NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
Description of Business
|
Description
of Business
Cirrus Logic, Inc. (Cirrus Logic, We, Us, Our, or the
Company) develops high-precision, analog and mixed-signal integrated circuits (ICs) for a broad range of consumer and industrial markets. Building on our diverse analog mixed-signal patent portfolio, Cirrus Logic delivers
highly optimized products for consumer and professional audio, automotive entertainment, and targeted industrial applications including energy control, energy management, light emitting diode (LED) and energy exploration.
We were incorporated in California in 1984, became a public company in 1989, and were reincorporated in the State of Delaware in February
1999. Our primary facility housing engineering, sales and marketing, and administration functions is located in Austin, Texas. In addition, we have sales locations internationally and throughout the United States. Specifically, we serve customers
from international sales offices in Europe and Asia, including the Peoples Republic of China, Hong Kong, South Korea, Japan, Singapore, Taiwan, and the United Kingdom. Our common stock, which has been publicly traded since 1989, is listed on
the NASDAQ Global Select Market under the symbol CRUS.
Basis of Presentation
We prepare financial statements on a 52- or 53-week year that ends on the last Saturday in March. Fiscal years 2014 and 2013 were 52-week
years, whereas fiscal year 2012 was a 53-week year.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles
(U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to prior year
balances in order to conform to the current years presentation of financial information.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the use of management estimates. These estimates are
subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
2.
|
Summary of Significant Accounting Policies
|
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of money market funds, commercial paper, and U.S. Government Treasury and Agency instruments
with original maturities of three months or less at the date of purchase.
Marketable Securities
We determine the appropriate classification of marketable securities at the time of purchase and reevaluate this designation as of each
balance sheet date. We classify these securities as either held-to-maturity, trading, or available-for-sale. As of March 29, 2014 and March 30, 2013, all marketable securities were classified as
Page 44 of 72
available-for-sale securities. The Company classifies its investments as available for sale because it expects to possibly sell some securities prior to maturity. The Companys
investments are subject to market risk, primarily interest rate and credit risk. The Companys investments are managed by an outside professional manager within investment guidelines set by the Company. Such guidelines include security type,
credit quality, and maturity, and are intended to limit market risk by restricting the Companys investments to high quality debt instruments with relatively short-term maturities. The fair value of investments is determined using observable or
quoted market prices for those securities.
Available-for-sale securities are carried at fair value, with unrealized gains and
losses included as a component of accumulated other comprehensive loss. Realized gains and losses, declines in value judged to be other than temporary, and interest on available-for-sale securities are included in net income. The cost of securities
sold is based on the specific identification method.
Inventories
We use the lower of cost or market method to value our inventories, with cost being determined on a first-in, first-out basis. One of the
factors we consistently evaluate in the application of this method is the extent to which products are accepted into the marketplace. By policy, we evaluate market acceptance based on known business factors and conditions by comparing forecasted
customer unit demand for our products over a specific future period, or demand horizon, to quantities on hand at the end of each accounting period.
On a quarterly and annual basis, we analyze inventories on a part-by-part basis. Product life cycles and the competitive nature of the industry are factors considered in the evaluation of customer unit
demand at the end of each quarterly accounting period. Inventory quantities on-hand in excess of forecasted demand is considered to have reduced market value and, therefore, the cost basis is adjusted to the lower of cost or market. Typically,
market values for excess or obsolete inventories are considered to be zero. During fiscal year 2013, the Company recorded excess and obsolete inventory charges of $25.5 million, primarily associated with a customer build forecast that exceeded
actual market demand and resulted in excess inventory levels for certain high volume products. No significant inventory charges were recorded in fiscal year 2014 for excess and obsolete inventory.
Inventories were comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
Work in process
|
|
$
|
37,967
|
|
|
$
|
34,169
|
|
Finished goods
|
|
|
31,776
|
|
|
|
85,131
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69,743
|
|
|
$
|
119,300
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net
Property, plant and equipment is recorded at cost, net of depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis over estimated economic lives, ranging from
three to 39 years. Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated useful life. Furniture, fixtures, machinery, and equipment are all depreciated over a useful life of three to 10 years, while
buildings are depreciated over a period of up to 39 years. In general, our capitalized software is amortized over a useful life of three years, with capitalized enterprise resource planning software being amortized over a useful life of 10 years.
Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred.
Page 45 of 72
Property, plant and equipment was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
Land
|
|
$
|
23,806
|
|
|
$
|
23,778
|
|
Buildings
|
|
|
37,899
|
|
|
|
38,257
|
|
Furniture and fixtures
|
|
|
9,440
|
|
|
|
9,677
|
|
Leasehold improvements
|
|
|
2,387
|
|
|
|
1,091
|
|
Machinery and equipment
|
|
|
59,552
|
|
|
|
51,080
|
|
Capitalized software
|
|
|
24,437
|
|
|
|
24,671
|
|
Construction in progress
|
|
|
3,797
|
|
|
|
2,528
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
161,318
|
|
|
|
151,082
|
|
Less: Accumulated depreciation and amortization
|
|
|
(57,668
|
)
|
|
|
(50,459
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
103,650
|
|
|
$
|
100,623
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense on property, plant, and equipment for fiscal years 2014, 2013, and
2012, was $12.1 million, $10.2 million, and $6.3 million, respectively.
Goodwill and Intangibles, net
Intangible assets include purchased technology licenses and patents that are reported at cost and are amortized on a straight-line basis
over their useful lives, generally ranging from one to ten years. Acquired intangibles include existing technology, core technology or patents, license agreements, trademarks, tradenames, and customer relationships. These assets are amortized on a
straight-line basis over lives ranging from four to fifteen years.
Goodwill is recorded at the time of an acquisition and is
calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are
subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of
our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our
common stock, (iii) a significant slowdown in the worldwide economy and the semiconductor industry, or (iv) any failure to meet the performance projections included in our forecasts of future operating results. The Company tests goodwill
and indefinite lived intangibles for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve managements assessment of qualitative factors to determine whether it
is more likely than not that goodwill and other intangible assets are impaired. If management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists, then a quantitative impairment test will be
performed involving management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in these evaluations. If our actual results, or the plans
and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. There were no impairments of goodwill in
fiscal years 2014, 2013 or 2012. There were no material intangible asset impairments in fiscal years 2014, 2013 and 2012.
Long-Lived
Assets
We test for impairment losses on long-lived assets and definite-lived intangibles used in operations when
indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. We measure any impairment loss by comparing the fair value of the asset to its carrying
amount. We estimate fair value based on discounted future cash flows, quoted market prices, or independent appraisals.
Page 46 of 72
Foreign Currency Translation
All of our international subsidiaries have the U.S. dollar as the functional currency. The local currency financial statements are remeasured into U.S. dollars using current rates of exchange for assets
and liabilities. Gains and losses from remeasurement are included in other income (expense), net. Revenue and expenses from our international subsidiaries are remeasured using the monthly average exchange rates in effect for the period in which the
items occur. For all periods presented, our foreign currency remeasurement expense was not significant.
Concentration of Credit Risk
Financial instruments that potentially subject us to material concentrations of credit risk consist primarily of cash
equivalents, marketable securities, long-term marketable securities, and trade accounts receivable. We are exposed to credit risk to the extent of the amounts recorded on the balance sheet. By policy, our cash equivalents, marketable securities, and
long-term marketable securities are subject to certain nationally recognized credit standards, issuer concentrations, sovereign risk, and marketability or liquidity considerations.
In evaluating our trade receivables, we perform credit evaluations of our major customers financial condition and monitor closely
all of our receivables to limit our financial exposure by limiting the length of time and amount of credit extended. In certain situations, we may require payment in advance or utilize letters of credit to reduce credit risk. By policy, we establish
a reserve for trade accounts receivable based on the type of business in which a customer is engaged, the length of time a trade account receivable is outstanding, and other knowledge that we may possess relating to the probability that a trade
receivable is at risk for non-payment.
We had three contract manufacturers, Futaihua Industrial, Hongfujin Precision and
Protek, who represented 14 percent, 44 percent, and 12 percent, respectively, for fiscal year 2014 and 21 percent, 36 percent, and 16 percent, respectively for fiscal year 2013, of our consolidated gross accounts receivable. Additionally, in
fiscal year 2014, we had one distributor, Avnet, Inc. who represented 11 percent of our consolidated gross accounts receivable. No other distributor or customer had receivable balances that represented more than 10 percent of consolidated gross
trade accounts receivable as of the end of fiscal year 2014 or 2013.
Since the components we produce are largely proprietary
and generally not available from second sources, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, from a distributor, or through a
third party manufacturer contracted to produce their end product. For fiscal years 2014, 2013, and 2012, our ten largest end customers represented approximately 88 percent, 89 percent, and 74 percent, of our sales, respectively. For fiscal years
2014, 2013, and 2012, we had one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 80 percent, 82 percent, and 62 percent, of the Companys total sales, respectively. Further, we had
one distributor, Avnet, Inc., that represented 15 percent of our sales for fiscal year 2012. No other customer or distributor represented more than 10 percent of net sales in fiscal years 2014, 2013, or 2012.
Revenue Recognition
We
recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured. We evaluate our
distributor arrangements, on a distributor by distributor basis, with respect to each of the four criteria above. For a majority of our distributor arrangements, we provide rights of price protection and stock rotation. As a result, revenue is
deferred at the time of shipment to our domestic distributors and certain international distributors due to the determination that the ultimate sales price to the distributor is not fixed or determinable. Once the distributor has resold the product,
and our final sales price is fixed or determinable, we recognize revenue for the final sales price and record the related costs of sales. For certain of our smaller international distributors, we do not grant price protection rights and provide
minimal stock rotation rights. For these distributors, revenue is recognized upon delivery to the distributor, less an allowance for estimated returns, as the revenue recognition criteria have been met upon shipment.
Page 47 of 72
Further, for sales where revenue is deferred, the Company defers the associated cost of
goods sold on our Consolidated Balance Sheet, net within the deferred income caption. The Company routinely evaluates the products held by our distributors for impairment to the extent such products may be returned by the distributor within these
limited rights and such products would be considered excess or obsolete if included within our own inventory. Products returned by distributors and subsequently scrapped have historically been immaterial to the Company.
Warranty Expense
We
warrant our products and maintain a provision for warranty repair or replacement of shipped products. The accrual represents managements estimate of probable returns. Our estimate is based on an analysis of our overall sales volume and
historical claims experience. The estimate is re-evaluated periodically for accuracy.
Shipping Costs
Our shipping and handling costs are included in cost of sales for all periods presented in the Consolidated Statements of Comprehensive
Income.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $1.4 million, $1.5 million, and $1.8 million, in fiscal years 2014, 2013, and 2012, respectively.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards and is recognized as an expense,
on a ratable basis, over the vesting period, which is generally between zero and four years. Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of
stock options. The Company calculates the grant-date fair value for stock options using the Black-Scholes valuation model. The use of valuation models requires the Company to make estimates of assumptions such as expected volatility, expected term,
risk-free interest rate, expected dividend yield, and forfeiture rates. The grant-date fair value of restricted stock units is the market value at grant date multiplied by the number of units.
Income Taxes
We provide
for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company evaluates the ability to realize its deferred tax assets based on all the facts and circumstances, including projections of future
taxable income and expiration dates of carryover attributes on a quarterly basis. We have provided a valuation allowance against a portion of our net U.S. deferred tax assets due to uncertainties regarding its realization. The calculation of our tax
liabilities involves assessing uncertainties with respect to the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. We recognize
liabilities for uncertain tax positions based on the two-step process. The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate
whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be
taken, in an income tax return as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in
facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. If our estimates of these taxes are greater or less than actual results, an additional tax benefit or
charge will result.
Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, we
cannot assure that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material
effect on our income tax provision and net income in the period or periods for which that determination
Page 48 of 72
is made. We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to
resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been made for all periods.
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 grants.
The following table details the
calculation of basic and diluted earnings per share for fiscal years 2014, 2013, and 2012 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
108,111
|
|
|
$
|
136,598
|
|
|
$
|
87,983
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
62,926
|
|
|
|
64,580
|
|
|
|
64,934
|
|
Effect of dilutive securities
|
|
|
2,609
|
|
|
|
3,874
|
|
|
|
3,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares
|
|
|
65,535
|
|
|
|
68,454
|
|
|
|
68,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.72
|
|
|
$
|
2.12
|
|
|
$
|
1.35
|
|
Diluted earnings per share
|
|
$
|
1.65
|
|
|
$
|
2.00
|
|
|
$
|
1.29
|
|
The weighted outstanding options excluded from our diluted calculation for the years ended March 29,
2014, March 30, 2013, and March 31, 2012, were 833 thousand, 453 thousand, and 1,052 thousand, respectively, as the exercise price exceeded the average market price during the period.
Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments from prior years when we had subsidiaries whose functional currency was not the U.S. Dollar, as well
as unrealized gains and losses on investments classified as available-for-sale. See Note 16 Accumulated Other Comprehensive loss for additional discussion.
The Companys 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 Balance Sheet as marketable securities, as appropriate.
The following table is a summary of available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 29, 2014
|
|
Amortized
Cost
|
|
|
Gross Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Estimated Fair Value
(Net Carrying 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
|
|
|
|
1
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 49 of 72
The Companys specifically identified gross unrealized losses of $253 thousand relates
to 74 different securities with a 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 30, 2013
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated Fair Value
(Net Carrying Amount)
|
|
Corporate debt securities
|
|
$
|
94,798
|
|
|
$
|
2
|
|
|
$
|
(133
|
)
|
|
$
|
94,667
|
|
U.S. Treasury securities
|
|
|
34,380
|
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
34,381
|
|
Agency discount notes
|
|
|
1,027
|
|
|
|
|
|
|
|
|
|
|
|
1,027
|
|
Commercial paper
|
|
|
40,089
|
|
|
|
9
|
|
|
|
(28
|
)
|
|
|
40,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
170,294
|
|
|
$
|
15
|
|
|
$
|
(164
|
)
|
|
$
|
170,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys specifically identified gross unrealized losses of $164 thousand relates to 43
different securities with a 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
investments by contractual maturity were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2014
|
|
|
March 30, 2013
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
Within 1 year
|
|
$
|
263,418
|
|
|
$
|
263,417
|
|
|
$
|
105,290
|
|
|
$
|
105,235
|
|
After 1 year
|
|
|
89,422
|
|
|
|
89,243
|
|
|
|
65,004
|
|
|
|
64,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
352,840
|
|
|
$
|
352,660
|
|
|
$
|
170,294
|
|
|
$
|
170,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Fair Value of Financial Instruments
|
The Company has determined that the only assets and liabilities in the Companys financial statements that are required to be measured at fair value on a recurring basis are the Companys
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 Companys investment portfolio assets consist of corporate debt securities, money
market funds, U.S. Treasury securities, obligations of U.S. government-sponsored enterprises, commercial paper, and certificates of
Page 50 of 72
deposit and are reflected on our Consolidated Balance Sheet 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 March 29, 2014 and March 30, 2013, the Company classified all investment portfolio assets as Level 1 or Level 2
assets. The Company has no Level 3 assets. There were no transfers between Level 1, Level 2, or Level 3 measurements for the years ending March 29, 2014 and March 30, 2013.
The fair value of our financial assets at March 29, 2014, was determined using the following inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
in
Active
Markets
for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
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
|
|
The fair value of our financial assets at March 30, 2013, was determined using the following inputs
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
in
Active
Markets
for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
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
|
|
Page 51 of 72
5.
|
Accounts Receivable, net
|
The following are the components of accounts receivable, net (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
Gross accounts receivable
|
|
$
|
63,449
|
|
|
$
|
69,590
|
|
Allowance for doubtful accounts
|
|
|
(229
|
)
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
63,220
|
|
|
$
|
69,289
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the changes in the allowance for doubtful accounts (in thousands):
|
|
|
|
|
Balance, March 26, 2011
|
|
$
|
(421
|
)
|
Bad debt expense, net of recoveries
|
|
|
50
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
(371
|
)
|
Bad debt expense, net of recoveries
|
|
|
70
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
(301
|
)
|
Bad debt expense, net of recoveries
|
|
|
72
|
|
|
|
|
|
|
Balance, March 29, 2014
|
|
$
|
(229
|
)
|
|
|
|
|
|
6.
|
Goodwill and Intangibles, net
|
The goodwill balance included on the Consolidated Balance Sheets under the caption Goodwill and intangibles, net is $16.4 million and $6.0 million at March 29, 2014 and March 30,
2013, respectively. The increase in the goodwill and intangibles balances resulted from the acquisition discussed below in Note 7 Acquisition.
The following information details the gross carrying amount and accumulated amortization of our intangible assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2014
|
|
|
March 30, 2013
|
|
Intangible Category (Weighted-Average
Amortization period (years))
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
Core technology (a)
|
|
$
|
1,390
|
|
|
$
|
(1,390
|
)
|
|
$
|
1,390
|
|
|
$
|
(1,390
|
)
|
License agreement (a)
|
|
|
440
|
|
|
|
(440
|
)
|
|
|
440
|
|
|
|
(440
|
)
|
Existing technology (10.1)
|
|
|
9,826
|
|
|
|
(4,206
|
)
|
|
|
5,566
|
|
|
|
(3,802
|
)
|
Trademarks and tradename (b)
|
|
|
1,600
|
|
|
|
(384
|
)
|
|
|
320
|
|
|
|
(320
|
)
|
Customer relationships (10.0)
|
|
|
2,400
|
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
Technology licenses (3.2)
|
|
|
18,000
|
|
|
|
(15,117
|
)
|
|
|
16,303
|
|
|
|
(13,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
33,656
|
|
|
$
|
(21,657
|
)
|
|
$
|
24,019
|
|
|
$
|
(19,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Intangible assets are fully amortized.
|
|
(b)
|
Trademark assets are fully amortized. The tradename is being amortized over a period of ten years.
|
Page 52 of 72
Amortization expense for intangibles in fiscal years 2014, 2013, and 2012 was $2.8 million,
$3.4 million, and $3.7 million, respectively. The following table details the estimated aggregate amortization expense for all intangibles owned as of March 29, 2014, for each of the five succeeding fiscal years (in thousands):
|
|
|
|
|
For the year ended March 28, 2015
|
|
$
|
3,443
|
|
For the year ended March 26, 2016
|
|
$
|
2,295
|
|
For the year ended March 25, 2017
|
|
$
|
1,101
|
|
For the year ended March 31, 2018
|
|
$
|
794
|
|
For the year ended March 30, 2019
|
|
$
|
794
|
|
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 Companys technology and software expertise in our portable audio applications.
The Company acquired Acoustic for approximately $20.4 million, net of cash obtained, 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 Consolidated Statements of Comprehensive Income presented include Acoustics
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.
Goodwill was recorded in relation to the acquisition, as the purchase price was in excess of the fair value of the net assets acquired.
None of the goodwill is tax-deductible. The final purchase price was allocated as follows (in thousands):
|
|
|
|
|
Goodwill and Net Assets Acquired
|
|
Amount
|
|
Cash and cash equivalents
|
|
$
|
120
|
|
Accounts receivable
|
|
|
775
|
|
Other current assets
|
|
|
2
|
|
Property and equipment
|
|
|
175
|
|
Intangible assets
|
|
|
7,940
|
|
Goodwill
|
|
|
10,340
|
|
Deferred tax asset long-term
|
|
|
1,440
|
|
Other non-current assets
|
|
|
36
|
|
Current liabilities
|
|
|
(276
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
20,552
|
|
|
|
|
|
|
The acquired intangible assets and related weighted average amortization periods are detailed below (in
thousands):
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
Amount
|
|
|
Weighted-average
Amortization
Period (years)
|
|
Technology
|
|
$
|
4,260
|
|
|
|
10
|
|
Tradename
|
|
|
1,280
|
|
|
|
10
|
|
Customer relationships
|
|
|
2,400
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,940
|
|
|
|
|
|
Page 53 of 72
The Company
entered into an agreement to sell certain assets associated with Apex Precision Power (Apex) products in Tucson, Arizona for $26.1 million. On August 17, 2012, the Company closed the transaction under this agreement. After closing
the transaction, the Company maintained a high voltage / high power IC design team in Tucson. See Note 10 Restructuring Costs for information regarding the subsequent closure and relocation of the Tucson design center. The Company received
$22.2 million in cash and has recorded a long-term note receivable for $3.9 million to be paid in its entirety by August 17, 2014. The gain recorded on the sale was $0.2 million and is included on the Consolidated Statement of Comprehensive
Income under the caption,
Restructuring and other, net.
9.
|
Revolving Line of Credit
|
The Company maintained a revolving credit agreement (the Expired Credit Agreement) with Wells Fargo Bank, National
Association, as administrative agent and issuing lender, Barclays Bank, as syndication agent, Wells Fargo Securities, LLC and Barclays Capital, as joint lead arrangers and co-book managers until early fiscal year 2014. The aggregate borrowing limit
under the unsecured revolving 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 interest
rate payable was, at the Companys election, (i) a base rate plus the applicable margin, where the base rate is determined by reference to the highest of 1) the prime rate publicly announced by the administrative agent, 2) the federal
funds rate plus 0.50%, and 3) LIBOR for a one month period plus the difference between the applicable margin for LIBOR rate loans and the applicable margin for base rate loans, or (ii) the LIBOR rate plus the applicable margin that varies
according to the leverage ratio of the Company. Certain representations and warranties were required under the Expired Credit Agreement, and the Company must have been in compliance with specified financial covenants, including (i) the
requirement that the Company maintain a ratio of consolidated funded indebtedness to consolidated EBITDA of not greater than 1.75 to 1.0, computed in accordance with the terms of the Expired Credit Agreement, and (ii) a minimum ratio of
consolidated EBITDA to consolidated interest expense of not less than 3.50 to 1.0. The Company was in compliance with these covenants during the period. The Company had no outstanding amounts under the facility as of March 29, 2014 and
March 30, 2013, and there were no borrowings under the facility prior to its expiration on April 19, 2013. See Note 20 Subsequent Event for details on new revolving line of credit.
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 Companys headquarters in Austin, Texas. As a result, the Company incurred a one-time 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. The charge included $1.5 million in severance and relocation-related costs and $2.0 million in
facility and other related charges. In fiscal year 2014, the Company recorded a credit of approximately $0.6 million related to changes in estimates for the facility, due to new subleases on the vacated property. This information is presented in a
separate line item on the Consolidated Statements of Comprehensive Income in operating expenses under the caption
Restructuring and other, net.
Of the net $2.9 million expense incurred, approximately $2.5 million has been completed, and consisted of severance and relocation-related costs of approximately $1.1 million, an asset impairment charge
of approximately $1.0 million, and facility-related costs of approximately $0.4 million. As of March 29, 2014, we have a remaining restructuring accrual of $0.4 million, included in
Other accrued liabilities
on the
Consolidated Balance Sheet.
11.
|
Employee Benefit Plans
|
We have a 401(k) Profit Sharing Plan (the 401(k) Plan) covering all of our qualifying domestic employees. Under the 401(k)
Plan, employees may elect to contribute any percentage of their annual compensation up to the annual IRS limitations. Beginning in the fourth quarter of fiscal year 2014, the Company matches 50 percent of the first 8 percent of the employees
annual contribution; prior to the fourth quarter of the
Page 54 of 72
current fiscal year, the Company matched 50 percent of the first 6 percent of the employees annual contribution. We made matching employee contributions of $1.8 million, $1.5 million, and
$1.3 million during fiscal years 2014, 2013, and 2012, respectively.
The
Company is currently granting equity awards from the 2006 Stock Incentive Plan (the Plan), which was approved by stockholders in July 2006. The Plan provides for granting of stock options, restricted stock awards, performance awards,
phantom stock awards, and bonus stock awards, or any combination of the foregoing. To date, the Company has granted stock options, restricted stock awards, and phantom stock awards (also called restricted stock units) under the Plan. Stock
options generally vest between zero and four years, and are exercisable for a period of ten years from the date of grant. Generally, restricted stock awards are subject to vesting schedules up to four years. Restricted stock units are generally
subject to vesting from one to three years, depending upon the terms of the grant.
The following table summarizes the activity
in total shares available for grant (in thousands):
|
|
|
|
|
|
|
Shares
Available
for
Grant
|
|
Balance, March 26, 2011
|
|
|
8,175
|
|
Plans terminated
|
|
|
(34
|
)
|
Granted
|
|
|
(2,049
|
)
|
Forfeited
|
|
|
165
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
6,257
|
|
Plans terminated
|
|
|
|
|
Granted
|
|
|
(1,600
|
)
|
Forfeited
|
|
|
468
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
5,125
|
|
Plans terminated
|
|
|
|
|
Granted
|
|
|
(1,785
|
)
|
Forfeited
|
|
|
207
|
|
|
|
|
|
|
Balance, March 29, 2014
|
|
|
3,547
|
|
Stock Compensation Expense
The following table summarizes the effects of stock-based compensation on cost of goods sold, research and development, sales, general and administrative, pre-tax income, and net income after taxes for
options granted under the Companys equity incentive plans (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Cost of sales
|
|
$
|
864
|
|
|
$
|
751
|
|
|
$
|
398
|
|
Research and development
|
|
|
10,392
|
|
|
|
10,549
|
|
|
|
5,590
|
|
Sales, general and administrative
|
|
|
11,818
|
|
|
|
10,195
|
|
|
|
6,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on pre-tax income
|
|
|
23,074
|
|
|
|
21,495
|
|
|
|
12,178
|
|
Income Tax Benefit
|
|
|
(8,445
|
)
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense (net of taxes)
|
|
|
14,629
|
|
|
|
21,389
|
|
|
|
12,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation effects on basic earnings per share
|
|
$
|
0.50
|
|
|
$
|
0.33
|
|
|
$
|
0.19
|
|
Share-based compensation effects on diluted earnings per share
|
|
|
0.48
|
|
|
|
0.32
|
|
|
|
0.18
|
|
Share-based compensation effects on operating activities cash flow
|
|
|
14,629
|
|
|
|
21,389
|
|
|
|
12,178
|
|
Share-based compensation effects on financing activities cash flow
|
|
|
8,445
|
|
|
|
106
|
|
|
|
|
|
Page 55 of 72
The total share based compensation expense included in the table above and which is
attributable to restricted stock awards and restricted stock units was $18.6 million, $16.3 million, and $6.3 million, for fiscal years 2014, 2013, and 2012, respectively.
As of March 29, 2014, there was $37.5 million of compensation costs related to non-vested stock options, restricted stock awards, and restricted stock units granted under the Companys equity
incentive plans not yet recognized in the Companys financial statements. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.21 years for stock options, 0.27 years for restricted stock awards,
and 1.49 years for restricted stock units.
Stock Option Awards
We estimated the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model using a dividend
yield of zero and the following additional assumptions:
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 29, 2014
|
|
March 30, 2013
|
|
March 31, 2012
|
Expected stock price volatility
|
|
51.93 - 54.34%
|
|
63.42%
|
|
59.25 - 66.11%
|
Risk-free interest rate
|
|
0.47 - 0.52%
|
|
0.31%
|
|
0.27 - 1.43%
|
Expected term (in years)
|
|
2.46 - 2.61
|
|
2.46
|
|
2.32 - 3.82
|
The Black-Scholes valuation calculation requires us to estimate key assumptions such as stock price
volatility, expected term, risk-free interest rate and dividend yield. The expected stock price volatility is based upon implied volatility from traded options on our stock in the marketplace. The expected term of options granted is derived from an
analysis of historical exercises and remaining contractual life of stock options, and represents the period of time that options granted are expected to be outstanding after becoming vested. The risk-free interest rate reflects the yield on
zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption. Finally, we have never paid cash dividends, do not currently intend to pay cash dividends, and thus have assumed a zero percent dividend
yield.
Using the Black-Scholes option valuation model, the weighted average estimated fair values of employee stock options
granted in fiscal years 2014, 2013, and 2012, were $10.45, $20.43, $7.58, respectively.
During fiscal year 2014, 2013, and
2012, we received a net $5.1 million, $12.0 million, and $4.1 million, respectively, from the exercise of 0.8 million, 1.7 million, and 0.6 million, respectively, stock options granted under the Companys Stock Plan.
The total intrinsic value of stock options exercised during fiscal year 2014, 2013, and 2012, was $12.4 million, $48.6 million, and
$7.6 million, respectively. Intrinsic value represents the difference between the market value of the Companys common stock at the time of exercise and the strike price of the stock option.
As of March 29, 2014, approximately 7.3 million shares of common stock were reserved for issuance under the Companys Stock
Plan.
Page 56 of 72
Additional information with respect to stock option activity is as follows (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
Balance, March 26, 2011
|
|
|
6,181
|
|
|
$
|
7.63
|
|
Options granted
|
|
|
450
|
|
|
|
15.63
|
|
Options exercised
|
|
|
(593
|
)
|
|
|
6.88
|
|
Options forfeited
|
|
|
(67
|
)
|
|
|
7.70
|
|
Options expired
|
|
|
(67
|
)
|
|
|
15.68
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
5,904
|
|
|
$
|
8.23
|
|
Options granted
|
|
|
264
|
|
|
|
37.22
|
|
Options exercised
|
|
|
(1,746
|
)
|
|
|
6.88
|
|
Options forfeited
|
|
|
(144
|
)
|
|
|
12.52
|
|
Options expired
|
|
|
|
|
|
|
20.25
|
|
|
|
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
4,278
|
|
|
$
|
10.42
|
|
Options granted
|
|
|
318
|
|
|
|
23.45
|
|
Options exercised
|
|
|
(834
|
)
|
|
|
6.12
|
|
Options forfeited
|
|
|
(10
|
)
|
|
|
15.33
|
|
Options expired
|
|
|
(27
|
)
|
|
|
19.52
|
|
|
|
|
|
|
|
|
|
|
Balance, March 29, 2014
|
|
|
3,725
|
|
|
$
|
12.42
|
|
Additional information with regards to outstanding options that are vesting, expected to vest, or
exercisable as of March 29, 2014 is as follows (in thousands, except years and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise price
|
|
|
Weighted Average
Remaining Contractual
Term (years)
|
|
|
Aggregate
Intrinsic Value
|
|
Vested and expected to vest
|
|
|
3,676
|
|
|
$
|
12.24
|
|
|
|
5.68
|
|
|
$
|
32,674
|
|
Exercisable
|
|
|
3,004
|
|
|
$
|
9.54
|
|
|
|
5.07
|
|
|
$
|
31,823
|
|
In accordance with U.S. GAAP, stock options outstanding that are expected to vest are presented net of
estimated future option forfeitures, which are estimated as compensation costs are recognized. Options with a fair value of $4.8 million, $4.8 million, and $6.3 million, became vested during fiscal years 2014, 2013, and 2012, respectively.
The following table summarizes information regarding outstanding and exercisable options as of March 29, 2014 (in
thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number
|
|
|
Weighted
Average
Remaining
Contractual Life
(years)
|
|
|
Weighted
Average Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
$2.82 - $5.53
|
|
|
502
|
|
|
|
4.03
|
|
|
$
|
5.16
|
|
|
|
502
|
|
|
$
|
5.16
|
|
$5.55 - $5.55
|
|
|
943
|
|
|
|
5.50
|
|
|
|
5.55
|
|
|
|
943
|
|
|
|
5.55
|
|
$5.66 - $7.87
|
|
|
701
|
|
|
|
3.21
|
|
|
|
7.27
|
|
|
|
701
|
|
|
|
7.27
|
|
$8.06 - $16.25
|
|
|
831
|
|
|
|
6.74
|
|
|
|
15.21
|
|
|
|
616
|
|
|
|
15.10
|
|
$16.28 - $24.14
|
|
|
499
|
|
|
|
8.30
|
|
|
|
22.03
|
|
|
|
154
|
|
|
|
19.46
|
|
$38.99 - $38.99
|
|
|
249
|
|
|
|
8.52
|
|
|
|
38.99
|
|
|
|
88
|
|
|
|
38.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,725
|
|
|
|
5.72
|
|
|
$
|
12.42
|
|
|
|
3,004
|
|
|
$
|
9.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 57 of 72
As of March 29, 2014 and March 30, 2013, the number of options exercisable was
3.0 million and 3.2 million, respectively.
Restricted Stock Awards
The Company periodically grants restricted stock awards (RSAs) to select employees. The grant date for these awards is
equal to the measurement date and the awards are valued as of the measurement date and amortized over the requisite vesting period, which is no more than four years. Each full value award, including RSAs, reduces the total shares available for
grant under the Plan at a rate of 1.5 shares per RSA granted. As of March 29, 2014, approximately 0.1 million shares attributable to RSA awards were reserved for issuance under the Plan, which includes the additional shares associated with
this full value multiplier. A summary of the activity for RSAs in fiscal year 2014, 2013, and 2012, is presented below (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
(per share)
|
|
March 26, 2011
|
|
|
45
|
|
|
$
|
7.21
|
|
Granted
|
|
|
49
|
|
|
|
15.31
|
|
Vested
|
|
|
(54
|
)
|
|
|
14.57
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
40
|
|
|
|
7.19
|
|
Granted
|
|
|
27
|
|
|
|
28.24
|
|
Vested
|
|
|
(62
|
)
|
|
|
15.45
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
5
|
|
|
|
17.28
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2014
|
|
|
5
|
|
|
$
|
17.28
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of RSAs outstanding as of March 29, 2014 was $98 thousand.
RSAs with a fair value of $951 thousand and $637 thousand became vested during fiscal years 2013 and 2012, respectively. No RSAs became vested during fiscal year 2014.
Restricted Stock Units
Commencing in fiscal year 2011, the Company began
granting restricted stock units (RSUs) to select employees. These awards are valued as of the grant date and amortized over the requisite vesting period. Generally, RSUs vest 100 percent on the first to third anniversary of
the grant date depending on the vesting specifications. Each full value award, including RSUs, reduces the total shares available for grant under the 2006 option plan at a rate of 1.5 shares per RSU granted. As of March 29, 2014,
approximately 3.9 million shares attributable to RSU awards were reserved for issuance under the Plan, which includes the additional shares
Page 58 of 72
associated with this full value award multiplier. A summary of the activity for RSUs in fiscal year 2014, 2013, and 2012 is presented below (in thousands, except year and per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Fair Value
|
|
March 26, 2011
|
|
|
620
|
|
|
$
|
16.41
|
|
Granted
|
|
|
1,017
|
|
|
|
16.59
|
|
Vested
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(21
|
)
|
|
|
16.04
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
1,616
|
|
|
|
16.52
|
|
Granted
|
|
|
864
|
|
|
|
37.26
|
|
Vested
|
|
|
(193
|
)
|
|
|
20.56
|
|
Forfeited
|
|
|
(216
|
)
|
|
|
21.46
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
2,071
|
|
|
|
23.66
|
|
Granted
|
|
|
977
|
|
|
|
22.55
|
|
Vested
|
|
|
(626
|
)
|
|
|
17.71
|
|
Forfeited
|
|
|
(113
|
)
|
|
|
25.81
|
|
|
|
|
|
|
|
|
|
|
March 29, 2014
|
|
|
2,309
|
|
|
$
|
25.26
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of RSUs outstanding as of March 29, 2014 was $45.1 million.
Additional information with regards to outstanding restricted stock units that are vesting or expected to vest as of March 29, 2014, is as follows (in thousands, except year and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Fair Value
|
|
|
Weighted Average
Remaining Contractual
Term (years)
|
|
Vested and expected to vest
|
|
|
2,174
|
|
|
$
|
25.26
|
|
|
|
1.46
|
|
RSUs outstanding that are expected to vest are presented net of estimated future forfeitures, which
are estimated as compensation costs are recognized. RSUs with a fair value of $11.1 million and $3.8 million became vested during fiscal years 2014 and 2013, respectively. No RSUs became vested during fiscal year 2012. The majority of
RSUs that vested in 2014 and 2013 were net settled such that the Company withheld a portion of the shares at fair value to satisfy tax withholding requirements. In fiscal years 2014 and 2013, the vesting of RSUs reduced the authorized and
unissued share balance by approximately 0.6 million and 0.2 million, respectively. Total shares withheld and subsequently retired out of the Plan were approximately 0.2 million and 0.1 million, and total payments for the
employees tax obligations to taxing authorities were $3.9 million and $1.7 million for fiscal years 2014 and 2013, respectively. A portion of RSUs that vested in fiscal year 2014 were cash settled such that the Company received cash from
employees in lieu of withholding shares to satisfy tax withholding requirements. The total amount received from cash settled shares during fiscal year 2014 was $0.2 million.
13. Commitments and Contingencies
Facilities and Equipment
Under Operating Lease Agreements
With the exception of our corporate headquarters and select surrounding properties,
we lease our facilities and certain equipment under operating lease agreements, some of which have renewal options. Certain of these arrangements provide for lease payment increases based upon future fair market rates. As of May 1, 2014, our
principal facilities are located in Austin, Texas.
The Company closed operations in Tucson, Arizona during fiscal year 2013,
which included 28,000 square feet of leased office space which was primarily occupied by engineering personnel. The term of this lease extends through May 2015.
Page 59 of 72
The aggregate minimum future rental commitments under all operating leases, net of sublease
income, for the following fiscal years are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities
|
|
|
Subleases
|
|
|
Net Facilities
Commitments
|
|
|
Equipment
Commitments
|
|
|
Total
Commitments
|
|
2015
|
|
$
|
3,292
|
|
|
$
|
238
|
|
|
$
|
3,054
|
|
|
$
|
11
|
|
|
$
|
3,065
|
|
2016
|
|
|
2,623
|
|
|
|
27
|
|
|
|
2,596
|
|
|
|
8
|
|
|
|
2,604
|
|
2017
|
|
|
2,519
|
|
|
|
|
|
|
|
2,519
|
|
|
|
5
|
|
|
|
2,524
|
|
2018
|
|
|
823
|
|
|
|
|
|
|
|
823
|
|
|
|
5
|
|
|
|
828
|
|
2019
|
|
|
373
|
|
|
|
|
|
|
|
373
|
|
|
|
4
|
|
|
|
377
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payment
|
|
$
|
9,630
|
|
|
$
|
265
|
|
|
$
|
9,365
|
|
|
$
|
33
|
|
|
$
|
9,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense was approximately $2.8 million, $3.2 million, and $4.7 million, for fiscal years 2014,
2013, and 2012, respectively. Sublease rental income was $0.1 million, $0.1 million, $0.4 million, for fiscal years 2014, 2013, and 2012, respectively.
Wafer, Assembly and Test Purchase Commitments
We rely primarily on
third-party foundries for our wafer manufacturing needs. As of March 29, 2014, we had agreements with multiple foundries for the manufacture of wafers. On December 22, 2011, the Company entered into a $10 million Capacity Investment and
Loading Agreement with STATS ChipPAC Ltd (Supplier Agreement) in order to secure assembly and test capacity for certain products. As part of the agreement, we are eligible to receive rebates on our purchases up to the full amount of the specified
$10 million in the Supplier Agreement upon our meeting certain purchase volume milestones. We have utilized $2.6 million and $4.3 million during fiscal years 2014 and 2013, respectively, related to the agreement and expect to receive the full
amount of our $10 million payments back in rebates through fiscal year 2015, based on our current projections. Other than the previously mentioned agreement, our foundry agreements do not have volume purchase commitments or take or pay
clauses and provide for purchase commitments based on purchase orders. Cancellation fees or other charges may apply and are generally dependent upon whether wafers have been started or the stage of the manufacturing process at which the notice of
cancellation is given. As of March 29, 2014, we had foundry commitments of $36.7 million.
In addition to our wafer
supply arrangements, we contract with third-party assembly vendors to package the wafer die into finished products. Assembly vendors provide fixed-cost-per-unit pricing, as is common in the semiconductor industry. We had non-cancelable assembly
purchase orders with numerous vendors totaling $2.1 million at March 29, 2014.
Test vendors provide
fixed-cost-per-unit pricing, as is common in the semiconductor industry. Our total non-cancelable commitment for outside test services as of March 29, 2014 was $5.3 million.
14. 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 to assess whether a loss is probable or there is a
reasonable possibility that a loss or additional loss may have been incurred and to 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,
Page 60 of 72
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
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 Companys 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 plaintiffs 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
Companys motion and dismissed the case with prejudice. The plaintiff did not appeal the courts order and the case has concluded.
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,
53
rd
Judicial District (the Derivative Case).
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. On January 27, 2014, the plaintiff filed a Notice of Non-Suit (the
Notice) indicating that the plaintiff did not intend to pursue the claims further. Based on the plaintiffs filing of the Notice, the Court dismissed the plaintiffs claims without prejudice.
15. Stockholders Equity
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 Companys common stock. As of March 29, 2014, the Company
had repurchased 5.6 million shares at a cost of approximately $137.7 million, or an average cost of $24.46 per share. Of this total, 2.6 million shares were purchased in the current fiscal year at a cost of $52.1 million, or an average
cost of $19.78 per share. As of March 29, 2014, approximately $62.3 million remains available for repurchase under this plan.
In fiscal year 2013, the Company repurchased 3.0 million shares at a cost of $86.1 million, or an average cost of $28.59 per share. This amount included $0.5 million of stock repurchased pursuant to
the remaining portion of the $80 million share repurchase program authorized by the Board of Directors in November 2010.
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 March 29, 2014.
Preferred Stock
We have 5.0 million shares of Preferred Stock
authorized. As of March 29, 2014 we have not issued any of the authorized shares.
16. Accumulated Other
Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments and
unrealized gains and losses on investments classified as available-for-sale. The foreign currency translation adjustments are not currently adjusted for income taxes because they relate to indefinite investments in non-U.S. subsidiaries that have
since changed from a foreign functional currency to a U.S dollar functional currency.
Page 61 of 72
The following table summarizes the changes in the components of accumulated other
comprehensive loss, net of tax (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
|
|
|
Unrealized Gains
(Losses) on Securities
|
|
|
Total
|
|
Balance, March 31, 2012
|
|
$
|
(770
|
)
|
|
$
|
8
|
|
|
$
|
(762
|
)
|
Current period activity
|
|
|
|
|
|
|
(157
|
)
|
|
|
(157
|
)
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
(770
|
)
|
|
|
(149
|
)
|
|
|
(919
|
)
|
Current period activity
|
|
|
|
|
|
|
(31
|
)
|
|
|
(31
|
)
|
Tax effect
|
|
|
|
|
|
|
64
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 29, 2014
|
|
$
|
(770
|
)
|
|
$
|
(116
|
)
|
|
$
|
(886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. Income Taxes
Income before income taxes consisted of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
United States
|
|
$
|
155,431
|
|
|
$
|
200,124
|
|
|
$
|
79,425
|
|
Non-U.S.
|
|
|
306
|
|
|
|
1,066
|
|
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,737
|
|
|
$
|
201,190
|
|
|
$
|
79,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes consists of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
10,550
|
|
|
$
|
3,537
|
|
|
$
|
1,322
|
|
State
|
|
|
258
|
|
|
|
323
|
|
|
|
518
|
|
Non-U.S.
|
|
|
335
|
|
|
|
243
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax provision
|
|
$
|
11,143
|
|
|
$
|
4,103
|
|
|
$
|
2,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
36,543
|
|
|
|
60,506
|
|
|
|
(10,102
|
)
|
Non-U.S.
|
|
|
(60
|
)
|
|
|
(17
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax provision (benefit)
|
|
|
36,483
|
|
|
|
60,489
|
|
|
|
(10,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provision (benefit)
|
|
$
|
47,626
|
|
|
$
|
64,592
|
|
|
$
|
(8,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 62 of 72
The effective income tax rates differ from the rates computed by applying the statutory
federal rate to pretax income as follows (in percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Expected income tax provision at the U.S. federal statutory rate
|
|
|
35.0
|
|
|
|
35.0
|
|
|
|
35.0
|
|
Valuation allowance changes affecting the provision of income taxes
|
|
|
(0.1
|
)
|
|
|
(1.3
|
)
|
|
|
(46.7
|
)
|
Foreign taxes at different rates
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
|
|
R&D credit
|
|
|
(0.9
|
)
|
|
|
(2.1
|
)
|
|
|
|
|
Stock compensation
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
1.0
|
|
Recognition of prior year benefit
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
|
|
Nondeductible expenses
|
|
|
0.5
|
|
|
|
0.3
|
|
|
|
0.1
|
|
Other
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
30.6
|
|
|
|
32.1
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of our deferred tax assets and liabilities as of March 29, 2014 and
March 30, 2013 are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Inventory valuation
|
|
$
|
7,692
|
|
|
$
|
12,065
|
|
Accrued expenses and allowances
|
|
|
3,905
|
|
|
|
5,077
|
|
Net operating loss carryforwards
|
|
|
29,062
|
|
|
|
28,162
|
|
Research and development tax credit carryforwards
|
|
|
15,164
|
|
|
|
37,054
|
|
State tax credit carryforwards
|
|
|
231
|
|
|
|
237
|
|
Capitalized research and development
|
|
|
3,485
|
|
|
|
6,601
|
|
Other
|
|
|
28,627
|
|
|
|
21,505
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
88,166
|
|
|
$
|
110,701
|
|
Valuation allowance for deferred tax assets
|
|
|
(32,159
|
)
|
|
|
(23,232
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
56,007
|
|
|
$
|
87,469
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
5,709
|
|
|
$
|
5,238
|
|
Acquisition intangibles
|
|
|
3,209
|
|
|
|
623
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
8,918
|
|
|
$
|
5,861
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
47,089
|
|
|
$
|
81,608
|
|
|
|
|
|
|
|
|
|
|
These net deferred tax assets have been categorized on the Consolidated Balance Sheets as of
March 29, 2014 and March 30, 2013 as follows:
|
|
|
|
|
|
|
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
Current deferred tax assets
|
|
$
|
22,024
|
|
|
$
|
64,937
|
|
Long-term deferred tax assets
|
|
|
25,065
|
|
|
|
16,671
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
47,089
|
|
|
$
|
81,608
|
|
|
|
|
|
|
|
|
|
|
Page 63 of 72
The current and long-term deferred tax assets are disclosed separately under their
respective captions on the Consolidated Balance Sheets.
The valuation allowance increased by $8.9 million in fiscal year 2014
and decreased by $5.8 million in fiscal year 2013. The increase during fiscal year 2014 was primarily due to the equity acquisition of Acoustic, which had a large Federal net operating loss that will not be fully realized due to the limitations of
Internal Revenue Code Section 382. The Company maintained its valuation allowance on various state net operating losses and credits due to the likelihood that they will expire or go unutilized because the Company no longer has a significant
apportionment in the jurisdiction in which the attribute was created. The decrease in the fiscal year 2013 allowance was the result of a release of valuation allowance that the Company had maintained on its capital loss carryforward due to the
capital gain income generated by the sale of assets associated with the Companys Apex products. With regard to the remaining deferred tax assets, Management believes that the Companys results from future operations will generate
sufficient taxable income such that it is more likely than not that these deferred tax assets will be realized.
At
March 29, 2014, we had federal net operating loss carryforwards of $81.3 million. Of that amount, $29.5 million related to acquired companies and are, therefore, subject to certain limitations under Section 382 of the Internal Revenue
Code. Because the Company has elected the with and without method for purposes of tracking its excess stock deductions, the amount of federal net operating loss included in deferred tax assets is $61.2 million, which yields a tax
effected deferred tax asset of $21.4 million. The net deferred tax asset for federal net operating loss carryforwards is $8.8 million after taking into account the valuation allowance that has been placed on this deferred tax asset. The Company had
$110.0 million of excess stock deductions which are not included in deferred tax assets. The tax benefit from these deductions will increase additional paid-in capital when they are deemed realized under the with and without method. We
had net operating losses in various states that total $94.0 million. The federal net operating loss carryforwards expire in fiscal years 2019 through 2034. The state net operating loss carryforwards expire in fiscal years 2015 through 2029. We also
have non-U.S. net operating losses of $2.2 million, which do not expire.
Federal research and development credit carryforwards
of $21.0 million expire in fiscal years 2018 through 2034. Under the with and without method, all but $612 thousand of these credit carryforwards are deemed to have been utilized in fiscal year 2014 and are therefore, not reflected as
deferred tax assets at the end of the fiscal year. Of the $14.5 million of state research and development credits, $2.8 million will expire in fiscal years 2022 through 2027. The remaining $11.7 million of state research and development credits are
not subject to expiration.
We have approximately $307 thousand of cumulative undistributed earnings in certain non-U.S.
subsidiaries. We have not recognized a deferred tax liability on these undistributed earnings because the Company currently intends to reinvest these earnings in operations outside the U.S. The unrecognized deferred tax liability on these earnings
is approximately $109 thousand.
We record unrecognized tax benefits for the estimated risk associated with tax positions taken
on tax returns. The unrecognized tax benefits balance was zero at March 29, 2014 and March 30, 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 March 29, 2014, the balance of accrued interest and penalties was zero. No interest or penalties were incurred during
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 2014 remain open to examination by the major taxing jurisdictions to which we are subject.
Page 64 of 72
18. Segment Information
We determine our operating segments in accordance with Financial Accounting Standards Board (FASB) 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. Revenue from our product lines are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Audio Products
|
|
$
|
667,739
|
|
|
$
|
754,769
|
|
|
$
|
350,743
|
|
Energy Products
|
|
|
46,599
|
|
|
|
55,017
|
|
|
|
76,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
714,338
|
|
|
$
|
809,786
|
|
|
$
|
426,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Area
The following illustrates sales by geographic locations based on the sales office location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
United States
|
|
$
|
35,582
|
|
|
$
|
38,670
|
|
|
$
|
50,230
|
|
European Union
|
|
|
13,125
|
|
|
|
17,601
|
|
|
|
23,493
|
|
United Kingdom
|
|
|
1,513
|
|
|
|
1,610
|
|
|
|
434
|
|
China
|
|
|
617,850
|
|
|
|
700,051
|
|
|
|
294,143
|
|
Hong Kong
|
|
|
6,057
|
|
|
|
8,590
|
|
|
|
8,671
|
|
Japan
|
|
|
5,150
|
|
|
|
9,299
|
|
|
|
15,196
|
|
South Korea
|
|
|
9,338
|
|
|
|
8,975
|
|
|
|
9,781
|
|
Taiwan
|
|
|
13,739
|
|
|
|
11,694
|
|
|
|
10,662
|
|
Other Asia
|
|
|
11,112
|
|
|
|
10,387
|
|
|
|
13,063
|
|
Other non-U.S. countries
|
|
|
872
|
|
|
|
2,909
|
|
|
|
1,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated sales
|
|
$
|
714,338
|
|
|
$
|
809,786
|
|
|
$
|
426,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 65 of 72
The following illustrates property, plant and equipment, net, by geographic locations, based
on physical location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 29,
2014
|
|
|
March 30,
2013
|
|
United States
|
|
$
|
103,287
|
|
|
$
|
100,343
|
|
United Kingdom
|
|
|
16
|
|
|
|
23
|
|
China
|
|
|
265
|
|
|
|
137
|
|
Hong Kong
|
|
|
2
|
|
|
|
5
|
|
Japan
|
|
|
12
|
|
|
|
25
|
|
South Korea
|
|
|
5
|
|
|
|
6
|
|
Taiwan
|
|
|
52
|
|
|
|
70
|
|
Other Asia
|
|
|
11
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Total consolidated property, plant and equipment, net
|
|
$
|
103,650
|
|
|
$
|
100,623
|
|
|
|
|
|
|
|
|
|
|
19. Quarterly Results (Unaudited)
The following quarterly results have been derived from our audited annual consolidated financial statements. In the opinion of management,
this unaudited quarterly information has been prepared on the same basis as the annual consolidated financial statements and includes all adjustments, including normal recurring adjustments, necessary for a fair presentation of this quarterly
information. This information should be read along with the financial statements and related notes. The operating results for any quarter are not necessarily indicative of results to be expected for any future period.
The unaudited quarterly statement of operations data for each quarter of fiscal years 2014 and 2013 were as follows (in thousands, except
per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2014
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
Net sales
|
|
$
|
155,125
|
|
|
$
|
190,671
|
|
|
$
|
218,883
|
|
|
$
|
149,659
|
|
Gross profit
|
|
|
79,498
|
|
|
|
99,448
|
|
|
|
103,849
|
|
|
|
73,368
|
|
Net income
|
|
|
20,642
|
|
|
|
33,367
|
|
|
|
41,500
|
|
|
|
12,602
|
|
Basic income per share
|
|
$
|
0.33
|
|
|
$
|
0.53
|
|
|
$
|
0.66
|
|
|
$
|
0.20
|
|
Diluted income per share
|
|
|
0.31
|
|
|
|
0.50
|
|
|
|
0.63
|
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2013
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
Net sales
|
|
$
|
99,006
|
|
|
$
|
193,774
|
|
|
$
|
310,133
|
|
|
$
|
206,873
|
|
Gross profit
|
|
|
53,440
|
|
|
|
100,087
|
|
|
|
158,050
|
|
|
|
83,614
|
|
Net income
|
|
|
6,927
|
|
|
|
35,449
|
|
|
|
67,862
|
|
|
|
26,360
|
|
Basic income per share
|
|
$
|
0.11
|
|
|
$
|
0.55
|
|
|
$
|
1.04
|
|
|
$
|
0.41
|
|
Diluted income per share
|
|
|
0.10
|
|
|
|
0.51
|
|
|
|
0.99
|
|
|
|
0.39
|
|
20. Subsequent Event
On April 29, 2014, Cirrus Logic announced that Cirrus Logic and board of directors of Wolfson Microelectronics plc, a public limited
company incorporated in Scotland (Wolfson), had 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.
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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). As a result of this agreement, 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 approved, is expected to strengthen Cirrus Logics 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 Logics balance sheet and $225 million in debt funding from Wells Fargo Bank, National Association. The Acquisition is expected to close in the second half of calendar year 2014.
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 deal. 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 therein) 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 Logics 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 Commitment of the Lenders. Certain
representations and warranties are required under the Credit Agreement, and the Company must be in compliance with specified financial covenants, including 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 the sum of cash and cash equivalents of Cirrus Logic and its subsidiaries on a consolidated basis must not be less than $75 million.
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