 44 new chips.

We returned $219.1 million of capital to our shareholders in the first quarter, in line with our strategy and commitment, delivering a dividend payout of $36.6 million and repurchasing $182.5 million of common stock. By quarter's end, we had completed $239 million, or 53.1%, of the $450 million stock buy-back program we announced in the fourth quarter.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the first quarter was 36.9%, consistent with the lower fab utilization inherent in our lean inventory initiative, which will run through the third quarter of 2016. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 37.0%. Fab utilization was 52% in the first quarter.

+ Net inventory at the end of the first quarter was $226 million, down 7.3% from the fourth quarter and down 42.0% from the first quarter of 2015. This steep inventory reduction is the intended benefit of our lean inventory initiative.

+ Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock as of the close of business on March 31, 2016. This dividend was paid on April 21, 2016.

SECOND QUARTER 2016 FINANCIAL OUTLOOK

For the second quarter of 2016, Cypress estimates non-GAAP financial results as follows: net sales in the range of $440 million to $470 million, gross margin of 38%, and diluted EPS in the range of $0.10 to $0.14 vs. the street consensus of $0.11.^*

FIRST QUARTER 2016 HIGHLIGHTS