CIRRUS LOGIC, INC. - Annual Report: 2011 (Form 10-K)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K
þ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended March 26,
2011
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period
from to
Commission File Number 0-17795
CIRRUS LOGIC, INC.
DELAWARE | 2901 Via Fortuna, Austin, TX 78746 | 77-0024818 | ||
(State of incorporation) | (512) 851-4000 | (I.R.S. ID) |
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.001 Par Value
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. YES þ NO o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. YES o NO þ
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. YES þ NO
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405) during the preceding 12 months (or
for such shorter period that the registrant was required to
submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405) is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer, and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check One):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). YES o NO þ
The aggregate market value of the registrants voting and
non-voting common equity held by non-affiliates was
$1,060,858,149 based upon the closing price reported on the
NASDAQ Global Select Market as of September 24, 2010. Stock
held by directors, officers and stockholders owning
5 percent or more of the outstanding common stock were
excluded as they may be deemed affiliates. This determination of
affiliate status is not a conclusive determination for any other
purpose.
As of May 20, 2011, the number of outstanding shares of the
registrants Common Stock, $0.001 par value, was
66,221,753.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain information contained in the registrants proxy
statement for its annual meeting of stockholders to be held
July 28, 2011 is incorporated by reference in Part III
of this Annual Report on
Form 10-K.
Page 1 of 71
CIRRUS
LOGIC, INC.
FORM 10-K
For The
Fiscal Year Ended March 26, 2011
INDEX
PART I | ||||||||
Item 1. | 3 | |||||||
Item 1A. | 8 | |||||||
Item 1B. | 18 | |||||||
Item 2. | 19 | |||||||
Item 3. | 19 | |||||||
Item 4. | 20 | |||||||
PART II | ||||||||
Item 5. | 20 | |||||||
Item 6. | 22 | |||||||
Item 7. | 22 | |||||||
Item 7A. | 33 | |||||||
Item 8. | 35 | |||||||
Item 9. | 66 | |||||||
Item 9A. | 66 | |||||||
PART III | ||||||||
Item 10. | 66 | |||||||
Item 11. | 66 | |||||||
Item 12. | 67 | |||||||
Item 13. | 67 | |||||||
Item 14. | 67 | |||||||
PART IV | ||||||||
Item 15. | 67 | |||||||
70 | ||||||||
71 | ||||||||
Financial Certifications
|
||||||||
EX-23.1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 |
Page 2 of 71
Table of Contents
PART I
ITEM 1. | Business |
Cirrus Logic, Inc. (Cirrus Logic,
Cirrus, We, Us,
Our, or the Company) develops
high-precision, analog and mixed-signal integrated circuits
(ICs) for a broad range of audio and energy markets.
Building on our diverse analog mixed-signal patent portfolio,
Cirrus Logic delivers highly optimized products for consumer and
commercial audio, automotive entertainment, and targeted
industrial and energy-related applications. We also develop ICs,
board-level modules and hybrids for high-power amplifier
applications branded as the Apex Precision
Powertm
(Apex) line of products.
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 administrative functions is located in
Austin, Texas. In addition, we have an engineering,
administrative, and assembly facility in Tucson, Arizona, as
well as sales locations throughout the United States. We also
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.
We maintain a Web site with the address www.cirrus.com.
We are not including the information contained on our Web site
as a part of, or incorporating it by reference into, this Annual
Report on
Form 10-K.
We make available free of charge through our Web site our Annual
Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
and amendments to these reports, as soon as reasonably
practicable after we electronically file such material with, or
furnish such material to, the Securities and Exchange Commission
(the SEC). To receive a free copy of this
Form 10-K,
please forward your written request to Cirrus Logic, Inc., Attn:
Investor Relations, 2901 Via Fortuna, Austin, Texas 78746, or
via email at Investor.Relations@cirrus.com. In addition,
the SEC maintains a website at
http://www.sec.gov
that contains reports, proxy and information statements filed
electronically with the SEC by Cirrus Logic.
Background
of the Semiconductor Industry
In general, the semiconductor industry produces three types of
products: analog, digital and mixed-signal. Analog
semiconductors process a continuous range of signals that can
represent functions such as temperature, speed, pressure and
sound. Digital semiconductors process information represented by
discrete values, for example, 0s and 1s. Mixed-signal
semiconductors combine analog and digital circuits in a single
product. The design of the analog component of a mixed-signal IC
is particularly complex and difficult, and requires experienced
engineers to optimize speed, power and resolution within
standard manufacturing processes.
The convergence and sophistication of our customers
products, such as portable audio applications, home
entertainment and automotive audio devices, is made possible in
part by advances in semiconductor technology. Semiconductor
companies are attempting to differentiate their products based
on offering new features and functionality to customers, while
at the same time shrinking product sizes, reducing power
consumption, and lowering overall system costs.
Due to the extremely high costs involved in developing and
operating a wafer fabrication facility, many semiconductor
companies, including Cirrus, rely on third party foundries to
manufacture their ICs. We believe that our fabless
manufacturing model significantly reduces our capital
requirements and allows us to focus our resources on design,
development, and marketing of our ICs.
Segments
We determine our operating segments in accordance with Financial
Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 280,
Segment Reporting. Our Chief Executive
Officer (CEO) has been identified as the chief
operating decision maker as defined by FASB ASC Topic 280.
The Company operates and tracks its results in one reportable
segment based on the aggregation of activity from its two
product lines under ASC Topic 280. Our CEO receives and uses
enterprise-wide financial
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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. We report revenue in two
product categories: audio products and energy products. For
fiscal years 2011, 2010, and 2009, audio product sales were
$264.8 million, $153.7 million, and
$97.3 million, respectively. For fiscal years 2011, 2010,
and 2009, energy product sales were $104.7 million,
$67.3 million, and $77.3 million, respectively.
See Note 17, Segment Information, of the
Notes to Consolidated Financial Statements contained in
Item 8 for further details including sales by geographic
locations and for property, plant and equipment, net, by
geographic locations.
Markets
and Products
The following provides a detailed discussion regarding our audio
and energy product lines:
Audio Products: High-precision analog
and mixed-signal components, as well as audio digital signal
processor (DSP) products for consumer, professional
and automotive entertainment markets.
Energy Products: High-precision analog
and mixed-signal components for energy-related applications,
such as energy measurement, energy exploration and energy
control systems. Energy products also include ICs, board-level
modules and hybrids for high-power pulse width modulation
(PWM) and power amplifier applications.
AUDIO
PRODUCTS
We are a recognized leader in analog and mixed-signal audio
converter and audio DSP products that enable todays new
consumer, professional and automotive entertainment
applications. Our products include
analog-to-digital
converters (ADCs),
digital-to-analog
converters (DACs), chips that integrate ADCs and
DACs into a single IC (codecs), digital interface
ICs, volume controls and digital amplifiers, as well as audio
DSPs for consumer electronics applications such as audio/video
receivers (AVRs) and digital TVs, and
CobraNet®
ICs and modules for networked audio applications. Our broad
portfolio of approximately 250 active proprietary products
includes the following publicly available products, which have
been added in the past fiscal year:
§ | The CS42L73 is a high-quality, ultra low-power audio codec designed for portable applications. The CS42L73 codec allows portable products to conserve energy and extend battery life by offloading audio-related tasks, such as signal routing and processing, that are typically reserved for the applications processor. | |
§ | The CS35L0X is an analog-input, hybrid Class D speaker amplifier for mobile communications and portable devices. Using an advanced closed-loop Delta Sigma architecture and patent-pending hybrid Class D technology, the amplifier family combines Class D efficiency and output power with low idle current consumption and minimal EMI found typically only in class AB amplifiers. | |
§ | The CS4354, a low-cost 24-bit DAC targeting consumer home audio applications, such as video game consoles, Blu-ray® Disc and DVD systems, TVs, set-top boxes and digital media players. The CS4354 marks significant progress in simplifying the design of analog output circuitry by reducing the need for multiple system components, which saves system cost and board space. |
Our products are used in a wide array of consumer applications,
including portable media players, smartphones, tablets, AVRs,
DVD and Blu-ray Disc players, complete home theater systems,
set-top boxes, gaming devices, sound cards and digital
televisions. Applications for products within professional
markets include digital mixing consoles, multi-track digital
recorders and effects processors. Applications for products
within automotive markets include amplifiers, satellite radio
systems, telematics and multi-speaker car-audio
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systems. In networked digital audio applications, our
proprietary CobraNet controller ICs and modules enable delivery
of uncompressed digital audio over Ethernet networks,
co-existing with standard Ethernet network data traffic.
ENERGY
PRODUCTS
We provide high-precision analog and mixed-signal ICs for
targeted energy control, energy measurement and energy
exploration applications, as well as ICs, board-level modules,
and hybrids from the Apex brand of products for high-power PWM
and power amplifier applications. We have approximately 450
active proprietary products which include ADCs, DACs, linear
amplifiers, PWM amplifiers, and amplifier ICs. Our products are
used in a wide array of high-precision, energy-related
applications including digital utility meters, power supplies,
lighting ballasts, motor control, energy exploration, and
high-power systems. New additions to our proprietary product
portfolio in the past fiscal year include:
§ | The CS1500 and CS1600 are digital power factor correction (PFC) ICs that support digital PFC for power supplies used in digital televisions, personal computers, notebook computers, and fluorescent and LED lighting systems. Both chips are based on Cirrus Logics EXL Coretm technology, which is a key component of the companys long-term product roadmap in energy products to help customers develop smarter, greener energy products. |
Customers,
Marketing, and Sales
We offer approximately 700 products to more than 3,000 active
customers worldwide through both direct and indirect sales
channels. Our major customers are among the worlds leading
electronics manufacturers. We target both large existing and
emerging growth consumer electronic and energy markets that
derive value from our expertise in advanced analog and
mixed-signal design processing, systems-level integrated circuit
engineering and embedded software development. We derive our
sales both domestically and from a variety of locations across
the world, including the Peoples Republic of China, the
European Union, Hong Kong, Japan, South Korea, Taiwan, and the
United Kingdom. Our domestic sales force includes a network of
regional direct sales offices located in California,
Massachusetts, Ohio, Nevada, North Carolina, and Texas.
International sales offices and staff are located in France,
Germany, Hong Kong, Shanghai and Shenzhen in the Peoples
Republic of China, Singapore, South Korea, Taiwan, Japan and the
United Kingdom. We supplement our direct sales force with
external sales representatives and distributors. Our technical
support staff is located in Texas and Arizona. Our worldwide
sales force provides geographically specific support to our
customers and specialized selling of product lines with unique
customer bases. See Note 17, Segment
Information, of the Notes to Consolidated Financial
Statements contained in Item 8 for further detail and for
additional disclosure regarding sales by geographic locations,
and for property, plant and equipment, net, by geographic
locations.
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 an external sales representative or
distributor, or through a third party manufacturer contracted to
produce their designs. For fiscal years 2011, 2010, and 2009,
our ten largest end customers represented approximately
62 percent, 54 percent, and 36 percent of our
sales. For fiscal years 2011, 2010, and 2009, we had one end
customer, Apple Inc., who purchased through multiple contract
manufacturers and represented approximately 47 percent,
35 percent, and 16 percent of the Companys total
sales, respectively. For fiscal years 2011, 2010, and 2009, we
had one distributor, Avnet Inc., who represented
24 percent, 26 percent, and 33 percent of our
sales, respectively.
Manufacturing
As a fabless semiconductor company, we contract with third
parties for wafer fabrication and nearly all of our assembly and
test operations. We use multiple wafer foundries, assembly
sources and test houses in the production of our inventory. The
company owns a 54,000 square foot facility in Tucson,
Arizona, which serves as the assembly and test facility for its
Apex product line. With the exception of these Apex products,
our outsourced manufacturing strategy allows us to concentrate
on our design strengths, minimize fixed costs and
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capital expenditures while giving us access to advanced
manufacturing facilities, and provide the flexibility to source
multiple leading-edge technologies through strategic
relationships. After wafer fabrication by the foundry,
third-party assembly vendors package the wafer die. The finished
products are then tested before shipment to our customers. While
we do have some redundancy of fabrication processes by using
multiple outside foundries, any interruption of supply by one or
more of these foundries could materially impact us. As a result,
we maintain some amount of business interruption insurance to
help reduce the risk of wafer supply interruption, but we are
not fully insured against such risk. Our supply chain management
organization is responsible for the management of all aspects of
the manufacturing, assembly, and testing of our products,
including process and package development, test program
development, and production testing of products in accordance
with our ISO-certified quality management system.
Although our products are made from basic materials (principally
silicon, metals and plastics), all of which are available from a
number of suppliers, capacity at wafer foundries sometimes
becomes constrained. The limited availability of certain
materials may impact our suppliers ability to meet our
demand needs or impact the price we are charged. The prices of
certain other basic materials, such as metals, gases and
chemicals used in the production of circuits can increase as
demand grows for these basic commodities. In most cases, we do
not procure these materials ourselves; nevertheless, we are
reliant on such materials for producing our products because our
outside foundry and package and test subcontractors must procure
them. To help mitigate risks associated with constrained
capacity, we use multiple foundries.
Patents,
Licenses and Trademarks
We rely on patent, copyright, trademark, and trade secret laws
to protect our intellectual property, products, and technology.
As of March 26, 2011, we held approximately 1,100 granted
U.S. patents, 100 U.S. pending patent
applications and various corresponding international patents and
applications. Our U.S. patents expire in calendar years
2011 through 2029. While our patents are an important element of
our success, our business as a whole is not dependent on any one
patent or group of patents. We do not anticipate any material
effect on our business due to any patents expiring in 2011, and
we continue to obtain new patents through our ongoing research
and development.
We have maintained U.S. federal trademark registrations for
CIRRUS LOGIC, CIRRUS, Cirrus Logic logo designs, CRYSTAL and
APEX PRECISION POWER. These U.S. registrations may be
renewed as long as the marks continue to be used in interstate
commerce. We have also filed or obtained foreign registration
for these marks in other countries or jurisdictions where we
conduct, or anticipate conducting, international business.
To complement our own research and development efforts, we have
also licensed and expect to continue to license, a variety of
intellectual property and technologies important to our business
from third parties.
Research
and Development
We concentrate our research and development efforts on the
design and development of new products for each of our principal
markets. We also fund certain advanced-process technology
development, as well as other emerging product opportunities.
Expenditures for research and development in fiscal years 2011,
2010 and 2009 were $63.9 million, $51.4 million and
$44.3 million, respectively. Our future success is highly
dependent upon our ability to develop complex new products, to
transfer new products to volume production, to introduce them
into the marketplace in a timely fashion, and to have them
selected for design into products of systems manufacturers. Our
future success may also depend on assisting our customers with
integration of our components into their new products, including
providing support from the concept stage through design, launch
and production ramp.
Competition
Markets for our products are highly competitive and we expect
that competition will continue to increase. Our ability to
compete effectively and to expand our business will depend on
our ability to continue to recruit key engineering talent, to
execute on new product developments, to persuade customers to
design-in these new
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products into their applications, and to provide lower-cost
versions of existing products. We compete with other
semiconductor suppliers that offer standard semiconductors,
application-specific standard product and fully customized ICs,
including embedded software, chip and board-level products.
While no single company competes with us in all of our product
lines, we face significant competition in all markets where our
products are available. We expect to face additional competition
from new entrants in our markets, which may include both large
domestic and international IC manufacturers and smaller,
emerging companies.
The principal competitive factors in our markets include: time
to market; quality of hardware/software design and end-market
systems expertise; price; product benefits that are
characterized by performance, features, quality and
compatibility with standards; access to advanced process and
packaging technologies at competitive prices; and sales and
technical support, which includes assisting our customers with
integration of our components into their new products and
providing support from the concept stage through design, launch
and production ramp.
Product life cycles may vary greatly by product category. For
example, many consumer electronic devices have shorter design-in
cycles; therefore, our competitors have increasingly frequent
opportunities to achieve design wins in next-generation systems.
Conversely, this also provides us frequent opportunities to
displace competitors in products that have previously not
utilized our design. The industrial and automotive markets
typically have longer life cycles, which provide continued
revenue streams over long periods of time.
Backlog
Sales are made primarily pursuant to short-term purchase orders
for delivery of products. The quantity actually ordered by the
customer, as well as the shipment schedules, are frequently
revised, without significant penalty, to reflect changes in the
customers needs. The majority of our backlog is typically
requested for delivery within six months. In markets where the
end system life cycles are relatively short, customers typically
request delivery in six to ten weeks. We believe a backlog
analysis at any given time gives little indication of our future
business except on a short-term basis, principally within the
next 60 days.
We utilize backlog as an indicator to assist us in production
planning. However, backlog is influenced by several factors
including market demand, pricing, and customer order patterns in
reaction to product lead times. Quantities actually purchased by
customers, as well as prices, are subject to variations between
booking and delivery because of changes in customer needs or
industry conditions. As a result, we believe that our backlog at
any given time is an incomplete indicator of future sales.
Employees
As of March 26, 2011, we had 570 full-time employees,
an increase of 65 employees, or 13 percent, over the
end of fiscal year 2010. Of these employees, 54 percent
were engaged in research and product development activities,
34 percent in sales, marketing, general and administrative
activities, and 12 percent in manufacturing-related
activities. Our future success depends, in part, on our ability
to continue to attract, retain and motivate highly qualified
technical, marketing, engineering, and administrative personnel.
We have never had a work stoppage and none of our employees are
represented by collective bargaining agreements. We consider our
employee relations to be good.
Forward
Looking Statements
This Annual Report on
Form 10-K
and certain information incorporated herein by reference contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of
the Securities the Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. All
statements included or incorporated by reference in this Annual
Report on
Form 10-K,
other than statements that are purely historical, are
forward-looking statements. In some cases, forward-looking
statements are identified by words such as expect,
anticipate, target, project,
believe, goals, estimates,
and intend. Variations of these types of words and
similar expressions are intended to identify
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these forward-looking statements. Any statements that refer to
our plans, expectations, strategies or other characterizations
of future events or circumstances are forward-looking
statements. Readers are cautioned that these forward-looking
statements are predictions and are subject to risks,
uncertainties, and assumptions that are difficult to predict.
Therefore, actual results may differ materially and adversely
from those expressed in any forward-looking statements. Among
the important factors that could cause actual results to differ
materially from those indicated by our forward-looking
statements are those discussed in Item 1A
Risk Factors and elsewhere in this report, as well as
in the documents filed by us with the SEC, specifically the most
recent reports on
Form 10-Q
and 8-K,
each as it may be amended from time to time.
We caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date of
this report, and we undertake no obligation to update this
information to reflect events or circumstances after the filing
of this report with the SEC, except as required by law. All
forward-looking statements, expressed or implied, included in
this
Form 10-K
and attributable to Cirrus are expressly qualified in their
entirety by this cautionary statement. This cautionary statement
should also be considered in connection with any subsequent
written or oral forward-looking statements that we may make or
persons acting on our behalf may issue. We undertake no
obligation to revise or update publicly any forward-looking
statement for any reason.
Item 1A. | Risk Factors |
Our business faces significant risks. The risk factors set forth
below may not be the only risks that we face and there is a risk
that we may have failed to identify all possible risk factors.
Additional risks that we are not aware of yet or that currently
are not significant may adversely affect our business
operations. You should read the following cautionary statements
in conjunction with the factors discussed elsewhere in this and
other Cirrus Logics filings with the SEC. These cautionary
statements are intended to highlight certain factors that may
affect the financial condition and results of operations of
Cirrus Logic and are not meant to be an exhaustive discussion of
risks that apply to companies such as ours.
We
depend on a limited number of customers and distributors for a
substantial portion of our sales, and the loss of, or a
significant reduction in orders from, any key customer or
distributor could significantly reduce our sales.
While we generate sales from a broad base of customers
worldwide, the loss of any of our key customers, or a
significant reduction in sales to any one of them, would
significantly reduce our sales and adversely affect our
business. For the twelve month periods ending March 26,
2011, and March 27, 2010, our ten largest end customers
represented approximately 62 percent and 54 percent of
our sales, respectively. For the twelve month periods ending
March 26, 2011, and March 27, 2010, we had one end
customer, Apple Inc., who purchased through multiple contract
manufacturers and represented approximately 47 percent and
35 percent of the Companys total sales, respectively.
For the twelve month periods ending March 26, 2011, and
March 27, 2010, we had one distributor, Avnet Inc., who
represented 24 percent and 26 percent of our sales,
respectively.
We may not be able to maintain or increase sales to certain of
our key customers for a variety of reasons, including the
following:
§ | most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty; | |
§ | our agreements with our customers typically do not require them to purchase a minimum quantity of our products; | |
§ | many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers decisions to purchase our products; | |
§ | our customers face intense competition from other manufacturers that do not use our products; and | |
§ | our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and their ability to obtain components from alternative sources. |
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Our key customer relationships often require us to develop new
products that may involve significant technological challenges.
Our customers frequently place considerable pressure on us to
meet their tight development schedules. In addition, we may from
time to time enter into customer agreements providing for
exclusivity periods during which we may only sell specified
products or technology to that customer. Accordingly, we may
have to devote a substantial amount of resources to strategic
relationships, which could detract from or delay our completion
of other important development projects or the development of
next generation products and technologies.
In
general, our customers may cancel or reschedule orders on short
notice without incurring significant penalties; therefore, our
sales and operating results in any quarter are difficult to
forecast.
In general, customers may cancel or reschedule orders on short
notice without incurring significant penalties. Therefore,
cancellations, reductions, or delays of orders from any
significant customer could have a material adverse effect on our
business, financial condition, and results of operations.
In addition, a significant portion of our sales and earnings in
any quarter depends upon customer orders for our products that
we receive and fulfill in that quarter. Because our expense
levels are based in part on our expectations as to future
revenue and to a large extent are fixed in the short term, we
likely will be unable to adjust spending on a timely basis to
compensate for any unexpected shortfall in sales. Accordingly,
any significant shortfall of sales in relation to our
expectations could hurt our operating results.
We are
dependent on third-party manufacturing and supply relationships
for the majority of our products. Our reliance on third-party
foundries and suppliers involves certain risks that may result
in increased costs, delays in meeting our customers
demand, and loss of revenue.
We do not own or operate a semiconductor fabrication facility
and do not have the resources to manufacture the majority of our
products internally. We depend upon third parties to
manufacture, assemble, package and test the majority of our
products. As a result, we are subject to risks associated with
these third parties, including:
§ | insufficient capacity available to meet our demand; | |
§ | inadequate manufacturing yields and excessive costs; | |
§ | inability of these third-parties to obtain an adequate supply of raw materials; | |
§ | difficulties selecting and integrating new subcontractors; | |
§ | limited warranties on products supplied to us; | |
§ | potential increases in prices; and | |
§ | increased exposure to potential misappropriation of our intellectual property. |
Our outside foundries and assembly and test suppliers generally
manufacture our products on a purchase order basis, and we have
few long-term supply arrangements with these suppliers.
Therefore, our third party manufacturers and suppliers are not
obligated to supply us with products for any specific period of
time, quantity, or price, except as may be provided in any
particular purchase order. A manufacturing or supply disruption
experienced by one or more of our outside suppliers or a
disruption of our relationship with an outside foundry could
negatively impact the production of certain of our products for
a substantial period of time.
In addition, difficulties associated with adapting our
technology and product design to the proprietary process
technology and design rules of outside foundries can lead to
reduced yields of our products. Since low yields may result from
either design or process technology failures, yield problems may
not be effectively determined or resolved until an actual
product exists that can be analyzed and tested to identify
process sensitivities relating to the design rules that are
used. As a result, yield problems may not be identified until
well into the production process, and resolution of yield
problems may require cooperation between us and our
manufacturer. This risk could be compounded by the offshore
location of certain of our manufacturers,
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increasing the effort and time required to identify, communicate
and resolve manufacturing yield problems. Manufacturing defects
that we do not discover during the manufacturing or testing
process may lead to costly product recalls. These risks may lead
to increased costs or delayed product delivery, which would harm
our profitability and customer relationships.
In some cases, our requirements may represent a small portion of
the total production of the third-party suppliers. As a result,
we are subject to the risk that a producer will cease production
of an older or lower-volume process that it uses to produce our
parts. We cannot assure you that our external foundries will
continue to devote resources to the production of parts for our
products or continue to advance the process design technologies
on which the manufacturing of our products are based. Each of
these events could increase our costs, lower our gross margin,
cause us to hold more inventories, or materially impact our
ability to deliver our products on time.
Shifts
in industry-wide capacity and our practice of purchasing our
products based on sales forecasts may result in significant
fluctuations in our quarterly and annual operating
results.
We rely on independent foundries and assembly and test houses to
manufacture, or provide components for, our products. Our
reliance on these third party suppliers involves certain risks
and uncertainties. For example, shifts in industry-wide capacity
from shortages to oversupply, or from oversupply to shortages,
may result in significant fluctuations in our quarterly and
annual operating results. We may order wafers and build
inventory in advance of receiving purchase orders from our
customers. Because our industry is highly cyclical and is
subject to significant downturns resulting from excess capacity,
overproduction, reduced demand, order cancellations, or
technological obsolescence, there is a risk that we will
forecast inaccurately and produce excess inventories of
particular products. In addition, if we experience supply
constraints or manufacturing problems at a particular supplier,
we could be required to switch suppliers or qualify additional
suppliers. Switching
and/or
qualifying additional suppliers could be an expensive process
and take as long as six to twelve months to complete, which
could result in material adverse fluctuations to our operating
results.
In addition, we generally order our products through
non-cancelable purchase orders from third-party foundries based
on our sales forecasts, and our customers can generally cancel
or reschedule orders they place with us without significant
penalties. If we do not receive orders as anticipated by our
forecasts, or our customers cancel orders that are placed, we
may experience increased inventory levels.
Due to the product manufacturing cycle characteristic of IC
manufacturing and the inherent imprecision in the accuracy of
our customers forecasts, product inventories may not
always correspond to product demand, leading to shortages or
surpluses of certain products. As a result of such inventory
imbalances, future inventory write-downs and charges to gross
margin may occur due to lower of cost or market accounting,
excess inventory, and inventory obsolescence.
Because
we depend on subcontractors internationally to perform key
manufacturing functions for us, we are subject to political,
economic, and natural disaster risks that could disrupt the
fabrication, assembly, packaging, or testing of our
products.
We depend on third-party subcontractors, primarily in Asia, for
the fabrication, assembly, packaging, and testing of most of our
products. International operations may be subject to a variety
of risks, including political instability, global health
conditions, currency controls, exchange rate fluctuations,
changes in import/export regulations, tariff and freight rates,
as well as the risks of natural disasters such as earthquakes,
tsunamis, and floods. Although we seek to reduce our dependence
on any one subcontractor, this concentration of subcontractors
and manufacturing operations in Asia subjects us to the risks of
conducting business internationally, including associated
political and economic conditions. If we experience
manufacturing problems at a particular location, or a supplier
is unable to continue operating due to financial difficulties,
natural disasters, or other reasons, we would be required to
transfer manufacturing to a backup supplier. Converting or
transferring manufacturing from a primary supplier to a backup
facility could be expensive and time consuming. As a result,
delays in our production or shipping by the parties to whom we
outsource these functions could reduce our sales, damage our
customer relationships, and damage our reputation in the
marketplace, any of which could harm our business, results of
operations, and financial condition.
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Our
sales could be materially impacted by the failure of other
component suppliers to deliver required parts needed in the
final assembly of our customers end
products.
The products we supply our customers are typically a portion of
the many components provided from multiple suppliers in order to
complete the final assembly of an end product. If one or more of
these other component suppliers are unable to deliver their
required component(s) in order for the final product to be
assembled, our customer may delay, or ultimately cancel, their
orders from us.
Our
products are complex and could contain defects, which could
result in material costs to us.
Product development in the markets we serve is becoming more
focused on the integration of multiple functions on individual
devices. There is a general trend towards increasingly complex
products. The greater integration of functions and complexity of
operations of our products increases the risk that we or our
customers or end users could discover latent defects or subtle
faults after volumes of product have been shipped. This could
result in material costs to us, including, but not limited to:
§ | reduced margins; | |
§ | damage to our reputation; | |
§ | a material recall and replacement costs for product warranty and support; | |
§ | payments to our customer related to the recall claims as a result of various industry or business practices, or in order to maintain good customer relationships; | |
§ | an adverse impact to our customer relationships by the occurrence of significant defects; | |
§ | a delay in recognition or loss of revenues, loss of market share, or failure to achieve market acceptance; and | |
§ | a diversion of the attention of our engineering personnel from our product development efforts. |
In addition, any defects or other problems with our products
could result in financial or other damages to our customers who
could seek damages from us for their losses. A product liability
or warranty claim brought against us, even if unsuccessful,
would likely be time consuming and costly to defend. In
particular, the sale of systems and components that are
incorporated into certain applications for the automotive
industry involves a high degree of risk that such claims may be
made.
While we believe that we are reasonably insured against some of
these risks and that we have attempted to contractually limit
our financial exposure with many of our customers, a warranty or
product liability claim against us in excess of our available
insurance coverage and established reserves, or a requirement
that we participate in a customer product recall, would have
adverse effects (that could be material) on our business,
results of operations, and financial condition.
Costs
related to product defects and errata may harm our results of
operations and business.
Costs associated with unexpected product defects and errata
(deviations from published specifications) due to, for example,
unanticipated problems in our design and manufacturing
processes, could include:
§ | writing off the value of inventory of such products; | |
§ | disposing of products that cannot be fixed; | |
§ | recalling such products that have been shipped to customers; | |
§ | providing product replacements for, or modifications to, such products; and | |
§ | defending against litigation related to such products. |
These costs could be substantial and may increase our expenses
and lower our profitability. In addition, our reputation with
our customers or users of our products could be damaged as a
result of such product defects and errata, and the demand for
our products could be reduced. The announcement of product
defects
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and/or
errata could cause customers to purchase products from our
competitors as a result of anticipated shortages of our
components or for other reasons. These factors could harm our
financial results and the prospects for our business.
As we
carry only limited insurance coverage, any incurred liability
resulting from uncovered claims could adversely affect our
financial condition and results of operations.
Our insurance policies may not be adequate to fully offset
losses from covered incidents, and we do not have coverage for
certain losses. For example, there is limited coverage available
with respect to the services provided by our third party
foundries and assembly and test subcontractors. Although we
believe that our existing insurance coverage is consistent with
common practices of companies in our industry, our insurance
coverage may be inadequate to protect us against product
recalls, natural disasters, and other unforeseen catastrophes
that could adversely affect our financial condition and results
of operations.
We
have historically experienced fluctuations in our operating
results and expect these fluctuations to continue in future
periods, which may result in volatility in our stock
price.
Our quarterly and annual operating results are affected by a
wide variety of factors that could materially and adversely
affect our net sales, gross margin, and operating results. If
our operating results fall below expectations of market analysts
or investors, the market price of our common stock could
decrease significantly. We are subject to business cycles and it
is difficult to predict the timing, length, or volatility of
these cycles. These business cycles may create pressure on our
sales, gross margin,
and/or
operating results.
Factors that could cause fluctuations and materially and
adversely affect our net sales, gross margin and operating
results include, but are not limited to:
§ | the volume and timing of orders received; | |
§ | changes in the mix of our products sold; | |
§ | market acceptance of our products and the products of our customers; | |
§ | excess or obsolete inventory; | |
§ | competitive pricing pressures; | |
§ | our ability to introduce new products on a timely basis; | |
§ | the timing and extent of our research and development expenses; | |
§ | the failure to anticipate changing customer product requirements; | |
§ | disruption in the supply of wafers, assembly, or test services; | |
§ | reduction of manufacturing yields; | |
§ | certain production and other risks associated with using independent manufacturers, assembly houses, and testers; and | |
§ | product obsolescence, price erosion, competitive developments, and other competitive factors. |
We may
be adversely impacted by current global economic conditions. As
a result, our financial results and the market price of our
common shares may decline.
Current global economic conditions could make it difficult for
our customers, our suppliers, and us to accurately forecast and
plan future business activities, and could cause global
businesses to defer or reduce spending on our products, or
increase the costs of manufacturing our products. During
challenging economic times our customers and distributors may
face issues gaining timely access to sufficient credit, which
could impact their ability to make timely payments to us. If
that were to occur, we may be required to increase our allowance
for doubtful accounts and our days sales outstanding would
increase.
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We cannot predict the timing, strength, or duration of any
economic slowdown or subsequent economic recovery. If the
economy or markets in which we operate were to deteriorate, our
business, financial condition, and results of operations will
likely be materially
and/or
adversely affected.
Our
results may be affected by the fluctuation in sales in the
consumer entertainment market.
Because we sell products in the consumer entertainment market,
we are likely to be affected by seasonality in the sales of our
products. Further, a decline in consumer confidence and consumer
spending relating to economic conditions, terrorist attacks,
armed conflicts, oil prices, global health conditions, natural
disasters,
and/or the
political stability of countries that we operate in or sell into
could have a material adverse effect on our business.
Our
products may be subject to average selling prices that decline
over short time periods. If we are unable to increase our
volumes, introduce new or enhanced products with higher selling
prices, or reduce our costs, our business and operating results
could be harmed.
Historically in the semiconductor industry, average selling
prices of products have decreased over time. If the average
selling price of any of our products decline and we are unable
to increase our unit volumes, introduce new or enhanced products
with higher margins,
and/or
reduce manufacturing costs to offset anticipated decreases in
the prices of our existing products, our operating results may
be adversely affected. In addition, because of procurement lead
times, we are limited in our ability to reduce total costs
quickly in response to any sales shortfalls. Because of these
factors, we may experience material adverse fluctuations in our
future operating results on a quarterly or annual basis.
Our
failure to develop and introduce in a timely manner new products
that gain market acceptance could harm our operating
results.
Our success depends upon our ability to develop new products for
new and existing markets, to introduce these products in a
timely and cost-effective manner, and to have these products
gain market acceptance. New product introductions involve
significant investment of resources and potential risks. Delays
in new product introductions or
less-than-anticipated
market acceptance of our new products are possible and would
have an adverse effect on our sales and earnings. The
development of new products is highly complex and, from
time-to-time,
we have experienced delays in developing and introducing these
new products. Successful product development and introduction
depend on a number of factors including, but not limited to:
§ | proper new product definition; | |
§ | timely completion of design and testing of new products; | |
§ | assisting our customers with integration of our components into their new products, including providing support from the concept stage through design, launch and production ramp; | |
§ | successfully developing and implementing the software necessary to integrate our products into our customers products; | |
§ | achievement of acceptable manufacturing yields; | |
§ | availability of wafer fabrication, assembly, and test capacity; | |
§ | market acceptance of our products and the products of our customers; and | |
§ | obtaining and retaining industry certification requirements. |
Both sales and margins may be materially affected if new product
introductions are delayed, or if our products are not designed
into successive generations of new or existing customers
products. We may not be able to meet these challenges, or adjust
to changing market conditions as quickly and cost-effectively as
necessary to compete successfully. Our failure to develop and
introduce new products successfully could harm our business and
operating results.
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Successful product design and development is dependent on our
ability to attract, retain and motivate qualified design
engineers, of which there is a limited number. Due to the
complexity and variety of analog and high-precision analog and
mixed-signal circuits, the limited number of qualified
integrated circuit designers and the limited effectiveness of
computer-aided design systems in the design of analog and
mixed-signal ICs, we cannot provide assurances that we will be
able to successfully develop and introduce new products on a
timely basis.
We
have significant international sales, and risks associated with
these sales could harm our operating results.
Export sales, principally to Asia, include sales to U.S-based
customers with manufacturing plants overseas and represented
82 percent, 79 percent, and 68 percent of our net
sales in fiscal years 2011, 2010, and 2009, respectively. We
expect export sales to continue to represent a significant
portion of product sales. This reliance on international sales
subjects us to the risks of conducting business internationally,
including risks associated with political and economic
instability, global health conditions, currency controls,
exchange rate fluctuations and changes in import/export
regulations, tariff and freight rates, as well as the risks of
natural disaster, especially in Asia. For example, the financial
instability in a given region may have an adverse impact on the
financial position of end users in the region, which could
affect future orders and harm our results of operations. Our
international sales operations involve a number of other risks
including, but not limited to:
§ | unexpected changes in government regulatory requirements; | |
§ | changes to countries banking and credit requirements; | |
§ | changes in diplomatic and trade relationships; | |
§ | delays resulting from difficulty in obtaining export licenses for technology; | |
§ | tariffs and other barriers and restrictions; | |
§ | competition with non-U.S. companies or other domestic companies entering the non-U.S. markets in which we operate; | |
§ | longer sales and payment cycles; | |
§ | problems in collecting accounts receivable; | |
§ | political instability; and | |
§ | the burdens of complying with a variety of non-U.S. laws. |
In addition, our competitive position may be affected by the
exchange rate of the U.S. dollar against other currencies.
Consequently, increases in the value of the dollar would
increase the price in local currencies of our products in
non-U.S. markets
and make our products relatively more expensive. Alternatively,
decreases in the value of the dollar will increase the relative
cost of our and our vendors operations that are based
overseas. We cannot provide assurances that regulatory,
political and other factors will not adversely affect our
operations in the future or require us to modify our current
business practices.
We are
subject to the export control regulations of the U.S. Department
of State and the Department of Commerce. A violation of these
export control regulations could have a material adverse effect
on our business or our results of operations, cash flows, or
financial position.
The nature of our international business, and in particular, the
manufacture and sale of certain products from our Apex Precision
Power Product line, subjects us to the export control
regulations of the U.S. Department of State and the
Department of Commerce. If these export control regulations are
violated, it could result in monetary penalties and denial of
export privileges. The government is very strict with respect to
compliance and has served notice generally that failure to
comply with these regulations may subject guilty parties to
fines and/or
imprisonment. Although we are not aware of any material
violation of any export control regulations, a failure to comply
with any of the above mentioned regulations could have a
material adverse effect on our business.
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Our
international operations subject our business to additional
political and economic risks that could have an adverse impact
on our business.
In addition to export sales constituting a large portion of our
net sales, we maintain international operations, sales, and
technical support personnel. International expansion has
required, and will continue to require, significant management
attention and resources. There are risks inherent in expanding
our presence into
non-U.S. regions,
including, but not limited to:
§ | difficulties in staffing and managing non-U.S. operations; | |
§ | failure of non-U.S. laws to adequately protect our U.S. intellectual property, patent, trademarks, copyrights know-how and other proprietary rights; | |
§ | global health conditions and potential natural disasters; | |
§ | political and economic instability in international regions; | |
§ | international currency controls and exchange rate fluctuations; | |
§ | vulnerability to terrorist groups targeting American interests abroad; and | |
§ | legal uncertainty regarding liability and compliance with non-U.S. laws and regulatory requirements. |
If we are unable to successfully manage the demands of our
international operations, it may have a material adverse effect
on our business, financial condition, or results of operations.
Our
failure to manage our distribution channel relationships could
adversely affect our business.
The future of our business, as well as the future growth of our
business, will depend in part on our ability to manage our
relationships with current and future distributors and external
sales representatives and to develop additional channels for the
distribution and sale of our products. The inability to
successfully manage these relationships could adversely affect
our business.
Strong
competition in the semiconductor market may harm our
business.
The IC industry is intensely competitive and is frequently
characterized by rapid technological change, price erosion,
technological obsolescence, and a push towards IC component
integration. Because of shortened product life cycles and even
shorter design-in cycles in a number of the markets that we
serve, our competitors have increasingly frequent opportunities
to achieve design wins in next-generation systems. In the event
that competitors succeed in supplanting our products, our market
share may not be sustainable and our net sales, gross margin and
operating results would be adversely affected. Additionally,
further component integration could eliminate the need for our
products.
We compete in a number of fragmented markets. Our principal
competitors in these markets include AKM Semiconductor Inc.,
Analog Devices Inc., Austriamicrosystems AG, Freescale
Semiconductor Inc., Integrated Device Technology Inc., iWatt
Inc., Infineon Technologies AG, Linear Technologies Corporation,
Maxim Integrated Products Inc., NXP Semiconductors N.V., ON
Semiconductor Corporation, Power Integrations Inc., Realtek
Semiconductor Corporation, ST Microelectronics N.V., Texas
Instruments, Inc., and Wolfson Microelectronics plc. Many of
these competitors have greater financial, engineering,
manufacturing, marketing, technical, distribution, and other
resources; broader product lines; broader intellectual property
portfolios; and longer relationships with customers. We also
expect intensified competition from emerging companies and from
customers who develop their own IC products. In addition, some
of our current and future competitors maintain their own
fabrication facilities, which could benefit them in connection
with cost, capacity, and technical issues.
Increased competition could adversely affect our business. We
cannot provide assurances that we will be able to compete
successfully in the future or that competitive pressures will
not adversely affect our financial condition and results of
operations. Competitive pressures could reduce market acceptance
of our products and result in price reductions and increases in
expenses that could adversely affect our business and our
financial condition.
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We may
be unable to protect our intellectual property
rights.
Our success depends in part on our ability to obtain patents and
to preserve our other intellectual property rights covering our
products. We seek patent protection for those inventions and
technologies for which we believe such protection is suitable
and is likely to provide a competitive advantage to us. We also
rely on trade secrets, proprietary technology, non-disclosure
and other contractual terms, and technical measures to protect
our technology and manufacturing knowledge. We work actively to
foster continuing technological innovation to maintain and
protect our competitive position. We cannot provide assurances
that steps taken by us to protect our intellectual property will
be adequate, that our competitors will not independently develop
or design around our patents, or that our intellectual property
will not be misappropriated. In addition, the laws of some
non-U.S. countries
may not protect our intellectual property as well as the laws of
the United States.
Any of these events could materially and adversely affect our
business, operating results, and financial condition. Policing
infringement of our technology is difficult, and litigation may
be necessary in the future to enforce our intellectual property
rights. Any such litigation could be expensive, take significant
time, and divert managements attention from other business
concerns.
Potential
intellectual property claims and litigation could subject us to
significant liability for damages and could invalidate our
proprietary rights.
The IC industry is characterized by frequent litigation
regarding patent and other intellectual property rights. We may
find it necessary to initiate a lawsuit to assert our patent or
other intellectual property rights. These legal proceedings
could be expensive, take significant time, and divert
managements attention from other business concerns. We
cannot provide assurances that we will ultimately be successful
in any lawsuit, nor can we provide assurances that any patent
owned by us will not be invalidated, circumvented, or
challenged. We cannot provide assurances that rights granted
under our patents will provide competitive advantages to us, or
that any of our pending or future patent applications will be
issued with the scope of the claims sought by us, if at all.
As is typical in the IC industry, we and our customers have,
from time to time, received and may in the future receive,
communications from third parties asserting patents, mask work
rights, or copyrights. In the event third parties were to make a
valid intellectual property claim and a license was not
available on commercially reasonable terms, our operating
results could be harmed. Litigation, which could result in
substantial cost to us and diversion of our management,
technical and financial resources, may also be necessary to
defend us against claimed infringement of the rights of others.
An unfavorable outcome in any such suit could have an adverse
effect on our future operations
and/or
liquidity.
If we
fail to attract, hire and retain qualified personnel, we may not
be able to develop, market, or sell our products or successfully
manage our business.
Competition for highly qualified personnel in our industry is
intense. The number of technology companies in the geographic
areas in which we operate is greater than it has been
historically and we expect competition for qualified personnel
to intensify. There are only a limited number of people in the
job market with the requisite skills. Our Human Resources
organization focuses significant efforts on attracting and
retaining individuals in key technology positions. The loss of
the services of key personnel or our inability to hire new
personnel with the requisite skills could restrict our ability
to develop new products or enhance existing products in a timely
manner, sell products to our customers, or manage our business
effectively.
We may
acquire other companies or technologies, which may create
additional risks associated with our ability to successfully
integrate them into our business.
We continue to consider future acquisitions of other companies,
or their technologies or products, to improve our market
position, broaden our technological capabilities, and expand our
product offerings. If we are able to acquire companies, products
or technologies that would enhance our business, we could
experience
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difficulties in integrating them. Integrating acquired
businesses involves a number of risks, including, but not
limited to:
§ | the potential disruption of our ongoing business; | |
§ | unexpected costs or incurring unknown liabilities; | |
§ | the diversion of management resources from other strategic and operational issues; | |
§ | the inability to retain the employees of the acquired businesses; | |
§ | difficulties relating to integrating the operations and personnel of the acquired businesses; | |
§ | adverse effects on the existing customer relationships of acquired companies; | |
§ | the potential incompatibility of business cultures; | |
§ | adverse effects associated with entering into markets and acquiring technologies in areas in which we have little experience; and | |
§ | acquired intangible assets becoming impaired as a result of technological advancements, or worse-than-expected performance of the acquired company. |
If we are unable to successfully address any of these risks, our
business could be harmed.
Future
transactions may limit our ability to use our net operating loss
carryforwards.
As of March 26, 2011, we had U.S. federal tax net
operating loss (NOL) carryforwards of approximately
$423.7 million. These NOL carryforwards may be used to
offset future taxable income and thereby reduce our
U.S. federal income taxes otherwise payable. There is a
risk we may not be able to generate taxable income in the future
in the amount necessary to fully utilize all of these NOLs.
Section 382 of the Internal Revenue Code of 1986, as
amended (the Code), imposes an annual limit on the
ability of a corporation that undergoes an ownership
change to use its NOL carry forwards to reduce its tax
liability. If we were at some point in the future to experience
an ownership change as defined in Section 382
of the Code, our use of the net operating loss carryforwards and
credit carryforwards may be limited as described in the Code.
Our
financial results may be adversely affected by changes in the
valuation allowance on our deferred tax assets.
The Company has a significant amount of deferred tax assets. Our
ability to recognize these deferred tax assets is dependent upon
our ability to determine whether it is more likely than not that
we will be able to realize, or actually use, these deferred tax
assets. That determination depends primarily on our ability to
generate future U.S. taxable income. Our judgments
regarding future profitability may change due to future market
conditions, changes in U.S. or international tax laws and
other factors. These changes, if any, may require possible
material adjustments to the net deferred tax asset and an
accompanying reduction or increase in net income in the period
in which such determinations are made.
Our
stock price has been and is likely to continue to be
volatile.
The market price of our common stock fluctuates significantly.
This fluctuation has been or may be the result of numerous
factors, including, but not limited to:
§ | actual or anticipated fluctuations in our operating results; | |
§ | announcements concerning our business or those of our competitors, customers, or suppliers; | |
§ | loss of a significant customer, or customers; | |
§ | changes in financial estimates by securities analysts or our failure to perform as anticipated by the analysts; |
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§ | news, commentary, and rumors emanating from the media relating to us, our customers, or the industry. These reports may be unrelated to the actual operating performance of the company, and in some cases, may be potentially misleading or incorrect; | |
§ | announcements regarding technological innovations or new products by us or our competitors; | |
§ | announcements by us of significant acquisitions, strategic partnerships, joint ventures, or capital commitment; | |
§ | announcements by us of significant divestitures or sale of certain assets or intellectual property; | |
§ | litigation arising out of a wide variety of matters, including, among others, employment matters and intellectual property matters; | |
§ | departure of key personnel; | |
§ | single significant stockholders selling for any reason; | |
§ | general conditions in the IC industry; and | |
§ | general market conditions and interest rates. |
We
have provisions in our certification of incorporation and
Bylaws, and are subject to certain provisions of Delaware law,
which could prevent, delay or impede a change of control of our
company. These provisions could affect the market price of our
stock.
Certain provisions of Delaware law and of our Certificate of
Incorporation and Bylaws could make it more difficult for a
third party to acquire us, even if our stockholders support the
acquisition. These provisions include, but are not limited to:
§ | the inability of stockholders to call a special meeting of stockholders; | |
§ | a prohibition on stockholder action by written consent; and | |
§ | a requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders. |
We are also subject to the anti-takeover laws of Delaware that
may prevent, delay or impede a third party from acquiring or
merging with us, which may adversely affect the market price of
our common stock.
We are
subject to the risks of owning real property.
We have purchased land for the purpose of building our
U.S. headquarters in Austin, Texas, and we own our facility
in Tucson, Arizona. The purchase of land and the current
construction of our U.S. headquarters, along with the
ownership of our facility in Tucson, subject us to the risks of
owning real property, which may include:
§ | the possibility of environmental contamination and the costs associated with correcting any environmental problems; | |
§ | adverse changes in the value of these properties, due to interest rate changes, changes in the neighborhood in which the property is located, or other factors; | |
§ | increased cash commitments for constructing a new building in Austin, Texas, or improving the current building and property in Tucson, Arizona; and | |
§ | the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of fire, floods, or other natural disasters. |
ITEM 1B. | Unresolved Staff Comments |
None.
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ITEM 2. | Properties |
As of May 1, 2011, our principal leased facilities, located
in Austin, Texas, consisted of approximately 214,000 square
feet of office space. This leased space includes our
headquarters and engineering facility, which has
197,000 square feet with lease terms that extend into the
summer of calendar year 2012, excluding lease extension options,
and 17,000 square feet of leased space at our failure
analysis facility with lease terms that extend into calendar
year 2013. We have subleased approximately 38,000 square
feet of space at our Austin headquarters with sublease terms
that extend into the summer of calendar year 2012. In addition,
we own an engineering, administrative, and assembly facility in
Tucson, Arizona, which primarily houses employees who design,
manufacture, and sell the Apex brand of products.
In February 2011, the Company commenced construction of its
future corporate headquarters in Austin, Texas. We anticipate
completing the construction of the facility in the summer of
calendar year 2012, at which time we expect to relocate our
Austin employees from their current leased facilities. The new
headquarters facility will consist of approximately
135,000 square feet of office space, and the Company will
be the sole occupant of this new office space.
In September 2010, the lease for our former design facility in
Boulder, Colorado terminated. The Company did not renew this
lease agreement.
We do not anticipate difficulty in either retaining occupancy at
any of our facilities through lease renewals prior to expiration
or replacing them with equivalent facilities, and we believe
that our existing facilities are suitable and adequate for our
present purposes.
Below is a detailed schedule that identifies our occupied leased
and owned property locations as of May 1, 2011, with
various lease terms through fiscal year 2014:
Design Centers
|
Sales Support
Offices USA
|
Sales Support
Offices International
|
||
Austin, Texas Tucson, Arizona |
Burlington, Massachusetts |
Hong Kong, China Shanghai, China Shenzhen, China Tokyo, Japan Singapore Seoul, South Korea Taipei, Taiwan Buckinghamshire, United Kingdom |
See Note 8 Commitments and Contingencies
and Note 11 Restructuring Costs and Other,
net of the Notes to Consolidated Financial Statements
contained in Item 8 for further detail.
ITEM 3. | Legal Proceedings |
As of the balance sheet date, to the best of our knowledge, the
Company is not a party to any material pending litigation. From
time to time, various claims, charges and litigation are
asserted or commenced against us arising from, or related to,
contractual matters, intellectual property, employment disputes,
as well as other issues. Frequent claims and litigation
involving these types of issues are not uncommon in our
industry. As to any of these potential claims or litigation, we
cannot predict the ultimate outcome with certainty.
Page 19 of 71
Table of Contents
ITEM 4. | Reserved |
PART II
ITEM 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Our Common Stock is traded on the NASDAQ Global Select Market
under the symbol CRUS. The following table shows, for the
periods indicated, the high and low
intra-day
sales prices for our Common Stock.
High | Low | |||||||
Fiscal year ended March 26, 2011
|
||||||||
First quarter
|
$ | 18.85 | $ | 7.86 | ||||
Second quarter
|
21.20 | 14.55 | ||||||
Third quarter
|
19.07 | 12.39 | ||||||
Fourth quarter
|
25.48 | 15.86 | ||||||
Fiscal year ended March 27, 2010
|
||||||||
First quarter
|
$ | 4.98 | $ | 3.25 | ||||
Second quarter
|
6.22 | 4.01 | ||||||
Third quarter
|
6.89 | 4.51 | ||||||
Fourth quarter
|
8.13 | 6.23 |
As of May 20, 2011, there were approximately 752 holders of
record of our Common Stock.
We have not paid cash dividends on our Common Stock and
currently intend to continue a policy of retaining any earnings
for reinvestment in our business.
The information under the caption Equity Compensation Plan
Information in our 2011 Proxy Statement is incorporated
herein by reference.
In the third quarter of the current fiscal year, the Company
repurchased approximately 1.8 million shares of the
Companys stock, at a total cost of $22.8 million, or
$12.94 per share. Of this amount, 1.5 million shares of the
Companys stock were repurchased pursuant to the
$20 million share repurchase program authorized by the
Board of Directors in January 2009. An additional 216 thousand
shares were repurchased in the third quarter of fiscal year
2011, at a cost of $2.8 million, under a new
$80 million share repurchase program approved by our Board
of Directors and which the Company publicly announced on
November 4, 2010. All shares of our common stock that were
repurchased under these share repurchase programs were cancelled
upon consummation of the daily repurchase transactions.
Page 20 of 71
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Stock
Price Performance Graph
The following graph and table show a comparison of the five-year
cumulative total stockholder return, calculated on a dividend
reinvestment basis, for Cirrus Logic, the S&P 500 Composite
Index (the S&P 500), and the Semiconductor
Subgroup of the S&P Electronics Index (the S&P
Semiconductors Index).
COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100
on March 25, 2006
Assumes Initial Investment of $100
on March 25, 2006
![(PERFORMANCE GRAPH)](https://www.sec.gov/Archives/edgar/data/0000772406/000095012311053974/d82129d8212901.gif)
3/25/06 | 3/31/07 | 3/29/08 | 3/28/09 | 3/27/10 | 3/26/11 | |||||||||||||||||||||
Cirrus Logic, Inc.
|
100.00 | 88.97 | 77.00 | 46.46 | 91.64 | 245.76 | ||||||||||||||||||||
S&P 500 Index
|
100.00 | 111.16 | 104.92 | 66.80 | 97.57 | 112.08 | ||||||||||||||||||||
S&P 500 Semiconductors Index
|
100.00 | 92.73 | 86.81 | 64.25 | 97.69 | 108.96 |
(1) | The graph assumes that $100 was invested in our common stock and in each index at the market close on March 25, 2006, and that all dividends were reinvested. No cash dividends were declared on our common stock during the periods presented. | |
(2) | Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. |
The information in this
Form 10-K
appearing under the heading Stock Price Performance
Graph is being furnished pursuant to
Item 2.01(e) of
Regulation S-K
under the securities Act of 1933, as amended, and shall not be
deemed to be soliciting material or
filed with the Securities and Exchange Commission or
subject to Regulation 14A or 14C, other than as provided in
Item 201(e) of
Regulation S-K,
or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended.
Page 21 of 71
Table of Contents
ITEM 6. | Selected Consolidated Financial Data |
The information contained below should be read along with
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations
and Item 8 Financial Statements and
Supplementary Data (Amounts in thousands, except per share
amounts).
Fiscal Years | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(1) | (1) | (1) | (3) | (4) | ||||||||||||||||
Net sales
|
$ | 369,571 | $ | 220,989 | $ | 174,642 | $ | 181,885 | $ | 182,304 | ||||||||||
Net Income (loss)
|
203,503 | 38,398 | 3,475 | (5,846 | ) | 27,895 | ||||||||||||||
Basic earnings (loss) per share
|
$ | 3.00 | $ | 0.59 | $ | 0.05 | $ | (0.07 | ) | $ | 0.32 | |||||||||
Diluted earnings (loss) per share
|
$ | 2.82 | $ | 0.59 | $ | 0.05 | $ | (0.07 | ) | $ | 0.31 | |||||||||
Financial position at year end:
|
||||||||||||||||||||
Cash, cash equivalents, restricted investments and marketable
securities(2)
|
$ | 215,055 | $ | 141,626 | $ | 120,232 | $ | 187,498 | $ | 271,715 | ||||||||||
Total assets
|
496,621 | 267,610 | 207,004 | 298,306 | 353,060 | |||||||||||||||
Working capital
|
267,416 | 142,965 | 126,908 | 194,665 | 286,417 | |||||||||||||||
Long-term obligations
|
6,188 | 7,119 | 8,328 | 9,381 | 13,503 | |||||||||||||||
Total stockholders equity(2)
|
$ | 438,379 | $ | 218,601 | $ | 172,928 | $ | 240,935 | $ | 304,937 |
1) | Refer to the consolidated financial statements and the Notes thereto contained in Item 8 of this Form 10-K for fiscal years 2011, 2010, and 2009 for an expanded discussion of factors that materially affect the comparability of the information reflected in the selected consolidated financial data presented above. | |
2) | The reduction in cash, cash equivalents, restricted investments, and marketable securities, as well as total stockholders equity, in fiscal years 2008 and 2009 was primarily attributable to the completion of a $150 million stock repurchase program, which commenced in late fiscal year 2008 and was completed in fiscal year 2009. Additionally, the Company completed the acquisition of Apex Microtechnology in fiscal year 2008. | |
3) | Net income in fiscal year 2008 was unfavorably impacted by a $10.5 million restructuring charge, a $4.6 million charge to increase the valuation allowance on our U.S. deferred tax assets, a $4.5 million increase in research and development expenses primarily attributable to the acquisition of Apex Microtechnology, a $3.7 million charge for an impairment of non-marketable securities, and a $1.8 million charge for acquired in-process research and development associated with the Apex Microtechnology acquisition. | |
4) | Net income in fiscal year 2007 was favorably impacted by an $8.4 million benefit for income taxes, attributable to the release of $7.8 million of the valuation allowance that had been placed on our U.S. deferred tax assets. Net income in fiscal year 2007 was unfavorably impacted by a $4.3 million charge for an impairment of non-marketable securities, a $1.1 million restructuring charge, and a $1.9 million charge for acquired in-process research and development associated with an acquisition completed on December 29, 2006. |
ITEM 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
You should read the following discussion in conjunction with
our audited historical consolidated financial statements and
notes thereto, which are included elsewhere in this
Form 10-K.
Managements Discussion and Analysis of Financial Condition
and Results of Operations contains statements that are
forward-looking. These statements are based on current
expectations and assumptions that are subject to risk,
uncertainties and other factors. Actual results could differ
materially because of the factors discussed in Part I,
Item 1A. Risk Factors of this
Form 10-K.
Page 22 of 71
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Overview
We were incorporated in California in 1984, became a public
company in 1989, and were reincorporated in the State of
Delaware in February 1999. Initially, our focus was on providing
ICs for personal computer applications, including personal
computer (PC) graphics and storage. In 2001, we
refocused our business efforts away from these areas, which we
believed had become commodity-like in terms of pricing and
offered diminished opportunities for sustained product
differentiation and profitability. We reinforced our commitment
to operate efficiently and profitably by taking strategic
actions beginning in 2005 to improve our top and bottom line
growth, including: (1) improving efficiencies by focusing
on our mixed-signal audio and energy product lines,
(2) divesting our digital video product line assets and
non-core products to focus on our core strengths, and
(3) enhancing our capital structure by completing a
$150 million stock repurchase program in fiscal year 2009
to increase long-term stockholder value. We continued this
process in fiscal years 2010 and 2011 by focusing on winning new
designs, growing our market share in portable audio products in
particular, completing another $20 million stock repurchase
program, announcing another $80 million stock buyback, and
by laying the foundation for growth in our energy products.
Fiscal
Year 2011
In fiscal year 2011 we continued our strategy of targeting and
developing relationships with Tier 1 customers in growing
markets, such as portable audio products, including smartphones;
automobile audio amplifiers; and energy measurement and energy
control. We build on our diverse analog and signal-processing
patent portfolio by delivering highly optimized products for a
variety of audio and energy-related applications. While we
dedicate substantial resources and investments towards portable
audio products, we are also investing in energy-related
applications. Our current investments in the Energy product
lines are focused on energy measurement and the energy control
areas such as power factor correction, motor control, and
lighting. We have received our first digital LED lighting
controller back from the fab, and have a Tier 1 customer
currently evaluating the use of this device.
Fiscal year 2011 net sales of $369.6 million
represented a 67 percent increase over fiscal year
2010 net sales of $221.0 million. Audio product line
sales of $264.8 million in fiscal year 2011 represented a
72 percent increase over fiscal year 2010 sales of
$153.7 million, and were primarily attributable to higher
sales of portable audio and surround codec products. Energy
product line sales of $104.7 million in fiscal year 2011
represented a 56 percent increase over fiscal year 2010
sales of $67.3 million, and were primarily attributable to
higher seismic, power meter, and power amplification products.
Overall gross margin of 54.7 percent for fiscal year 2011
reflects an increase from fiscal year 2010 margin of
53.7 percent due to enhanced supply chain management,
activity within the energy product line, and in particular to
the sales of seismic, power meter, and power amplification
products.
With expanding design win opportunities in both our audio and
energy product lines, the Company continued to take advantage of
the availability of engineering talent, which resulted in an
increase of 64 research and development employees, or
26 percent, as compared to the end of fiscal year 2010.
The Company achieved net income of $203.5 million in fiscal
year 2011, which included a benefit for income taxes in the
amount of $119.3 million as a result of the realization of
an additional $120.0 million of net deferred tax assets.
Finally, the Companys cash, cash equivalents and
investments balances as of March 26, 2011, of
$215.1 million reflects an increase of $73.5 million,
or 52 percent, over the ending balances from the prior
fiscal year.
Fiscal
Year 2010
Fiscal year 2010 net sales of $221 million represented
a 27 percent increase over fiscal year 2009 net sales
of $174.6 million. Increased sales from our audio product
line, in particular portable audio and surround codec products,
were key drivers in the overall improvement in top-line revenues
in fiscal year 2010 versus the prior fiscal year.
Page 23 of 71
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While fiscal year 2010 net sales from our energy product
line reflected a net 13 percent reduction from fiscal year
2009 results, the energy product line ended its fiscal year on a
positive note with increased sales of seismic and power meter
products, as well as improved performance from ARM and
communication products. We saw improvements in a variety of our
energy product lines throughout fiscal year 2010, as our
traditional industrial business benefitted from the improving
economy. Seismic product sales were down from prior year peak
levels, although they improved sequentially throughout fiscal
year 2010.
Overall gross margin of 53.7 percent for fiscal year 2010
reflected a decrease from fiscal year 2009 margin of
55.6 percent due to the recent growth in sales of portable
audio products, as well as a mix change to lower margin products
in our energy product line driven primarily by a reduction in
seismic product sales in fiscal year 2010. The Company achieved
net income of $38.4 million in fiscal year 2010, which
included an $11.9 million recognition of deferred tax
assets. The $38.4 million of net income in fiscal year 2010
represented an increase of $34.9 million over fiscal year
2009 net income of $3.5 million. Finally, the
Companys cash, cash equivalents and investments balances
as of March 27, 2010, of $141.6 million reflects an
increase of $21.4 million over the ending balances from the
prior fiscal year.
Fiscal
Year 2009
For fiscal year 2009, net sales were down approximately
4 percent from the preceding year. However, our strength in
revenue from new products and prudent expense management were
key drivers in the Company maintaining bottom-line profitability
for the year as a whole while establishing a solid base for
future growth.
Results
of Operations
The following table summarizes the results of our operations for
each of the past three fiscal years as a percentage of net
sales. All percentage amounts were calculated using the
underlying data, in thousands:
Fiscal Years Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Audio products
|
72 | % | 70 | % | 56 | % | ||||||
Energy products
|
28 | % | 30 | % | 44 | % | ||||||
Net sales
|
100 | % | 100 | % | 100 | % | ||||||
Gross margin
|
55 | % | 54 | % | 56 | % | ||||||
Research and development
|
17 | % | 23 | % | 26 | % | ||||||
Selling, general and administrative
|
16 | % | 21 | % | 26 | % | ||||||
Restructuring costs and other, net
|
| % | | % | | % | ||||||
Impairment of (proceeds from) non-marketable securities
|
| % | | % | | % | ||||||
Provision (benefit) for litigation expenses and settlements
|
| % | (1 | %) | 1 | % | ||||||
Patent agreement, net
|
(1 | %) | | % | | % | ||||||
Impairment of intangible assets
|
| % | | % | 1 | % | ||||||
Income from operations
|
23 | % | 11 | % | 2 | % | ||||||
Interest income
|
| % | 1 | % | 2 | % | ||||||
Other income (expense), net
|
| % | | % | | % | ||||||
Income before income taxes
|
23 | % | 12 | % | 4 | % | ||||||
Provision (benefit) for income taxes
|
(32 | %) | (5 | %) | 2 | % | ||||||
Net income
|
55 | % | 17 | % | 2 | % | ||||||
Page 24 of 71
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Net
Sales
We report sales in two product categories: audio products and
energy products. Our sales by product line are as follows (in
thousands):
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Audio products
|
$ | 264,840 | $ | 153,661 | $ | 97,293 | ||||||
Energy products
|
104,731 | 67,328 | 77,349 | |||||||||
Total
|
$ | 369,571 | $ | 220,989 | $ | 174,642 | ||||||
Net sales for fiscal year 2011 increased 67 percent, to
$369.6 million from $221.0 million in fiscal year
2010. The increase in net sales reflects a $111.2 million
increase in audio product sales and a $37.4 million
increase in energy product sales. The audio products group
experienced growth primarily from the sales of portable and
surround codecs products, while the energy product group sales
increases were primarily attributable to sales of seismic, power
meter, and power amplification products.
Net sales for fiscal year 2010 increased 27 percent, to
$221.0 million from $174.6 million in fiscal year
2009. The increase in net sales reflects a $56.4 million
increase in audio product sales and a $10.0 million
decrease in energy product sales. The audio products group
experienced growth from the sales of portable and surround
codecs products, which were partially offset by decreases in ADC
and interface product sales. Within the energy product group,
sales decreases were primarily attributable to lower sales of
seismic, communications, and ARM processor-based products. These
decreases were partially offset by an increase in power meter
products sales.
Export sales, principally to Asia, including sales to
U.S.-based
customers that manufacture products at plants overseas, were
approximately $302.7 million in fiscal year 2011,
$173.6 million in fiscal year 2010, and $119.5 million
in fiscal year 2009. Export sales to customers located in Asia
were 70 percent, 65 percent, and 48 percent of
net sales in fiscal years 2011, 2010, and 2009, respectively.
All other export sales represented 12 percent,
14 percent, and 20 percent of net sales in fiscal
years 2011, 2010, and 2009, respectively.
Our sales are denominated primarily in U.S. dollars. During
fiscal years 2011, 2010, and 2009, we did not enter into any
foreign currency hedging contracts.
Gross
Margin
Overall gross margin of 54.7 percent for fiscal year 2011
reflects an increase from fiscal year 2010 margin of
53.7 percent, primarily due to enhanced supply chain
management, sales activity within the energy product line, and
in particular to the sales of seismic, power meter, and power
amplification products. The sale of product written down in
prior fiscal years contributed approximately $1.5 million,
or 0.4 percent, to gross margin compared to approximately
$1.3 million, or 0.6 percent, in fiscal year 2010. In
total, excess and obsolete inventory charges, including scrapped
inventory, increased by $5.1 million from fiscal year 2010
and resulted in a decrease of gross margin by 1.4 percent.
The $5.1 million increase in excess and obsolete inventory
charges was primarily attributable to a charge of approximately
$4.2 million in the fourth quarter of the Companys
current fiscal year due to a production issue with a new audio
device that entered high volume production in March 2011.
Gross margin was 54 percent in fiscal year 2010, down from
56 percent in fiscal year 2009. The decrease in margin from
fiscal year 2009 was mainly due to changes in both customer and
product mix. While the audio product group experienced a slight
increase in margin from fiscal year 2009 to fiscal year 2010 and
the energy group margins were essentially unchanged for this
comparable period, the increase in the percentage of sales from
the audio group in fiscal year 2010 caused a net reduction in
overall margins. The sale of product that had been written down
in prior fiscal years contributed approximately
$1.3 million, or 0.6 percent, to gross margin compared
to a contribution of approximately $1.6 million, or
0.9 percent, in fiscal year 2009. In total, excess and
obsolete inventory charges increased by $0.6 million from
fiscal year 2009, which resulted in a decrease in gross margin
by 0.3 percent.
Page 25 of 71
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Research
and Development Expenses
Fiscal year 2011 research and development expenses of
$63.9 million reflect an increase of $12.5 million, or
24 percent, from fiscal year 2010. The variance was
primarily due to a 26 percent increase in research and
development headcount and associated employee expenses,
including variable compensation attributable to improved
operating profit. Additionally, employment expenses also
increased primarily due to contract labor costs and employee
hiring related expenses.
Fiscal year 2010 research and development expenses of
$51.4 million reflect an increase of $7.1 million, or
16 percent, from fiscal year 2009. The increase was
primarily due to $3.5 million in salary and benefit costs
associated with research and development personnel, whose
headcount increased 12 percent in fiscal year 2010 as
compared to fiscal year 2009. Additionally, product development
expenses increased $2.8 million, primarily due to higher
photo-mask expenses. These increases in research and development
expenses were partially offset by non-recurring engineering work
performed and billed to third parties, which resulted in a
$0.6 million reduction in research and development expenses.
Selling,
General and Administrative Expenses
Fiscal year 2011 selling, general and administrative expenses of
$58.1 million reflect an increase of $12.1 million, or
26 percent, compared to fiscal year 2010. The
$12.1 million increase was primarily attributable to
increased variable compensation costs driven by improved
operating profit, as well as to higher stock option expenses and
external sales representative commissions. The number of
employees in the selling, general, and administrative expense
category remained essentially unchanged from the end of fiscal
year 2010.
Fiscal year 2010 selling, general and administrative expenses of
$45.9 million reflect an increase of $0.6 million, or
1 percent, compared to fiscal year 2009 as an increase in
salaries and benefits costs was offset by decreased expenses
across several expense categories. A $2.3 million increase
in salaries and benefits costs was primarily attributable to
increased headcount, and also due to higher sales commissions
brought on by increased product sales and fluctuations in
commissionable product mix in fiscal year 2010 versus fiscal
year 2009. Offsetting this increase was a $0.6 million
reduction in net rent expenses, a $0.6 decrease in marketing
expenses, and a $0.5 million reduction in professional
expenses.
Restructuring
Costs and Other, net
During fiscal year 2010, we recorded net restructuring charges
of $0.5 million as a separate line item on the statement of
operations in operating expenses under the caption
Restructuring costs and other, net. The
restructuring charge was primarily due to revised sublease
assumptions for lease space within our corporate headquarters
building.
As of March 26, 2011, we have a remaining restructuring
accrual for all of our past restructurings of $0.4 million,
primarily related to future lease payments net of anticipated
subleases that will be paid over the respective lease terms
through the summer of calendar year 2012. We have classified
$0.1 million of this restructuring accrual as long-term.
Impairment
of (Proceeds From) Non-Marketable Securities
In the second quarter of the current fiscal year, the Company
recognized a loss on the impairment of an equity investment in
the amount of $0.5 million. Our original investment was in
the form of a note receivable, which was then converted into an
equity security during the second quarter of the current fiscal
year. After the conversion, we determined that an impairment
indicator existed related to our cost method investment. We
performed a fair value analysis of our cost method investment in
accordance with FASB ASC Topic 320
Investments Debt and Equity
Securities. Based on the results of this analysis as
of September 25, 2010, we recognized an impairment of
$0.5 million to reduce the carrying value of the cost
method investment to zero. The impairment was recorded as a
separate line item on the consolidated statement of operations
in operating expenses under the caption Impairment of
(proceeds from) non-marketable securities.
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In the third quarter of fiscal year 2010, as part of a
convertible note financing round for Magnum Semiconductor, Inc.
(Magnum), a company that we had previously had an
investment in, we received proceeds of $500 thousand from Magnum
as consideration for our ownership interest in Magnum
securities, which in fiscal year 2008 had previously been fully
impaired. The proceeds were recorded as a separate line item on
the consolidated statement of operations in operating expenses
under the caption Impairment of (proceeds from)
non-marketable securities.
Provision
(Benefit) For Litigation Expenses and Settlements
During the fourth quarter of the current fiscal year, in
response to certain patent infringement allegations, the Company
incurred $57 thousand as part of the execution of a Settlement
and License Agreement. During the third quarter of fiscal year
2011, the Company received proceeds of $113 thousand reflecting
the final resolution of litigation with Silvaco Data Systems. Of
this amount, $30 thousand represented the settlement awarded to
the Company, and the balance represented recoveries of certain
litigation expenses and interest. Finally, during the first
quarter of fiscal year 2011, the Company incurred $135 thousand
in settlement costs related to a dispute with a former
distributor of the Companys products. These transactions,
in the cumulative net amount of $162 thousand, are reflected as
a separate line item on the consolidated statement of operations
in operating expenses under the caption Provision
(benefit) for litigation expenses and settlements.
On March 23, 2009, a lawsuit was filed against the Company
alleging patent infringement. During the third quarter of fiscal
year 2010, a settlement agreement was concluded which resulted
in Cirrus Logic recognizing a $135 thousand charge related to
the suit. In a separate matter, on June 17, 2009, during
the first quarter of fiscal year 2010, the Company received
proceeds of a net $2.7 million from its insurance carrier
as part of the final settlement of litigation where a purported
stockholder filed a derivative lawsuit in the state district
court in Travis county, Texas against current and former
officers and directors of the Company related to certain prior
grants of stock options by the Company. The proceeds of
$2.7 million were recorded as a recovery of costs
previously incurred in accordance with FASB ASC Topic 450,
Contingencies. The combined net amount of
$2.6 million from these two fiscal year 2010 transactions
are reflected as a separate line item on the consolidated
statement of operations in operating expenses under the caption
Provision (benefit) for litigation expenses and
settlements.
During fiscal year 2009, we recognized a $2.2 million
charge related to legal fees and expenses associated with the
derivative lawsuits. The charge was recorded as a separate line
item on the consolidated statement of operations in operating
expenses under the caption Provision (benefit) for
litigation expenses and settlements.
Patent
Agreement, Net
On July 13, 2010, we entered into a Patent Purchase
Agreement for the sale of certain Company owned patents. As a
result of this agreement, on August 31, 2010, the Company
received cash consideration of $4.0 million from the
purchaser. The proceeds were recorded as a recovery of costs
previously incurred and are reflected as a separate line item on
the consolidated statement of operations in operating expenses
under the caption Patent agreement, net.
On June 11, 2009, we entered into a Patent Purchase
Agreement for the sale of certain Company owned patents and on
August 26, 2009, the Company received cash consideration of
$1.4 million from the purchaser. The proceeds were recorded
as a recovery of costs previously incurred and are reflected as
a separate line item on the consolidated statement of operations
in operating expenses under the caption Patent
agreement, net.
Impairment
of Intangible Assets
In the fourth quarter of fiscal year 2009, we noted several
impairment indicators surrounding patents that we acquired in
June 2007. We performed an impairment analysis under FASB ASC
Topic 360 Property, Plant, and Equipment, and
noted that the undiscounted cash flows estimated to be generated
from these patents were less than the carrying amount of the
assets. We then compared the estimated fair value of these
Page 27 of 71
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assets to their carrying amount and recognized an impairment
loss of $2.1 million. The impairment was recorded as a
separate line item on the consolidated statement of operations
in operating expenses under the caption Impairment of
intangible assets.
Interest
Income
Interest income in fiscal years 2011, 2010, and 2009, was
$0.9 million, $1.3 million, and $2.8 million
respectively. The decrease in interest income in fiscal year
2011 compared to fiscal year 2010, as well as for fiscal year
2010 as compared to fiscal year 2009, was attributable to lower
yields on invested capital.
Income
Taxes
We recorded an income tax benefit of $119.3 million in
fiscal year 2011 on a pre-tax income of $84.2 million,
yielding an effective tax benefit rate of 142 percent. Our
effective tax rate was lower than the U.S. statutory rate
of 35 percent, primarily as a result of the release of a
portion of the valuation allowance on certain deferred tax
assets that have not yet been utilized. The release of a portion
of the valuation allowance generated a $120.0 million tax
benefit and was based on an evaluation of the net
U.S. deferred tax assets that we expect are more likely
than not to be utilized in the upcoming years as a result of
projected net income.
We recorded an income tax benefit of $11.7 million in
fiscal year 2010 on a pre-tax income of $26.7 million,
yielding an effective tax benefit rate of 44 percent. Our
effective tax rate was lower than the U.S. statutory rate
of 35 percent, primarily as a result of the realization of
deferred tax assets that had been fully reserved and the release
of a portion of the valuation allowance on certain deferred tax
assets that have not yet been utilized. The release of a portion
of the valuation allowance generated an $11.8 million tax
benefit and was based on an evaluation of the net
U.S. deferred tax assets that we expect to utilize in the
upcoming year as a result of projected tax basis net income.
We recorded an income tax provision of $2.7 million in
fiscal year 2009 on a pre-tax income of $6.2 million,
yielding an effective tax rate of 44 percent. Our effective
tax rate was higher than the U.S. statutory rate of
35 percent primarily due to a $2.7 million charge to
tax expense to increase the valuation allowance on our
U.S. deferred tax assets.
We evaluate our ability to realize our deferred tax assets on a
quarterly basis. We have deferred tax assets generated in
non-U.S. jurisdictions
that we have recognized since it is more likely than not that
these assets will be realized.
Outlook
Based on our strategic plan, our long-term business model
targets for the Company are annual revenue growth of
15 percent, gross margins of 55 percent, and operating
profit of 20 percent. In fiscal year 2012, we anticipate
revenue growth below this target in the first two quarters, with
stronger revenue growth in the second half of the fiscal year
when new product introductions from multiple customers begin
shipping in full production.
Liquidity
and Capital Resources
In fiscal year 2011, our net cash provided by operating
activities was $86.9 million. The positive cash flow from
operating activities was predominantly due to the cash
components of our net income, which were partially offset by a
$12.8 million reduction in working capital. In fiscal year
2010, our operating activities generated $25.1 million in
cash. The positive cash flow from operating activities was
predominantly due to the cash components of our net income,
which were partially offset by a $14.0 million decrease in
working capital. In fiscal year 2009, our operating activities
generated $23.1 million in cash. The positive cash flow
from operating activities was predominantly due to the cash
components of our net income coupled with a $2.3 million
increase in working capital.
In fiscal year 2011, we used approximately $74.2 million in
cash from investing activities, principally due to the net
purchase of $52.7 million in marketable securities. In
addition, during fiscal year 2011, we invested
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$20.1 million in property, equipment, and capitalized
software, primarily attributable to the purchase of land for our
new corporate headquarters in the amount of $10.8 million,
coupled with $2.4 million in headquarters construction
costs. During fiscal year 2011, we also incurred
$1.5 million for investments in technology. In fiscal year
2010, we used approximately $42.6 million in cash from
investing activities, principally due to the net purchase of
$36.8 million in marketable securities. In addition, during
fiscal year 2010, we invested $3.7 million in property,
equipment, and capitalized software and $2.2 million in
technology. In fiscal year 2009, we generated approximately
$36.5 million in cash from investing activities,
principally due to the net sale of $41.8 million in
marketable securities. In addition, during fiscal year 2009, we
invested $3.1 million in property, equipment, and
capitalized software and $2.1 million in technology.
During fiscal years 2011, 2010, and 2009, we generated
$31.0 million, $2.0 million and $2.6 million,
respectively, in cash from financing activities related to the
receipt of cash from common stock issuances as a result of the
exercises of employee stock options and, in fiscal year 2009,
our employee stock purchase plan. In fiscal years 2011 and 2009,
the Company utilized approximately $22.8 million and
$87.2 million in cash, respectively, to repurchase and
retire portions of its outstanding common stock, as previously
discussed in Part II Item 5
Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
As of March 26, 2011, we had restricted investments of
$5.8 million, which primarily secures certain obligations
under our lease agreement for our principal facility located in
Austin, Texas. This facility is 197,000 square feet and
houses our headquarters and engineering operations. The cash
restriction for this lease agreement is reduced to
$2.6 million in September 2011 and expires in May 2012.
As of March 26, 2011 the Company has no debt arrangements.
The Company has commenced construction of our planned new
headquarters facility in Austin, Texas with completion expected
in the summer of calendar year 2012. We estimate that as of
March 26, 2011 the remaining facility construction costs
will be approximately $30 million and will generally occur
ratably throughout the construction process. In addition, we
estimate that we will incur an additional $9 million in
furniture, fixtures, and equipment in order to fully move our
headquarters employees into this new facility. It is anticipated
that the project will be funded internally from existing and
future cash flows.
Although we cannot provide assurances to our stockholders that
we will be able to generate cash in the future, we anticipate
that our existing capital resources and cash flow generated from
future operations will enable us to maintain our current level
of operations for at least the next 12 months.
Off
Balance Sheet Arrangements
As of March 26, 2011, the Company did not have any material
off-balance-sheet arrangements, as defined in
Item 303(a)(4)(ii) of SEC
Regulation S-K.
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Contractual
Obligations
In our business activities, we incur certain commitments to make
future payments under contracts such as purchase orders,
operating leases and other long-term contracts. The Company has
no debt arrangements. Maturities under these contracts are set
forth in the following table as of March 26, 2011:
Payment due by period (In thousands) | ||||||||||||||||||||
< 1 year | 1 3 years | 3 5 years | > 5 years | Total | ||||||||||||||||
Facilities leases, net
|
$ | 4,454 | $ | 1,922 | $ | | $ | | $ | 6,376 | ||||||||||
Equipment leases
|
18 | 21 | 5 | | 44 | |||||||||||||||
Wafer purchase commitments
|
19,221 | | | | 19,221 | |||||||||||||||
Assembly purchase commitments
|
2,647 | | | | 2,647 | |||||||||||||||
Outside test purchase commitments
|
3,417 | | | | 3,417 | |||||||||||||||
Manufacturing raw materials
|
1,723 | | | | 1,723 | |||||||||||||||
Other purchase commitments
|
189 | | | | 189 | |||||||||||||||
Total
|
$ | 31,669 | $ | 1,943 | $ | 5 | $ | | $ | 33,617 | ||||||||||
Certain of our operating lease obligations include escalation
clauses. These escalating payment requirements are reflected in
the table.
Recently
Issued Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update
(ASU)
No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements
(ASU 2010-06),
which amends the disclosure guidance with respect to fair value
measurements. Specifically, the new guidance requires disclosure
of amounts transferred in and out of Levels 1 and 2 fair
value measurements, a reconciliation presented on a gross basis
rather than a net basis of activity in Level 3 fair value
measurements, greater disaggregation of the assets and
liabilities for which fair value measurements are presented and
more robust disclosure of the valuation techniques and inputs
used to measure Level 2 and 3 fair value measurements. ASU
2010-06 was
effective for interim and annual reporting periods beginning
after December 15, 2009, with the exception of the new
guidance around the Level 3 activity reconciliations, which
is effective for fiscal years beginning after December 15,
2010. The adoption of this pronouncement did not have a material
impact on our consolidated financial statements.
Critical
Accounting Policies
Our discussion and analysis of the Companys financial
condition and results of operations are based upon the
consolidated financial statements included in this report, which
have been prepared in accordance with U.S. generally
accepted accounting principles. The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts. We evaluate the estimates on
an on-going basis. We base these estimates on historical
experience and on various other assumptions that we believe to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.
We believe the following critical accounting policies involve
significant judgments and estimates that are used in the
preparation of the consolidated financial statements:
§ | For purposes of determining the variables used in the calculation of stock compensation expense for stock options under the provisions of FASB ASC Topic 505, Equity and FASB ASC Topic 718, Compensation Stock Compensation, we perform an analysis of current market data and historical company data to calculate an estimate of implied volatility, the expected term of the option, and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we |
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use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our Consolidated Statement of Operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements. |
§ | We recognize revenue in accordance with ASC Topic 605, Revenue Recognition, 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. |
Further, the Company defers the associated cost of goods sold on
our consolidated balance sheet, net within the deferred income
on shipments to distributors current liability 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. We believe this treatment is in accordance with ASC
Topic
330-10-35,
Inventory.
§ | The Company evaluates accounts receivable in accordance with FASB ASC Topic 310, Receivables. We maintain allowances for doubtful accounts for estimated losses resulting from the inability or failure of our customers to make required payments. We regularly evaluate our allowance for doubtful accounts based upon the age of the receivable, our ongoing customer relations, as well as any disputes with the customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required, which could have a material effect on our operating results and financial position. Additionally, we may maintain an allowance for doubtful accounts for estimated losses on receivables from customers with whom we are involved in litigation. See Note 4 Accounts Receivable, net of the Notes to Consolidated Financial Statements contained in Item 8. | |
§ | The Company evaluates inventory in accordance with FASB ASC Topic 330, Inventory. Inventories are recorded at the lower of cost or market, with cost being determined on a first-in, first-out basis. We write down inventories to net realizable value based on forecasted demand, management judgment, and the age of inventory. Actual demand and market conditions may be different from those projected by management, which could have a material effect on our operating results and financial position. See Note 2 Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in Item 8. | |
§ | We evaluate the recoverability of property, plant, and equipment and intangible assets in accordance with FASB ASC Topic 360, Property, Plant, and Equipment, and FASB ASC Topic 350, Intangibles Goodwill and Other. We test for impairment losses on long-lived assets 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. An impairment loss is recognized in the event the carrying value of these assets exceeds the fair value of the applicable assets. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management, which |
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could have a material effect on our operating results and financial position. See Note 7 Intangibles, net of the Notes to Consolidated Financial Statements contained in Item 8. |
§ | The Company evaluates goodwill and other intangible assets in accordance with FASB ASC Topic 350, Intangibles Goodwill and Other. Goodwill is recorded at the time of an acquisition and is calculated as the difference between the total consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Accounting for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including in-process research and development (IPR&D). 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. In accordance with FASB ASC Topic 350, the Company tests goodwill for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve 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 the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. | |
§ | Our available-for-sale investments, non-marketable securities and other investments are subject to a periodic impairment review pursuant to FASB ASC Topic 320, Investments Debt and Equity Securities. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment and actual results may be materially different than our estimate. Marketable securities are evaluated for impairment if the decline in fair value below cost basis is significant and/or has lasted for an extended period of time. Non-marketable securities or other investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. For investments accounted for using the cost method of accounting, we evaluate information (e.g., budgets, business plans, financial statements) in addition to quoted market prices, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults, and subsequent rounds of financings at an amount below the cost basis of the investment. This list is not all inclusive and we weigh all quantitative and qualitative factors in determining if an other-than-temporary decline in value of an investment has occurred. When a decline in value is deemed to be other-than-temporary, we recognize an impairment loss in the current periods operating results to the extent of the decline. Actual values could be different from those estimated by management, which could have a material effect on our operating results and financial position. See Note 3 Marketable Securities and Note 5 Non-Marketable Securities of the Notes to Consolidated Financial Statements contained in Item 8. | |
§ | In accordance with Statement of FASB ASC Topic 740, 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 by using a three year forecast to determine the amount of net operating losses and other deferred tax assets that would be utilized if we achieved the results set forth in the three year forecast. The Company limited the forecast period to three years because of the cyclical and competitive nature of the semiconductor industry, and the Companys reliance on a key customer who accounted for approximately 47 percent of total sales in fiscal year 2011. There can be no assurance that we will achieve the results set forth in our three year forecast and our actual results may differ materially from our forecast. |
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We have provided a valuation allowance against a portion of our
net U.S. deferred tax assets due to uncertainties regarding
their realization. We evaluate our ability to realize our
deferred tax assets basis by determining whether or not the
anticipated future taxable income is expected to be sufficient
to utilize the deferred tax assets that we have recognized. If
our future income is not sufficient to utilize the deferred tax
assets that we have recognized, we increase the valuation
allowance to the point at which all of the remaining recognized
deferred tax assets will be utilized by the future taxable
income. If our anticipated future taxable income is sufficient
to conclude that additional deferred tax assets should be
recognized, we decrease the valuation allowance. The calculation
of our tax liabilities involves dealing with uncertainties in
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. If our estimates
of these taxes are greater or less than actual results, an
additional tax benefit or charge will result. See
Note 15 Income Taxes of the Notes to
Consolidated Financial Statements contained in Item 8.
§ | Restructuring charges for workforce reductions and facilities consolidations reflected in the accompanying financial statements were accrued based upon specific plans established by management, in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations. We use an estimated borrowing rate as the discount rate for all of our restructuring accruals made under FASB ASC Topic 420. Our facilities consolidation accruals are based upon our estimates as to the length of time a facility would be vacant, as well as the amount of sublease income we would receive once we sublet the facility, after considering current and projected market conditions. Changes in these estimates could result in an adjustment to our restructuring accruals in a future quarter, which could have a material effect on our operating results and financial position. See Note 11 Restructuring Costs and Other of the Notes to Consolidated Financial Statements contained in Item 8. | |
§ | We are subject to the possibility of loss contingencies for various legal matters. See Note 9 Legal Matters of the Notes to Consolidated Financial Statements contained in Item 8. We regularly evaluate current information available to us to determine whether any accruals should be made based on the status of the case, the results of the discovery process and other factors. If we ultimately determine that an accrual should be made for a legal matter, this accrual could have a material effect on our operating results and financial position and the ultimate outcome may be materially different than our estimate. |
ITEM 7A. | Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to market risks associated with interest rates on
our debt securities, currency movements on
non-U.S. dollar
denominated assets and liabilities, and the effect of market
factors on the value of our non-marketable equity securities. We
assess these risks on a regular basis and have established
policies that are designed to protect against the adverse
effects of these and other potential exposures. All of the
potential changes noted below are based on sensitivity analyses
as of March 26, 2011. Actual results may differ materially.
Interest
Rate Risk
Our primary financial instruments include cash and cash
equivalents, marketable securities, accounts receivable,
accounts payable, and accrued liabilities. The Companys
investments are managed by outside professional managers within
investment guidelines set by the Company. These 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 Company does not use derivative
financial instruments in its investment portfolio. Due to the
short-term nature of our investment portfolio and the current
low interest rate environment, our downside exposure to interest
rate risk is minimal.
To provide a meaningful assessment of the interest rate risk
associated with our investment portfolio, we performed a
sensitivity analysis to determine the impact a change in
interest rates would have on the value of our investment
portfolio. At March 26, 2011, an immediate one percent, or
100 basis points, increase or decrease in interest rates
could result in a $1.8 million fluctuation in our annual
interest income. However, our
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investment portfolio holdings as of March 26, 2011, yielded
less than 100 basis points, which reduces our downside
interest rate risk to the amount of interest income recognized
in fiscal year 2011, or $0.9 million. At March 27,
2010, an immediate one percent, or 100 basis points,
increase or decrease in interest rates could result in a
$1.3 million fluctuation in our annual interest income.
However, our investment portfolio holdings as of March 27,
2010, yielded less than 100 basis points, which reduced our
downside interest rate risk to an amount slightly less than the
$1.3 million calculation. At March 28, 2009, an
immediate one percent, or 100 basis points, increase or
decrease in interest rates could have resulted in a
$1.5 million fluctuation in our annual interest income. For
all of these fiscal years, the risks associated with fluctuating
interest rates were limited to our annual interest income and
not the underlying principal as we generally have the ability to
hold debt related investments to maturity. The amounts disclosed
in this paragraph are based on a 100 basis point
fluctuation in interest rates applied to the average cash
balance for that fiscal year.
Foreign
Currency Exchange Risk
Our revenue and spending is transacted primarily in
U.S. dollars; however, in fiscal years 2011, 2010, and
2009, we entered into minimal transactions in other currencies
to fund the operating needs of our design, technical support,
and sales offices outside of the U.S. As of March 26,
2011, and March 27, 2010, a ten percent change in the value
of the related currencies would not have a material impact on
our results of operations and financial position.
In addition to the direct effects of changes in exchange rates
on the value of open exchange contracts, we may, from time to
time, have changes in exchange rates that can also affect the
volume of sales or the foreign currency sales prices of our
products and the relative costs of operations based overseas.
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ITEM 8. | Financial Statements and Supplementary Data |
Index to
Consolidated Financial Statements
36 | ||||
38 | ||||
39 | ||||
40 | ||||
41 | ||||
42 |
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Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Cirrus Logic, Inc.
We have audited the accompanying consolidated balance sheets of
Cirrus Logic, Inc. as of March 26, 2011 and March 27,
2010, and the related consolidated statements of operations,
stockholders equity, and cash flows for each of the three
fiscal years in the period ended March 26, 2011. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Cirrus Logic, Inc. at March 26, 2011
and March 27, 2010, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended March 26, 2011, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Cirrus Logic, Inc.s internal control over financial
reporting as of March 26, 2011, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated May 25, 2011 expressed an
unqualified opinion thereon.
/s/ Ernst &
Young LLP
Austin, Texas
May 25, 2011
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Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Cirrus Logic, Inc.
We have audited Cirrus Logic, Inc.s internal control over
financial reporting as of March 26, 2011, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Cirrus Logic,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Cirrus Logic, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of March 26, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Cirrus Logic, Inc. as of
March 26, 2011 and March 27, 2010, and the related
consolidated statements of operations, shareholders
equity, and cash flows for each of the three fiscal years in the
period ended March 26, 2011 of Cirrus Logic, Inc. and our
report dated May 25, 2011 expressed an unqualified opinion
thereon.
/s/ Ernst &
Young LLP
Austin, Texas
May 25, 2011
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CIRRUS
LOGIC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 37,039 | $ | 16,109 | ||||
Restricted investments
|
5,786 | 5,855 | ||||||
Marketable securities
|
159,528 | 85,384 | ||||||
Accounts receivable, net
|
39,098 | 23,963 | ||||||
Inventories
|
40,497 | 35,396 | ||||||
Deferred tax assets
|
30,797 | 12,549 | ||||||
Prepaid assets
|
3,457 | 2,307 | ||||||
Other current assets
|
3,268 | 3,292 | ||||||
Total current assets
|
319,470 | 184,855 | ||||||
Long-term marketable securities
|
12,702 | 34,278 | ||||||
Property, plant and equipment, net
|
34,563 | 18,674 | ||||||
Intangibles, net
|
20,125 | 21,896 | ||||||
Deferred tax assets
|
102,136 | 339 | ||||||
Goodwill
|
6,027 | 6,027 | ||||||
Other assets
|
1,598 | 1,541 | ||||||
Total assets
|
$ | 496,621 | $ | 267,610 | ||||
Liabilities and Stockholders Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 27,639 | $ | 20,340 | ||||
Accrued salaries and benefits
|
12,402 | 9,962 | ||||||
Deferred income on shipments to distributors
|
6,844 | 6,488 | ||||||
Other accrued liabilities
|
5,169 | 5,100 | ||||||
Total current liabilities
|
52,054 | 41,890 | ||||||
Lease commitments and contingencies
|
287 | 1,070 | ||||||
Long-term restructuring accrual
|
113 | 596 | ||||||
Other long-term liabilities
|
5,788 | 5,453 | ||||||
Stockholders Equity:
|
||||||||
Preferred stock, 5.0 million shares authorized but unissued
|
| | ||||||
Common stock, $0.001 par value, 280,000 shares
authorized, 68,664 shares and 65,653 shares issued and
outstanding at March 26, 2011 and March 27, 2010,
respectively
|
69 | 66 | ||||||
Additional paid-in capital
|
991,878 | 952,737 | ||||||
Accumulated deficit
|
(552,814 | ) | (733,553 | ) | ||||
Accumulated other comprehensive loss
|
(754 | ) | (649 | ) | ||||
Total stockholders equity
|
438,379 | 218,601 | ||||||
Total liabilities and stockholders equity
|
$ | 496,621 | $ | 267,610 | ||||
The accompanying notes are an integral part of these financial
statements.
Page 38 of 71
Table of Contents
CIRRUS
LOGIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Fiscal Years Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Net sales
|
$ | 369,571 | $ | 220,989 | $ | 174,642 | ||||||
Cost of sales
|
167,576 | 102,258 | 77,458 | |||||||||
Gross margin
|
201,995 | 118,731 | 97,184 | |||||||||
Operating expenses:
|
||||||||||||
Research and development
|
63,934 | 51,421 | 44,315 | |||||||||
Selling, general and administrative
|
58,066 | 45,923 | 45,304 | |||||||||
Restructuring costs and other, net
|
6 | 493 | | |||||||||
Impairment of (proceeds from) non-marketable securities
|
500 | (500 | ) | | ||||||||
Provision (benefit) for litigation expenses and settlements
|
162 | (2,610 | ) | 2,205 | ||||||||
Patent agreement, net
|
(4,000 | ) | (1,400 | ) | | |||||||
Impairment of intangible assets
|
| | 2,144 | |||||||||
Total operating expenses
|
118,668 | 93,327 | 93,968 | |||||||||
Income from operations
|
83,327 | 25,404 | 3,216 | |||||||||
Interest income
|
860 | 1,345 | 2,777 | |||||||||
Other income (expense), net
|
27 | (66 | ) | 164 | ||||||||
Income before income taxes
|
84,214 | 26,683 | 6,157 | |||||||||
Provision (benefit) for income taxes
|
(119,289 | ) | (11,715 | ) | 2,682 | |||||||
Net income
|
$ | 203,503 | $ | 38,398 | $ | 3,475 | ||||||
Basic earnings per share:
|
$ | 3.00 | $ | 0.59 | $ | 0.05 | ||||||
Diluted earnings per share
|
$ | 2.82 | $ | 0.59 | $ | 0.05 | ||||||
Weighted average common shares outstanding:
|
||||||||||||
Basic
|
67,857 | 65,338 | 65,530 | |||||||||
Diluted
|
72,103 | 65,626 | 65,711 |
The accompanying notes are an integral part of these financial
statements.
Page 39 of 71
Table of Contents
CIRRUS
LOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Years Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 203,503 | $ | 38,398 | $ | 3,475 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
Depreciation and amortization
|
8,145 | 7,888 | 8,168 | |||||||||
Loss (gain) on retirement or write-off of long-lived assets
|
(24 | ) | 70 | 113 | ||||||||
Amortization of lease settlement
|
| (83 | ) | (995 | ) | |||||||
Deferred income taxes
|
(120,045 | ) | (11,932 | ) | 2,701 | |||||||
Gain on marketable securities
|
| (500 | ) | | ||||||||
Stock compensation expense
|
8,141 | 5,318 | 5,166 | |||||||||
Impairment of intangible assets
|
| | 2,144 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
(15,135 | ) | (13,149 | ) | 11,838 | |||||||
Inventories
|
(5,101 | ) | (15,518 | ) | 2,744 | |||||||
Other assets
|
(1,158 | ) | (937 | ) | 2,201 | |||||||
Accounts payable
|
7,299 | 10,454 | (6,278 | ) | ||||||||
Accrued salaries and benefits
|
2,440 | 3,530 | (653 | ) | ||||||||
Deferred revenues
|
356 | 3,062 | (3,158 | ) | ||||||||
Income taxes payable
|
(80 | ) | 116 | | ||||||||
Other accrued liabilities
|
(1,401 | ) | (1,581 | ) | (4,399 | ) | ||||||
Net cash provided by operating activities
|
86,940 | 25,136 | 23,067 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Proceeds from sale of available for sale marketable securities
|
202,753 | 111,167 | 148,941 | |||||||||
Purchases of available for sale marketable securities
|
(255,426 | ) | (147,929 | ) | (107,137 | ) | ||||||
Proceeds from sale of non-marketable securities
|
| 500 | | |||||||||
Purchases of property, plant and equipment
|
(20,060 | ) | (3,654 | ) | (3,060 | ) | ||||||
Investments in technology
|
(1,527 | ) | (2,185 | ) | (2,127 | ) | ||||||
Acquisition of businesses, net of cash acquired
|
| (550 | ) | (550 | ) | |||||||
Decrease (increase) in restricted investments
|
69 | (100 | ) | | ||||||||
Decrease (increase) in deposits and other assets
|
(58 | ) | 190 | 414 | ||||||||
Net cash provided by (used in) investing activities
|
(74,249 | ) | (42,561 | ) | 36,481 | |||||||
Cash flows from financing activities:
|
||||||||||||
Repurchase and retirement of common stock
|
(22,766 | ) | | (87,244 | ) | |||||||
Issuance of common stock, net of issuance costs
|
31,005 | 2,030 | 2,586 | |||||||||
Net cash provided by (used in) financing activities
|
8,239 | 2,030 | (84,658 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents
|
20,930 | (15,395 | ) | (25,110 | ) | |||||||
Cash and cash equivalents at beginning of year
|
16,109 | 31,504 | 56,614 | |||||||||
Cash and cash equivalents at end of year
|
$ | 37,039 | $ | 16,109 | $ | 31,504 | ||||||
Supplemental disclosures of cash flow information
|
||||||||||||
Cash payments (refunds) during the year for:
|
||||||||||||
Interest expense
|
$ | | $ | | $ | | ||||||
Income taxes
|
784 | 90 | 174 |
The accompanying notes are an integral part of these financial
statements.
Page 40 of 71
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CIRRUS
LOGIC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)
Accumulated |
||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||
Common Stock |
Paid-in |
Accumulated |
Comprehensive |
|||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income (Loss) | Total | |||||||||||||||||||
Balance, March 29, 2008
|
75,899 | $ | 76 | $ | 937,640 | $ | (696,557 | ) | $ | (224 | ) | $ | 240,935 | |||||||||||
Components of comprehensive income:
|
||||||||||||||||||||||||
Net income
|
| | | 3,475 | | 3,475 | ||||||||||||||||||
Change in unrealized gain on marketable securities
|
| | | | (352 | ) | (352 | ) | ||||||||||||||||
Total comprehensive income
|
| | | | | 3,123 | ||||||||||||||||||
Issuance of stock under stock plans
|
579 | | 2,584 | | | 2,584 | ||||||||||||||||||
Repurchase and retirement of common stock
|
(11,237 | ) | (11 | ) | | (78,869 | ) | | (78,880 | ) | ||||||||||||||
Amortization of deferred stock compensation
|
| | 5,166 | | | 5,166 | ||||||||||||||||||
Balance, March 28, 2009
|
65,241 | 65 | 945,390 | (771,951 | ) | (576 | ) | 172,928 | ||||||||||||||||
Components of comprehensive income:
|
||||||||||||||||||||||||
Net income
|
| | | 38,398 | | 38,398 | ||||||||||||||||||
Change in unrealized gain on marketable securities
|
| | | | (73 | ) | (73 | ) | ||||||||||||||||
Total comprehensive income
|
| | | | | 38,325 | ||||||||||||||||||
Issuance of stock under stock plans
|
412 | 1 | 2,029 | | | 2,030 | ||||||||||||||||||
Amortization of deferred stock compensation
|
| | 5,318 | | | 5,318 | ||||||||||||||||||
Balance, March 27, 2010
|
65,653 | 66 | 952,737 | (733,553 | ) | (649 | ) | 218,601 | ||||||||||||||||
Components of comprehensive income:
|
||||||||||||||||||||||||
Net income
|
| | | 203,503 | | 203,503 | ||||||||||||||||||
Change in unrealized gain on marketable securities
|
| | | | (105 | ) | (105 | ) | ||||||||||||||||
Total comprehensive income
|
| | | | | 203,398 | ||||||||||||||||||
Issuance of stock under stock plans
|
4,770 | 5 | 31,000 | | | 31,005 | ||||||||||||||||||
Repurchase and retirement of common stock
|
(1,759 | ) | (2 | ) | | (22,764 | ) | | (22,766 | ) | ||||||||||||||
Amortization of deferred stock compensation
|
| | 8,141 | | | 8,141 | ||||||||||||||||||
Balance, March 26, 2011
|
68,664 | $ | 69 | $ | 991,878 | $ | (552,814 | ) | $ | (754 | ) | $ | 438,379 | |||||||||||
The accompanying notes are an integral part of these financial
statements.
Page 41 of 71
Table of Contents
CIRRUS
LOGIC, INC.
1. | Description of Business |
Description
of Business
Cirrus Logic, Inc. (Cirrus Logic,
Cirrus, 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 and mixed-signal patent
portfolio, Cirrus Logic delivers highly optimized products for
consumer and commercial audio, automotive entertainment, and
targeted industrial applications including energy control,
energy measurement and energy exploration. We also develop ICs,
board-level modules and hybrids for high-power amplifier
applications branded as the Apex Precision
Powertm
(Apex) line of products. We also provide complete
system reference designs based on our technology that enable our
customers to bring products to market in a timely and
cost-effective manner.
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 facilities housing
engineering, sales and marketing, administration, and test
operations are located in Austin, Texas. In addition, we have an
administrative and manufacturing facility in Tucson, Arizona and
sales locations internationally and throughout the United
States. We also 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 2011, 2010, and
2009 were all 52-week years.
Principles
of Consolidation
The accompanying consolidated financial statements have been
prepared in accordance with U.S. generally accepted
accounting principles 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. generally accepted accounting principles 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.
Page 42 of 71
Table of Contents
Restricted
Investments
As of March 26, 2011, and March 27, 2010, we had
restricted investments of $5.8 million and
$5.9 million, respectively, in support of our letters of
credit needs. The letters of credit primarily secure certain
obligations under our operating lease agreement for our
headquarters and engineering facility in Austin, Texas, and are
scheduled for periodic declines in amount to $2.6 million
in September 2011 and expiring in May 2012. The
$0.1 million decrease in fiscal year 2011 relates to an
agreement executed on March 24, 2010, for the purchase of
real property for the construction of our U.S. headquarters
in Austin, Texas.
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
in accordance with FASB ASC Topic 320,
Investments Debt and Equity
Securities. As of March 26, 2011, and
March 27, 2010, all marketable securities and restricted
investments were classified as
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 income (loss). The amortized cost of debt
securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity computed under
the effective interest method and is included in interest
income. 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. Inventory quantities on hand in excess of forecasted
demand are 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. The short product life
cycles and the competitive nature of the industry are factors
considered in the estimation of customer unit demand at the end
of each quarterly accounting period.
Inventories were comprised of the following (in thousands):
Year Ended | ||||||||
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Work in process
|
$ | 22,048 | $ | 18,016 | ||||
Finished goods
|
18,449 | 17,380 | ||||||
Inventories
|
$ | 40,497 | $ | 35,396 | ||||
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.
Page 43 of 71
Table of Contents
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.
Property, plant and equipment was comprised of the following (in
thousands):
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Land and buildings
|
$ | 19,051 | $ | 8,120 | ||||
Furniture and fixtures
|
4,215 | 4,342 | ||||||
Leasehold improvements
|
6,732 | 6,582 | ||||||
Machinery and equipment
|
32,569 | 26,973 | ||||||
Capitalized software
|
22,579 | 21,950 | ||||||
Total property, plant and equipment
|
85,146 | 67,967 | ||||||
Less: Accumulated depreciation and amortization
|
(50,583 | ) | (49,293 | ) | ||||
Property, plant and equipment, net
|
$ | 34,563 | $ | 18,674 | ||||
The increase in the land and buildings balance in fiscal year
2011 was attributable to the purchase of land for our new
headquarters in Austin, Texas, which is currently under
construction. Depreciation and amortization expense on property,
plant, and equipment for fiscal years 2011, 2010, and 2009, was
$4.8 million, $4.3 million, and $4.7 million,
respectively. During fiscal year 2011 we retired fully
depreciated assets with an original cost of $3.7 million.
Other-Than-Temporary
Impairment
All of the Companys
available-for-sale
investments, non-marketable securities, and other investments
are subject to a periodic impairment review pursuant to FASB ASC
Topic 320, Investments Debt and Equity
Securities. Investments are considered to be impaired
when a decline in fair value is judged to be
other-than-temporary.
Marketable securities are evaluated for impairment if the
decline in fair value below cost basis is significant
and/or has
lasted for an extended period of time. Non-marketable securities
or other investments are considered to be impaired when a
decline in fair value is judged to be
other-than-temporary.
For investments accounted for using the cost method of
accounting, management evaluates information (e.g., budgets,
business plans, financial statements) in addition to quoted
market price, if any, in determining whether an
other-than-temporary
decline in value exists. Factors indicative of an
other-than-temporary
decline include recurring operating losses, credit defaults, and
subsequent rounds of financings at an amount below the cost
basis of the investment. When a decline in value is deemed to be
other-than-temporary,
we recognize an impairment loss in the current periods
operating results to the extent of the decline.
Goodwill
and Intangibles, net
The Company reports goodwill and other intangible assets in
accordance with FASB ASC Topic 350,
Intangibles Goodwill and Other.
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, covenants
not-to-compete
and customer agreements. 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. Accounting for acquisitions
requires extensive use of accounting estimates and judgments to
allocate the purchase price to the fair value of the net
tangible and intangible assets acquired, including in-process
research and development (IPR&D).
Page 44 of 71
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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. In accordance with FASB ASC Topic 350, 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 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 the
evaluations. It is possible, however, that the plans and
estimates used may be incorrect. If our actual results, or the
plans and estimates used in future impairment analysis, are
lower than the original estimates used to assess the
recoverability of these assets, we could incur additional
impairment charges in a future period.
Long-Lived
Assets
In accordance with FASB ASC Topic 360, Property, Plant,
and Equipment, 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.
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, restricted investments, 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,
restricted investments, 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.
For fiscal years 2011 and 2010, we had one customer, Futaihua
Industrial, who represented 42 percent and 20 percent
of our consolidated gross accounts receivable. For fiscal years
2011 and 2010, we had one distributor, Avnet, Inc., who
represented 17 percent and 17 percent of our
consolidated gross accounts receivable. No other distributor or
customer had receivable balances that represented more than
10 percent of consolidated gross accounts receivable as of
the end of fiscal years 2011 or 2010.
Page 45 of 71
Table of Contents
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 2011 and 2010, our ten largest end customers represented
approximately 62 percent and 54 percent of our sales.
For fiscal years 2011, 2010, and 2009, we had one end customer,
Apple Inc., who purchased through multiple contract
manufacturers and represented approximately 47 percent,
35 percent, and 16 percent of the Companys total
sales, respectively. Further, we had one distributor that
represented 24 percent, 26 percent, and
33 percent of our sales for fiscal years 2011, 2010, and
2009 respectively. No other customer or distributor represented
more than 10 percent of net sales in fiscal years 2011,
2010, or 2009.
Revenue
Recognition
We recognize revenue in accordance with ASC Topic 605,
Revenue Recognition, 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.
Further, the Company defers the associated cost of goods sold on
our consolidated balance sheet, net within the deferred income
on shipments to distributors current liability 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 that our products, when delivered, will be free from
defects in material workmanship under normal use and service.
Our obligations are generally limited to replacing, repairing or
giving credit for, at our option, any products that are returned
within one year after the date of shipment and if notice is
given to us in writing within 30 days of the customer
learning of such problem. We have recorded an estimated accrual,
for all periods presented, for such returns based upon
historical trends.
Shipping
Costs
Our shipping and handling costs are included in cost of sales
for all periods presented.
Advertising
Costs
Advertising costs are expensed as incurred. Advertising costs
were $1.3 million, $1.0 million, and $1.5 million
in fiscal years 2011, 2010, and 2009, 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
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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. See
Note 13 Stockholders
Equity for additional information relating to
stock-based compensation.
Income
Taxes
We report income taxes in accordance with FASB ASC Topic 740,
Income Taxes, which provides for the
recognition of deferred tax assets if realization of such assets
is more likely than not. We have provided a valuation allowance
against a portion of our net U.S. deferred tax assets due
to uncertainties regarding their realization. We evaluate our
ability to realize our deferred tax assets on a quarterly basis.
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,
effectively settled issues under audit, and new audit activity.
Depending on the jurisdiction, such a change in recognition or
measurement may result in the recognition of a tax benefit or an
additional charge to the tax provision in the period.
Net
Income Per Share
Basic net income per share is based on the weighted effect of
common shares issued and outstanding and is calculated by
dividing net income by the basic weighted average shares
outstanding during the period. Diluted net income per share is
calculated by dividing net income by the weighted average number
of common shares used in the basic net income per share
calculation, plus the equivalent number of common shares that
would be issued assuming exercise or conversion of all
potentially dilutive common shares outstanding. These
potentially dilutive items consist primarily of outstanding
stock options and restricted stock awards.
The weighted outstanding options excluded from our diluted
calculation for the years ended March 26, 2011,
March 27, 2010, and March 28, 2009, were 615,000,
8,043,000, and 7,796,000, respectively, as the exercise price
exceeded the average market price during the period.
Accumulated
Other Comprehensive Loss
We report our accumulated other comprehensive loss based upon
FASB ASC Topic 220, Comprehensive Income.
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 14 Accumulated Other
Comprehensive loss for additional discussion.
Recently
Issued Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update
(ASU)
No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements
(ASU 2010-06),
which amends the disclosure guidance with respect to fair value
measurements. Specifically, the new guidance requires disclosure
of amounts transferred in and out of Levels 1 and 2 fair
value measurements, a reconciliation presented on a gross basis
rather than a net basis of activity in Level 3 fair value
measurements, greater disaggregation of the assets and
liabilities for which fair value measurements are presented and
more robust disclosure of the valuation techniques and inputs
used to measure Level 2 and 3 fair value measurements. ASU
2010-06 was
effective for interim and annual reporting periods beginning
after December 15, 2009, with the exception of the new
guidance around the Level 3 activity reconciliations, which
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is effective for fiscal years beginning after December 15,
2010. The adoption of this pronouncement did not have a material
impact on our consolidated financial statements.
3. | Marketable Securities |
The Companys investments that have original maturities
greater than 90 days have been classified as
available-for-sale
securities in accordance with FASB ASC Topic 320,
Investments Debt and Equity
Securities. Marketable securities are categorized on
the consolidated balance sheet as restricted investments and
marketable securities, as appropriate.
The following table is a summary of
available-for-sale
securities (in thousands):
Amortized |
Gross Unrealized |
Gross Unrealized |
Estimated Fair Value |
|||||||||||||
As of March 26, 2011: | Cost | Gains | Losses | (Net Carrying Amount) | ||||||||||||
Corporate securities U.S.
|
$ | 64,228 | $ | 22 | $ | (38 | ) | $ | 64,212 | |||||||
U.S. Government securities
|
35,268 | 13 | | 35,281 | ||||||||||||
Agency discount notes
|
16,588 | 5 | (2 | ) | 16,591 | |||||||||||
Commercial Paper
|
56,130 | 23 | (7 | ) | 56,146 | |||||||||||
Total securities
|
$ | 172,214 | $ | 63 | $ | (47 | ) | $ | 172,230 | |||||||
The Companys specifically identified gross unrealized
losses of $47 thousand relates to 28 different securities with a
total amortized cost of approximately $61.8 million at
March 26, 2011. 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 26, 2011. Further, the securities with
gross unrealized losses had been in a continuous unrealized loss
position for less than 12 months as of March 26, 2011.
Amortized |
Gross Unrealized |
Gross Unrealized |
Estimated Fair Value |
|||||||||||||
As of March 27, 2010: | Cost | Gains | Losses | (Net Carrying Amount) | ||||||||||||
Corporate securities U.S.
|
$ | 57,283 | $ | 133 | $ | (55 | ) | $ | 57,361 | |||||||
U.S. Government securities
|
44,423 | 44 | (6 | ) | 44,461 | |||||||||||
Agency discount notes
|
15,946 | 7 | (7 | ) | 15,946 | |||||||||||
Commercial Paper
|
7,744 | 5 | | 7,749 | ||||||||||||
Total securities
|
$ | 125,396 | $ | 189 | $ | (68 | ) | $ | 125,517 | |||||||
The Companys specifically identified gross unrealized
losses of $68 thousand relates to 30 different securities with a
total amortized cost of approximately $46.2 million at
March 27, 2010. 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 27, 2010. Further, the securities with
gross unrealized losses had been in a continuous unrealized loss
position for less than 12 months as of March 27, 2010.
The cost and estimated fair value of
available-for-sale
investments by contractual maturity were as follows:
March 26, 2011 | March 27, 2010 | |||||||||||||||
Amortized |
Estimated |
Amortized |
Estimated |
|||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
Within 1 year
|
$ | 159,516 | $ | 159,528 | $ | 91,096 | $ | 91,239 | ||||||||
After 1 year
|
12,698 | 12,702 | 34,300 | 34,278 | ||||||||||||
$ | 172,214 | $ | 172,230 | $ | 125,396 | $ | 125,517 | |||||||||
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The increase in
available-for-sale
investments during fiscal year 2011 is primarily attributable to
cash generated from operations during the period, coupled with
cash receipts from the exercise of employee stock options.
4. | Accounts Receivable, net |
The following are the components of accounts receivable, net (in
thousands):
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Gross accounts receivable
|
$ | 39,519 | $ | 24,451 | ||||
Less: Allowance for doubtful accounts
|
(421 | ) | (488 | ) | ||||
Accounts receivable, net
|
$ | 39,098 | $ | 23,963 | ||||
The increase in accounts receivable balances at March 26,
2011, as compared to March 27, 2010, is consistent with
revenue growth experienced at the end of fiscal year 2011
compared to the end of fiscal year 2010.
The following table summarizes the changes in the allowance for
doubtful accounts (in thousands):
Balance, March 29, 2008
|
$ | (404 | ) | |
Write-off of uncollectible accounts, net of recoveries
|
(47 | ) | ||
Balance, March 28, 2009
|
(451 | ) | ||
Write-off of uncollectible accounts, net of recoveries
|
(37 | ) | ||
Balance, March 27, 2010
|
(488 | ) | ||
Write-off of uncollectible accounts, net of recoveries
|
67 | |||
Balance, March 26, 2011
|
$ | (421 | ) | |
5. | Non-Marketable Securities |
In the second quarter of the current fiscal year, the Company
recognized a loss on the impairment of an equity investment in
the amount of $0.5 million. Our original investment was in
the form of a note receivable, which was then converted into an
equity security during the second quarter of the current fiscal
year. After the conversion, we determined that an impairment
indicator existed related to our cost method investment. We
performed a fair value analysis of our cost method investment in
accordance with FASB ASC Topic 320
Investments Debt and Equity
Securities. Based on the results of this analysis we
recognized an impairment of $0.5 million to reduce the
carrying value of the cost method investment to zero. The
impairment was recorded as a separate line item on the
consolidated statement of operations in operating expenses under
the caption Impairment of (proceeds from)
non-marketable securities.
In the third quarter of fiscal year 2010, as part of a
convertible note financing round for Magnum Semiconductor, Inc.
(Magnum), a company that we previously had an
investment in, we received proceeds of $0.5 million from
Magnum as consideration for our ownership interest in Magnum
securities, which we determined had been fully impaired in
fiscal year 2008. The proceeds were recorded as a separate line
item on the consolidated statement of operations in operating
expenses under the caption Impairment of (proceeds
from) non-marketable securities.
Our consolidated balance sheet at March 26, 2011, reflects
no value attributable to investments in non-marketable
securities.
6. | Acquisitions |
On December 8, 2008, we executed an asset purchase
agreement with Thaler Corporation of Tucson, Arizona, an entity
specializing in the manufacture of precision analog and mixed
signal devices. The purchase price of the acquisition was
$1.1 million, which consisted primarily of intangible
assets and inventory. The
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intangible assets, which were $0.8 million of the purchase
price, are being amortized over a period of 5 years. Fifty
percent of the purchase price, or $550 thousand, was paid in
cash at closing, and the remaining balance was paid on
April 8, 2009.
7. | Intangibles, net |
The following information details the gross carrying amount and
accumulated amortization of our intangible assets (in thousands):
March 26, 2011 | March 27, 2010 | |||||||||||||||
Gross |
Accumulated |
Gross |
Accumulated |
|||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Core technology
|
$ | 1,390 | $ | (1,390 | ) | $ | 1,390 | $ | (1,377 | ) | ||||||
License agreements
|
440 | (440 | ) | 440 | (436 | ) | ||||||||||
Existing technology
|
17,235 | (6,321 | ) | 17,235 | (5,325 | ) | ||||||||||
Trademarks
|
2,758 | (320 | ) | 2,758 | (320 | ) | ||||||||||
Non-compete agreements
|
398 | (179 | ) | 398 | (99 | ) | ||||||||||
Customer relationships
|
4,682 | (1,179 | ) | 4,682 | (844 | ) | ||||||||||
Technology licenses
|
16,928 | (13,877 | ) | 16,125 | (12,731 | ) | ||||||||||
$ | 43,831 | $ | (23,706 | ) | $ | 43,028 | $ | (21,132 | ) | |||||||
In the fourth quarter of fiscal year 2009, we noted several
impairment indicators surrounding patents that we acquired in
June 2007. We performed an impairment analysis under FASB ASC
Topic 360 and noted that the undiscounted cash flows estimated
to be generated from these patents were less than the carrying
amount of the assets. We then compared the estimated fair value
of these assets to their carrying amount and recognized an
impairment loss of $2.1 million. The impairment was
recorded as a separate line item on the statement of operations
in operating expenses under the caption Impairment of
intangible assets.
Amortization expense for all intangibles in fiscal years 2011,
2010, and 2009 was $3.3 million, $3.6 million, and
$3.5 million, respectively. The following table details the
estimated aggregate amortization expense for all intangibles
owned as of March 26, 2011 for each of the five succeeding
fiscal years (in thousands):
For the year ended March 31, 2012
|
$ | 3,304 | ||
For the year ended March 30, 2013
|
$ | 2,174 | ||
For the year ended March 29, 2014
|
$ | 1,638 | ||
For the year ended March 28, 2015
|
$ | 1,303 | ||
For the year ended March 26, 2016
|
$ | 1,303 |
8. | Commitments and Contingencies |
Facilities
and Equipment Under Operating Lease Agreements
With the exception of the Apex facility in Tucson, Arizona, 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, 2011, our principal
leased facilities, located in Austin, Texas, consisted of
approximately 214,000 square feet of office space. This
leased space includes our headquarters and engineering facility,
which has 197,000 square feet with lease terms that extend
into the summer of calendar year 2012, and 17,000 square
feet of leased space at our failure analysis facility with lease
terms that extend into calendar year 2013. We have subleased
approximately 37,000 square feet of space at our Austin
headquarters with sublease terms that extend into the summer of
calendar year 2012. The Company has commenced construction of
our planned new headquarters facility in Austin, Texas with
completion expected in the summer of calendar year 2012. Upon
completion, we anticipate relocating our
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headquarters employees into the newly constructed facility with
the current lease agreement being allowed to terminate under the
terms of the agreement.
The aggregate minimum future rental commitments under all
operating leases, net of sublease income, for the following
fiscal years are (in thousands):
Net Facilities |
Equipment |
Total |
||||||||||||||||||
Facilities | Subleases | Commitments | Commitments | Commitments | ||||||||||||||||
2012
|
$ | 5,362 | $ | 907 | $ | 4,455 | $ | 18 | $ | 4,473 | ||||||||||
2013
|
2,261 | 382 | 1,879 | 12 | 1,891 | |||||||||||||||
2014
|
42 | | 42 | 9 | 51 | |||||||||||||||
2015
|
| | | 4 | 4 | |||||||||||||||
2016
|
| | | 1 | 1 | |||||||||||||||
Thereafter
|
| | | | | |||||||||||||||
Total minimum lease payments
|
$ | 7,665 | $ | 1,289 | $ | 6,376 | $ | 44 | $ | 6,420 | ||||||||||
Total rent expense was approximately $4.6 million,
$4.4 million, and $5.9 million, for fiscal years 2011,
2010, and 2009, respectively. Sublease rental income was
$1.1 million, $1.2 million, and $2.1 million, for
fiscal years 2011, 2010, and 2009, respectively. During fiscal
years 2011, 2010, and 2009, we recorded approximately
$0.1 million, $0.4 million, and $0.1 million in
rent expense reductions, respectively, to adjust our loss
contingency accrual for a change in sublease assumptions with
regards to our facilities in Austin, Texas and Fremont,
California.
As of March 26, 2011, a total of $1.0 million related
to vacated leases remained accrued, of which $0.3 million
has been classified as long-term. These amounts are included in
the table above. The $0.4 million in facilities
restructuring accruals that existed for these leases as of
March 26, 2011 are discussed in greater detail in
Note 11 Restructuring Costs and Other.
Wafer,
Assembly and Test Purchase Commitments
We rely primarily on third-party foundries for our wafer
manufacturing needs. As of March 26, 2011, we had
agreements with multiple foundries for the manufacture of
wafers. None of these foundry agreements have volume purchase
commitments or take or pay clauses. The agreements
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 26, 2011, we had foundry commitments of
$19.2 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 $2.6 million at March 26, 2011.
We have transitioned the majority of our test services to
outside third party contractors. 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 26, 2011 was $3.4 million.
Other open purchase orders as of March 26, 2011 amount to
$1.9 million and primarily relate to raw material costs
incurred in our facility in Tucson, Arizona, which continues to
serve as the assembly and test facility for our Apex products.
9. | Legal Matters |
During the fourth quarter of the current fiscal year, in
response to certain patent infringement allegations, the Company
incurred $57 thousand as part of the execution of a Settlement
and License Agreement. During the third quarter of fiscal year
2011, the Company received proceeds of $113 thousand reflecting
the final resolution of litigation with Silvaco Data Systems. Of
this amount, $30 thousand represented the settlement
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awarded to the Company, and the balance represented recoveries
of certain litigation expenses and interest. Finally, during the
first quarter of fiscal year 2011, the Company incurred $135
thousand in settlement costs related to a dispute with a former
distributor of the Companys products. These transactions,
in the cumulative net amount of $162 thousand, are reflected as
a separate line item on the consolidated statement of operations
in operating expenses under the caption Provision
(benefit) for litigation expenses and settlements.
On March 23, 2009, a lawsuit was filed against the Company
alleging patent infringement. During the third quarter of fiscal
year 2010, a settlement agreement was concluded which resulted
in Cirrus Logic recognizing a $135 thousand charge related to
the suit. In a separate matter, on June 17, 2009, during
the first quarter of fiscal year 2010, the Company received
proceeds of a net $2.7 million from its insurance carrier
as part of the final settlement of litigation where a purported
stockholder filed a derivative lawsuit in the state district
court in Travis county, Texas against current and former
officers and directors of the Company related to certain prior
grants of stock options by the Company. The proceeds of
$2.7 million were recorded as a recovery of costs
previously incurred in accordance with FASB ASC Topic 450,
Contingencies. The combined net amount of
$2.6 million from these two fiscal year 2010 transactions
are reflected as a separate line item on the consolidated
statement of operations in operating expenses under the caption
Provision (benefit) for litigation expenses and
settlements.
During fiscal year 2009, we recognized a $2.2 million
charge related to legal fees and expenses associated with the
derivative lawsuits. The charge was recorded as a separate line
item on the consolidated statement of operations in operating
expenses under the caption Provision (benefit) for
litigation expenses and settlements.
As of the balance sheet date, to the best of our knowledge, the
Company is not a party to any material pending litigation. From
time to time, various claims, charges and litigation are
asserted or commenced against us arising from, or related to,
contractual matters, intellectual property, employment disputes,
as well as other issues. Frequent claims and litigation
involving these types of issues are not uncommon in our
industry. As to any of these potential claims or litigation, we
cannot predict the ultimate outcome with certainty.
10. | Fair Value Measurements |
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. |
As of March 26, 2011, the Companys cash equivalents
and restricted investments of $42.8 million, and short and
long-term investments of $172.2 million, are all valued
using quoted prices generated by market transactions involving
identical assets, or Level 1 assets as defined under FASB
ASC Topic 820.
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The following table summarizes the carrying amount and fair
value of the Companys financial instruments (in thousands):
March 26, 2011 | March 27, 2010 | |||||||||||||||
Carrying |
Fair |
Carrying |
Fair |
|||||||||||||
Financial instruments
|
Amount | Value | Amount | Value | ||||||||||||
Cash and cash equivalents
|
$ | 37,039 | $ | 37,039 | $ | 16,109 | $ | 16,109 | ||||||||
Restricted investments
|
5,786 | 5,786 | 5,855 | 5,855 | ||||||||||||
Marketable securities
|
159,528 | 159,528 | 85,384 | 85,384 | ||||||||||||
Long term marketable securities
|
12,702 | 12,702 | 34,278 | 34,278 | ||||||||||||
$ | 215,055 | $ | 215,055 | $ | 141,626 | $ | 141,626 | |||||||||
Financial assets with carrying amounts approximating fair value
include cash and cash equivalents, restricted investments, and
marketable securities. The carrying amount of these financial
assets approximates fair value because of their short maturity.
The fair values of long-term marketable securities are valued
using quoted prices generated by market transactions involving
identical assets.
11. | Restructuring Costs and Other |
During fiscal year 2011, we recorded net restructuring charges
of six thousand dollars as a separate line item on the statement
of operations in operating expenses under the caption
Restructuring costs and other, net.
During fiscal year 2010, we recorded net restructuring charges
of $0.5 million as a separate line item on the statement of
operations in operating expenses under the caption
Restructuring costs and other, net. The
restructuring charge primarily relates to a change in sublease
assumptions for the Companys corporate offices in Austin,
Texas.
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The following table sets forth the activity in our fiscal year
2004 restructuring accrual (in thousands):
Facilities |
||||||||||||
Severance | Abandonment | Total | ||||||||||
Balance, March 29, 2003
|
$ | | $ | | $ | | ||||||
Fiscal year 2004 provision and accretion
|
1,688 | 6,205 | 7,893 | |||||||||
Cash payments, net
|
(1,514 | ) | (908 | ) | (2,422 | ) | ||||||
Balance, March 27, 2004
|
174 | 5,297 | 5,471 | |||||||||
Fiscal year 2005 provision and accretion
|
| 178 | 178 | |||||||||
Cash payments, net
|
(174 | ) | (944 | ) | (1,118 | ) | ||||||
Balance, March 26, 2005
|
| 4,531 | 4,531 | |||||||||
Fiscal year 2006 provision and accretion
|
| 627 | 627 | |||||||||
Cash payments, net
|
| (954 | ) | (954 | ) | |||||||
Balance, March 25, 2006
|
| 4,204 | 4,204 | |||||||||
Fiscal year 2007 provision and accretion
|
| 214 | 214 | |||||||||
Cash payments, net
|
| (1,124 | ) | (1,124 | ) | |||||||
Balance, March 31, 2007
|
| 3,294 | 3,294 | |||||||||
Fiscal year 2008 provision and accretion
|
| 14 | 14 | |||||||||
Cash payments, net
|
| (1,069 | ) | (1,069 | ) | |||||||
Balance, March 29, 2008
|
| 2,239 | 2,239 | |||||||||
Fiscal year 2009 provision and accretion
|
| 147 | 147 | |||||||||
Cash payments, net
|
| (423 | ) | (423 | ) | |||||||
Balance, March 28, 2009
|
| 1,963 | 1,963 | |||||||||
Fiscal year 2010 provision and accretion
|
| 604 | 604 | |||||||||
Cash payments, net
|
| (1,226 | ) | (1,226 | ) | |||||||
Balance, March 27, 2010
|
| 1,341 | 1,341 | |||||||||
Fiscal year 2011 provision and accretion
|
| 75 | 75 | |||||||||
Cash payments, net
|
| (1,020 | ) | (1,020 | ) | |||||||
Balance, March 26, 2011
|
$ | | $ | 396 | $ | 396 | ||||||
Fiscal year 2011 activity reflected a net reduction in the 2004
restructuring accrual of $0.9 million, which included an
increase in the provision for normal accretion of
$0.1 million for the period. Fiscal year 2010 activity
reflected a net reduction in the 2004 restructuring accrual of
$0.6 million, which included an increase in the provision
for a $0.5 million restructuring charge brought about by a
change in sublease assumptions, as well as normal accretion of
$0.1 million for the period. Fiscal year 2009 activity
reflected a net reduction in the 2004 restructuring accrual of
$0.3 million, which included an increase in the provision
for normal accretion for the period.
As of March 26, 2011, we have a remaining restructuring
accrual of $0.4 million, primarily related to net lease
expenses that will be paid over the respective lease terms
through the summer of calendar year 2012, along with other
anticipated lease termination costs. We have classified the
short-term portion of our restructuring activities,
$0.3 million, as Other accrued
liabilities.
12. | Employee Benefit Plans |
We have a 401(k) Profit Sharing Plan (the Plan)
covering all of our qualifying domestic employees. Under the
Plan, employees may elect to contribute any percentage of their
annual compensation up to the annual IRS limitations. We match
50 percent of the first 6 percent of the
employees annual contribution to
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the plan. We made matching employee contributions of
$1.0 million, $0.9 million, and $0.9 million
during fiscal years 2011, 2010, and 2009, respectively.
13. | Stockholders Equity |
Share
Repurchase Program
In the third quarter of the current fiscal year, the Company
completed the repurchase of approximately 1.8 million
shares of the Companys common stock, at a total cost of
$22.8 million, or $12.94 per share. Of this amount,
1.5 million shares of the Companys common stock were
repurchased pursuant to the remaining portion of the
$20 million share repurchase program authorized by the
Board of Directors in January 2009. In addition, as of
March 26, 2011, 216 thousand shares have been repurchased,
none of which occurred in the fourth quarter of the
Companys current fiscal year, at a cost of
$2.8 million under a new $80 million share repurchase
program approved by our Board of Directors and which the Company
publicly announced on November 4, 2010. All shares of our
common stock that were repurchased under these share repurchase
programs were cancelled upon consummation of the daily
repurchase transactions.
On January 30, 2008, we announced that our Board authorized
a share repurchase program of up to $150 million. The
Company repurchased 13.3 million shares of its common stock
for $71.1 million during fiscal year 2008 and completed the
program in fiscal year 2009 by repurchasing a total of
11.2 million shares of our common stock for
$78.9 million. A cumulative 24.5 million shares were
acquired at a total cost of $150 million. All of these
shares were repurchased in the open market and were funded from
existing cash. All shares of our common stock that were
repurchased were cancelled upon consummation of the daily
repurchase transactions.
Preferred
Stock
We have 1.5 million shares of Series A Participating
Preferred Stock. As of March 26, 2011 we have not issued
any of the authorized shares.
Stock
Compensation Expense
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, restricted stock units,
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
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 and restricted stock units are subject
to cliff vesting schedules of four and three years, respectively.
Page 55 of 71
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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 (loss), and
net income after taxes for options granted under the
Companys equity incentive plans (in thousands, except per
share amounts; unaudited):
Fiscal Years Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Cost of sales
|
$ | 243 | $ | 212 | $ | 212 | ||||||
Research and development
|
2,641 | 1,882 | 1,923 | |||||||||
Sales, general and administrative
|
5,257 | 3,224 | 3,031 | |||||||||
Effect on pre-tax income (loss)
|
8,141 | 5,318 | 5,166 | |||||||||
Income Tax Benefit
|
| | | |||||||||
Total share based compensation expense (net of taxes)
|
$ | 8,141 | $ | 5,318 | $ | 5,166 | ||||||
Share based compensation effects on basic earnings (loss) per
share
|
$ | 0.12 | $ | 0.08 | $ | 0.08 | ||||||
Share based compensation effects on diluted earnings (loss) per
share
|
$ | 0.11 | $ | 0.08 | $ | 0.08 | ||||||
Share based compensation effects on operating activities cash
flow
|
8,141 | 5,318 | 5,166 | |||||||||
Share based compensation effects on financing activities cash
flow
|
| | |
The total share based compensation expense included in the table
above and which is attributable to restricted stock awards and
restricted stock units was $1.1 million, $0.1 million,
and $0.2 million for fiscal years 2011, 2010, and 2009,
respectively.
As of March 26, 2011, there was $17.1 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 1.17 years for stock options,
1.27 years for restricted stock awards, and 2.54 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 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Expected stock price volatility
|
52.03-67.11 | % | 50.71-56.59 | % | 47.23-59.22 | % | ||||||
Risk-free interest rate
|
1.19-2.06 | % | 1.80-2.25 | % | 1.48-2.99 | % | ||||||
Expected term (in years)
|
3.83-4.34 | 4.33-4.64 | 4.08-4.23 |
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. 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 2011, 2010, and 2009, were $9.61, $2.89, and
$2.82, respectively.
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During fiscal year 2011, we received a net $31.0 million
from the exercise of 4.7 million stock options granted
under the Companys Stock Plans.
The total intrinsic value of stock options exercised during
fiscal year 2011, 2010, and 2009 was $50.4 million,
$0.8 million, and $0.9 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 26, 2011, approximately 14.4 million
shares of common stock were reserved for issuance under the
Stock Option Plans.
Additional information with respect to stock option activity is
as follows (in thousands, except per share amounts):
Outstanding Options | ||||||||||||
Weighted |
||||||||||||
Options Available |
Average |
|||||||||||
for Grant | Number | Exercise Price | ||||||||||
Balance, March 29, 2008
|
13,812 | 8,536 | $ | 7.94 | ||||||||
Option plans terminated
|
(652 | ) | | | ||||||||
Options granted
|
(2,117 | ) | 2,068 | 5.18 | ||||||||
Options exercised
|
| (501 | ) | 4.72 | ||||||||
Options forfeited
|
1,061 | (436 | ) | 6.71 | ||||||||
Options expired
|
| (604 | ) | 9.31 | ||||||||
Balance, March 28, 2009
|
12,104 | 9,063 | $ | 7.45 | ||||||||
Option plans terminated
|
(477 | ) | | | ||||||||
Options granted
|
(2,471 | ) | 2,471 | 5.53 | ||||||||
Options exercised
|
| (401 | ) | 5.01 | ||||||||
Options forfeited
|
774 | (264 | ) | 5.44 | ||||||||
Options expired
|
| (490 | ) | 9.63 | ||||||||
Balance, March 27, 2010
|
9,930 | 10,379 | $ | 6.74 | ||||||||
Option plans terminated
|
(300 | ) | | | ||||||||
Options granted
|
(1,927 | ) | 977 | 16.75 | ||||||||
Options exercised
|
| (4,718 | ) | 6.57 | ||||||||
Options forfeited
|
472 | (153 | ) | 5.90 | ||||||||
Options expired
|
| (304 | ) | 23.68 | ||||||||
Balance, March 26, 2011
|
8,175 | 6,181 | $ | 7.63 | ||||||||
Additional information with regards to outstanding options that
are vesting, expected to vest, or exercisable as of
March 26, 2011 is as follows (in thousands, except per
share amounts):
Weighted |
Weighted Average |
|||||||||||||||
Number of |
Average |
Remaining Contractual |
Aggregate |
|||||||||||||
Options | Exercise Price | Term (years) | Intrinsic Value | |||||||||||||
Vested and expected to vest
|
5,791 | $ | 7.53 | 7.32 | $ | 79,033 | ||||||||||
Exercisable
|
2,919 | $ | 6.97 | 6.35 | $ | 41,423 |
In accordance with the provisions of FASB ASC Topic 718,
Compensation Stock Compensation,
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 $6.7 million, $4.4 million, and
$4.2 million became vested during fiscal years 2011, 2010,
and 2009, respectively.
Page 57 of 71
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The following table summarizes information regarding outstanding
and exercisable options as of March 26, 2011 (in thousands,
except per share amounts):
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted Average |
||||||||||||||||||||
Remaining |
Weighted |
Weighted |
||||||||||||||||||
Contractual Life |
Average Exercise |
Number |
Average |
|||||||||||||||||
Range of Exercise Prices
|
Number | (years) | Price | Exercisable | Exercise Price | |||||||||||||||
$ 1.83 - $ 5.20
|
489 | 5.41 | $ | 4.31 | 318 | $ | 4.34 | |||||||||||||
$ 5.25 - $ 5.25
|
1,012 | 7.52 | 5.25 | 406 | 5.25 | |||||||||||||||
$ 5.27 - $ 5.53
|
132 | 8.15 | 5.48 | 43 | 5.49 | |||||||||||||||
$ 5.55 - $ 5.55
|
1,605 | 8.53 | 5.55 | 427 | 5.55 | |||||||||||||||
$ 5.66 - $ 6.17
|
233 | 6.46 | 5.73 | 160 | 5.75 | |||||||||||||||
$ 6.51 - $ 6.51
|
720 | 6.48 | 6.51 | 536 | 6.51 | |||||||||||||||
$ 6.56 - $ 7.87
|
818 | 5.90 | 7.43 | 672 | 7.50 | |||||||||||||||
$ 8.06 - $16.25
|
786 | 8.05 | 13.47 | 210 | 9.18 | |||||||||||||||
$16.40 - $22.51
|
366 | 8.90 | 19.08 | 147 | 19.39 | |||||||||||||||
$23.33 - $23.33
|
20 | 9.93 | 23.33 | 0 | 0.00 | |||||||||||||||
6,181 | 7.41 | $ | 7.63 | 2,919 | $ | 6.97 | ||||||||||||||
As of March 26, 2011, and March 27, 2010, the number
of options exercisable was 2.9 million and
5.9 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. Generally, the current unreleased RSA
awards vest 100 percent on the fourth anniversary of the
grant date. A summary of the activity for RSAs in fiscal
year 2011, 2010 and 2009 is presented below (in thousands,
except per share amounts):
Weighted |
||||||||||||
Average |
||||||||||||
Grant Date |
Aggregate |
|||||||||||
Number of |
Fair Value |
Intrinsic |
||||||||||
Shares | (per share) | value(1) | ||||||||||
March 29, 2008
|
61 | $ | 7.75 | |||||||||
Granted
|
48 | 5.73 | ||||||||||
Vested
|
(15 | ) | 7.75 | 86 | ||||||||
Forfeited
|
(21 | ) | 8.23 | |||||||||
March 28, 2009
|
73 | 6.86 | ||||||||||
Granted
|
| | ||||||||||
Vested
|
(11 | ) | 6.98 | 55 | ||||||||
Forfeited
|
(13 | ) | 6.05 | |||||||||
March 27, 2010
|
49 | $ | 6.20 | |||||||||
Granted
|
5 | 17.28 | ||||||||||
Vested
|
(7 | ) | 7.35 | 134 | ||||||||
Forfeited
|
(2 | ) | 7.35 | |||||||||
March 26, 2011
|
45 | $ | 7.21 | |||||||||
(1) Represents the value of Cirrus stock on the date that
the restricted stock vested.
Page 58 of 71
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The weighted average remaining recognition period for RSAs
outstanding as of March 26, 2011 was 1.27 years.
RSAs with a fair value of $37 thousand, $65 thousand, and
$62 thousand became vested during fiscal years 2011, 2010, and
2009, respectively.
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 third anniversary of the
grant date. Each full value award, including RSUs and
RSAs, reduce the total shares available for grant under
the 2006 option plan at a rate of 1.5 shares per RSA or RSU
granted. As of March 26, 2011, approximately
1.0 million shares attributable to RSU awards were reserved
for issuance under the Option Plans, which includes the
additional shares associated with this full value award
multiplier. A summary of the activity for RSUs in fiscal
year 2011 is presented below (in thousands, except per share
amounts):
Weighted Average |
||||||||||||
Weighted |
Remaining |
|||||||||||
Average |
Contractual Term |
|||||||||||
Shares | Fair Value | (years) | ||||||||||
March 27, 2010
|
| | | |||||||||
Granted
|
628 | $ | 16.41 | | ||||||||
Vested
|
| | | |||||||||
Forfeited
|
(8 | ) | | | ||||||||
March 26, 2011
|
620 | $ | 16.41 | 2.54 | ||||||||
Additional information with regards to outstanding restricted
stock units that are vesting or expected to vest as of
March 26, 2011 is as follows (in thousands, except year
reference):
Weighted Average |
||||||||||||
Weighted |
Remaining |
|||||||||||
Average |
Contractual Term |
|||||||||||
Shares | Fair Value | (years) | ||||||||||
Vested and expected to vest
|
466 | $ | 16.41 | 2.54 |
RSUs outstanding that are expected to vest are presented
net of estimated future forfeitures, which are estimated as
compensation costs are recognized. No RSUs became vested
during fiscal year 2011.
14. | 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.
The following table summarizes the changes in the components of
accumulated other comprehensive loss (in thousands):
Foreign |
Unrealized Gains |
|||||||||||
Currency | (Losses) on Securities | Total | ||||||||||
Balance, March 28, 2009
|
$ | (770 | ) | $ | 194 | $ | (576 | ) | ||||
Current-period activity
|
| (73 | ) | (73 | ) | |||||||
Balance, March 27, 2010
|
(770 | ) | 121 | (649 | ) | |||||||
Current-period activity
|
| (105 | ) | (105 | ) | |||||||
Balance, March 26, 2011
|
$ | (770 | ) | $ | 16 | $ | (754 | ) | ||||
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15. | Income Taxes |
Income before income taxes consisted of (in thousands):
Year Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
United States
|
$ | 83,569 | $ | 24,289 | $ | 3,739 | ||||||
Non-U.S.
|
645 | 2,394 | 2,418 | |||||||||
$ | 84,214 | $ | 26,683 | $ | 6,157 | |||||||
The provision (benefit) for income taxes consists of (in
thousands):
Year Ended | ||||||||||||
March 26, 2011 | March 27, 2010 | March 28, 2009 | ||||||||||
Current:
|
||||||||||||
Federal
|
$ | 26,264 | $ | (75 | ) | $ | (142 | ) | ||||
State
|
901 | 8 | 6 | |||||||||
Non-U.S.
|
204 | 264 | 167 | |||||||||
Total current tax provision
|
$ | 27,369 | $ | 197 | $ | 31 | ||||||
Deferred:
|
||||||||||||
U.S.
|
$ | (146,746 | ) | $ | (11,787 | ) | $ | 2,660 | ||||
Non-U.S.
|
88 | (125 | ) | (9 | ) | |||||||
Total deferred tax provision (benefit)
|
(146,658 | ) | (11,912 | ) | 2,651 | |||||||
Total tax provision (benefit)
|
$ | (119,289 | ) | $ | (11,715 | ) | $ | 2,682 | ||||
The provision (benefit) for income taxes differs from the amount
computed by applying the statutory federal rate to pretax income
as follows (in percentages):
Year Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Expected income tax provision at the U.S. federal statutory rate
|
35.0 | 35.0 | 35.0 | |||||||||
Foreign earnings repatriation
|
| | | |||||||||
In-process research and development
|
| | | |||||||||
Valuation allowance changes affecting the provision of income
taxes
|
(178.6 | ) | (80.5 | ) | (12.4 | ) | ||||||
Foreign taxes at different rates
|
0.1 | (2.7 | ) | (11.6 | ) | |||||||
Foreign earnings taxed in the U.S.
|
| 0.2 | 6.6 | |||||||||
Refundable R&D credit
|
| (0.3 | ) | (2.3 | ) | |||||||
Stock compensation
|
(0.1 | ) | 4.2 | 17.3 | ||||||||
Nondeductible expenses
|
1.1 | 0.4 | 11.3 | |||||||||
Other
|
0.9 | (0.2 | ) | (0.3 | ) | |||||||
Provision (benefit) for income taxes
|
(141.6 | ) | (43.9 | ) | 43.6 | |||||||
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Significant components of our deferred tax assets and
liabilities are (in thousands):
Year Ended | ||||||||
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Deferred tax assets:
|
||||||||
Inventory valuation
|
$ | 4,494 | $ | 2,617 | ||||
Accrued expenses and allowances
|
3,017 | 3,127 | ||||||
Net operating loss carryforwards
|
131,331 | 168,832 | ||||||
Research and development tax credit carryforwards
|
37,464 | 33,552 | ||||||
State tax credit carryforwards
|
250 | 532 | ||||||
Capitalized research and development
|
14,773 | 20,353 | ||||||
Depreciation and Amortization
|
159 | 315 | ||||||
Other
|
14,807 | 15,287 | ||||||
Total deferred tax assets
|
$ | 206,295 | $ | 244,615 | ||||
Valuation allowance for deferred tax assets
|
(68,380 | ) | (226,213 | ) | ||||
Net deferred tax assets
|
$ | 137,915 | $ | 18,402 | ||||
Deferred tax liabilities:
|
||||||||
Acquisition intangibles
|
$ | 5,861 | $ | 6,393 | ||||
Total deferred tax liabilities
|
$ | 5,861 | $ | 6,393 | ||||
Total net deferred tax assets
|
$ | 132,054 | $ | 12,009 | ||||
These net deferred tax assets have been categorized on the
Consolidated Balance Sheets as follows:
March 26, |
March 27, |
|||||||
2011 | 2010 | |||||||
Current deferred tax assets
|
$ | 30,797 | $ | 12,549 | ||||
Long-term deferred tax assets
|
102,136 | 339 | ||||||
Long-term deferred tax liabilities
|
(879 | ) | (879 | ) | ||||
Total net deferred tax assets
|
$ | 132,054 | $ | 12,009 | ||||
The current and long-term deferred tax assets are disclosed
separately under their respective captions on the consolidated
balance sheets, while the long term deferred tax liabilities are
aggregated under the caption Other long- term
liabilities on the consolidated balance sheets.
The valuation allowance decreased by $157.8 million in
fiscal year 2011 and decreased by $26.3 million in fiscal
year 2010. During fiscal year 2011, the Company evaluated the
ability to realize its deferred tax assets by using a three year
forecast to determine the amount of net operating losses and
other deferred tax assets that would be utilized if we achieved
the results set forth in our three year forecast. The Company
limited the forecast period to three years because of the
cyclical and competitive nature of the semiconductor industry,
and the Companys reliance on a key customer who accounted
for approximately 47 percent of total sales in fiscal year
2011. There can be no assurance that we will achieve the results
set forth in our three year forecast and our actual results may
differ materially from our forecast.
At the end of fiscal year 2011, after the release of a
significant portion of the valuation allowance, the Company has
a remaining valuation allowance of $68.4 million of its
deferred tax assets. Of that amount, there is approximately
$30.5 million of deferred tax assets that may never be
recognized because they pertain to federal or state tax credits
that may expire before being utilized.
At March 26, 2011, we had federal net operating loss
carryforwards of $423.7 million. Of that amount,
$27.9 million relates to companies we acquired during
fiscal year 2002 and are, therefore, subject to certain
limitations under Section 382 of the Internal Revenue Code.
Because the Company has elected the with and
Page 61 of 71
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without method for purposes of tracking its excess stock
deductions, the amount of Federal net operating loss included in
deferred tax assets is $350.6 million which yields a tax
effected deferred tax asset of $122.7 million. The Company
has $73.1 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 have net operating losses in various states that
total $104.9 million. The federal net operating loss
carryforwards expire in fiscal years 2019 through 2029. The
state net operating loss carryforwards expire in fiscal years
2012 through 2029. We also have
non-U.S. net
operating losses of $1.9 million which do not expire.
There are federal research and development credit carryforwards
of $22.8 million that expire in fiscal years 2012 through
2031. There are $14.7 million of state research and
development credits. Of that amount, $3.0 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 $339 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 $121 thousand. With our current tax attributes, if
the earnings were distributed, we would most likely not accrue
any additional current income tax expense because this income
would be offset by our net operating loss carryforwards and
other future deductions.
We record unrecognized tax benefits for the estimated risk
associated with tax positions taken on tax returns. A
reconciliation of the beginning and ending amounts of
unrecognized tax benefits is as follows (in thousands):
Balance at March 27, 2010
|
$ | 85 | ||
Additions based on tax positions related to the current year
|
| |||
Reductions for tax positions of prior years
|
| |||
Settlements
|
| |||
Reductions related to expirations of statutes of limitation
|
(85 | ) | ||
Balance at March 26, 2011
|
$ | 0 | ||
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. We
did not record any interest or penalties during fiscal year 2011.
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 2008 through 2011
remain open to examination by the major taxing jurisdictions to
which we are subject. During fiscal year 2010, the Internal
Revenue Service issued a no change letter in
connection with the audit of our fiscal year 2006 federal income
tax return.
16. | Patent Agreement, Net |
On July 13, 2010, we entered into a Patent Purchase
Agreement for the sale of certain Company owned patents. As a
result of this agreement, on August 31, 2010, the Company
received cash consideration of $4.0 million from the
purchaser. The proceeds were recorded as a recovery of costs
previously incurred and are reflected as a separate line item on
the consolidated statement of operations in operating expenses
under the caption Patent agreement, net.
On June 11, 2009, we entered into a Patent Purchase
Agreement for the sale of certain Company owned patents and on
August 26, 2009, the Company received cash consideration of
$1.4 million from the purchaser. The proceeds were recorded
as a recovery of costs previously incurred and are reflected as
a separate line item on the consolidated statement of operations
in operating expenses under the caption Patent
agreement, net.
Page 62 of 71
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17. | Segment Information |
We determine our operating segments in accordance with FASB ASC
Topic 280, Segment Reporting. Our Chief
Executive Officer (CEO) has been identified as the
chief operating decision maker as defined by FASB ASC Topic 280.
The Company operates and tracks its results in one reportable
segment based on the aggregation of activity from its two
product lines under ASC Topic 280. 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):
Year Ended | ||||||||||||
March 26, |
March 27, |
March 28, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Audio products
|
$ | 264,840 | $ | 153,661 | $ | 97,293 | ||||||
Energy products
|
104,731 | 67,328 | 77,349 | |||||||||
Total
|
$ | 369,571 | $ | 220,989 | $ | 174,642 | ||||||
Geographic
Area
The following illustrates sales by geographic locations based on
the sales office location (in thousands):
Year Ended | ||||||||||||
March 26, 2011 | March 27, 2010 | March 28, 2009 | ||||||||||
United States
|
$ | 66,701 | $ | 47,936 | $ | 53,309 | ||||||
United Kingdom
|
27,398 | 17,156 | 26,006 | |||||||||
China
|
205,775 | 103,992 | 46,266 | |||||||||
Hong Kong
|
9,216 | 5,611 | 5,937 | |||||||||
Japan
|
16,902 | 12,335 | 10,062 | |||||||||
South Korea
|
12,413 | 10,134 | 7,021 | |||||||||
Taiwan
|
13,073 | 10,585 | 10,862 | |||||||||
Other Asia
|
16,012 | 12,381 | 12,408 | |||||||||
Other
non-U.S.
countries
|
2,081 | 859 | 2,771 | |||||||||
Total consolidated sales
|
$ | 369,571 | $ | 220,989 | $ | 174,642 | ||||||
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The following illustrates property, plant and equipment, net, by
geographic locations, based on physical location (in thousands):
Year Ended | ||||||||
March 26, 2011 | March 27, 2010 | |||||||
United States
|
$ | 33,977 | $ | 18,449 | ||||
United Kingdom
|
29 | 9 | ||||||
China
|
117 | 104 | ||||||
Hong Kong
|
3 | 10 | ||||||
Japan
|
377 | 23 | ||||||
South Korea
|
4 | 25 | ||||||
Taiwan
|
44 | 38 | ||||||
Other Asia
|
12 | 16 | ||||||
Total consolidated property, plant and equipment, net
|
$ | 34,563 | $ | 18,674 | ||||
18. | 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 2011 and 2010 were as follows (in
thousands, except per share data):
Fiscal Year 2011 | ||||||||||||||||
4th |
3rd |
2nd |
1st |
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(6) | (5) | (4) | ||||||||||||||
Net sales
|
$ | 91,433 | $ | 95,625 | $ | 100,598 | $ | 81,915 | ||||||||
Gross margin
|
46,018 | 52,462 | 56,780 | 46,735 | ||||||||||||
Net income
|
130,406 | 24,621 | 30,874 | 17,602 | ||||||||||||
Basic income per share
|
$ | 1.91 | $ | 0.36 | $ | 0.45 | $ | 0.26 | ||||||||
Diluted income per share
|
1.80 | 0.34 | 0.42 | 0.25 |
Fiscal Year 2010 | ||||||||||||||||
4th |
3rd |
2nd |
1st |
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(3) | (2) | (1) | ||||||||||||||
Net sales
|
$ | 62,639 | $ | 65,162 | $ | 55,674 | $ | 37,514 | ||||||||
Gross margin
|
35,284 | 34,886 | 28,974 | 19,587 | ||||||||||||
Net income
|
20,358 | 11,055 | 6,764 | 221 | ||||||||||||
Basic income per share
|
$ | 0.31 | $ | 0.17 | $ | 0.10 | $ | | ||||||||
Diluted income per share
|
0.31 | 0.17 | 0.10 | |
(1) | Net income was favorably impacted by a $2.7 million benefit for litigation expenses related to the receipt of proceeds from our insurance carrier as part of the final settlement of the derivative lawsuits described in Note 9, Legal Matters. | |
(2) | Net income was favorably impacted by the receipt of $1.4 million from a Patent Purchase Agreement for the sale of certain Company owned patents. |
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(3) | Net income was favorably impacted by an $11.8 million benefit to tax expense to decrease the valuation allowance on our U.S. deferred tax assets. | |
(4) | Net income was favorably impacted by a $4.0 million gain on the sale of certain Company owned patents and a $1.6 million benefit to tax expense to decrease the valuation allowance on our U.S. deferred tax assets. | |
(5) | Net income was favorably impacted by a $1.3 million benefit to tax expense to decrease the valuation allowance on our U.S. deferred tax assets. | |
(6) | Net income was favorably impacted by a $117.0 million benefit to tax expense to decrease the valuation allowance on our U.S. deferred tax assets, which was partially offset by reduced gross margins attributable to a charge of approximately $4.2 million due to a production issue with a new audio device that entered high volume production in March 2011. |
19. | Subsequent Event |
The Company has made additional repurchases under the previously
announced $80 million stock repurchase program. For the
period March 27, 2011 through May 24, 2011, the
Company has repurchased and retired approximately
3.5 million shares of Cirrus common stock at a cost of
approximately $55.3 million.
In addition, on March 15, 2011, we entered into an
Agreement relating to the purchase of certain real property near
our new headquarters facility in Austin, Texas. Pursuant to the
Agreement, we agreed to purchase the property for
$3.35 million subject to the completion of our due
diligence. We have substantially completed our due diligence and
expect to complete the transaction during the June quarter.
Page 65 of 71
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ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
Disclosure
Controls and Procedures
The Companys management carried out an evaluation, under
the supervision and with the participation of the CEO and CFO,
of the effectiveness of the design and operation of
Companys disclosure controls and procedures (as defined in
Securities Exchange Act of 1934
Rules 13a-15(c)
and
15d-15(e))
as of March 26, 2011. Based on that evaluation, the
Companys CEO and CFO have concluded that such disclosure
controls and procedures were effective in alerting them in a
timely manner to material information relating to the Company
required to be included in its periodic reports filed with the
SEC.
Managements
Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined under
Rule 13a-15(f).
Under the supervision and with the participation of our
management, including our CEO and CFO, we assessed the
effectiveness of our internal control over financial reporting
as of the end of the period covered by this report based on the
framework in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Because of its inherent limitation, internal control over
financial reporting may not prevent or detect misstatements. In
addition, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become
inadequate because of changes in conditions and that the degree
of compliance with the policies or procedures may deteriorate.
Based on its assessment of internal control over financial
reporting, management has concluded that our internal control
over financial reporting was effective as of March 26,
2011, to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of our financial
statements for external purposes in accordance with
U.S. generally accepted accounting principles.
Our independent registered public accounting firm,
Ernst & Young LLP, has issued an attestation report on
managements assessment of our internal control over
financial reporting as of March 26, 2011, included in
Item 8 of this report.
Changes
in Internal Control Over Financial Reporting
There has been no change in the Companys internal control
over financial reporting during the quarter ended March 26,
2011, that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over
financial reporting.
PART III
ITEM 10. | Directors and Executive Officers of the Registrant |
The information set forth in the Proxy Statement to be delivered
to stockholders in connection with our Annual Meeting of
Stockholders to be held on July 28, 2011 under the headings
Corporate Governance - Board Meetings and Committees,
Corporate Governance Audit Committee, Proposals to
be Voted on Proposal No. 1
Election of Directors, Summary of Executive Compensation, and
Section 16(a) Beneficial Ownership Reporting Compliance
is incorporated herein by reference.
ITEM 11. | Executive Compensation |
The information set forth in the Proxy Statement under the
headings Compensation Discussion and Analysis and
Compensation Committee Report is incorporated herein by
reference.
Page 66 of 71
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ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information set forth in the Proxy Statement under the
headings Equity Compensation Plan Information and
Ownership of Securities is incorporated herein by
reference.
ITEM 13. | Certain Relationships and Related Transactions |
The information set forth in the Proxy Statement under the
headings Certain Relationships and Related Transactions
and Corporate Governance is incorporated herein by
reference.
ITEM 14. | Principal Accountant Fees and Services |
The information set forth in the Proxy Statement under the
heading Audit and Non-Audit Fees and Services is
incorporated herein by reference.
PART IV
ITEM 15. | Exhibit and Financial Statement Schedules |
(a) The following documents are filed as part of this
Report:
1. | Consolidated Financial Statements |
§ | Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm. | |
§ | Consolidated Balance Sheets as of March 26, 2011, and March 27, 2010. | |
§ | Consolidated Statements of Operations for the fiscal years ended March 26, 2011, March 27, 2010, and March 28, 2009. | |
§ | Consolidated Statements of Cash Flows for the fiscal years ended March 26, 2011, March 27, 2010, and March 28, 2009. | |
§ | Consolidated Statements of Stockholders Equity for the fiscal years ended March 26, 2011, March 27, 2010, and March 28, 2009. | |
§ | Notes to Consolidated Financial Statements. |
2. | Financial Statement Schedules |
All schedules have been omitted since the required information
is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required
is included in the consolidated financial statements or notes
thereto.
3. | Exhibits |
The following exhibits are filed as part of or incorporated by
reference into this Report:
3.1
|
Certificate of Incorporation of Registrant, filed with the Delaware Secretary of State on August 26, 1998. (1) | |
3.2
|
Amended and Restated Bylaws of Registrant. (2) | |
10.1+
|
1990 Directors Stock Option Plan, as amended. (3) | |
10.2+
|
Cirrus Logic, Inc. 1996 Stock Plan, as amended and restated as of December 4, 2007. (4) | |
10.3+
|
2002 Stock Option Plan, as amended. (5) | |
10.4+
|
Cirrus Logic, Inc. 2006 Stock Incentive Plan. (6) | |
10.5+
|
Form of Stock Option Agreement for options granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (14) | |
10.6+
|
Form of Notice of Grant of Stock Option for options granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (6) | |
10.7+
|
Form of Stock Option Agreement for Outside Directors under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (7) | |
10.8+
|
Form of Restricted Stock Award Agreement under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (8) | |
10.9+
|
Form of Restricted Stock Unit Agreement for U.S. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (14) | |
10.10+
|
Form of Notice of Grant of Restricted Stock Units granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (14) | |
10.11+
|
2007 Executive Severance and Change of Control Plan, effective as of October 1, 2007. (9) |
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10.12+
|
2007 Management and Key Individual Contributor Incentive Plan, as amended on February 15, 2008. (10) | |
10.13
|
Lease Agreement by and between Desta Five Partnership, Ltd. and Registrant, dated November 10, 2000, for 197,000 square feet located at 2901 Via Fortuna, Austin, Texas. (1) | |
10.14
|
Amendment No. 1 to Lease Agreement by and between Desta Five Partnership, Ltd. and Registrant dated November 10, 2000. (11) | |
10.15
|
Amendment No. 2 to Lease Agreement by and between Desta Five Partnership, Ltd. and Registrant dated November 10, 2000. (5) | |
10.16
|
Amendment No. 3 to Lease Agreement by and between Desta Five Partnership, Ltd. and Registrant dated November 10, 2000. (12) | |
10.17
|
The Revised Stipulation of Settlement dated March 10, 2009 (13) | |
10.18
|
Purchase and Sale Agreement by and between Fortis Communities-Austin, L.P. and Registrant dated March 24, 2010. (15) | |
10.19
|
First Amendment to Purchase and Sale Agreement by and between Fortis Communities-Austin, L.P. and Registrant dated May 14, 2010. (15) | |
10.20
|
Second Amendment to Purchase and Sale Agreement by and between Fortis Communities-Austin, L.P. and Registrant dated June 7, 2010. (16) | |
10.21
|
General Contractors Agreement by Registrant dated January 25, 2011. (17) | |
14
|
Code of Conduct. (18) | |
23.1*
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. | |
24.1*
|
Power of Attorney (see signature page). | |
31.1*
|
Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2*
|
Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1*#
|
Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2*#
|
Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
+ | Indicates a management contract or compensatory plan or arrangement. | |
* | Filed with this Form 10-K. | |
# | Not considered to be filed for the purposes of section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. |
(1) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 31, 2001, filed with the SEC on June 22, 2001 (Registration No. 000-17795). | |
(2) | Incorporated by reference from Registrants Report on Form 8-K filed with the SEC on September 21, 2005. | |
(3) | Incorporated by reference from Registrants Registration Statement on Form S-8 filed with the SEC on August 8, 2001 (Registration No. 333-67322). | |
(4) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on January 30, 2008. | |
(5) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 29, 2003, filed with the SEC on June 13, 2003 (Registration No. 000-17795). | |
(6) | Incorporated by reference from Registrations Statement on Form S-8 filed with the SEC on August 1, 2006. | |
(7) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on August 1, 2007. | |
(8) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on November 5, 2007. | |
(9) | Incorporated by reference from Registrants Report on Form 8-K filed with the SEC on October 3, 2007. | |
(10) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 29, 2008, filed with the SEC on May 29, 2008 (Registration No. 000-17795). | |
(11) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 30, 2002, filed with the SEC on June 19, 2002 (Registration No. 000-17795). | |
(12) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 25, 2006, filed with the SEC on May 25, 2006 (Registration No. 000-17795). |
Page 68 of 71
Table of Contents
(13) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on April 1, 2009. | |
(14) | Incorporated by reference from Registrants Report on Form 8-K filed with the SEC on October 7, 2010. | |
(15) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 27, 2010, filed with the SEC on June 1, 2010. | |
(16) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on July 20, 2010. | |
(17) | Incorporated by reference from Registrants Report on Form 10-Q filed with the SEC on January 27, 2011. | |
(18) | Incorporated by reference from Registrants Report on Form 10-K for the fiscal year ended March 27, 2004, filed with the SEC on June 9, 2004 (Registration No. 000-17795). |
Page 69 of 71
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned;
thereunto duly authorized.
CIRRUS LOGIC, INC.
By: |
/s/ Thurman
K. Case
|
Thurman K. Case
Vice President, Chief Financial Officer and
Chief Accounting Officer
May 25, 2011
KNOW BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Thurman K. Case, his
attorney-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this report on
Form 10-K
and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of the
attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, the following persons on behalf of the Registrant, in the
capacities and on the dates indicated have signed this report
below:
Signature
|
Title
|
Date
|
||||
/s/ Michael
L. Hackworth Michael L. Hackworth |
Chairman of the Board and Director | May 25, 2011 | ||||
/s/ Jason
P. Rhode Jason P. Rhode |
President and Chief Executive Officer | May 25, 2011 | ||||
/s/ Thurman
K. Case Thurman K. Case |
Vice President, Chief Financial Officer and Chief Accounting Officer | May 25, 2011 | ||||
/s/ John
C. Carter John C. Carter |
Director | May 25, 2011 | ||||
/s/ Timothy
R. Dehne Timothy R. Dehne |
Director | May 25, 2011 | ||||
/s/ D.
James Guzy D. James Guzy |
Director | May 25, 2011 | ||||
/s/ William
D. Sherman William D. Sherman |
Director | May 25, 2011 | ||||
/s/ Robert
H. Smith Robert H. Smith |
Director | May 25, 2011 |
Page 70 of 71
Table of Contents
Exhibit Index
The following exhibits are filed or furnished as part of this
Report:
Number
|
Description
|
|
23.1
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. | |
24.1
|
Power of Attorney (see signature page). | |
31.1
|
Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1
|
Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2
|
Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Page 71 of 71