CIRRUS LOGIC INC, 10-Q filed on 1/28/2014
Quarterly Report
Document And Entity Information
9 Months Ended
Dec. 28, 2013
Jan. 24, 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 
 
Document Period End Date
Dec. 28, 2013 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--03-29 
 
Entity Common Stock, Shares Outstanding
 
62,318,377 
Consolidated Condensed Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 28, 2013
Mar. 30, 2013
Assets
 
 
Cash and cash equivalents
$ 74,690 
$ 66,402 
Marketable securities
215,792 
105,235 
Accounts receivable, net
109,535 
69,289 
Inventories
69,985 
119,300 
Deferred tax assets
33,155 
64,937 
Other current assets
25,662 
19,371 
Total current assets
528,819 
444,534 
Long-term marketable securities
37,115 
64,910 
Property and equipment, net
102,542 
100,623 
Goodwill and intangibles, net
29,762 
10,677 
Deferred tax assets
17,354 
16,671 
Other assets
6,848 
13,932 
Total assets
722,440 
651,347 
Liabilities and Stockholders' Equity
 
 
Accounts payable
60,493 
60,827 
Accrued salaries and benefits
13,937 
16,592 
Deferred income
4,998 
4,956 
Other accrued liabilities
12,881 
10,704 
Total current liabilities
92,309 
93,079 
Long-term liabilities
5,108 
10,094 
Stockholders' equity:
 
 
Capital stock
1,069,113 
1,041,834 
Accumulated deficit
(443,322)
(492,741)
Accumulated other comprehensive loss
(768)
(919)
Total stockholders' equity
625,023 
548,174 
Total liabilities and stockholders' equity
$ 722,440 
$ 651,347 
Consolidated Condensed Statements Of Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Dec. 28, 2013
Dec. 29, 2012
Dec. 28, 2013
Dec. 29, 2012
Consolidated Condensed Statements Of Comprehensive Income [Abstract]
 
 
 
 
Net sales
$ 218,883 
$ 310,133 
$ 564,679 
$ 602,913 
Cost of sales
115,034 
152,083 
281,884 
291,336 
Gross profit
103,849 
158,050 
282,795 
311,577 
Operating expenses
 
 
 
 
Research and development
32,426 
29,608 
90,678 
83,986 
Selling, general and administrative
18,625 
19,021 
57,038 
57,274 
Patent infringement settlements, net
695 
Restructuring and other, net
12 
3,292 
(572)
3,292 
Total operating expenses
51,063 
51,921 
147,839 
144,552 
Income from operations
52,786 
106,129 
134,956 
167,025 
Interest income, net
222 
76 
581 
334 
Other expense, net
(45)
(31)
(100)
(94)
Income before income taxes
52,963 
106,174 
135,437 
167,265 
Provision for income taxes
11,463 
38,312 
39,928 
57,027 
Net income
41,500 
67,862 
95,509 
110,238 
Change in unrealized gain (loss) on marketable securities, net of tax
(42)
(30)
151 
(11)
Comprehensive income
$ 41,458 
$ 67,832 
$ 95,660 
$ 110,227 
Basic earnings per share
$ 0.66 
$ 1.04 
$ 1.51 
$ 1.70 
Diluted earnings per share
$ 0.63 
$ 0.99 
$ 1.45 
$ 1.60 
Basic weighted average common shares outstanding
62,854 
65,055 
63,170 
64,859 
Diluted weighted average common shares outstanding
65,368 
68,866 
65,894 
68,946 
Consolidated Condensed Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Dec. 28, 2013
Dec. 29, 2012
Cash flows from operating activities:
 
 
Net income
$ 95,509 
$ 110,238 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
Depreciation and amortization
10,846 
10,040 
Stock compensation expense
17,713 
15,760 
Deferred income taxes
36,914 
52,602 
(Gain) loss on retirement or write-off of long-lived assets
165 
(342)
Excess tax benefit related to the exercise of employee stock options
(5,113)
Other non-cash charges
3,996 
2,872 
Net change in operating assets and liabilities:
 
 
Accounts receivable, net
(39,500)
(126,626)
Inventories
49,315 
(83,329)
Other assets
(5,785)
(2,270)
Accounts payable and other accrued liabilities
(1,062)
53,116 
Deferred income
27 
(1,649)
Income taxes payable
(35)
Net cash provided by operating activities
163,025 
30,377 
Cash flows from investing activities:
 
 
Proceeds from sale of available for sale marketable securities
69,394 
96,139 
Purchases of available for sale marketable securities
(152,005)
(38,076)
Purchases of property, equipment and software
(12,785)
(51,405)
Acquisition of Acoustic Technologies, net of cash obtained
(20,432)
Proceeds from sale of Apex assets
22,220 
(Increase) decrease in deposits and other assets
(2,385)
493 
Net cash (used in) provided by investing activities
(118,213)
29,371 
Cash flows from financing activities:
 
 
Issuance of common stock, net of shares withheld for taxes
754 
9,563 
Repurchase and retirement of common stock
(42,391)
(47,856)
Excess tax benefit related to the exercise of employee stock options
5,113 
Net cash used in financing activities
(36,524)
(38,293)
Net increase in cash and cash equivalents
8,288 
21,455 
Cash and cash equivalents at beginning of period
66,402 
65,997 
Cash and cash equivalents at end of period
$ 74,690 
$ 87,452 
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 30, 2013, included in our Annual Report on Form 10-K filed with the Commission on May 29, 2013.  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.      

Marketable Securities
Marketable Securities

2.     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 December 28, 2013 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of December 28, 2013

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

174,157 

 

$

57 

 

$

(74)

 

$

174,140 

U.S. Treasury securities

 

43,722 

 

 

 

 

(5)

 

 

43,725 

Agency discount notes

 

4,014 

 

 

 

 

 -

 

 

4,016 

Commercial paper

 

31,012 

 

 

14 

 

 

 -

 

 

31,026 

Total securities

$

252,905 

 

$

81 

 

$

(79)

 

$

252,907 

 

The Company’s specifically identified gross unrealized losses of $79 thousand relates to 47 different securities with total amortized cost of approximately  $131.6 million at December 28, 2013.  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 December 28, 2013.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of December 28, 2013

 

The following table is a summary of available-for-sale securities at March 30, 2013 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of March 30, 2013

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

94,798 

 

$

 

$

(133)

 

$

94,667 

U.S. Treasury securities

 

34,380 

 

 

 

 

(3)

 

 

34,381 

Agency discount notes

 

1,027 

 

 

 -

 

 

 -

 

 

1,027 

Commercial paper

 

40,089 

 

 

 

 

(28)

 

 

40,070 

Total securities

$

170,294 

 

$

15 

 

$

(164)

 

$

170,145 

 

The Company’s specifically identified gross unrealized losses of $164 thousand relates to 43 different securities with total amortized cost of approximately $124.1 million at March 30, 2013.  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 30, 2013.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of March 30, 2013.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28, 2013

 

March 30, 2013

 

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

 

Cost

 

Fair Value

 

Cost

 

Fair Value

Within 1 year

 

$

215,742 

 

$

215,792 

 

$

105,290 

 

$

105,235 

After 1 year

 

 

37,163 

 

 

37,115 

 

 

65,004 

 

 

64,910 

Total

 

$

252,905 

 

$

252,907 

 

$

170,294 

 

$

170,145 

 

Fair Value Of Financial Instruments
Fair Value Of Financial Instruments

3.     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 and investment portfolio 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, and commercial paper, 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.  

 

As of  December 28, 2013, the Company classified its investment portfolio 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 December 28, 2013.

 

The fair value of our financial assets at  December 28, 2013, 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

$

34,949 

 

$

 -

 

$

 -

 

$

34,949 

Commercial paper

 

 -

 

 

3,100 

 

 

 -

 

 

3,100 

 

$

34,949 

 

$

3,100 

 

$

 -

 

$

38,049 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

174,140 

 

$

 -

 

$

174,140 

U.S. Treasury securities

 

43,725 

 

 

 -

 

 

 -

 

 

43,725 

Agency discount notes

 

 -

 

 

4,016 

 

 

 -

 

 

4,016 

Commercial paper

 

 -

 

 

31,026 

 

 

 -

 

 

31,026 

 

$

43,725 

 

$

209,182 

 

$

 -

 

$

252,907 

 

 

The fair value of our financial assets at March 30, 2013, 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

$

54,762 

 

$

 -

 

$

 -

 

$

54,762 

Commercial paper

 

 -

 

 

1,500 

 

 

 -

 

 

1,500 

 

$

54,762 

 

$

1,500 

 

$

 -

 

$

56,262 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

94,667 

 

$

 -

 

$

94,667 

U.S. Treasury securities

 

34,381 

 

 

 -

 

 

 -

 

 

34,381 

Agency discount notes

 

 -

 

 

1,027 

 

 

 -

 

 

1,027 

Commercial paper

 

 -

 

 

40,070 

 

 

 -

 

 

40,070 

 

$

34,381 

 

$

135,764 

 

$

 -

 

$

170,145 

 

Accounts Receivable, Net
Accounts Receivable, Net

4.     Accounts Receivable, net

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

March 30,

 

2013

 

2013

Gross accounts receivable

$

109,834 

 

$

69,590 

Allowance for doubtful accounts

 

(299)

 

 

(301)

Accounts receivable, net

$

109,535 

 

$

69,289 

 

Inventories
Inventories

 

5.     Inventories

 

Inventories are comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

March 30,

 

2013

 

2013

Work in process

$

40,949 

 

$

34,169 

Finished goods

 

29,036 

 

 

85,131 

 

$

69,985 

 

$

119,300 

 

Restructuring Costs
Restructuring and Related Activities Disclosure [Text Block]

 

6.     Restructuring Costs

 

In the third quarter of fiscal year 2013, the Company committed to a plan to close its Tucson, Arizona design center and move those operations to the Company’s headquarters in Austin, Texas.  As a result, the Company incurred a restructuring charge for relocation, severance-related items and facility-related costs to operating expenses totaling $3.5 million in the third quarter of fiscal year 2013.  For the three months ended December 28, 2013, the Company reported an insignificant charge and for the nine months ended December 28, 2013, the Company reported a credit of approximately $0.6 million, respectively, related to changes in estimates for the facility, due to a new sublease on the vacated property.  This information, along with asset sale activities described in Note 7 of our Form 10-K for the year ended March 30, 2013,  is presented as a separate line item on the consolidated condensed statements of comprehensive income in operating expenses under the caption “Restructuring and other, net.” 

 

Of the net $2.9 million expense incurred, approximately $2.4 million has been completed, and consisted of severance and relocation-related costs of approximately $1.2 million, an asset impairment charge of approximately $1.0 million, and facility-related costs of approximately $0.2 million.    As of December 28, 2013, we have a remaining restructuring accrual of $0.5  million, included in “Other accrued liabilities” and “Long-term liabilities” on the consolidated condensed balance sheet, which will continue to be completed through calendar year 2015.

Acquisition
Business Combination Disclosure [Text Block]

7.    Acquisition

 

On October 1, 2013, the Company acquired 100 percent of the outstanding equity of Acoustic Technologies, Inc. (“Acoustic”), a privately held company.  The Mesa, Ariz.,-based firm is a leader in embedded firmware voice processing technology, including noise reduction, echo cancelation and voice enhancement.  This strategic acquisition enhances the Company’s technology and software expertise in our portable audio applications.

 

The Company acquired Acoustic for approximately $20.4 million net and recorded the purchase using the acquisition method of accounting.  This method allows for the recognition of the assets acquired and liabilities assumed at their fair values as of the acquisition date.  The Company is continuing to evaluate the fair values of the consideration transferred, assets acquired and liabilities assumed and expects to complete its purchase price allocation by the end of fiscal year 2014.

 

The consolidated condensed statements of comprehensive income presented include Acoustic’s results of operations beginning on the date of the acquisition.  Pro forma information related to this acquisition has not been presented because it would not be materially different from amounts reported. 

 

Income Taxes
Income Taxes

8.    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

 

Nine Months Ended

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

2013

 

2012

 

2013

 

2012

Income before income taxes

$

52,963 

 

$

106,174 

 

$

135,437 

 

$

167,265 

Provision for income taxes

$

11,463 

 

$

38,312 

 

$

39,928 

 

$

57,027 

Effective tax rate

 

21.6% 

 

 

36.1% 

 

 

29.5% 

 

 

34.1% 

 

Our income tax expense for the third quarter and first nine months of fiscal year 2014 was below the federal statutory rate primarily due to the effect of a tax benefit of $6.3 million provided by the Extraterritorial Income Exclusion Act, an elective provision of the Internal Revenue Code.  Another factor causing our tax expense to be below the federal statutory rate was the federal research development credit, which was extended through December 31, 2013 by the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013.   Our income tax expense for the third quarter of fiscal year 2013 was slightly above the federal statutory rate primarily due to the effect of state income taxes and nondeductible expenses.  Our income tax expense for the first nine months of fiscal year 2013 was below the federal statutory rate primarily due to the release of valuation allowance on the Company’s deferred tax assets in the second quarter of fiscal year 2013.  The release was due to the sale of assets of Apex Microtechnology (“Apex”), which generated sufficient capital gain to utilize a capital loss carry forward that was previously expected to expire unutilized.

 

We had no unrecognized tax benefits as of December 28, 2013.  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 December 28, 2013, the balance of accrued interest and penalties was zeroNo interest or penalties were incurred during the first nine months of fiscal year 2014 or 2013.

 

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 2013 remain open to examination by the major taxing jurisdictions to which we are subject. 

Net Income Per Share
Net Income Per Share

9.     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 and nine months ended December 28, 2013 and December 29, 2012 (in thousands, except per share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

December 28,
2013

 

December 29,
2012

 

December 28,
2013

 

December 29,
2012

Numerator:

 

 

 

 

 

 

 

 

 

 

 

Net income

$

41,500 

 

$

67,862 

 

$

95,509 

 

$

110,238 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

62,854 

 

 

65,055 

 

 

63,170 

 

 

64,859 

Effect of dilutive securities

 

2,514 

 

 

3,811 

 

 

2,724 

 

 

4,087 

Weighted average diluted shares

 

65,368 

 

 

68,866 

 

 

65,894 

 

 

68,946 

Basic earnings per share

$

0.66 

 

$

1.04 

 

$

1.51 

 

$

1.70 

Diluted earnings per share

$

0.63 

 

$

0.99 

 

$

1.45 

 

$

1.60 

 

The weighted outstanding options excluded from our diluted calculation for the three and nine months ended December 28, 2013, were 1,226,000,  and 1,305,000, respectivelyThe weighted outstanding options excluded from our diluted calculation for the three and nine months ended December 29, 2012, were 924,000 and 309,000, respectively.  These options were excluded as the exercise price exceeded the average market price during the periods.

Legal Matters
Legal Matters

10.     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.

 

On February 4, 2013, a purported shareholder filed a class action complaint in the U.S. District Court, Southern District of New York against the Company and two of the Company’s executives (the “Securities Case”). Koplyay v. Cirrus Logic, Inc., et al., Civil Action No. 13-CV-0790. The complaint alleges that the defendants violated the federal securities laws by making materially false and misleading statements regarding our business results between July 31, 2012, and October 31, 2012, and seeks unspecified damages along with plaintiff’s costs and expenses, including attorneys’ fees.  A second complaint was filed on April 13, 2013, by a different purported shareholder, in the same Court, setting forth substantially the same allegations.  On April 19, 2013, the Court appointed the plaintiff and counsel in the first class action complaint as the lead plaintiff and lead counsel.  The lead plaintiff filed an amended complaint on May 1, 2013, including substantially the same allegations as the original complaint.  On May 24, 2013, the Company filed a motion to dismiss the amended complaint for failure to state a claim.  On December 2, 2013, the Court granted the Company’s motion and dismissed the case with prejudice.  The plaintiff did not appeal the Court’s order and the case has concluded.

 

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 theis 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 April 13, 2013, another purported shareholder filed a shareholder derivative complaint against several of our current officers and directors in the District Court of Travis County, Texas, 53rd Judicial District. Graham, derivatively on behalf of Cirrus Logic, Inc. v. Rhode, et al., Cause No. D-1-GN-13-001285.  In this complaint, the plaintiff makes allegations similar to those presented in the Securities Case, but the plaintiff asserts various state law causes of action, including claims of breach of fiduciary duty and unjust enrichment.  The Company is named solely as a nominal defendant against whom no recovery is sought. 

Stockholders' Equity
Stockholder's Equity

 

11.   Stockholders’ Equity

Common Stock

 

The Company issued a net 0.8 million and 1.1 million shares of common stock for the three and nine month periods ending December 28, 2013, respectively, in connection with stock issuances during the respective periods pursuant to our 2006 Stock Incentive Plan.  The Company issued a net 0.3 million and 1.4 million shares of common stock for the three and nine month periods ending December  29, 2012, respectively,  in connection with stock issuances during the respective periods pursuant to our 2006 Stock Incentive Plan.  

 

Share Repurchase Program

 

On November 20, 2012, we announced that our Board of Directors authorized a share repurchase program of up to $200 million of the Company’s common stock.  Since inception, $128.0 million of the Company’s common stock has been repurchased under the plan, leaving $72.0 million available for repurchase under this plan as of December 28, 2013.  During the three months ended December 28, 2013, the Company repurchased 1.5 million shares of its common stock for $29.7 million, at an average cost of $19.37The Company repurchased 2.1 million shares of its common stock for $42.4 million during the nine months ended December 28, 2013, at an average cost of $19.85 per share.  During fiscal year 2013, the Company repurchased 3.0 million shares of its common stock for a total of $85.6  million.  All of these shares were repurchased in the open market and were funded from existing cash.  All shares of our common stock that were repurchased were retired as of December 28, 2013.

Segment Information
Segment Information

12.   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

 

Nine Months Ended

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

2013

 

2012

 

2013

 

2012

Audio Products

$

206,388 

 

$

300,010 

 

$

529,966 

 

$

558,671 

Energy Products

 

12,495 

 

 

10,123 

 

 

34,713 

 

 

44,242 

 

$

218,883 

 

$

310,133 

 

$

564,679 

 

$

602,913 

 

Marketable Securities (Tables)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of December 28, 2013

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

174,157 

 

$

57 

 

$

(74)

 

$

174,140 

U.S. Treasury securities

 

43,722 

 

 

 

 

(5)

 

 

43,725 

Agency discount notes

 

4,014 

 

 

 

 

 -

 

 

4,016 

Commercial paper

 

31,012 

 

 

14 

 

 

 -

 

 

31,026 

Total securities

$

252,905 

 

$

81 

 

$

(79)

 

$

252,907 

 

The Company’s specifically identified gross unrealized losses of $79 thousand relates to 47 different securities with total amortized cost of approximately  $131.6 million at December 28, 2013.  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 December 28, 2013.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of December 28, 2013

 

The following table is a summary of available-for-sale securities at March 30, 2013 (in thousands): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

Gross

 

Gross

 

Fair Value

 

Amortized

 

Unrealized

 

Unrealized

 

(Net Carrying

As of March 30, 2013

Cost

 

Gains

 

Losses

 

Amount)

Corporate debt securities

$

94,798 

 

$

 

$

(133)

 

$

94,667 

U.S. Treasury securities

 

34,380 

 

 

 

 

(3)

 

 

34,381 

Agency discount notes

 

1,027 

 

 

 -

 

 

 -

 

 

1,027 

Commercial paper

 

40,089 

 

 

 

 

(28)

 

 

40,070 

Total securities

$

170,294 

 

$

15 

 

$

(164)

 

$

170,145 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28, 2013

 

March 30, 2013

 

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

 

Cost

 

Fair Value

 

Cost

 

Fair Value

Within 1 year

 

$

215,742 

 

$

215,792 

 

$

105,290 

 

$

105,235 

After 1 year

 

 

37,163 

 

 

37,115 

 

 

65,004 

 

 

64,910 

Total

 

$

252,905 

 

$

252,907 

 

$

170,294 

 

$

170,145 

 

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

$

34,949 

 

$

 -

 

$

 -

 

$

34,949 

Commercial paper

 

 -

 

 

3,100 

 

 

 -

 

 

3,100 

 

$

34,949 

 

$

3,100 

 

$

 -

 

$

38,049 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

174,140 

 

$

 -

 

$

174,140 

U.S. Treasury securities

 

43,725 

 

 

 -

 

 

 -

 

 

43,725 

Agency discount notes

 

 -

 

 

4,016 

 

 

 -

 

 

4,016 

Commercial paper

 

 -

 

 

31,026 

 

 

 -

 

 

31,026 

 

$

43,725 

 

$

209,182 

 

$

 -

 

$

252,907 

 

 

The fair value of our financial assets at March 30, 2013, 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

$

54,762 

 

$

 -

 

$

 -

 

$

54,762 

Commercial paper

 

 -

 

 

1,500 

 

 

 -

 

 

1,500 

 

$

54,762 

 

$

1,500 

 

$

 -

 

$

56,262 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

$

 -

 

$

94,667 

 

$

 -

 

$

94,667 

U.S. Treasury securities

 

34,381 

 

 

 -

 

 

 -

 

 

34,381 

Agency discount notes

 

 -

 

 

1,027 

 

 

 -

 

 

1,027 

Commercial paper

 

 -

 

 

40,070 

 

 

 -

 

 

40,070 

 

$

34,381 

 

$

135,764 

 

$

 -

 

$

170,145 

 

Accounts Receivable, Net (Tables)
Components Of Accounts Receivable, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

March 30,

 

2013

 

2013

Gross accounts receivable

$

109,834 

 

$

69,590 

Allowance for doubtful accounts

 

(299)

 

 

(301)

Accounts receivable, net

$

109,535 

 

$

69,289 

 

Inventories (Tables)
Schedule Of Inventories

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

March 30,

 

2013

 

2013

Work in process

$

40,949 

 

$

34,169 

Finished goods

 

29,036 

 

 

85,131 

 

$

69,985 

 

$

119,300 

 

Income Taxes (Tables)
Schedule of Provision for Income Taxes and Effective Tax Rates [Table Text Block]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

2013

 

2012

 

2013

 

2012

Income before income taxes

$

52,963 

 

$

106,174 

 

$

135,437 

 

$

167,265 

Provision for income taxes

$

11,463 

 

$

38,312 

 

$

39,928 

 

$

57,027 

Effective tax rate

 

21.6% 

 

 

36.1% 

 

 

29.5% 

 

 

34.1% 

 

Net Income Per Share (Tables)
Calculation Of Basic And Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

December 28,
2013

 

December 29,
2012

 

December 28,
2013

 

December 29,
2012

Numerator:

 

 

 

 

 

 

 

 

 

 

 

Net income

$

41,500 

 

$

67,862 

 

$

95,509 

 

$

110,238 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

62,854 

 

 

65,055 

 

 

63,170 

 

 

64,859 

Effect of dilutive securities

 

2,514 

 

 

3,811 

 

 

2,724 

 

 

4,087 

Weighted average diluted shares

 

65,368 

 

 

68,866 

 

 

65,894 

 

 

68,946 

Basic earnings per share

$

0.66 

 

$

1.04 

 

$

1.51 

 

$

1.70 

Diluted earnings per share

$

0.63 

 

$

0.99 

 

$

1.45 

 

$

1.60 

 

Segment Information (Tables)
Schedule Of Segment Revenue From Product Lines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

2013

 

2012

 

2013

 

2012

Audio Products

$

206,388 

 

$

300,010 

 

$

529,966 

 

$

558,671 

Energy Products

 

12,495 

 

 

10,123 

 

 

34,713 

 

 

44,242 

 

$

218,883 

 

$

310,133 

 

$

564,679 

 

$

602,913 

 

Marketable Securities (Schedule of Available-for-sale Securities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 28, 2013
Mar. 30, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
$ 252,905 
$ 170,294 
Gross Unrealized Gains
81 
15 
Gross Unrealized Losses
79 
164 
Estimated Fair Value (Net Carrying Amount)
252,907 
170,145 
Corporate Debt Securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
174,157 
94,798