SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): October
29, 2014
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CIRRUS
LOGIC, INC.
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(Exact
name of Registrant as specified in its charter)
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Delaware
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0-17795
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77-0024818
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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800 West 6th Street, Austin, TX
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78701
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (512)
851-4000
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
⃞
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
⃞
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
⃞
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On October 29, 2014, the Company issued a press release announcing its
results for its second quarter and first six months of fiscal year
2015. The full text of the press release is furnished as Exhibit No.
99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD.
On October 29, 2014, in addition to issuing a press release, the Company
posted on its website a shareholder letter to investors summarizing the
financial results for its second quarter and first six months of fiscal
year 2015. The full text of the shareholder letter is furnished as
Exhibit No. 99.2 to this Current Report on Form 8-K.
Use of Non-GAAP Financial Information
To supplement Cirrus Logic's financial statements presented on a GAAP
basis, Cirrus has provided certain non-GAAP financial information,
including gross margin, operating expenses, net income, income from
operations, operating margin and diluted earnings per share. A
reconciliation of the adjustments to GAAP results is included in the
tables to the press release furnished as Exhibit No. 99.1 to this
Current Report on Form 8-K. 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.
The information contained in Items 2.02, 7.01, and 9.01 in this Current
Report on Form 8-K and the exhibits furnished hereto contain
forward-looking statements regarding the Company and cautionary
statements identifying important factors that could cause actual results
to differ materially from those anticipated. In addition, this
information shall not be deemed “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
otherwise subject to the liabilities of that section, nor shall they be
deemed incorporated by reference in any filing under the Securities Act
of 1933, as amended, or the Exchange Act, except as expressly set forth
by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
Exhibit 99.1 Cirrus Logic, Inc. press release dated
October 29, 2014
Exhibit 99.2 Cirrus Logic, Inc.
shareholder letter dated October 29, 2014
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, Registrant has
duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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CIRRUS LOGIC, INC.
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Date:
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October 29, 2014
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By:
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/s/ Thurman K. Case
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Name: Thurman K. Case
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Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibit No.
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Description
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99.1
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Registrant’s press release dated October 29, 2014
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99.2
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Cirrus Logic, Inc. shareholder letter dated October 29, 2014
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Exhibit 99.1
Cirrus
Logic Reports Revenue of $210.2 Million
Strong
Demand for Portable Audio Drives September Quarter Revenue Growth
AUSTIN, Texas--(BUSINESS WIRE)--October 29, 2014--Cirrus Logic, Inc.
(Nasdaq: CRUS), a leader in high-precision analog and digital
signal processing components, today posted on its investor relations
website at http://investor.cirrus.com the quarterly Shareholder
Letter that contains the complete financial results for the second
quarter fiscal year 2015, which ended Sept. 27, 2014, as well as the
company’s current business outlook.
“Q2 was an outstanding quarter for Cirrus Logic, as strong demand for
portable audio products drove revenue above expectations. In addition,
we were pleased to have closed the acquisition of Wolfson
Microelectronics on Aug. 21,” said Jason Rhode, president and chief
executive officer. “The acquisition further strengthens Cirrus Logic’s
position as a market leader and helps accelerate critical R&D programs
we believe will fuel revenue growth in the future.”
Reported Financial Results – Second Quarter FY15
-
Revenue of $210.2 million, including $197.2 million from Cirrus Logic
and $13 million from five weeks of Wolfson Microelectronics;
-
GAAP gross margin of 47.8 percent and non-GAAP gross margin of 48.7
percent;
-
GAAP operating expenses of $82.5 million and non-GAAP operating
expenses of $57.3 million. GAAP operating expense includes $18.7
million in acquisition costs and $6.5 million of share-based
compensation and amortization of acquired intangibles; and
-
GAAP diluted earnings per share of $0.01 and non-GAAP diluted earnings
per share of $0.68.
A reconciliation of the non-GAAP charges is included in the tables
accompanying this press release.
Business Outlook – Third Quarter FY15
-
Revenue is expected to range between $265 million and $285 million;
-
GAAP gross margin is expected to be between 42 percent and 44 percent,
which includes roughly 200 basis points of costs associated with the
fair value write up of acquired inventory; and
-
Combined R&D and SG&A expenses are expected to range between $86
million and $90 million, which includes approximately $9 million in
share-based compensation and $7 million in amortization of acquired
intangibles.
Cirrus Logic will host a live Q&A session at 5 p.m. EDT today to answer
questions related to its financial results and business outlook.
Participants may listen to the conference call on the Cirrus Logic
website. Participants who would like to submit a question to be
addressed during the call are requested to email investor.relations@cirrus.com.
A replay of the webcast can be accessed on the Cirrus Logic website
approximately two hours following its completion, or by calling (404)
537-3406, or toll-free at (855) 859-2056 (Access Code: 13896797).
Cirrus Logic, Inc.
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, industrial
and energy-related applications. The company operates from headquarters
in Austin, Texas, with offices in the United States, United Kingdom,
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
gross margins, operating expenses, net income, operating profit and
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. 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 2015 revenue, gross margin,
combined research and development and selling, general and
administrative expense levels, share-based compensation expense,
amortization of acquired intangibles and acquisition related costs
associated with the fair value write up of acquired inventory. In some
cases, forward-looking statements are identified by words such as
“expect,” “anticipate,” “target,” “project,” “believe,” “goals,”
“opportunity,” “estimates,” “intend,” and variations of these types of
words and similar expressions. 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: the level of orders and shipments during the third quarter of
fiscal year 2015, as well as customer cancellations of orders, or the
failure to place orders consistent with forecasts; and the risk factors
listed in our Form 10-K for the year ended March 29, 2014, 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, Cirrus and Wolfson are registered trademarks of Cirrus
Logic, Inc. or its subsidiaries. All other company or product names
noted herein may be trademarks of their respective holders.
Summary financial data follows:
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CIRRUS LOGIC, INC.
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CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
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(unaudited)
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(in thousands, except per share data)
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Three Months Ended
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Six Months Ended
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Sep. 27,
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Jun. 28,
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Sep. 28,
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Sep. 27,
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Sep. 28,
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2014
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2014
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2013
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2014
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2013
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Q2'15
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Q1'15
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Q2'14
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Q2'15
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Q2'14
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Portable audio products
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$
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163,563
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$
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112,570
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$
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150,949
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$
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276,132
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$
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267,556
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Non-portable audio and other products
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46,651
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39,995
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39,722
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86,647
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78,240
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Net sales
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210,214
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152,565
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190,671
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362,779
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345,796
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Cost of sales
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109,647
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77,190
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91,223
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186,837
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166,850
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Gross profit
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100,567
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75,375
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99,448
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175,942
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178,946
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Gross margin
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47.8
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%
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49.4
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%
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52.2
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%
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48.5
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%
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51.7
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%
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Research and development
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44,557
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39,777
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29,722
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84,334
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58,252
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Selling, general and administrative
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21,545
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19,683
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19,215
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41,228
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38,413
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Restructuring and other
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1,455
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-
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(154
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)
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1,455
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(584
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)
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Acquisition related costs
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14,937
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-
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-
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14,937
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-
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Patent infringement settlements, net
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-
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-
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-
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-
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695
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Total operating expenses
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82,494
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59,460
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48,783
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141,954
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96,776
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Operating income
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18,073
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15,915
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50,665
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33,988
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82,170
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Interest income (expense), net
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(2,670
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)
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(467
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)
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201
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(3,137
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)
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359
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Other income (expense), net
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(11,994
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)
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501
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(38
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)
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(11,493
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)
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(55
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)
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Income before income taxes
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3,409
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15,949
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50,828
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19,358
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|
82,474
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Provision for income taxes
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2,557
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5,701
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17,461
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8,258
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|
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|
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28,465
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Net income
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|
$
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852
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$
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10,248
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$
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33,367
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|
$
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11,100
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$
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54,009
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Basic earnings per share:
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$
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0.01
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$
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0.17
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$
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0.53
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$
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0.18
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$
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0.85
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Diluted earnings per share:
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$
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0.01
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$
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0.16
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$
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0.50
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$
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0.17
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|
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$
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0.82
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Weighted average common shares outstanding:
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Basic
|
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|
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62,241
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|
|
|
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62,032
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|
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|
63,217
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|
|
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|
62,137
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|
|
|
|
63,329
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Diluted
|
|
|
|
65,085
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|
|
64,688
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|
66,125
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|
|
|
64,892
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|
|
|
|
66,203
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|
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Prepared in accordance with Generally Accepted Accounting
Principles
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CIRRUS LOGIC, INC.
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RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION
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(unaudited, in thousands, except per share data)
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(not prepared in accordance with GAAP)
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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.
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|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
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|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep. 27,
|
|
|
Jun. 28,
|
|
|
Sep. 28,
|
|
|
Sep. 27,
|
|
|
Sep. 28,
|
|
|
|
2014
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Net Income Reconciliation
|
|
|
Q2'15
|
|
|
Q1'15
|
|
|
Q2'14
|
|
|
Q2'15
|
|
|
Q2'14
|
GAAP Net Income
|
|
|
$
|
852
|
|
|
|
$
|
10,248
|
|
|
|
$
|
33,367
|
|
|
|
$
|
11,100
|
|
|
|
$
|
54,009
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|
Amortization of acquisition intangibles
|
|
|
|
2,524
|
|
|
|
|
246
|
|
|
|
|
-
|
|
|
|
|
2,770
|
|
|
|
|
-
|
|
Stock based compensation expense
|
|
|
|
6,496
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|
|
|
|
5,622
|
|
|
|
|
5,739
|
|
|
|
|
12,118
|
|
|
|
|
11,513
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|
Provision for litigation expenses and settlements
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
695
|
|
Restructuring and other costs, net
|
|
|
|
1,455
|
|
|
|
|
-
|
|
|
|
|
(154
|
)
|
|
|
|
1,455
|
|
|
|
|
(584
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)
|
Wolfson acquisition items
|
|
|
|
30,875
|
|
|
|
|
2,304
|
|
|
|
|
-
|
|
|
|
|
33,179
|
|
|
|
|
-
|
|
Provision for income taxes
|
|
|
|
1,764
|
|
|
|
|
5,226
|
|
|
|
|
16,378
|
|
|
|
|
6,990
|
|
|
|
|
26,539
|
|
Non-GAAP Net Income
|
|
|
$
|
43,966
|
|
|
|
$
|
23,646
|
|
|
|
$
|
55,330
|
|
|
|
$
|
67,612
|
|
|
|
$
|
92,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted earnings per share
|
|
|
$
|
0.01
|
|
|
|
$
|
0.16
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.17
|
|
|
|
$
|
0.82
|
|
Effect of Amortization of acquisition intangibles
|
|
|
|
0.04
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
0.04
|
|
|
|
|
-
|
|
Effect of Stock based compensation expense
|
|
|
|
0.10
|
|
|
|
|
0.09
|
|
|
|
|
0.09
|
|
|
|
|
0.19
|
|
|
|
|
0.17
|
|
Effect of Provision for litigation expenses and settlements
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
0.01
|
|
Effect of Restructuring and other costs, net
|
|
|
|
0.03
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
0.02
|
|
|
|
|
(0.01
|
)
|
Effect of Wolfson acquisition items
|
|
|
|
0.47
|
|
|
|
|
0.04
|
|
|
|
|
-
|
|
|
|
|
0.51
|
|
|
|
|
-
|
|
Effect of Provision for income taxes
|
|
|
|
0.03
|
|
|
|
|
0.08
|
|
|
|
|
0.25
|
|
|
|
|
0.11
|
|
|
|
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Diluted earnings per share
|
|
|
$
|
0.68
|
|
|
|
$
|
0.37
|
|
|
|
$
|
0.84
|
|
|
|
$
|
1.04
|
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income
|
|
|
$
|
18,073
|
|
|
|
$
|
15,915
|
|
|
|
$
|
50,665
|
|
|
|
$
|
33,988
|
|
|
|
$
|
82,170
|
|
GAAP Operating Profit
|
|
|
|
9
|
%
|
|
|
|
10
|
%
|
|
|
|
27
|
%
|
|
|
|
9
|
%
|
|
|
|
24
|
%
|
Amortization of acquisition intangibles
|
|
|
|
2,524
|
|
|
|
|
246
|
|
|
|
|
-
|
|
|
|
|
2,770
|
|
|
|
|
-
|
|
Stock compensation expense - COGS
|
|
|
|
253
|
|
|
|
|
231
|
|
|
|
|
239
|
|
|
|
|
484
|
|
|
|
|
245
|
|
Stock compensation expense - R&D
|
|
|
|
2,781
|
|
|
|
|
2,543
|
|
|
|
|
2,158
|
|
|
|
|
5,324
|
|
|
|
|
5,012
|
|
Stock compensation expense - SG&A
|
|
|
|
3,462
|
|
|
|
|
2,848
|
|
|
|
|
3,342
|
|
|
|
|
6,310
|
|
|
|
|
6,256
|
|
Provision for litigation expenses and settlements
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
695
|
|
Restructuring and other costs, net
|
|
|
|
1,455
|
|
|
|
|
-
|
|
|
|
|
(154
|
)
|
|
|
|
1,455
|
|
|
|
|
(584
|
)
|
Wolfson acquisition items
|
|
|
|
16,547
|
|
|
|
|
2,192
|
|
|
|
|
-
|
|
|
|
|
18,739
|
|
|
|
|
-
|
|
Non-GAAP Operating Income
|
|
|
$
|
45,095
|
|
|
|
$
|
23,975
|
|
|
|
$
|
56,250
|
|
|
|
$
|
69,070
|
|
|
|
$
|
93,794
|
|
Non-GAAP Operating Profit
|
|
|
|
21
|
%
|
|
|
|
16
|
%
|
|
|
|
30
|
%
|
|
|
|
19
|
%
|
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expense Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Expenses
|
|
|
$
|
82,494
|
|
|
|
$
|
59,460
|
|
|
|
$
|
48,783
|
|
|
|
$
|
141,954
|
|
|
|
$
|
96,776
|
|
Amortization of acquisition intangibles
|
|
|
|
(2,524
|
)
|
|
|
|
(246
|
)
|
|
|
|
-
|
|
|
|
|
(2,770
|
)
|
|
|
|
-
|
|
Stock compensation expense - R&D
|
|
|
|
(2,781
|
)
|
|
|
|
(2,543
|
)
|
|
|
|
(2,158
|
)
|
|
|
|
(5,324
|
)
|
|
|
|
(5,012
|
)
|
Stock compensation expense - SG&A
|
|
|
|
(3,462
|
)
|
|
|
|
(2,848
|
)
|
|
|
|
(3,342
|
)
|
|
|
|
(6,310
|
)
|
|
|
|
(6,256
|
)
|
Provision for litigation expenses and settlements
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(695
|
)
|
Restructuring and other costs, net
|
|
|
|
(1,455
|
)
|
|
|
|
-
|
|
|
|
|
154
|
|
|
|
|
(1,455
|
)
|
|
|
|
584
|
|
Wolfson acquisition items
|
|
|
|
(14,937
|
)
|
|
|
|
(2,192
|
)
|
|
|
|
-
|
|
|
|
|
(17,129
|
)
|
|
|
|
-
|
|
Non-GAAP Operating Expenses
|
|
|
$
|
57,335
|
|
|
|
$
|
51,631
|
|
|
|
$
|
43,437
|
|
|
|
$
|
108,966
|
|
|
|
$
|
85,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin/Profit Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin
|
|
|
$
|
100,567
|
|
|
|
$
|
75,375
|
|
|
|
$
|
99,448
|
|
|
|
$
|
175,942
|
|
|
|
$
|
178,946
|
|
GAAP Gross Profit
|
|
|
|
47.8
|
%
|
|
|
|
49.4
|
%
|
|
|
|
52.2
|
%
|
|
|
|
48.5
|
%
|
|
|
|
51.7
|
%
|
Wolfson acquisition items
|
|
|
|
1,610
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,610
|
|
|
|
|
-
|
|
Stock compensation expense - COGS
|
|
|
|
253
|
|
|
|
|
231
|
|
|
|
|
239
|
|
|
|
|
484
|
|
|
|
|
245
|
|
Non-GAAP Gross Margin
|
|
|
$
|
102,430
|
|
|
|
$
|
75,606
|
|
|
|
$
|
99,687
|
|
|
|
$
|
178,036
|
|
|
|
$
|
179,191
|
|
Non-GAAP Gross Profit
|
|
|
|
48.7
|
%
|
|
|
|
49.6
|
%
|
|
|
|
52.3
|
%
|
|
|
|
49.1
|
%
|
|
|
|
51.8
|
%
|
|
|
|
|
|
|
|
|
|
|
CIRRUS LOGIC, INC.
|
|
CONSOLIDATED CONDENSED BALANCE SHEET
|
|
(in thousands)
|
|
|
|
|
|
|
|
Sep. 27,
|
|
Mar. 29,
|
|
Sep. 28,
|
|
|
|
|
|
|
|
2014
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
48,214
|
|
|
$
|
31,850
|
|
|
$
|
68,886
|
|
|
Marketable securities
|
|
|
|
|
|
85,796
|
|
|
|
263,417
|
|
|
|
199,423
|
|
|
Accounts receivable, net
|
|
|
|
|
126,161
|
|
|
|
63,220
|
|
|
|
97,640
|
|
|
Inventories
|
|
|
|
|
|
121,169
|
|
|
|
69,743
|
|
|
|
91,247
|
|
|
Deferred tax assets
|
|
|
|
|
|
16,435
|
|
|
|
22,024
|
|
|
|
38,398
|
|
|
Other current assets
|
|
|
|
|
|
29,089
|
|
|
|
25,079
|
|
|
|
23,978
|
|
|
Total current assets
|
|
|
|
|
|
426,864
|
|
|
|
475,333
|
|
|
|
519,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term marketable securities
|
|
|
|
9,228
|
|
|
|
89,243
|
|
|
|
40,254
|
|
|
Property and equipment, net
|
|
|
|
133,458
|
|
|
|
103,650
|
|
|
|
101,885
|
|
|
Intangibles, net
|
|
|
|
|
|
187,030
|
|
|
|
11,999
|
|
|
|
4,734
|
|
|
Goodwill
|
|
|
|
|
|
|
265,410
|
|
|
|
16,367
|
|
|
|
6,027
|
|
|
Deferred tax assets
|
|
|
|
|
|
24,998
|
|
|
|
25,065
|
|
|
|
16,638
|
|
|
Other assets
|
|
|
|
|
|
17,658
|
|
|
|
3,087
|
|
|
|
10,051
|
|
|
Total assets
|
|
|
|
|
$
|
1,064,646
|
|
|
$
|
724,744
|
|
|
$
|
699,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
$
|
81,549
|
|
|
$
|
51,932
|
|
|
$
|
56,868
|
|
|
Accrued salaries and benefits
|
|
|
|
17,706
|
|
|
|
13,388
|
|
|
|
16,894
|
|
|
Other accrued liabilities
|
|
|
|
|
34,946
|
|
|
|
11,572
|
|
|
|
6,313
|
|
|
Deferred income
|
|
|
|
|
|
5,218
|
|
|
|
5,631
|
|
|
|
4,858
|
|
|
Total current liabilities
|
|
|
|
|
139,419
|
|
|
|
82,523
|
|
|
|
84,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
25,376
|
|
|
|
4,863
|
|
|
|
11,231
|
|
|
Long-term debt
|
|
|
|
|
|
226,439
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
Capital stock
|
|
|
|
|
|
1,104,379
|
|
|
|
1,078,878
|
|
|
|
1,055,256
|
|
|
Accumulated deficit
|
|
|
|
|
|
(430,144
|
)
|
|
|
(440,634
|
)
|
|
|
(451,532
|
)
|
|
Accumulated other comprehensive loss
|
|
|
|
(823
|
)
|
|
|
(886
|
)
|
|
|
(727
|
)
|
|
Total stockholders' equity
|
|
|
|
673,412
|
|
|
|
637,358
|
|
|
|
602,997
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
1,064,646
|
|
|
$
|
724,744
|
|
|
$
|
699,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepared in accordance with Generally Accepted Accounting
Principles
|
CONTACT:
Cirrus Logic, Inc.
Investor Contact:
Thurman K.
Case, 512-851-4125
Chief Financial Officer
Investor.Relations@cirrus.com
October 29, 2014 Letter to
Shareholders Q2 FY15 CIRRUS LOGIC, INC. FY13 800 WEST SIXTH STREET,
AUSTIN, TEXAS 78701
October 29, 2014 Dear
Shareholders, Q2 was an outstanding quarter for Cirrus Logic as we
delivered revenue of $210.2 million, which included approximately five
weeks of contribution from Wolfson Microelectronics. On a standalone
basis, Cirrus Logic’s revenue exceeded expectations, increasing 29
percent quarter over quarter and three percent year over year to $197.2
million, as strong demand for portable audio products was fueled by
shipments ramping in several new flagship smartphones. The September
quarter was very productive as we broadened both our custom and
general-market product portfolios with both the US and UK teams taping
out several new devices in advanced geometries targeting the audio and
voice markets. We were pleased to close the Wolfson Microelectronics
transaction on Aug. 21. The strategic rationale for the acquisition was
primarily driven by the fundamental value of Wolfson’s technology,
skilled engineering teams, and the potential for the combined company to
capitalize on additional opportunities. The acquisition accelerates
Cirrus Logic’s strategic roadmap; further strengthens our technology
portfolio with the addition
of MEMS microphones,
advanced DSP technology, and extensive software capabilities,
particularly in the Android ecosystem; and expands our development
capacity and customer base. As a premier supplier of IC solutions that
span the complete audio signal chain from capture to playback, Cirrus
Logic is now well positioned as a market leader with a broad portfolio
of custom-and general-market products shipping in many tier-one flagship
devices today, including five of the top ten global smartphone OEMs. We
believe as the value placed on audio and voice technology continues to
increase there is an opportunity to drive revenue growth over the next
several years through the addition of new customers and expanding
content with existing customers. Revenue and Gross Margins Revenue for
the second quarter was $210.2 million, including $13 million from the
acquisition of Wolfson. On a standalone basis, Cirrus Logic’s revenue
increased 29 percent sequentially and three percent year over year to
$197.2 million, as we experienced strong demand for our custom portable
audio products. As anticipated, the previously mentioned year-over-year
revenue headwinds associated with the change in our portable audio
pricing structure are largely behind us as we have transitioned to a
different product mix. While revenue from the Wolfson acquisition only
contributed five weeks of sales to the combined results in Q2, for the
full quarter they generated total revenue of $28.8 million. Our largest
customer contributed approximately 73 percent of total revenue in Q2.
Our relationship with this customer remains outstanding with design
activity continuing on various products. While we understand there is
intense interest in this
customer, in accordance
with our policy, we do not discuss specifics about our business
relationship. As a combined company, we derive the vast majority of our
revenue from the audio market; therefore, going forward we are adjusting
how we identify revenue to better reflect our sales by product lines.
Beginning this quarter, revenue will be designated as Portable Audio
Products, which includes devices selling into such end applications as
tablets and smartphones. The remainder of the revenue will be defined as
Non-Portable Audio and Other Products, which target high-end home
entertainment, automotive, energy, industrial and various general
markets. In the September quarter, revenue generated by the combined
company consisted of approximately 78 percent of Portable Audio Products
and 22 percent of Non-Portable Audio and Other Products. In the December
quarter we expect revenue to range from $265 million to $285 million,
representing growth on both a quarter-over-quarter and a year-over-year
basis. This guidance reflects reduced revenue expectations for
general-market portable products selling into high-end Android
applications. Sales into this application have been negatively impacted
by a variety of market factors over the past several quarters, and as a
result, we have lowered our outlook for Wolfson revenue in Q3. However,
on a standalone basis, Cirrus Logic’s revenue outlook is exceeding prior
expectations and contributing to year over year revenue growth for FY15.
GAAP gross margins for the September quarter, including Wolfson, were
47.8 percent and non-GAAP gross margins were 48.7 percent. GAAP gross
margins reflect a seasonally higher mix of portable products and costs
related to the accounting requirements associated with the fair value
write up of acquired inventory. We expect these charges to also affect
Q3, but to be largely behind us by the end of the quarter. In the
December quarter, we expect GAAP gross margin to range from 42 percent
to 44 percent, which includes an impact of approximately 200 basis
points due to acquired inventory
accounting charges. Gross
margin guidance also reflects a product mix more in-line with our
long-term model in the mid-40 percent range. Operating Profit and Cash
Operating profit in the September quarter, including the contribution
from the acquisition of Wolfson, was nine percent GAAP and 21 percent
non-GAAP. Operating expenses on a GAAP basis were $82.5 million and
$57.3 million non-GAAP. GAAP operating expenses include approximately
$6.5 million in share-based compensation and roughly $18.7 million in
costs associated with the acquisition of Wolfson. In the December
quarter R&D and SG&A expenses should range from $86 million to $90
million, including $9 million in share-based compensation and $7 million
in amortization of acquired intangibles. Our total headcount exiting Q2
was 1,099, which includes the addition of 381 Wolfson employees. A key
consideration in the acquisition of Wolfson was the ability of the
combined company to aggressively target a significant number of
meaningful opportunities in the audio and voice market that we believe
will fuel future revenue growth and diversification. Since the
acquisition closed in August, our engineering and technical marketing
teams have diligently evaluated and aligned our strategic roadmaps.
Consequently, we are increasing investment in several critical projects
being developed by our UK teams, including next
generation smart codecs,
which we believe will enable the company to deliver innovative solutions
across a broader range of key customers and markets. Operating expense
guidance for the December quarter includes costs associated with design
tools and contract resources needed to expedite these projects. As a
result of our decision to accelerate R&D investment and our adjusted
expectations for sales of general market portable products, we do not
anticipate the Wolfson acquisition to be accretive in the December
quarter. However, longer-term, we continue to expect to see improvements
in operating efficiencies and profitability as these product lines
benefit from Cirrus Logic’s supply chain and engineering processes.
Furthermore, we remain on track to meet our ongoing annual savings goal
for the acquisition. The ending cash balance in the September quarter
was $143 million, down from the prior quarter as a portion of our cash
was utilized to finance the acquisition of Wolfson. As of Q2, the
company’s balance sheet reflects $226 million in debt associated with
funding the acquisition. Interest expense related to this debt is
expected to range from $1 million to $1.5 million per quarter for FY15.
Taxes Our GAAP tax expense during the quarter was $2.6 million, which
included $1.8 million of non-cash charges associated with our deferred
tax asset and other tax credits. At this time, we anticipate our
effective quarterly cash tax rate to be less than four percent for the
remainder of the fiscal year. Our U.S. deferred tax assets and other tax
credits should be largely depleted by the end of FY15. We anticipate
paying an annual worldwide tax rate of approximately 30 percent in FY16,
with the rate being higher in the first half of the fiscal year. Moving
forward, we expect a growing portion of our revenue and income will be
generated offshore, accordingly, our worldwide effective tax rate has
the potential to be further reduced in FY17 and beyond.
We are excited to have
closed the acquisition of Wolfson during the quarter. This acquisition
accelerates Cirrus Logic’s strategic roadmap and strengthens our
technology portfolio with the addition of MEMS microphones, extensive
software infrastructure and proven smart codec technology. The combined
company is leveraging our unparalleled expertise in analog and
mixed-signal technology, comprehensive software capabilities and
world-class engineering teams to drive continued innovation in the
rapidly changing audio market. With a broad portfolio of products,
including amplifiers, codecs, DSPs and MEMS microphones, Cirrus Logic is
currently the only IC company with a solution that encompasses the
complete audio signal chain from capture to playback. Cirrus Logic and
Wolfson’s product development approach and our vision of the audio
market are very complementary. On a standalone basis, Cirrus Logic has
historically dedicated a large portion of our engineering resources to
the rapid development of custom silicon products, while Wolfson has
largely focused on general market products for Android platforms where
they can provide added differentiation via embedded software algorithms.
Both companies have been successful engaging tier-one customers but have
been limited by engineering resource constraints and scale in efforts to
meaningfully address additional opportunities. As a combined company, we
are maximizing our engineering experience and resources to target
initiatives we view as critical for future growth. We have a robust
product roadmap that spans the complete audio signal chain and would
like to highlight three of our key investment areas: smart codecs, MEMS
microphones and software. Smart codecs integrate the functionality of
several discrete audio components, including codecs, audio and voice
DSP's, and class-D amplifiers, into one component with complex digital
signal processing capabilities and programmable DSP. This integration
greatly reduces the amount of board space required for the audio
subsystem and lowers the total bill of materials for customers. As a
result of these benefits combined with the
processing capabilities,
enable the company to command higher ASPs for smart codecs compared to
individual components. The company is shipping smart codecs in flagship
devices today and we are heavily investing in next generation products
with increased performance and functionality that target both high-end
and mid-tier devices across numerous applications. Through the
acquisition of Wolfson, we gained MEMS microphone technology, which is
an integral component of our strategic roadmap and significantly
broadens our served available market as two to three microphones are
typically connected to a codec in each device. While we are shipping
microphones today in several devices, we expect to target additional
opportunities going forward where our microphones are designed in tandem
with our smart codecs to enable the chipset to deliver enhanced
performance and features. We are also ramping our investment in
software, as we believe it is essential to deliver a complete,
best-in-class hardware and software solution to our customers. The
combination offers flexible solutions that provide compelling features
to consumers across a variety of use cases. We have seen a notable
transformation in mobile devices over the past few years as they have
transitioned from a tool used for basic communications to a
sophisticated device used for creating, sharing and consuming multimedia
content. As this market evolves and new product categories emerge, OEMs
are increasingly looking to differentiate their products with features
and functions that enable a compelling and consistent audio and voice
user experience. This interest is fueling demand for ultra low power,
smaller, smarter and more complex analog and mixed signal processing
products, which aligns well with Cirrus Logic’s core competencies. Still
in the early stages of development, the proliferation of voice is
expanding beyond mobile devices and gaining traction across many product
categories including wearables, headphones and accessories. While there
has been concern about slowing sales in high-end smartphones, we believe
audio and voice will continue to drive growth as more manufacturers push
penetration of these features into mid and lower tier devices.
Additionally, we believe these same features and technologies will be
increasingly appealing in other markets such as automotive and
wearables. At this time we do not expect wearables to contribute
meaningfully to near-term revenue. However, longer
term we believe our ability
to provide comprehensive hardware and software solutions across the
audio signal chain gives Cirrus Logic a significant advantage. We are
extremely pleased to be recognized in Fortune magazine, for the fourth
year in a row, by the Great Places to Work® Institute as one of the top
10 employers on the 2014 50 Best Small and Medium Workplaces in America.
Cirrus Logic has focused on developing a corporate culture that
encourages innovation, creativity and timely execution, while fostering
an environment of integrity, trust and camaraderie. We believe this
unique culture is a critical element in to retaining motivated employees
and attracting talented engineers, who will strengthen our workforce,
deliver best-in-class audio solutions and contribute to the company’s
long-term success. Summary and Guidance For the December quarter we
expect the following results: • Revenue to range between $265 million
and $285 million; • GAAP gross margin to be between 42 percent and 44
percent, which includes roughly 200 basis points of costs associated
with the fair value write up of acquired inventory; and • Combined R&D
and SG&A expenses to range between $86 million and $90 million,
including approximately $9 million in share-based compensation expense
and $ 7 million in amortization of acquired intangibles. In summary, Q2
was a great quarter for Cirrus Logic as we delivered strong sequential
revenue growth and closed the acquisition of Wolfson. With a broad range
of solutions spanning the audio signal chain from capture to playback,
an innovative strategic
roadmap and a commitment to
accelerating R&D investment in compelling programs we believe we are
well positioned to drive future growth opportunities. Sincerely, Jason
Rhode Thurman Case President and Chief Executive Officer Chief Financial
Officer Conference Call Q&A Session Cirrus Logic will host a live Q&A
session at 5 p.m. EDT today to answer questions related to its financial
results and business outlook. Participants may listen to the conference
call on the Cirrus Logic website. Participants who would like to submit
a question to be addressed during the call are requested to email
investor.relations@cirrus.com. A replay of the webcast can be accessed
on the Cirrus Logic website approximately two hours following its
completion, or by calling (404) 537-3406, or toll-free at (855) 859-
2056 (Access Code: 13896797). Use of Non-GAAP Financial Information This
shareholder letter and its attachments include references to non-GAAP
financial information, including gross margins, operating expenses, net
income, operating profit and 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
future
growth
expectations
and
our
estimates
of
third
quarter
fiscal
year
2015
revenue,
gross
margin,
combined
research
and
development
and
selling,
general
and
administrative
expense
levels,
share--‐based
compensation
expense,
amortization
of
acquired
intangibles
and
acquisition
related
costs
associated
with
the
fair
value
write
up
of
acquired
inventory.
In
some
cases,
forward--‐looking
statements
are
identified
by
words
such
as
“expect,”
“anticipate,”
“target,”
“project,”
“believe,”
“goals,”
“opportunity,”
“estimates,”
“intend,”
and
variations
of
these
types
of
words
and
similar
expressions.
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
level
of
orders
and
shipments
during
the
third
quarter
fiscal
year
2015,
as
well
as
customer
cancellations
of
orders,
or
the
failure
to
place
orders
consistent
with
forecasts;
and
the
risk
factors
listed
in
our
Form
10--‐K
for
the
year
ended
March
29,
2014,
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, Cirrus and Wolfson are registered trademarks of Cirrus
Logic, Inc. or its subsidiaries. All other company or product names
noted herein may be trademarks of their respective holders. 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
Net sales 210,214 152,565 190,671 362,779 345,796 Cost of sales 109,647
77,190 91,223 186,837 166,850 Gross profit 100,567 75,375 99,448
175,942 178,946 Gross margin 47.8% 49.4% 52.2% 48.5% 51.7% Research
and development 44,557 39,777 29,722 84,334 58,252 Selling, general and
administrative 21,545 19,683 19,215 41,228 38,413 Restructuring and
other 1,455 - (154) 1,455 (584) Acquisition related costs 14,937 - -
14,937 - Patent infringement settlements, net - - - - 695 Total
operating expenses 82,494 59,460 48,783 141,954 96,776 Operating income
18,073 15,915 50,665 33,988 82,170 Interest income (expense), net
(2,670) (467) 201 (3,137) 359 Other income (expense), net (11,994) 501
(38) (11,493) (55) Income before income taxes 3,409 15,949 50,828 19,358
82,474 Provision for income taxes 2,557 5,701 17,461 8,258 28,465 Net
income $ 852 $ 10,248 $ 33,367 $ 11,100 $ 54,009 Basic earnings per
share: $ 0.01 $ 0.17 $ 0.53 $ 0.18 $ 0.85 Diluted earnings per share: $
0.01 $ 0.16 $ 0.50 $ 0.17 $ 0.82 Weighted average common shares
outstanding: Basic 62,241 62,032 63,217 62,137 63,329 Diluted 65,085
64,688 66,125 64,892 66,203 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) 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. Three Months Ended Six Months Ended Provision for litigation
expenses and settlements - - - - 695 Restructuring and other costs, net
1,455 - (154) 1,455 (584) Wolfson acquisition items 30,875 2,304 -
33,179 - Provision for income taxes 1,764 5,226 16,378 6,990 26,539
Non-GAAP Net Income $ 43,966 $ 23,646 $ 55,330 $ 67,612 $ 92,172
Earnings Per Share Reconciliation GAAP Diluted earnings per share $ 0.01
$ 0.16 $ 0.50 $ 0.17 $ 0.82 Effect of Amortization of acquisition
intangibles 0.04 - - 0.04 - Effect of Stock based compensation expense
0.10 0.09 0.09 0.18 0.17 Effect of Provision for litigation expenses and
settlements - - - - 0.01 Effect of Restructuring and other costs, net
0.03 - - 0.02 (0.01) Effect of Wolfson acquisition items 0.47 0.04 -
0.50 - Effect of Provision for income taxes 0.03 0.08 0.25 0.11 0.40
Non-GAAP Diluted earnings per share $ 0.68 $ 0.37 $ 0.84 $ 1.02 $ 1.39
Operating Income Reconciliation GAAP Operating Income $ 18,073 $ 15,915
$ 50,665 $ 33,988 $ 82,170 GAAP Operating Profit 9% 10% 27% 9% 24%
Amortization of acquisition intangibles 2,524 246 - 2,770 - Stock
compensation expense - COGS 253 231 239 484 245 Stock compensation
expense - R&D 2,781 2,543 2,158 5,324 5,012 Stock compensation expense -
SG&A 3,462 2,848 3,342 6,310 6,256 Provision for litigation expenses and
settlements - - - - 695 Restructuring and other costs, net 1,455 - (154)
1,455 (584) Wolfson acquisition items 16,547 2,192 - 18,739 - Non-GAAP
Operating Income $ 45,095 $ 23,975 $ 56,250 $ 69,070 $ 93,794 Non-GAAP
Operating Profit 21% 16% 30% 19% 27% Operating Expense Reconciliation
GAAP Operating Expenses $ 82,494 $ 59,460 $ 48,783 $ 141,954 $ 96,776
Amortization of acquisition intangibles (2,524) (246) - (2,770) - Stock
compensation expense - R&D (2,781) (2,543) (2,158) (5,324) (5,012) Stock
compensation expense - SG&A (3,462) (2,848) (3,342) (6,310) (6,256)
Provision for litigation expenses and settlements - - - - (695)
Restructuring and other costs, net (1,455) - 154 (1,455) 584 Wolfson
acquisition items (14,937) (2,192) - (17,129) - Non-GAAP Operating
Expenses $ 57,335 $ 51,631 $ 43,437 $ 108,966 $ 85,397 Gross
Margin/Profit Reconciliation GAAP Gross Margin $ 100,567 $ 75,375 $
99,448 $ 175,942 $ 178,946 GAAP Gross Profit 47.8% 49.4% 52.2% 48.5%
51.7% Wolfson acquisition items 1,610 - - 1,610 - Stock compensation
expense - COGS 253 231 239 484 245 Non-GAAP Gross Margin $ 102,430 $
75,606 $ 99,687 $ 178,036 $ 179,191 Non-GAAP Gross Profit 48.7% 49.6%
52.3% 49.1% 51.8%
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEET Sep. 27, Mar. 29, Sep. 28, 2014
2014 2013 (unaudited) (unaudited) ASSETS Current assets Cash and cash
equivalents $ 48,214 $ 31,850 $ 68,886 (in thousands) Marketable
securities 85,796 263,417 199,423 Accounts receivable, net 126,161
63,220 97,640 Inventories 121,169 69,743 91,247 Deferred tax assets
16,435 22,024 38,398 Other current assets 29,089 25,079 23,978 Total
current assets 426,864 475,333 519,572 Long-term marketable securities
9,228 89,243 40,254 Property and equipment, net 133,458 103,650 101,885
Intangibles, net 187,030 11,999 4,734 Goodwill 265,410 16,367 6,027
Deferred tax assets 24,998 25,065 16,638 Other assets 17,658 3,087
10,051 Total assets $ 1,064,646 $ 724,744 $ 699,161 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 81,549 $
51,932 $ 56,868 Accrued salaries and benefits 17,706 13,388 16,894 Other
accrued liabilities 34,946 11,572 6,313 Deferred income 5,218 5,631
4,858 Total current liabilities 139,419 82,523 84,933 Other long-term
liabilities 25,376 4,863 11,231 Long-term debt 226,439 - - Stockholders'
equity: Capital stock 1,104,379 1,078,878 1,055,256 Accumulated deficit
(430,144) (440,634) (451,532) Accumulated other comprehensive loss (823)
(886) (727) Total stockholders' equity 673,412 637,358 602,997 Total
liabilities and stockholders' equity $ 1,064,646 $ 724,744 $ 699,161
Prepared in accordance with Generally Accepted Accounting Principles
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