CRUS Cirrus Logic Inc

Cirrus Logic, Inc. (Nasdaq: CRUS), a leader in high-precision analog and digital signal processing components, today announced financial results for the second quarter of fiscal year 2010, which ended Sept. 26, 2009.

Revenue for the quarter was $55.7 million compared to $53.3 million during the second quarter of fiscal year 2009 and $37.5 million in the previous quarter. Gross margin for the quarter was 52 percent, down from 56 percent in the quarter a year ago and flat compared to 52 percent reported for the previous quarter.

Total GAAP operating expenses for the quarter were approximately $22.5 million, up from $19.8 million in the previous quarter. GAAP operating expenses in the second quarter included a net benefit of approximately $1.4 million related to the sale of certain patents as well as an additional $165,000 in facilities restructuring credits. GAAP operating expenses also include charges of $1.3 million for stock-based compensation and $400,000 in acquisition-related amortization of intangibles. Non-GAAP operating expenses for the quarter were approximately $22.4 million, compared to $20.9 million for the June quarter.

Income from operations on a GAAP basis was approximately $6.4 million. Excluding the items noted above, non-GAAP income from operations was $6.7 million.

Cirrus Logic reported second quarter GAAP net income of approximately $6.8 million, or $0.10 per share based on 65.5 million average diluted shares outstanding. Excluding the items noted above, on a non-GAAP basis the company reported net income of $7.0 million, or $0.11 per share.

“We are extremely pleased with our Q2 results, as revenue and gross margin exceeded our expectations, driven by both new audio product ramps as well as a modest recovery across our other product lines,“ said Jason Rhode, president and chief executive officer, Cirrus Logic. “We expect further revenue growth in Q3, coupled with gross margin improvements due to a higher mix of Energy revenue as well as continued improvements to our product cost structures.”

Outlook for Third Quarter FY 2010 (ending December 26, 2009):

• Revenue is expected to range between $58 million and $62 million;
• Gross margin is expected to be between 52 percent and 54 percent; and
• Combined R&D and SG&A expenses are expected to range between $23 million and $25 million, which include approximately $2 million in share-based compensation and amortization of acquisition-related intangibles expenses.

Conference Call

Cirrus Logic management will hold a conference call to discuss the company’s results for the second quarter of fiscal year 2010, on Oct. 20, 2009 at 10:30 a.m. EDT. Those wishing to join should call 480-629-9820, or 877-941-8631 (Conference ID: 4165423) at approximately 10:20 a.m. EDT. A replay of the conference call will also be available beginning one hour after the completion of the call, until Oct. 27, 2009. To access the recording, dial 303-590-3030, or toll-free at 800-406-7325 (Conference ID: 4165423). A live and an archived webcast of the conference call will also be available via the investor section of the company’s website at www.cirrus.com.

Cirrus Logic, Inc.

Celebrating its 25th year as a leading fabless semiconductor company in 2009, Cirrus Logic develops high-precision, analog and mixed-signal integrated circuits for a broad range of innovative customers. Building on its diverse analog and signal-processing patent portfolio, Cirrus Logic delivers highly optimized products for a variety of audio and energy-related applications. The company operates from headquarters in Austin, Texas, with offices in Tucson, Ariz., Europe, Japan and Asia. More information about Cirrus Logic is available at www.cirrus.com.

Use of non-GAAP Financial Information

To supplement Cirrus Logic's financial statements presented on a GAAP basis, Cirrus has provided non-GAAP financial information, including non-GAAP operating expenses, non-GAAP net income, non-GAAP net income from operations, and non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results is included in the tables below. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to our investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. As a note, the non-GAAP financial information used by Cirrus Logic may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP.

Safe Harbor Statement

Except for historical information contained herein, the matters set forth in this news release contain forward-looking statements, including our estimates of third quarter fiscal year 2010 revenue, gross margin, combined research and development and selling, general and administrative expense levels, share-based compensation expense, and amortization of acquired intangible expenses. In some cases, forward-looking statements are identified by words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “opportunity,” “estimates,” and “intend,” variations of these types of words and similar expressions are intended to identify these forward-looking statements. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, the following: overall economic pressures and general market and economic conditions; overall conditions in the semiconductor market; the level of orders and shipments during the third quarter of fiscal year 2010, as well as customer cancellations of orders, or the failure to place orders consistent with forecasts; the loss of a key customer; pricing pressures; and the risk factors listed in our Form 10-K for the year ended March 28, 2009, and in our other filings with the Securities and Exchange Commission, which are available at www.sec.gov. The foregoing information concerning our business outlook represents our outlook as of the date of this news release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Cirrus Logic and Cirrus are trademarks of Cirrus Logic Inc.

Summary financial data follows:

CIRRUS LOGIC, INC. CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (unaudited) (in thousands, except per share data)          

Three Months Ended

Six Months Ended

  Sep. 26, Jun. 27, Sep. 27, Sep. 26, Sep. 27, 2009 2009 2008 2009 2008 Q2'10 Q1'10 Q2'09 Q2'10 Q2'09 Audio products $ 41,271 $ 24,787 $ 30,604 $ 66,058 $ 52,634 Energy products   14,403     12,727     22,674     27,130     44,655

Net revenue

  55,674     37,514     53,278     93,188     97,289

Cost of sales

  26,700     17,927     23,292     44,627     42,652 Gross Profit 28,974 19,587 29,986 48,561 54,637     Operating expenses: Research and development 12,355 12,508 10,864 24,863 22,469 Selling, general and administrative 11,746 10,071 11,597 21,817 23,600 Restructuring and other costs (165 ) - - (165 ) - Provision for litigation expenses - (2,745 ) 1,771 (2,745 ) 1,771 Patent agreement, net   (1,400 )   -     -     (1,400 )   - Total operating expenses   22,536     19,834     24,232     42,370     47,840  

Operating income (loss)

6,438 (247 ) 5,754 6,191 6,797   Interest income, net 376 463 637 839 1,573

Other income (expense), net

  (21 )   (18 )   (52 )   (39 )   143 Income (loss) before income taxes 6,793 198 6,339 6,991 8,513 Provision (benefit) for income taxes   29     (23 )   (16 )   6     20 Net income (loss) $ 6,764   $ 221   $ 6,355   $ 6,985   $ 8,493 Basic income (loss) per share: Basic income (loss) per share: $ 0.10 $ - $ 0.10 $ 0.11 $ 0.13 Diluted income (loss) per share: $ 0.10 $ - $ 0.10 $ 0.11 $ 0.13   Weighted average number of shares: Basic 65,281 65,254 64,971 65,268 65,797 Diluted 65,473 65,341 65,317 65,392 66,264  

Prepared in accordance with Generally Accepted Accounting Principles

CIRRUS LOGIC, INC. CONSOLIDATED CONDENSED BALANCE SHEET (in thousands)         Sep. 26,   Mar. 28,   Sep. 27, 2009 2009 2008 (unaudited) (unaudited) ASSETS Current assets Cash and cash equivalents $ 20,692 $ 31,504 $ 55,566 Restricted investments 5,755 5,755 5,755 Marketable securities 62,191 79,346 48,565 Accounts receivable, net 26,160 10,814 25,556 Inventories 22,497 19,878 28,106 Other current assets   4,618     5,359     7,794   Total Current Assets 141,913 152,656 171,342   Long-term marketable securities 35,391 3,627 - Property and equipment, net 18,788 19,367 20,779 Intangibles, net 22,856 23,309 24,559 Goodwill 6,027 6,027 6,194 Other assets   1,925     2,018     2,301   Total Assets $ 226,900   $ 207,004   $ 225,175     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 20,758 $ 9,886 $ 17,620 Accrued salaries and benefits 6,873 6,432 7,552 Other accrued liabilities 4,894 6,004 8,657 Deferred income on shipments to distributors   3,728     3,426     7,751   Total Current Liabilities 36,253 25,748 41,580   Long-term restructuring accrual 548 931 1,285 Other long-term obligations 7,265 7,397 7,093   Stockholders' equity: Capital stock 948,371 945,455 942,853 Accumulated deficit (764,966 ) (771,951 ) (766,933 ) Accumulated other comprehensive loss   (571 )   (576 )   (703 ) Total Stockholders' Equity   182,834     172,928     175,217   Total Liabilities and Stockholders' Equity $ 226,900   $ 207,004   $ 225,175     Prepared in accordance with Generally Accepted Accounting Principles CIRRUS LOGIC, INC. RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION (unaudited, in thousands, except per share data) (not prepared in accordance with GAAP)          

We use these Non-GAAP financial numbers to assist us in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.

    Three Months Ended Six Months Ended   Sep. 26, Jun. 27, Sep. 27, Sep. 26, Sep. 27, 2009 2009 2008 2009 2008 Net Income Reconciliation Q2'10 Q1'10 Q2'09 Q2'10 Q2'09

GAAP Net Income

$ 6,764 $ 221 $ 6,355 $ 6,985 $ 8,493

Acquisition related items

404 404 364 808 36

Stock based compensation expense

1,383 1,353 1,230 2,736 2,900

Facility and other related adjustments

- (22 ) (34 ) (22 ) 216

Provision for Litigation expenses

- (2,745 ) 1,771 (2,745 ) 1,771

Restructing and other costs, net

(165 ) - - (165 ) - Impairment of Intangibles - - - - 11 Patent agreement, net   (1,400 )   -     -     (1,400 )   -   Non-GAAP Net Income (Loss) $ 6,986   $ (789 ) $ 9,686   $ 6,197   $ 13,427     Earnings Per Share reconciliation GAAP Diluted income per share $ 0.10 $ - $ 0.10 $ 0.11 $ 0.13 Effect of Acquisition related items 0.01 0.01 - 0.01 - Effect of Stock based compensation expense 0.02 0.02 0.02 0.04 0.04

Effect of Facility and other related adjustments

- - - - - Effect of Provision for Litigation expenses - (0.04 ) 0.03 (0.04 ) 0.03 Effect of Restructing and other costs, net - - - - - Effect of Impairment of Intangibles - - - - - Effect of Patent agreement, net   (0.02 )   -     -     (0.02 )   -   Non-GAAP Net income (loss) per share $ 0.11   $ (0.01 ) $ 0.15   $ 0.10   $ 0.20     Operating Income Reconciliation GAAP Operating Income (Loss) $ 6,438 $ (247 ) $ 5,754 $ 6,191 $ 6,797 Stock compensation expense - COGS 43 52 48 95 245 Stock compensation expense - R&D 428 514 446 942 1,023 Stock compensation expense - SG&A 912 787 736 1,699 1,632 Amortization of acquisition intangibles 404 404 364 808 36 Facility and other related adjustments - (22 ) (34 ) (22 ) 216 Provision for litigation expenses - (2,745 ) 1,771 (2,745 ) 1,771 Restructing and other costs, net (165 ) - - (165 ) - Impairment of Intangibles - - - - 11 Patent agreement, net   (1,400 )   -     -     (1,400 )   -   Non-GAAP Operating Income (Loss) $ 6,660   $ (1,257 ) $ 9,085   $ 5,403   $ 11,731     Operating Expense Reconciliation GAAP Operating Expenses $ 22,536 $ 19,834 $ 24,232 $ 42,370 $ 47,840 Stock compensation expense - R&D (428 ) (514 ) (446 ) (942 ) (1,023 ) Stock compensation expense - SG&A (912 ) (787 ) (736 ) (1,699 ) (1,632 ) Amortization of acquisition intangibles (404 ) (404 ) (364 ) (808 ) (36 ) Facility and other related adjustments - 22 34 22 (216 ) Provision for litigation expenses - 2,745 (1,771 ) 2,745 (1,771 ) Restructing and other costs, net 165 - - 165 - Impairment of Intangibles - - - - (11 ) Patent agreement, net   1,400     -     -     1,400     -   Non-GAAP Operating Expenses $ 22,357   $ 20,896   $ 20,949   $ 43,253   $ 43,151