Other adjustments: These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and ongoing operating performance of Cypress. Excluding these items, which can vary significantly from quarter to quarter, allows management to better compare Cypress’ period-over-period performance. However, limitations of non-GAAP measures that exclude these items include that these adjustments are often subjective and may not be comparable to similarly titled non-GAAP financial measures used by other companies. Other adjustments primarily include:

• Revenue from an intellectual property license,
• Changes in value of deferred compensation plan assets and liabilities,
• Investment-related gains or losses, including equity method investments,
• Restructuring and related costs,
• Debt issuance costs, including imputed interest related to the equity component of convertible debt,
• Asset impairments,
• Tax effects of non-GAAP adjustments,
• Certain other expenses and benefits, and
• Diluted weighted average shares non-GAAP adjustment - for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits related to share-based compensation expense.

FORWARD-LOOKING STATEMENTS

Statements herein that are not historical facts and that refer to Cypress or its subsidiaries’ plans and expectations for the future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as “may,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “future,” “continue” or other wording indicating future results or expectations to identify such forward-looking statements that include, but are not limited to: statements related to our estimated non-GAAP revenue, non-GAAP margin, non-GAAP operating expenses, non-GAAP EPS, net interest expense, tax expense, capital expenditures and depreciation for the third quarter of fiscal 2017; the expected benefits of our acquisition of Broadcom’s wireless IoT business, including revenue growth and margin improvement; sources of revenue for the third quarter; the expected impact of our lean inventory initiative on fab utilization, inventory levels, cash flow, pricing and profitability; estimates of certain GAAP to non-GAAP reconciling items for the third quarter; the demand environment for semiconductors; the expected impact of our margin improvement plan; the impact of seasonality on revenue; cross-selling opportunities in the automotive business; our ability to meet our targeted range of inventory; the expected synergies related to our merger with Spansion; expected or anticipated uses of cash flow, including to pay dividends, repurchase shares of common stock, or pay down our existing indebtedness; and plans to reduce excess inventory. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this press release. Our actual results may differ materially due to a variety of risks and uncertainties, including, but not limited to: global economic and market conditions; business conditions and growth trends in the semiconductor market; our ability to compete effectively; the volatility in supply and demand conditions for our products, including but not limited to the impact of seasonality on supply and demand; our ability to develop, introduce and sell new products and technologies; potential problems relating to our manufacturing activities; the impact of acquisitions, including but not limited to the continuing integration of Spansion and the acquisition of Broadcom’s wireless IoT business; our ability to attract and retain key personnel; the unpredictability and expense of legal proceedings; and other risks and uncertainties described in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.

Cypress, the Cypress logo and WICED are registered trademarks and EZ-PD is a trademark of Cypress Semiconductor Corporation. All other trademarks are property of their owners.

CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		July 2, 2017				January 1, 2017
ASSETS
Cash, cash equivalents and short-term investments		$	108,771			$	121,144
Accounts receivable, net			336,547				333,037
Inventories			311,774				287,776
Property, plant and equipment, net			289,458				297,266
Goodwill and other intangible assets, net			2,244,900				2,344,033
Other assets			452,660				488,615
Total assets		$	3,744,110			$	3,871,871
LIABILITIES AND EQUITY
Accounts payable		$	214,222			$	241,424
Income tax liabilities			55,110				49,552
Revenue reserves, deferred margin and other liabilities			460,938				493,164
Revolving credit facility and long-term debt			1,168,851				1,194,979
Total liabilities			1,899,121				1,979,119
Total Cypress stockholders' equity			1,843,935				1,891,828
Non-controlling interest			1,054				924
Total equity			1,844,989				1,892,752
Total liabilities and equity		$	3,744,110			$	3,871,871

CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ON A GAAP BASIS
(In thousands, except per-share data)
(Unaudited)
		Three Months Ended
		July 2, 2017				April 2, 2017
Revenues		$	593,776			$	531,874
Costs and expenses:
Cost of revenues			357,594				332,814
Research and development			89,736				88,481
Selling, general and administrative			81,243				73,847
Amortization of intangible assets			49,354				48,249
Costs and settlement charges related to shareholder matter			12,043				2,267
Restructuring costs			898				2,572
Total costs and expenses			590,868				548,230
Operating income (loss)			2,908				(16,356	)
Interest and other expense, net			(16,407	)			(19,359	)
Loss before income taxes and non-controlling interest			(13,499	)			(35,715	)
Income tax provision			(4,504	)			(4,927	)
Equity in net loss of equity method investees			(4,835	)			(5,076	)
Net loss			(22,838	)			(45,718	)
Net gain attributable to non-controlling interests			(66	)			(64	)
Net loss attributable to Cypress		$	(22,904	)		$	(45,782	)
Net loss per share attributable to Cypress:
Basic		$	(0.07	)		$	(0.14	)
Diluted		$	(0.07	)		$	(0.14	)
Cash dividend declared per share		$	0.11			$	0.11
Shares used in net loss per share calculation:
Basic			329,860				326,964
Diluted			329,860				326,964

CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per-share data)
(Unaudited)
Table A: GAAP to Non-GAAP reconciling items: Three Months Ended Q2 2017
														Costs and
														settlement
						Research				SG&A and				charges related				Amortization of				Interest and				Income tax
		Cost of				and				Restructuring				to shareholder				Intangible				other				(provision)
		revenues				development				costs				matter				assets				expense, net				benefit
GAAP [i]		$	357,594			$	89,736			$	82,141			$	12,043			$	49,354			$	(21,242	)		$	(4,504	)
[1] Stock based compensation			4,833				11,274				14,226				—				—				—				—
[2] Changes in value of deferred compensation plan			137				563				896				—				—				(1,584	)			—
[3] Merger, integration, related costs and adjustments related to assets held for sale			1,336				(96	)			1,193				—				—				—				—
[4] Inventory step-up related to acquisition accounting			167				—				—				—				—				—				—
[5] Losses from equity method investments			—				—				—				—				—				4,835				—
[6] Settlement charges			—				—								3,500				—				—				—
[7] Imputed interest on convertible debt, equity component amortization on convertible debt and others			—				—				—				—				—				3,507				—
[8] Amortization of debt issuance costs			—				—				—				—				—				920				—
[9] Amortization of intangible assets							—				—				—				49,354				—				—
[10] Restructuring costs			—				—				898				—				—				—				—
[11] Tax impact			—				—				—				—				—				227				1,421
Non - GAAP [ii]		$	351,121			$	77,995			$	64,928			$	8,543			$	—			$	(13,337	)		$	(3,083	)
Impact of reconciling items [ii - i]		$	(6,473	)		$	(11,741	)		$	(17,213	)		$	(3,500	)		$	(49,354	)		$	7,905			$	1,421

Table B: GAAP to Non-GAAP reconciling items: Three Months Ended Q1 2017
		Cost of revenues				Research and development				SG&A and Restructuring costs				Costs and settlement charges related to shareholder matter				Amortization of Intangible assets				Interest and other expense, net				Income tax (provision) benefit
GAAP [i]		$	332,814			$	88,481			$	76,419			$	2,267			$	48,249			$	(24,435	)		$	(4,927	)
[1] Stock based compensation		5,331				11,771				8,835				—				—				—				—
[2] Changes in value of deferred compensation plan		166				597				1,008				—				—				(1,558		)		—
[3] Merger, integration, related costs and adjustments related to assets held for sale		1,350				—				(1,479		)		—				—				—				—
[4] Inventory step-up related to acquisition accounting		2,864				—				—				—				—				—				—
[5] Losses from equity method investments		—				—				—				—				—				5,076				—
[6] Imputed interest on convertible debt, equity component amortization on convertible debt and others		—				—				—				—				—				3,489				—
[7] Amortization of debt issuance costs		—				—				—				—				—				858				—
[8] Amortization of intangible assets		—				—				—				—				48,249				—				—
[9] Restructuring costs		—								2,572				—				—				—				—
[10] Tax impact		—				—				—				—				—				415				2,125
Non - GAAP [ii]		$	323,103			$	76,113			$	65,483			$	2,267			$	—			$	(16,155	)		$	(2,802	)
Impact of reconciling items [ii - i]		$	(9,711	)		$	(12,368	)		$	(10,936	)		$	—			$	(48,249	)		$	8,280			$	2,125

Table C: Margin %
		Q2'17								Q1'17
		GAAP				Non-GAAP				GAAP				Non-GAAP
Revenue [i]		$	593,776			$	593,776			$	531,874			$	531,874
Cost of revenues (See Table A, B) [ii]		357,594				351,121				332,814				323,103
Margin [iii] [ii - i]		$	236,182			$	242,655			$	199,060			$	208,771
Margin % [iii / i]		39.8		%		40.9		%		37.4		%		39.3		%

Table D: Operating income (loss)
		Q2'17				Q1'17
GAAP operating income (loss) [i]		$	2,908			$	(16,356	)
Impact of reconciling items on Cost of revenues (see Table A, B)			6,473				9,711
Impact of reconciling items on R&D (see Table A, B)			11,741				12,368
Impact of reconciling items on SG&A (see Table A, B)			17,213				10,936
Settlement charges (Table A)			3,500				—
Impact of Amortization of Intangible Assets (see Table A, B)			49,354				48,249
Non-GAAP operating income [ii]		$	91,189			$	64,908
Impact of reconciling items [ii - i]		$	88,281			$	81,264

Table E: Pre-tax profit
			Q2'17				Q1'17
GAAP Pre-tax loss			$	(18,334	)		$	(40,791	)
Impact of reconciling items on Operating income (see Table D)				88,281				81,264
Interest and other expense, net (see Table A, B)				7,905				8,280
Non-GAAP Pre-tax income			$	77,852			$	48,753

Table F: Net income (loss)
			Q2'17				Q1'17
GAAP Net loss			$	(22,904	)		$	(45,782	)
Impact of reconciling items on Operating income (see Table D)				88,281				81,264
Interest and other expense, net (see Table A, B)				7,905				8,280
Income tax benefit (provision) (see Table A, B)				1,421				2,125
Non-GAAP Net income			$	74,703			$	45,887

Table G: Pretax profit margin %
		Q2'17								Q1'17
		GAAP				Non-GAAP				GAAP				Non-GAAP
Revenue [i]		$	593,776			$	593,776			$	531,874			$	531,874
Pre-tax (loss) profit (see Table E) [ii]		$	(18,334	)		$	77,852			$	(40,791	)		$	48,753
Pre-tax profit margin % [ii / i]			(3.1	)%			13.1	%			(7.7	)%			9.2	%

Table H: Weighted-average shares, diluted
		Q2'17				Q1'17
		GAAP		Non-GAAP		GAAP		Non-GAAP
Weighted-average common shares outstanding, basic		329,860		329,860		326,964		326,964
Effect of dilutive securities:
Stock options, unvested restricted stock and other		—		15,822		—		14,852
Impact of convertible bond		—		18,208		—		17,304
Weighted-average common shares outstanding, diluted		329,860		363,890		326,964		359,120

Table I: Net income (loss) Per Share
		Q2'17								Q1'17
		GAAP				Non-GAAP				GAAP				Non-GAAP
Net income [i] (loss) (see Table F)		$	(22,904	)		$	74,703			$	(45,782	)		$	45,887
Weighted-average common shares outstanding (see Table H) [ii]			329,860				363,890				326,964				359,120
Non-GAAP earnings per share - Diluted [i/ii]		$	(0.07	)		$	0.21			$	(0.14	)		$	0.13

CYPRESS SEMICONDUCTOR CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(In thousands)
(Unaudited)
		Three Months Ended
		July 2, 2017				April 2, 2017
Selected Cash Flow Data (Preliminary):
Net cash provided by operating activities		$	32,447			$	25,721
Net cash (used in) provided by investing activities		$	(14,992	)		$	21,650
Net cash used in financing activities		$	(30,184	)		$	(46,043	)
Other Supplemental Data (Preliminary):
Capital expenditures		$	15,577			$	13,772
Depreciation		$	16,045			$	16,157
Payment of dividend		$	36,217			$	35,537
Dividend paid per share		$	0.11			$	0.11

CYPRESS SEMICONDUCTOR CORPORATION
RECONCILIATION OF GAAP FORWARDING LOOKING ESTIMATES TO NON-GAAP FORWARD LOOKING ESTIMATES
																				Forward looking
		Forward looking																		Non-GAAP
		GAAP estimate																		estimate
		(A)		Adjustments (B)																(C)=(A)+(B)
				Amortization of intangibles				Share-based compensation expense				Restructuring				Other items
Margin %		40.0% - 41.0%		—		%		0.9		%		—		%		0.4		%		41.0% - 42.0%
Diluted earnings per share		$(0.05) to $(0.00)		$	0.14			$	0.08			$	—			$	0.02			$0.21 to $0.25

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