CIRRUS LOGIC INC, 10-Q filed on 7/23/2014
Quarterly Report
Document and Entity Information
3 Months Ended
Jun. 28, 2014
Jul. 18, 2014
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Entity Registrant Name
CIRRUS LOGIC INC 
 
Entity Central Index Key
0000772406 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Document Period End Date
Jun. 28, 2014 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Current Fiscal Year End Date
--03-28 
 
Entity Common Stock, Shares Outstanding
 
62,133,785 
Consolidated Condensed Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 28, 2014
Mar. 29, 2014
Assets
 
 
Cash and cash equivalents
$ 268,544 
$ 31,850 
Marketable securities
75,198 
263,417 
Accounts receivable, net
77,219 
63,220 
Inventories
92,002 
69,743 
Deferred tax assets
19,921 
22,024 
Other current assets
40,469 
25,079 
Total current assets
573,353 
475,333 
Long-term marketable securities
39,952 
89,243 
Property and equipment, net
102,765 
103,650 
Goodwill and intangibles, net
27,708 
28,366 
Deferred tax assets
25,034 
25,065 
Other assets
1,007 
3,087 
Total assets
769,819 
724,744 
Liabilities and Stockholders' Equity
 
 
Accounts payable
75,695 
51,932 
Accrued salaries and benefits
11,598 
13,388 
Deferred income
7,398 
5,631 
Other accrued liabilities
14,080 
11,572 
Total current liabilities
108,771 
82,523 
Long-term liabilities
4,039 
4,863 
Stockholders' equity:
 
 
Capital stock
1,088,493 
1,078,878 
Accumulated deficit
(430,663)
(440,634)
Accumulated other comprehensive loss
(821)
(886)
Total stockholders' equity
657,009 
637,358 
Total liabilities and stockholders' equity
$ 769,819 
$ 724,744 
Consolidated Condensed Statements of Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Jun. 28, 2014
Jun. 29, 2013
Consolidated Statements of Comprehensive Income [Abstract]
 
 
Net sales
$ 152,565 
$ 155,125 
Cost of sales
77,190 
75,627 
Gross profit
75,375 
79,498 
Operating expenses:
 
 
Research and development
39,777 
28,530 
Selling, general and administrative
19,683 
19,198 
Patent infringement settlements, net
 
695 
Restructuring and other
 
(430)
Total operating expenses
59,460 
47,993 
Income from operations
15,915 
31,505 
Interest income
195 
158 
Interest expense
(662)
 
Other income (expense)
501 
(17)
Income before income taxes
15,949 
31,646 
Provision for income taxes
5,701 
11,004 
Net income
10,248 
20,642 
Change in unrealized gain (loss) on marketable securities
100 
(40)
Tax effect of unrealized (gain) loss on marketable securities
(35)
67 
Comprehensive income
$ 10,313 
$ 20,669 
Basic earnings per share
$ 0.17 
$ 0.33 
Diluted earnings per share
$ 0.16 
$ 0.31 
Basic weighted average common shares outstanding
62,032 
63,363 
Diluted weighted average common shares outstanding
64,688 
66,188 
Consolidated Condensed Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Jun. 28, 2014
Jun. 29, 2013
Cash flows from operating activities:
 
 
Net income
$ 10,248 
$ 20,642 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
4,097 
3,367 
Stock compensation expense
5,622 
5,862 
Deferred income taxes
2,134 
10,102 
Loss on retirement or write-off of long-lived assets
325 
 
Excess tax benefit related to the exercise of employee stock options
(3,119)
 
Other non-cash charges
2,125 
1,265 
Net change in operating assets and liabilities:
 
 
Accounts receivable, net
(13,999)
5,647 
Inventories
(22,259)
8,676 
Other assets
(698)
(2,054)
Accounts payable and other accrued liabilities
24,010 
(16,979)
Deferred income
1,767 
(537)
Income taxes payable
2,513 
721 
Net cash provided by operating activities
12,766 
36,712 
Cash flows from investing activities:
 
 
Proceeds from sale of available for sale marketable securities
246,865 
4,922 
Purchases of available for sale marketable securities
(9,290)
(39,698)
Purchases of property, equipment and software
(3,274)
(1,222)
Purchase of hedge
(11,095)
 
Investments in technology
(112)
(650)
Decrease (increase) in deposits and other assets
118 
(16)
Net cash provided by (used in) investing activities
223,212 
(36,664)
Cash flows from financing activities:
 
 
Payments for debt issuance costs
(2,978)
 
Issuance of common stock, net of shares withheld for taxes
852 
720 
Repurchase of stock to satisfy employee tax withholding obligations
(277)
 
Excess tax benefit related to the exercise of employee stock options
3,119 
 
Net cash provided by financing activities
716 
720 
Net increase in cash and cash equivalents
236,694 
768 
Cash and cash equivalents at beginning of period
31,850 
66,402 
Cash and cash equivalents at end of period
$ 268,544 
$ 67,170 
Basis of Presentation
Basis of Presentation

1.     Basis of Presentation

 

The consolidated condensed financial statements have been prepared by Cirrus Logic, Inc. (“Cirrus Logic,” “we,” “us,” “our,” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”).  The accompanying unaudited consolidated condensed financial statements do not include complete footnotes and financial presentations.  As a result, these financial statements should be read along with the audited consolidated financial statements and notes thereto for the year ended March 29, 2014, included in our Annual Report on Form 10-K filed with the Commission on May 28, 2014.  In our opinion, the financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented.  The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities.  Actual results could differ from those estimates and assumptions.  Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.  Additionally, prior period amounts have been adjusted to conform to current year presentation.      

Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

2.     Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606).  The purpose of the ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS).  “The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”  The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption not permitted by the FASB.  The Company is currently evaluating the impact of this ASU on its consolidated financial position, results of operations and cash flows.

 

Marketable Securities
Marketable Securities

3.     Marketable Securities

 

The Company’s investments that have original maturities greater than 90 days have been classified as available-for-sale securities in accordance with U.S. GAAP.  Marketable securities are categorized on the consolidated condensed balance sheet as short- and long-term marketable securities, as appropriate.  

 

The following table is a summary of available-for-sale securities at June 28, 2014 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of June 28, 2014

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

93,759 

 

$

 

$

(98)

 

$

93,670 

Commercial paper

 

16,472 

 

 

 

 

(5)

 

 

16,474 

Certificates of deposit

 

5,005 

 

 

 

 

 -

 

 

5,006 

Total securities

$

115,236 

 

$

17 

 

$

(103)

 

$

115,150 

 

The Company’s specifically identified gross unrealized losses of $103 thousand relates to 23 different securities with total amortized cost of approximately $86.6 million at June 28, 2014.  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at June 28, 2014.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of June 28, 2014. 

 

The following table is a summary of available-for-sale securities at March 29, 2014 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of March 29, 2014

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

246,878 

 

$

52 

 

$

(245)

 

$

246,685 

U.S. Treasury securities

 

56,986 

 

 

10 

 

 

(2)

 

 

56,994 

Agency discount notes

 

2,008 

 

 

 

 

 -

 

 

2,009 

Commercial paper

 

41,962 

 

 

10 

 

 

(2)

 

 

41,970 

Certificates of deposit

 

5,006 

 

 

 -

 

 

(4)

 

 

5,002 

Total securities

$

352,840 

 

$

73 

 

$

(253)

 

$

352,660 

 

The Company’s specifically identified gross unrealized losses of $253 thousand relates to 74 different securities with total amortized cost of approximately $207.8 million at March 29, 2014.  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at March 29, 2014.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of March 29, 2014.  

 

The cost and estimated fair value of available-for-sale securities by contractual maturities were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28, 2014

 

March 29, 2014

 

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

 

Cost

 

Fair Value

 

Cost

 

Fair Value

Within 1 year

 

$

75,261 

 

$

75,198 

 

$

263,418 

 

$

263,417 

After 1 year

 

 

39,975 

 

 

39,952 

 

 

89,422 

 

 

89,243 

Total

 

$

115,236 

 

$

115,150 

 

$

352,840 

 

$

352,660 

 

Fair Value of Financial Instruments
Fair Value of Financial Instruments

4.     Fair Value of Financial Instruments

 

The Company has determined that the only assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents, investment portfolio and foreign currency hedge assets.  The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

 

 

 

 

 

 

 

   

Level 1 - Quoted prices in active markets for identical assets or liabilities.

   

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

   

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

 

 

 

The Company’s investment portfolio assets consist of corporate debt securities, money market funds, U.S. Treasury securities, obligations of certain U.S. government-sponsored enterprises, commercial paper, and certificates of deposit and are reflected on our consolidated condensed balance sheets under the headings cash and cash equivalents, marketable securities, and long-term marketable securities.  The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party portfolio managers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.    

 

The fair value of the foreign currency hedge is included in “Other current assets” on the consolidated condensed balance sheet.  Realized gains (losses) related to the hedge are reported under the caption “Other income (expense)” in the consolidated condensed statements of comprehensive income.    

 

As of  June 28, 2014, the Company classified its investment portfolio and foreign currency hedge assets as Level 1 or Level 2 inputs.  The Company has no Level 3 assets.  There were no transfers between Level 1, Level 2, or Level 3 measurements for the three month period ending June 28, 2014.

 

The fair value of our financial assets at  June 28, 2014, was determined using the following inputs (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

100,662 

 

$

 -

 

$

 -

 

$

100,662 

Commercial paper

 

 -

 

 

149,987 

 

 

 -

 

 

149,987 

 

$

100,662 

 

$

149,987 

 

$

 -

 

$

250,649 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

93,670 

 

$

 -

 

$

93,670 

Commercial paper

 

 -

 

 

16,474 

 

 

 -

 

 

16,474 

Certificates of deposit

 

 -

 

 

5,006 

 

 

 -

 

 

5,006 

 

$

 -

 

$

115,150 

 

$

 -

 

$

115,150 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency hedge

$

 -

 

$

11,645 

 

$

 -

 

$

11,645 

 

 

 

The fair value of our financial assets at March 29, 2014, was determined using the following inputs (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

20,456 

 

$

 -

 

$

 -

 

$

20,456 

Commercial paper

 

 -

 

 

1,878 

 

 

 -

 

 

1,878 

 

$

20,456 

 

$

1,878 

 

$

 -

 

$

22,334 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

246,685 

 

$

 -

 

$

246,685 

U.S. Treasury securities

 

56,994 

 

 

 -

 

 

 -

 

 

56,994 

Agency discount notes

 

 -

 

 

2,009 

 

 

 -

 

 

2,009 

Commercial paper

 

 -

 

 

41,970 

 

 

 -

 

 

41,970 

Certificates of deposit

 

 -

 

 

5,002 

 

 

 -

 

 

5,002 

 

$

56,994 

 

$

295,666 

 

$

 -

 

$

352,660 

 

Accounts Receivable, net
Accounts Receivable, net

5.     Accounts Receivable, net

 

The following are the components of accounts receivable, net (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28,

 

March 29,

 

2014

 

2014

Gross accounts receivable

$

77,448 

 

$

63,449 

Allowance for doubtful accounts

 

(229)

 

 

(229)

Accounts receivable, net

$

77,219 

 

$

63,220 

 

Inventories
Inventories

 

6.     Inventories

 

Inventories are comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28,

 

March 29,

 

2014

 

2014

Work in process

$

53,849 

 

$

37,967 

Finished goods

 

38,153 

 

 

31,776 

 

$

92,002 

 

$

69,743 

 

Acquisition
Acquisition

7.    Acquisition

On April 29, 2014, Cirrus Logic announced that Cirrus Logic and the board of directors of Wolfson Microelectronics plc, a public limited company incorporated in Scotland (“Wolfson”), agreed on the terms of a recommended cash offer of £2.35 per share (the “Offer”) to be made by Cirrus Logic for the acquisition of the entire issued and to be issued share capital of Wolfson (the “Acquisition”). The Offer values the entire issued and to be issued share capital of Wolfson at approximately £291 million (approximately $488 million based on a U.S. dollar to pound sterling exchange rate of 1.68) (the “Offer Consideration”), and implies an enterprise value of Wolfson of approximately £278 million (approximately $467 million based on a U.S. dollar to pound sterling exchange rate of 1.68)The Acquisition will be effected by means of a court-sanctioned scheme of arrangement under the laws of the United Kingdom (the “Scheme”).  On June 23, 2014, Wolfson announced that Wolfson shareholders approved the Acquisition.  Completion of the Acquisition remains subject to the satisfaction or waiver of certain conditions, including the sanction of the Scheme by the Court of Session in Edinburgh, Scotland.  In connection with the Acquisition, we entered into a nine-month foreign currency hedging contract, which is expected to mitigate the risks of foreign currency fluctuation related to this transaction.  The Acquisition, if completed, is expected to strengthen Cirrus Logic’s ability to expand its customer base with highly differentiated, end-to-end audio solutions for portable audio applications.  The Acquisition will be financed by a combination of existing cash on Cirrus Logic’s balance sheet and $225 million in debt funding from Wells Fargo Bank, National Association, as discussed below.  The Acquisition is expected to close in the second quarter of fiscal year 2015.

 

Revolving Line of Credit
Revolving Line of Credit

8.     Revolving Line of Credit

 Cirrus Logic entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association as administrative agent and lender, on April 29, 2014, in connection with the Acquisition.  The Credit Agreement provides for a $225 million senior secured revolving credit facility (the “Credit Facility”).  The Credit Facility may be used for, among other things, payment of the Offer Consideration in connection with the Acquisition.  The Credit Facility matures on the earliest to occur of (a) January 23, 2015, (b) the date of termination of the Commitments as a result of a permanent reduction of all of the Commitments (as defined in the Credit Agreement) by Cirrus Logic or (c) the date of termination of the Commitments as a result of an event of default (such date, the “Maturity Date”).  Cirrus Logic must repay the outstanding principal amount of all borrowings, together with all accrued but unpaid interest thereon, on the Maturity Date.  The Credit Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”).  The Credit Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.

Borrowings under the Credit Facility may, at our election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR rate plus the applicable margin (“LIBOR Rate Loans”). The applicable margin ranges from 0% to .25% per annum for Base Rate Loans and 1.75% to 2.25% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below).  A commitment fee accrues at a rate per annum ranging from 0.30% to 0.40% (based on the Leverage Ratio) on the average daily unused portion of the Commitments.  Certain representations and warranties are required under the Credit Agreement, and the Company must be in compliance with specified financial covenants, including (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four consecutive quarters must not be greater than 1.75 to 1.00 (the “Leverage Ratio”) and (b) the sum of cash and cash equivalents of Cirrus Logic and its subsidiaries on a consolidated basis must not be less than $75 million.  At June 28, 2014, the Company was in compliance with all covenants under the Credit Facility.  There were no borrowings under this facility as of June 28, 2014.

The Company maintained an unsecured revolving credit facility (the “Expired Credit Facility”) until early fiscal year 2014.  The aggregate borrowing limit under the Expired Credit Facility was $100 million, with a $15 million letter of credit sublimit and was intended to provide the Company with short-term borrowings for working capital and other general corporate purposes.  The Company had no outstanding amounts under the facility prior to its expiration on April 19, 2013.

 

Income Taxes
Income Taxes

9.   Income Taxes

 

Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items and any applicable credits. Our income tax expense is primarily a non-cash charge due to the utilization of U.S. net operating losses.

 

The following table presents the provision for income taxes and the effective tax rates (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Income before income taxes

$

15,949 

 

$

31,646 

Provision for income taxes

$

5,701 

 

$

11,004 

Effective tax rate

 

35.7% 

 

 

34.8% 

 

Our income tax expense for the first quarter of fiscal year 2015 was slightly above the federal statutory rate primarily due to the effect of permanent differences that are nondeductible for tax purposes.  Our income tax expense for the first quarter of fiscal year 2014 was slightly below the federal statutory rate primarily due to the effect of the federal research and development credit which was extended through December 31, 2013 by the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013.

 

We had no unrecognized tax benefits as of June 28, 2014.  The Company does not believe that its unrecognized tax benefits will significantly increase or decrease during the next 12 months.    

 

We accrue interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.  As of June 28, 2014, the balance of accrued interest and penalties was zeroNo interest or penalties were incurred during the first three months of fiscal year 2015 or 2014.

 

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions.  Fiscal years 2011 through 2014 remain open to examination by the major taxing jurisdictions to which we are subject. 

Net Income Per Share
Net Income Per Share

10.   Net Income Per Share

 

Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period.  Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.  These potentially dilutive items consist primarily of outstanding stock options and restricted stock awards.

 

The following table details the calculation of basic and diluted earnings per share for the three months ended June 28, 2014 and June 29, 2013 (in thousands, except per share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Numerator:

 

 

 

 

 

Net income

$

10,248 

 

$

20,642 

Denominator:

 

 

 

 

 

Weighted average shares outstanding

 

62,032 

 

 

63,363 

Effect of dilutive securities

 

2,656 

 

 

2,825 

Weighted average diluted shares

 

64,688 

 

 

66,188 

Basic earnings per share

$

0.17 

 

$

0.33 

Diluted earnings per share

$

0.16 

 

$

0.31 

 

The weighted outstanding shares excluded from our diluted calculation for the three months ended June 28, 2014 and June 29, 2013 were 640 thousand and 1,068 thousand, respectively, as the shares were  anti-dilutive.

Legal Matters
Legal Matters

11.   Legal Matters

From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities.  We regularly evaluate the status of legal proceedings in which we are involved in order to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred and determine if accruals are appropriate.  We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. 

 

On June 4, 2012, U.S. Ethernet Innovations, LLC (the “Plaintiff”) filed suit against Cirrus Logic and two other defendants in the U.S. District Court, Eastern District of Texas.  The Plaintiff alleges that Cirrus Logic infringed four U.S. patents relating to Ethernet technology.  In its complaint, the Plaintiff indicated that it is seeking unspecified monetary damages, including up to treble damages for willful infringement.  We answered the complaint on June 29, 2012, denying the allegations of infringement and seeking a declaratory judgment that the patents in suit were invalid and not infringed.  The parties entered into a settlement agreement on May 30, 2013.  In exchange for a full release of claims as it relates to the asserted patent, we paid the Plaintiff $0.7 million.  This amount is recorded as a separate line item on the consolidated condensed statements of comprehensive income under the caption “Patent infringement settlements, net.”

 

For the case described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties.  For this case, however, management does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on our financial condition.  However, the ultimate resolutions of this proceeding and matters are inherently difficult to predict; as such, our operating results could be materially affected  by the unfavorable resolution of this proceeding or matters for any particular period, depending, in part, upon the operating results for such period.  We intend to vigorously defend ourselves against the allegations made in the legal case described below.

 

On June 17, 2014, Enterprise Systems Technologies S.a.r.l. (the “Plaintiff”) filed suit against Cirrus Logic, Inc. in the U.S. District Court, District of Delaware.  The Plaintiff alleges that Cirrus Logic indirectly infringes two U.S. patents through the manufacture and sale of digital signal processors, audio codecs, audio processors, and other components included in communications and consumer electronic devices such as smartphones and computers.  The Plaintiff is seeking unspecified monetary damages.

Stockholder's Equity
Stockholder's Equity

 

12.   Stockholders’ Equity

Common Stock

 

The Company issued a net 0.2 million and 0.1 million shares of common stock during the three month periods ending June 28, 2014,  and June 29, 2013, respectively, in connection with stock issuances pursuant to the Company’s 2006 Stock Incentive Plan.   

Segment Information
Segment Information

13.   Segment Information

 

We determine our operating segments in accordance with Financial Accounting Standards Board guidelines.  Our Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker under these guidelines

 

The Company operates and tracks its results in one reportable segment, but reports revenue performance in two product lines, which currently are audio and energy.   Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level.  Additionally, our product lines have similar characteristics and customers.  They share operations support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative functions of human resources, legal, finance and information technology.  Therefore, there is no complete, discrete financial information maintained for these product lines.

 

Revenues from our product lines are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Audio Products

$

141,161 

 

$

143,666 

Energy Products

 

11,404 

 

 

11,459 

 

$

152,565 

 

$

155,125 

 

Marketable Securities (Tables)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of June 28, 2014

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

93,759 

 

$

 

$

(98)

 

$

93,670 

Commercial paper

 

16,472 

 

 

 

 

(5)

 

 

16,474 

Certificates of deposit

 

5,005 

 

 

 

 

 -

 

 

5,006 

Total securities

$

115,236 

 

$

17 

 

$

(103)

 

$

115,150 

 

The Company’s specifically identified gross unrealized losses of $103 thousand relates to 23 different securities with total amortized cost of approximately $86.6 million at June 28, 2014.  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at June 28, 2014.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of June 28, 2014. 

 

The following table is a summary of available-for-sale securities at March 29, 2014 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of March 29, 2014

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

246,878 

 

$

52 

 

$

(245)

 

$

246,685 

U.S. Treasury securities

 

56,986 

 

 

10 

 

 

(2)

 

 

56,994 

Agency discount notes

 

2,008 

 

 

 

 

 -

 

 

2,009 

Commercial paper

 

41,962 

 

 

10 

 

 

(2)

 

 

41,970 

Certificates of deposit

 

5,006 

 

 

 -

 

 

(4)

 

 

5,002 

Total securities

$

352,840 

 

$

73 

 

$

(253)

 

$

352,660 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28, 2014

 

March 29, 2014

 

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

 

Cost

 

Fair Value

 

Cost

 

Fair Value

Within 1 year

 

$

75,261 

 

$

75,198 

 

$

263,418 

 

$

263,417 

After 1 year

 

 

39,975 

 

 

39,952 

 

 

89,422 

 

 

89,243 

Total

 

$

115,236 

 

$

115,150 

 

$

352,840 

 

$

352,660 

 

Fair Value of Financial Instruments (Tables)
Schedule of Fair Value of Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

100,662 

 

$

 -

 

$

 -

 

$

100,662 

Commercial paper

 

 -

 

 

149,987 

 

 

 -

 

 

149,987 

 

$

100,662 

 

$

149,987 

 

$

 -

 

$

250,649 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

93,670 

 

$

 -

 

$

93,670 

Commercial paper

 

 -

 

 

16,474 

 

 

 -

 

 

16,474 

Certificates of deposit

 

 -

 

 

5,006 

 

 

 -

 

 

5,006 

 

$

 -

 

$

115,150 

 

$

 -

 

$

115,150 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency hedge

$

 -

 

$

11,645 

 

$

 -

 

$

11,645 

 

 

 

The fair value of our financial assets at March 29, 2014, was determined using the following inputs (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

20,456 

 

$

 -

 

$

 -

 

$

20,456 

Commercial paper

 

 -

 

 

1,878 

 

 

 -

 

 

1,878 

 

$

20,456 

 

$

1,878 

 

$

 -

 

$

22,334 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

246,685 

 

$

 -

 

$

246,685 

U.S. Treasury securities

 

56,994 

 

 

 -

 

 

 -

 

 

56,994 

Agency discount notes

 

 -

 

 

2,009 

 

 

 -

 

 

2,009 

Commercial paper

 

 -

 

 

41,970 

 

 

 -

 

 

41,970 

Certificates of deposit

 

 -

 

 

5,002 

 

 

 -

 

 

5,002 

 

$

56,994 

 

$

295,666 

 

$

 -

 

$

352,660 

 

Accounts Receivable, net (Tables)
Components of Accounts Receivable, net

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28,

 

March 29,

 

2014

 

2014

Gross accounts receivable

$

77,448 

 

$

63,449 

Allowance for doubtful accounts

 

(229)

 

 

(229)

Accounts receivable, net

$

77,219 

 

$

63,220 

 

Inventories (Tables)
Schedule of Inventories

 

 

 

 

 

 

 

 

 

 

 

 

 

June 28,

 

March 29,

 

2014

 

2014

Work in process

$

53,849 

 

$

37,967 

Finished goods

 

38,153 

 

 

31,776 

 

$

92,002 

 

$

69,743 

 

Income Taxes (Tables)
Schedule of Provision for Income Taxes and Effective Tax Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Income before income taxes

$

15,949 

 

$

31,646 

Provision for income taxes

$

5,701 

 

$

11,004 

Effective tax rate

 

35.7% 

 

 

34.8% 

 

Net Income Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Numerator:

 

 

 

 

 

Net income

$

10,248 

 

$

20,642 

Denominator:

 

 

 

 

 

Weighted average shares outstanding

 

62,032 

 

 

63,363 

Effect of dilutive securities

 

2,656 

 

 

2,825 

Weighted average diluted shares

 

64,688 

 

 

66,188 

Basic earnings per share

$

0.17 

 

$

0.33 

Diluted earnings per share

$

0.16 

 

$

0.31 

 

Segment Information (Tables)
Schedule of Segment Revenue from Product Lines

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 28,

 

June 29,

 

2014

 

2013

Audio Products

$

141,161 

 

$

143,666 

Energy Products

 

11,404 

 

 

11,459 

 

$

152,565 

 

$

155,125 

 

Marketable Securities (Narrative) (Details) (USD $)
Jun. 28, 2014
security
Mar. 29, 2014
security
Marketable Securities [Abstract]
 
 
Gross Unrealized Losses
$ (103,000)
$ (253,000)
Amortized cost on available for sale securities held at gross unrealized loss
$ 86,600,000 
$ 207,800,000 
Number of securities
23 
74 
Marketable Securities (Schedule of Available-for-sale Securities) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 28, 2014
Mar. 29, 2014
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
$ 115,150 
$ 352,660 
Gross Unrealized Gains
17 
73 
Gross Unrealized Losses
(103)
(253)
Amortized Cost
115,236 
352,840 
Corporate Debt Securities - U.S. [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
93,670 
246,685 
Gross Unrealized Gains
52 
Gross Unrealized Losses
(98)
(245)
Amortized Cost
93,759 
246,878 
U.S. Treasury Securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
 
56,994 
Gross Unrealized Gains
 
10 
Gross Unrealized Losses
 
(2)
Amortized Cost
 
56,986 
Agency Discount Notes [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
 
2,009 
Gross Unrealized Gains
 
Amortized Cost
 
2,008 
Commercial Paper [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
16,474 
41,970 
Gross Unrealized Gains
10 
Gross Unrealized Losses
(5)
(2)
Amortized Cost
16,472 
41,962 
Certificates of Deposit [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Estimated Fair Value
5,006 
5,002 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
(4)
Amortized Cost
$ 5,005 
$ 5,006 
Marketable Securities (Schedule of Cost and Estimated Fair Value of Available-for-sale Securities by Contractual Maturity) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 28, 2014
Mar. 29, 2014
Marketable Securities [Abstract]
 
 
Within 1 year, Amortized Cost
$ 75,261 
$ 263,418 
After 1 year, Amortized Cost
39,975 
89,422 
Within 1 year, Estimated Fair Value
75,198 
263,417 
After 1 year, Estimated Fair Value
39,952 
89,243 
Amortized Cost
115,236 
352,840 
Estimated Fair Value
$ 115,150 
$ 352,660 
Fair Value of Financial Instruments (Schedule of Fair Value of Financial Assets) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 28, 2014
Mar. 29, 2014
Cash Equivalents [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
$ 250,649 
$ 22,334 
Cash Equivalents [Member] |
Quoted Prices In Active Markets For Identical Assets Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
100,662 
20,456 
Cash Equivalents [Member] |
Significant Other Observable Inputs Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
149,987 
1,878 
Cash Equivalents [Member] |
Money-Market Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
100,662 
20,456 
Cash Equivalents [Member] |
Money-Market Funds [Member] |
Quoted Prices In Active Markets For Identical Assets Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
100,662 
20,456 
Cash Equivalents [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
149,987 
1,878 
Cash Equivalents [Member] |
Commercial Paper [Member] |
Significant Other Observable Inputs Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
149,987 
1,878 
Available-for-sale Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
115,150 
352,660 
Available-for-sale Securities [Member] |
Quoted Prices In Active Markets For Identical Assets Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
 
56,994 
Available-for-sale Securities [Member] |
Significant Other Observable Inputs Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
115,150 
295,666 
Available-for-sale Securities [Member] |
Corporate Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
93,670 
246,685 
Available-for-sale Securities [Member] |
Corporate Debt Securities [Member] |
Significant Other Observable Inputs Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
93,670 
246,685 
Available-for-sale Securities [Member] |
U.S. Treasury Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
 
56,994 
Available-for-sale Securities [Member] |
U.S. Treasury Securities [Member] |
Quoted Prices In Active Markets For Identical Assets Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of financial assets
 
56,994