CRUS 10-Q

Cirrus Logic, Inc. (CRUS)

10-Q 2020-11-02 For: 2020-09-26

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Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐


PART I - FINANCIAL INFORMATION








Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets - September 26, 2020 (unaudited) and March 28, 2020	3

	Consolidated Condensed Statements of Income (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 2019	4

	Consolidated Condensed Statements of Comprehensive Income (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 2019	5

	Consolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended September 26, 2020 and September 28, 2019	6

	Consolidated Condensed Statements of Stockholders' Equity (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 2019	7

	Notes to Consolidated Condensed Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

	Signatures	27


	September 26,		March 28,
	2020		2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	247,536	$	292,119
Marketable securities	36,641		22,008
Accounts receivable, net	181,496		153,998
Inventories	209,050		146,725
Prepaid assets	20,853		23,594
Other current assets	13,655		11,752
Total current assets	709,231		650,196

Long-term marketable securities	328,255		283,573
Right-of-use lease assets	137,045		141,274
Property and equipment, net	153,640		158,244
Intangibles, net	27,898		34,430
Goodwill	287,673		287,088
Deferred tax assets	7,899		10,052
Other assets	48,223		27,820
Total assets	$	1,699,864	$	1,592,677

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	99,105	$	78,412
Accrued salaries and benefits	41,707		42,439
Software license agreements	7,785		10,888
Current lease liabilities	13,994		13,580
Other accrued liabilities	15,452		13,318
Total current liabilities	178,043		158,637

Long-term liabilities:

Software license agreements	9,917		3,806
Non-current income taxes	66,503		71,143
Non-current lease liabilities	128,570		129,312

Total long-term liabilities	204,990		204,261

Stockholders' equity:
Capital stock	1,466,978		1,434,929
Accumulated deficit	(155,260)		(201,681)
Accumulated other comprehensive income (loss)	5,113		(3,469)
Total stockholders' equity	1,316,831		1,229,779
Total liabilities and stockholders' equity	$	1,699,864	$	1,592,677


	Three Months Ended				Six Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Net sales	$	347,325	$	388,912	$	589,898	$	627,165
Cost of sales	167,115		180,979		282,216		296,738
Gross profit	180,210		207,933		307,682		330,427
Operating expenses
Research and development	84,810		88,239		163,551		177,069
Selling, general and administrative	31,247		33,018		60,951		62,538
Restructuring costs	—		—		352		—
Total operating expenses	116,057		121,257		224,854		239,607
Income from operations	64,153		86,676		82,828		90,820
Interest income	1,658		2,530		3,493		5,074
Interest expense	(280)		(280)		(539)		(539)
Other income (expense)	784		(568)		895		(946)
Income before income taxes	66,315		88,358		86,677		94,409
Provision for income taxes	6,829		12,148		8,982		13,581
Net income	$	59,486	$	76,210	77,695		$	80,828

Basic earnings per share	$	1.02	$	1.31	$	1.33	$	1.39
Diluted earnings per share	$	0.99	$	1.27	$	1.29	$	1.34
Basic weighted average common shares outstanding	58,191		58,011		58,252		58,276
Diluted weighted average common shares outstanding	60,127		60,213		60,203		60,260


	Three Months Ended				Six Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Net income	$	59,486	$	76,210	$	77,695	$	80,828
Other comprehensive income (loss), before tax
Foreign currency translation gain (loss)	651		(1,427)		1,665		(1,403)
Unrealized gain (loss) on marketable securities	(733)		385		8,755		2,500

Cumulative effect of adoption of ASU 2018-02	—		—		—		(257)
(Provision) benefit for income taxes	154		(81)		(1,838)		(525)
Comprehensive income	$	59,558	$	75,087	$	86,277	$	81,143


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income / (Loss)		Total
Three Months Ended	Shares	Amount
Balance, June 29, 2019	58,121	$	58	$	1,375,719	$	(258,899)	$	372	$	1,117,250
Net income	—	—		—		76,210		—		76,210
Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		304		304
Change in foreign currency translation adjustments	—	—		—		—		(1,427)		(1,427)
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	224	—		3,115		(584)		—		2,531


Repurchase and retirement of common stock	(559)	—		—		(30,001)		—		(30,001)
Stock-based compensation	—	—		13,758		—		—		13,758
Balance, September 28, 2019	57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625

Balance, June 27, 2020	58,381	$	58	$	1,451,239	$	(184,049)	$	5,041	$	1,272,289
Net income	—	—		—		59,486		—		59,486
Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		(579)		(579)
Change in foreign currency translation adjustments	—	—		—		—		651		651
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	52	—		205		(696)		—		(491)
Repurchase and retirement of common stock	(476)	—		—		(30,001)		—		(30,001)
Stock-based compensation	—	—		15,476		—		—		15,476
Balance, September 26, 2020	57,957	$	58	$	1,466,920	$	(155,260)	$	5,113	$	1,316,831
Six Months Ended
Balance, March 30, 2019	58,954	$	59	$	1,363,677	$	(222,430)	$	(1,066)	$	1,140,240
Net income	—	—		—		80,828		—		80,828
Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		1,975		1,975
Change in foreign currency translation adjustments	—	—		—		—		(1,403)		(1,403)
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	279	—		3,375		(1,203)		—		2,172
Cumulative effect of adoption of ASU 2016-02, net of tax	—	—		—		(726)		—		(726)
Cumulative effect of adoption of ASU 2018-02	—	—		—		257		(257)		—
Repurchase and retirement of common stock	(1,447)	(1)		—		(70,000)		—		(70,001)
Stock-based compensation	—	—		25,540		—		—		25,540
Balance, September 28, 2019	57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625

Balance, March 28, 2020	58,242	$	58	$	1,434,871	$	(201,681)	$	(3,469)	$	1,229,779
Net income	—	—		—		77,695		—		77,695
Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		6,917		6,917
Change in foreign currency translation adjustments	—	—		—		—		1,665		1,665
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	191	—		3,267		(1,273)		—		1,994
Repurchase and retirement of common stock	(476)	—		—		(30,001)		—		(30,001)
Stock-based compensation	—	—		28,782		—		—		28,782
Balance, September 26, 2020	57,957	$	58	$	1,466,920	$	(155,260)	$	5,113	$	1,316,831


As of September 26, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
Corporate debt securities	$	342,943	$	6,136	$	(63)	$	349,016
Non-U.S. government securities	10,520		250		—		10,770
U.S. Treasury securities	1,263		18		—		1,281

Agency discount notes	3,824		5		—		3,829
Total securities	$	358,550	$	6,409	$	(63)	$	364,896


As of March 28, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
Corporate debt securities	$	286,668	$	1,157	$	(3,993)	$	283,832
Non-U.S. government securities	12,483		260		—		12,743
U.S. Treasury securities	8,839		167		—		9,006


Total securities	$	307,990	$	1,584	$	(3,993)	$	305,581


	September 26, 2020				March 28, 2020
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Within 1 year	$	36,020	$	36,641	$	22,012	$	22,008
After 1 year	322,530		328,255		285,978		283,573
Total	$	358,550	$	364,896	$	307,990	$	305,581


	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Assets:
Cash equivalents
Money market funds	$	208,821	$	—	$	—	$	208,821



Available-for-sale securities
Corporate debt securities	$	—	$	349,016	$	—	$	349,016
Non-U.S. government securities	—		10,770		—		10,770
Agency discount notes	—		3,829		—		3,829
U.S. Treasury securities	1,281		—		—		1,281


	$	1,281	$	363,615	$	—	$	364,896


	Restructuring Liability
Beginning balance as of March 28, 2020	$	982
Other exit costs	222
Cash payments	(1,025)
Ending balance as of September 26, 2020	$	179


Monthly Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximately Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
June 28, 2020 - July 25, 2020	—	$	—	—	$	—
July 26, 2020 - August 22, 2020	311	64.41		311	100,001
August 23, 2020 - September 26, 2020	165	60.54		165	90,000
Total	476	$	63.06	476	$	90,000


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)
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.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	September 26,		March 28,
	2020		2020
Work in process	$	125,082	$	82,494
Finished goods	83,968		64,231
	$	209,050	$	146,725



Date:	November 2, 2020	/s/ Thurman K. Case

		Thurman K. Case

		Vice President, Chief Financial Officer and Principal Accounting Officer