falsedesktopCRUS2020-09-26000077240620000039{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Delaware\t\t\t\t77-0024818\n(State or other jurisdiction of incorporation or organization)\t\t\t\t(I.R.S. Employer Identification No.)\n800 W. 6th Street\tAustin\tTexas\t\t78701\n(Address of principal executive offices)\t\t\t\t(Zip Code)\nRegistrant's telephone number including area code:\t\t\t(512)\t851-4000\nSecurities registered pursuant to Section 12(b) of the Act: None\t\t\t\t\nSecurities registered pursuant to Section 12(g) of the Act:\t\t\t\t\n", "q10k_tbl_1": "Large Accelerated Filer\t☑\tAccelerated Filer\t☐\nNon-accelerated Filer\t☐\tSmaller Reporting Company\t☐\n\t\tEmerging Growth Company\t☐\n", "q10k_tbl_2": "PART I - FINANCIAL INFORMATION\t\t\nItem 1.\tFinancial Statements\t\n\tConsolidated Condensed Balance Sheets - September 26 2020 (unaudited) and March 28 2020\t3\n\t\t\n\tConsolidated Condensed Statements of Income (unaudited) - Three and Six Months Ended September 26 2020 and September 28 2019\t4\n\t\t\n\tConsolidated Condensed Statements of Comprehensive Income (unaudited) - Three and Six Months Ended September 26 2020 and September 28 2019\t5\n\t\t\n\tConsolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended September 26 2020 and September 28 2019\t6\n\tConsolidated Condensed Statements of Stockholders' Equity (unaudited) - Three and Six Months Ended September 26 2020 and September 28 2019\t7\n\tNotes to Consolidated Condensed Financial Statements (unaudited)\t8\n\t\t\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t16\n\t\t\nItem 3.\tQuantitative and Qualitative Disclosures about Market Risk\t22\n\t\t\nItem 4.\tControls and Procedures\t22\n\t\t\nPART II - OTHER INFORMATION\t\t\n\t\t\nItem 1.\tLegal Proceedings\t23\n\t\t\nItem 1A.\tRisk Factors\t23\n\t\t\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t26\n\t\t\nItem 3.\tDefaults Upon Senior Securities\t26\n\t\t\nItem 4.\tMine Safety Disclosures\t26\n\t\t\nItem 5.\tOther Information\t26\n\t\t\nItem 6.\tExhibits\t27\n\t\t\n\tSignatures\t27\n", "q10k_tbl_3": "\tSeptember 26\tMarch 28\n\t2020\t2020\n\t(unaudited)\t\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t247536\t292119\nMarketable securities\t36641\t22008\nAccounts receivable net\t181496\t153998\nInventories\t209050\t146725\nPrepaid assets\t20853\t23594\nOther current assets\t13655\t11752\nTotal current assets\t709231\t650196\n\t\t\nLong-term marketable securities\t328255\t283573\nRight-of-use lease assets\t137045\t141274\nProperty and equipment net\t153640\t158244\nIntangibles net\t27898\t34430\nGoodwill\t287673\t287088\nDeferred tax assets\t7899\t10052\nOther assets\t48223\t27820\nTotal assets\t1699864\t1592677\n\t\t\nLiabilities and Stockholders' Equity\t\t\nCurrent liabilities:\t\t\nAccounts payable\t99105\t78412\nAccrued salaries and benefits\t41707\t42439\nSoftware license agreements\t7785\t10888\nCurrent lease liabilities\t13994\t13580\nOther accrued liabilities\t15452\t13318\nTotal current liabilities\t178043\t158637\n\t\t\nLong-term liabilities:\t\t\nSoftware license agreements\t9917\t3806\nNon-current income taxes\t66503\t71143\nNon-current lease liabilities\t128570\t129312\nTotal long-term liabilities\t204990\t204261\n\t\t\nStockholders' equity:\t\t\nCapital stock\t1466978\t1434929\nAccumulated deficit\t(155260)\t(201681)\nAccumulated other comprehensive income (loss)\t5113\t(3469)\nTotal stockholders' equity\t1316831\t1229779\nTotal liabilities and stockholders' equity\t1699864\t1592677\n", "q10k_tbl_4": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\t\t\t\t\t\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nNet sales\t347325\t388912\t589898\t627165\t\t\t\t\t\t\nCost of sales\t167115\t180979\t282216\t296738\t\t\t\t\t\t\nGross profit\t180210\t207933\t307682\t330427\t\t\t\t\t\t\nOperating expenses\t\t\t\t\t\t\t\t\t\t\nResearch and development\t84810\t88239\t163551\t177069\t\t\t\t\t\t\nSelling general and administrative\t31247\t33018\t60951\t62538\t\t\t\t\t\t\nRestructuring costs\t0\t0\t352\t0\t\t\t\t\t\t\nTotal operating expenses\t116057\t121257\t224854\t239607\t\t\t\t\t\t\nIncome from operations\t64153\t86676\t82828\t90820\t\t\t\t\t\t\nInterest income\t1658\t2530\t3493\t5074\t\t\t\t\t\t\nInterest expense\t(280)\t(280)\t(539)\t(539)\t\t\t\t\t\t\nOther income (expense)\t784\t(568)\t895\t(946)\t\t\t\t\t\t\nIncome before income taxes\t66315\t88358\t86677\t94409\t\t\t\t\t\t\nProvision for income taxes\t6829\t12148\t8982\t13581\t\t\t\t\t\t\nNet income\t59486\t76210\t77695\t80828\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\nBasic earnings per share\t1.02\t1.31\t1.33\t1.39\t\t\t\t\t\t\nDiluted earnings per share\t0.99\t1.27\t1.29\t1.34\t\t\t\t\t\t\nBasic weighted average common shares outstanding\t58191\t58011\t58252\t58276\t\t\t\t\t\t\nDiluted weighted average common shares outstanding\t60127\t60213\t60203\t60260\t\t\t\t\t\t\n", "q10k_tbl_5": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\t\t\t\t\t\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\nNet income\t59486\t76210\t77695\t80828\t\t\t\t\t\t\nOther comprehensive income (loss) before tax\t\t\t\t\t\t\t\t\t\t\nForeign currency translation gain (loss)\t651\t(1427)\t1665\t(1403)\t\t\t\t\t\t\nUnrealized gain (loss) on marketable securities\t(733)\t385\t8755\t2500\t\t\t\t\t\t\nCumulative effect of adoption of ASU 2018-02\t0\t0\t0\t(257)\t\t\t\t\t\t\n(Provision) benefit for income taxes\t154\t(81)\t(1838)\t(525)\t\t\t\t\t\t\nComprehensive income\t59558\t75087\t86277\t81143\t\t\t\t\t\t\n", "q10k_tbl_6": "\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet income\t77695\t80828\nAdjustments to reconcile net income to net cash generated by operating activities:\t\t\nDepreciation and amortization\t23845\t37911\nStock-based compensation expense\t28782\t25540\nDeferred income taxes\t(1221)\t(1919)\nLoss on retirement or write-off of long-lived assets\t11\t5\nOther non-cash adjustments\t124\t453\nMEMS restructuring charges\t352\t0\nNet change in operating assets and liabilities:\t\t\nAccounts receivable net\t(27498)\t(97305)\nInventories\t(62325)\t19904\nOther assets\t(4630)\t(6816)\nAccounts payable and other accrued liabilities\t19351\t61525\nIncome taxes payable\t(12348)\t(2291)\nNet cash generated by operating activities\t42138\t117835\n\t\t\nCash flows from investing activities:\t\t\nMaturities and sales of available-for-sale marketable securities\t73458\t90922\nPurchases of available-for-sale marketable securities\t(124016)\t(121100)\nPurchases of property equipment and software\t(6967)\t(9333)\nInvestments in technology\t(1189)\t(4730)\nNet cash used in investing activities\t(58714)\t(44241)\n\t\t\nCash flows from financing activities:\t\t\nIssuance of common stock net of shares withheld for taxes\t3267\t3374\nRepurchase of stock to satisfy employee tax withholding obligations\t(1273)\t(1202)\nRepurchase and retirement of common stock\t(30001)\t(70001)\nNet cash used in financing activities\t(28007)\t(67829)\n\t\t\nNet increase (decrease) in cash and cash equivalents\t(44583)\t5765\n\t\t\nCash and cash equivalents at beginning of period\t292119\t216172\nCash and cash equivalents at end of period\t247536\t221937\n", "q10k_tbl_7": "\tCommon Stock\t\tAdditional Paid-In Capital\tAccumulated Deficit\tAccumulated Other Comprehensive Income / (Loss)\tTotal\nThree Months Ended\tShares\tAmount\t\t\nBalance June 29 2019\t58121\t58\t1375719\t(258899)\t372\t1117250\nNet income\t0\t0\t0\t76210\t0\t76210\nChange in unrealized gain (loss) on marketable securities net of tax\t0\t0\t0\t0\t304\t304\nChange in foreign currency translation adjustments\t0\t0\t0\t0\t(1427)\t(1427)\nIssuance of stock under stock option plans and other net of shares withheld for employee taxes\t224\t0\t3115\t(584)\t0\t2531\nRepurchase and retirement of common stock\t(559)\t0\t0\t(30001)\t0\t(30001)\nStock-based compensation\t0\t0\t13758\t0\t0\t13758\nBalance September 28 2019\t57786\t58\t1392592\t(213274)\t(751)\t1178625\nBalance June 27 2020\t58381\t58\t1451239\t(184049)\t5041\t1272289\nNet income\t0\t0\t0\t59486\t0\t59486\nChange in unrealized gain (loss) on marketable securities net of tax\t0\t0\t0\t0\t(579)\t(579)\nChange in foreign currency translation adjustments\t0\t0\t0\t0\t651\t651\nIssuance of stock under stock option plans and other net of shares withheld for employee taxes\t52\t0\t205\t(696)\t0\t(491)\nRepurchase and retirement of common stock\t(476)\t0\t0\t(30001)\t0\t(30001)\nStock-based compensation\t0\t0\t15476\t0\t0\t15476\nBalance September 26 2020\t57957\t58\t1466920\t(155260)\t5113\t1316831\nSix Months Ended\t\t\t\t\t\t\nBalance March 30 2019\t58954\t59\t1363677\t(222430)\t(1066)\t1140240\nNet income\t0\t0\t0\t80828\t0\t80828\nChange in unrealized gain (loss) on marketable securities net of tax\t0\t0\t0\t0\t1975\t1975\nChange in foreign currency translation adjustments\t0\t0\t0\t0\t(1403)\t(1403)\nIssuance of stock under stock option plans and other net of shares withheld for employee taxes\t279\t0\t3375\t(1203)\t0\t2172\nCumulative effect of adoption of ASU 2016-02 net of tax\t0\t0\t0\t(726)\t0\t(726)\nCumulative effect of adoption of ASU 2018-02\t0\t0\t0\t257\t(257)\t0\nRepurchase and retirement of common stock\t(1447)\t(1)\t0\t(70000)\t0\t(70001)\nStock-based compensation\t0\t0\t25540\t0\t0\t25540\nBalance September 28 2019\t57786\t58\t1392592\t(213274)\t(751)\t1178625\nBalance March 28 2020\t58242\t58\t1434871\t(201681)\t(3469)\t1229779\nNet income\t0\t0\t0\t77695\t0\t77695\nChange in unrealized gain (loss) on marketable securities net of tax\t0\t0\t0\t0\t6917\t6917\nChange in foreign currency translation adjustments\t0\t0\t0\t0\t1665\t1665\nIssuance of stock under stock option plans and other net of shares withheld for employee taxes\t191\t0\t3267\t(1273)\t0\t1994\nRepurchase and retirement of common stock\t(476)\t0\t0\t(30001)\t0\t(30001)\nStock-based compensation\t0\t0\t28782\t0\t0\t28782\nBalance September 26 2020\t57957\t58\t1466920\t(155260)\t5113\t1316831\n", "q10k_tbl_8": "As of September 26 2020\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tEstimated Fair Value (Net Carrying Amount)\nCorporate debt securities\t342943\t6136\t(63)\t349016\nNon-U.S. government securities\t10520\t250\t0\t10770\nU.S. Treasury securities\t1263\t18\t0\t1281\nAgency discount notes\t3824\t5\t0\t3829\nTotal securities\t358550\t6409\t(63)\t364896\n", "q10k_tbl_9": "As of March 28 2020\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tEstimated Fair Value (Net Carrying Amount)\nCorporate debt securities\t286668\t1157\t(3993)\t283832\nNon-U.S. government securities\t12483\t260\t0\t12743\nU.S. Treasury securities\t8839\t167\t0\t9006\nTotal securities\t307990\t1584\t(3993)\t305581\n", "q10k_tbl_10": "\tSeptember 26 2020\t\tMarch 28 2020\t\n\tAmortized\tEstimated\tAmortized\tEstimated\n\tCost\tFair Value\tCost\tFair Value\nWithin 1 year\t36020\t36641\t22012\t22008\nAfter 1 year\t322530\t328255\t285978\t283573\nTotal\t358550\t364896\t307990\t305581\n", "q10k_tbl_11": "\tQuoted Prices in Active Markets for Identical Assets Level 1\tSignificant Other Observable Inputs Level 2\tSignificant Unobservable Inputs Level 3\tTotal\nAssets:\t\t\t\t\nCash equivalents\t\t\t\t\nMoney market funds\t208821\t0\t0\t208821\nAvailable-for-sale securities\t\t\t\t\nCorporate debt securities\t0\t349016\t0\t349016\nNon-U.S. government securities\t0\t10770\t0\t10770\nAgency discount notes\t0\t3829\t0\t3829\nU.S. Treasury securities\t1281\t0\t0\t1281\n\t1281\t363615\t0\t364896\n", "q10k_tbl_12": "\tQuoted Prices in Active Markets for Identical Assets Level 1\tSignificant Other Observable Inputs Level 2\tSignificant Unobservable Inputs Level 3\tTotal\nAssets:\t\t\t\t\nCash equivalents\t\t\t\t\nMoney market funds\t237714\t0\t0\t237714\nAvailable-for-sale securities\t\t\t\t\nCorporate debt securities\t0\t283832\t0\t283832\nNon-U.S. government securities\t0\t12743\t0\t12743\nU.S. Treasury securities\t9006\t0\t0\t9006\n\t9006\t296575\t0\t305581\n", "q10k_tbl_13": "\tThree Months Ended\t\tSix Months Ended\t\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\t\n\t2020\t2019\t2020\t2019\tLocation\nGain (loss) recognized in income:\t\t\t\t\t\nForeign currency forward contracts\t735\t(1852)\t1918\t(4.215)\tOther income (expense)\n", "q10k_tbl_14": "\tSeptember 26\tMarch 28\n\t2020\t2020\nGross accounts receivable\t181496\t153998\nAllowance for doubtful accounts\t0\t0\nAccounts receivable net\t181496\t153998\n", "q10k_tbl_15": "\tSeptember 26\tMarch 28\n\t2020\t2020\nWork in process\t125082\t82494\nFinished goods\t83968\t64231\n\t209050\t146725\n", "q10k_tbl_16": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nNon-United States\t343114\t385222\t581611\t619263\nUnited States\t4211\t3690\t8287\t7902\n\t347325\t388912\t589898\t627165\n", "q10k_tbl_17": "\tRestructuring Liability\nBeginning balance as of March 28 2020\t982\nOther exit costs\t222\nCash payments\t(1025)\nEnding balance as of September 26 2020\t179\n", "q10k_tbl_18": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nIncome before income taxes\t66315\t88358\t86677\t94409\nProvision for income taxes\t6829\t12148\t8982\t13581\nEffective tax rate\t10.3%\t13.7%\t10.4%\t14.4%\n", "q10k_tbl_19": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nNumerator:\t\t\t\t\nNet income\t59486\t76210\t77695\t80828\nDenominator:\t\t\t\t\nWeighted average shares outstanding\t58191\t58011\t58252\t58276\nEffect of dilutive securities\t1936\t2202\t1951\t1984\nWeighted average diluted shares\t60127\t60213\t60203\t60260\nBasic earnings per share\t1.02\t1.31\t1.33\t1.39\nDiluted earnings per share\t0.99\t1.27\t1.29\t1.34\n", "q10k_tbl_20": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nPortable Products\t312911\t349379\t523572\t552317\nNon-Portable and Other Products\t34414\t39533\t66326\t74848\n\t347325\t388912\t589898\t627165\n", "q10k_tbl_21": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nNet sales\t100%\t100%\t100%\t100%\nGross margin\t52%\t53%\t52%\t53%\nResearch and development\t24%\t23%\t28%\t29%\nSelling general and administrative\t9%\t8%\t10%\t10%\nRestructuring costs\t-%\t-%\t-%\t-%\nIncome from operations\t19%\t22%\t14%\t14%\nInterest income\t-%\t1%\t1%\t1%\nInterest expense\t-%\t-%\t-%\t-%\nOther income (expense)\t-%\t-%\t-%\t-%\nIncome before income taxes\t19%\t23%\t15%\t15%\nProvision for income taxes\t2%\t3%\t2%\t2%\nNet income\t17%\t20%\t13%\t13%\n", "q10k_tbl_22": "\tThree Months Ended\t\tSix Months Ended\t\n\tSeptember 26\tSeptember 28\tSeptember 26\tSeptember 28\n\t2020\t2019\t2020\t2019\nIncome before income taxes\t66315\t88358\t86677\t94409\nProvision for income taxes\t6829\t12148\t8982\t13581\nEffective tax rate\t10.3%\t13.7%\t10.4%\t14.4%\n", "q10k_tbl_23": "Monthly Period\tTotal Number of Shares Purchased\tAverage Price Paid Per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs\tApproximately Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)\nJune 28 2020 - July 25 2020\t0\t0\t0\t0\nJuly 26 2020 - August 22 2020\t311\t64.41\t311\t100001\nAugust 23 2020 - September 26 2020\t165\t60.54\t165\t90000\nTotal\t476\t63.06\t476\t90000\n", "q10k_tbl_24": "3.1\tCertificate of Incorporation of Registrant filed with the Delaware Secretary of State on August 26 1998. (1)\n3.2\tAmended and Restated Bylaws of Registrant. (2)\n31.1\tCertification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n31.2\tCertification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n32.1\tCertification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n32.2\tCertification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\n101.SCH\tXBRL Taxonomy Extension Schema Document\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document\n104\tCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_4", "cf": "q10k_tbl_6"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 26, 2020
☐
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.
(Exact name of registrant as specified in its charter)
Delaware
77-0024818
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
800 W. 6th Street
Austin,
Texas
78701
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code:
(512)
851-4000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, $0.001 par value
CRUS
The NASDAQ Stock Market LLC
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☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☑
Accelerated Filer
☐
Non-accelerated Filer
☐
Smaller Reporting Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The number of shares of the registrant's common stock, $0.001 par value, outstanding as of October 29, 2020 was 57,964,907.
CIRRUS LOGIC, INC.
FORM 10-Q QUARTERLY REPORT
QUARTERLY PERIOD ENDEDSEPTEMBER 26, 2020
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Condensed Balance Sheets - September 26, 2020 (unaudited) and March 28, 2020
The accompanying notes are an integral part of these consolidated condensed financial statements.
3
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts; unaudited)
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
The accompanying notes are an integral part of these consolidated condensed financial statements.
4
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands; unaudited)
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
The accompanying notes are an integral part of these consolidated condensed financial statements.
5
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Six Months Ended
September 26,
September 28,
2020
2019
Cash flows from operating activities:
Net income
$
77,695
$
80,828
Adjustments to reconcile net income to net cash generated by operating activities:
Depreciation and amortization
23,845
37,911
Stock-based compensation expense
28,782
25,540
Deferred income taxes
(1,221)
(1,919)
Loss on retirement or write-off of long-lived assets
11
5
Other non-cash adjustments
124
453
MEMS restructuring charges
352
—
Net change in operating assets and liabilities:
Accounts receivable, net
(27,498)
(97,305)
Inventories
(62,325)
19,904
Other assets
(4,630)
(6,816)
Accounts payable and other accrued liabilities
19,351
61,525
Income taxes payable
(12,348)
(2,291)
Net cash generated by operating activities
42,138
117,835
Cash flows from investing activities:
Maturities and sales of available-for-sale marketable securities
73,458
90,922
Purchases of available-for-sale marketable securities
(124,016)
(121,100)
Purchases of property, equipment and software
(6,967)
(9,333)
Investments in technology
(1,189)
(4,730)
Net cash used in investing activities
(58,714)
(44,241)
Cash flows from financing activities:
Issuance of common stock, net of shares withheld for taxes
3,267
3,374
Repurchase of stock to satisfy employee tax withholding obligations
(1,273)
(1,202)
Repurchase and retirement of common stock
(30,001)
(70,001)
Net cash used in financing activities
(28,007)
(67,829)
Net increase (decrease) in cash and cash equivalents
(44,583)
5,765
Cash and cash equivalents at beginning of period
292,119
216,172
Cash and cash equivalents at end of period
$
247,536
$
221,937
The accompanying notes are an integral part of these consolidated condensed financial statements.
6
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands; unaudited)
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
The accompanying notes are an integral part of these consolidated condensed financial statements.
7
CIRRUS LOGIC, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated condensed financial statements have been prepared by Cirrus Logic, Inc. (“Cirrus Logic,” “we,” “us,” “our,” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). The accompanying unaudited consolidated condensed financial statements do not include complete footnotes and financial presentations. As a result, these financial statements should be read along with the audited consolidated financial statements and notes thereto for the year ended March 28, 2020, included in our Annual Report on Form 10-K filed with the Commission on May 20, 2020. In our opinion, the financial statements reflect all material adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented. The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses. Actual results could differ from those estimates and assumptions. Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.
2. Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on financial instruments, including available-for-sale debt securities, to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The Company adopted this ASU in the first quarter of fiscal year 2021, with no material impact to the financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates step two of the goodwill impairment test. An impairment charge is to be recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods. Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017, and should be applied prospectively. The Company adopted this ASU in the first quarter of fiscal year 2021, with no material impact to the financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adjusts current required disclosures related to fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this ASU in the first quarter of fiscal year 2021, with no material impact to the financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU provides guidance on the accounting for implementation costs related to a cloud computing arrangement that is a service contract. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this ASU in the first quarter of fiscal year 2021,with prospective application and no material impact to the financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the financial statements upon adoption.
In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321) - Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). This ASU clarifies the interaction of the accounting for equity securities, investments accounted for under the equity method of accounting, and the accounting for certain forward contracts and purchased options. This ASU is effective for fiscal years beginning after
8
December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the financial statements upon adoption.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU, effective immediately for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with a new alternative reference rate. The guidance is applicable to investment securities, receivables, debt, leases, hedging relationships and other contractual arrangements. The Company adopted this ASU in the first quarter of fiscal year 2021, with no material impact to the financial statements.
3.Marketable Securities
The Company’s investments have been classified as available-for-sale securities in accordance with U.S. GAAP. Marketable securities are categorized on the consolidated condensed balance sheet as "Marketable securities", within the short-term or long-term classification, as appropriate.
The following table is a summary of available-for-sale securities at September 26, 2020 (in thousands):
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
The Company typically invests in highly-rated securities with original maturities generally ranging from one to three years. The Company's specifically identified gross unrealized loss of $0.1 million related to securities with total amortized costs of approximately $32.4 million atSeptember 26, 2020. There were no securities that had been in a continuous unrealized loss position for more than 12 months as of September 26, 2020. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipated or actual changes in credit rating and duration management. The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of September 26, 2020, the Company does not consider any of its investments to be impaired.
The following table is a summary of available-for-sale securities at March 28, 2020 (in thousands):
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
The Company's specifically identified gross unrealized loss of $4.0 million related to securities with total amortized costs of approximately $172.9 million atMarch 28, 2020. There were no securities that had been in a continuous unrealized loss position for more than 12 months as of March 28, 2020. As ofMarch 28, 2020, the Company did not consider any of its investments to be impaired.
9
The cost and estimated fair value of available-for-salesecuritiesby contractual maturities were as follows(in thousands):
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
4.Fair Value of Financial Instruments
The Company has determined that the only material assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents and marketable securities portfolio. 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 (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s cash equivalents and marketable securities portfolio consist of money market funds, debt securities, non-U.S. government securities, U.S. Treasury securities and securities of U.S. government-sponsored enterprises and are reflected on our consolidated condensed balance sheets under the headings cash and cash equivalents, marketable securities, and long-term marketable securities. The Company determines the fair value of its marketable securities portfolio by obtaining non-binding market prices from third-party pricing providers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.
The Company's long-term revolving credit facility, described in Note 8, bears interest at a base rate plus applicable margin or LIBOR plus applicable margin. As of September 26, 2020, there are no amounts drawn under the credit facility and the fair value is zero.
As of September 26, 2020 and March 28, 2020, the Company has no material Level 3 assets or liabilities. There were no transfers between Level 1, Level 2, or Level 3 measurements for the three months ended September 26, 2020.
10
The following summarizes the fair value of our financial instruments at September 26, 2020 (in thousands):
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
The following summarizes the fair value of our financial instruments at March 28, 2020 (in thousands):
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
$
237,714
$
—
$
—
$
237,714
Available-for-sale securities
Corporate debt securities
$
—
$
283,832
$
—
$
283,832
Non-U.S. government securities
—
12,743
—
12,743
U.S. Treasury securities
9,006
—
—
9,006
$
9,006
$
296,575
$
—
$
305,581
5.Derivative Financial Instruments
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-functional currency balance sheet exposures. The Company recognizes both the gains and losses on foreign currency forward contracts and the gains and losses on the remeasurement of non-functional currency assets and liabilities within "Other income (expense)" in the consolidated condensed statements of income. The Company does not apply hedge accounting to these foreign currency derivative instruments.
As of September 26, 2020, the Company held one foreign currency forward contract denominated in British Pound Sterling with a notional value of $19.1 million. The fair value of this contract was not material as of September 26, 2020.
11
The before-tax effect of derivative instruments not designated as hedging instruments was as follows (in thousands):
Three Months Ended
Six Months Ended
September 26,
September 28,
September 26,
September 28,
2020
2019
2020
2019
Location
Gain (loss) recognized in income:
Foreign currency forward contracts
$
735
$
(1,852)
$
1,918
$
(4.215)
Other income (expense)
6.Accounts Receivable, net
The following are the components of accounts receivable, net (in thousands):
September 26,
March 28,
2020
2020
Gross accounts receivable
$
181,496
$
153,998
Allowance for doubtful accounts
—
—
Accounts receivable, net
$
181,496
$
153,998
7. Inventories
Inventories are comprised of the following (in thousands):
September 26,
March 28,
2020
2020
Work in process
$
125,082
$
82,494
Finished goods
83,968
64,231
$
209,050
$
146,725
8. RevolvingCredit Facility
On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto, for the purpose of refinancing an existing credit facility and providing ongoing working capital. The Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Credit Facility”). The Credit Facility matures on July 12, 2021. The Credit Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Credit Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.
Borrowings under the Credit Facility may, at our election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR rate plus the applicable margin (“LIBOR Rate Loans”). The applicable margin ranges from 0% to 0.50% per annum for Base Rate Loans and 1.25% to 2.00% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below). A commitment fee accrues at a rate per annum ranging from 0.20% to 0.30% (based on the Leverage Ratio) on the average daily unused portion of the commitment of the lenders. The Credit Agreement contains certain financial covenants providing that (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four fiscal quarters must not be greater than 3.00 to 1.00 (the “Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive fiscal quarters to consolidated fixed charges (including amounts paid in cash for consolidated interest expenses, capital expenditures, scheduled principal payments of indebtedness, and income taxes) for the prior four consecutive fiscal quarters must not be less than 1.25 to 1.00 as of the end of each fiscal quarter. The Credit Agreement also contains negative covenants limiting the Company’s or any Subsidiary’s ability to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.
As of September 26, 2020, the Company had no amounts outstanding under the Credit Facility and was in compliance with all covenants under the Credit Agreement.
12
9.Revenues
Disaggregation of revenue
We disaggregate revenue from contracts with customers based on the ship to location of the customer. The geographic regions that are reviewed are the United States and countries outside of the United States (primarily located in Asia).
Total net sales based on the disaggregation criteria described above are as follows:
Three Months Ended
Six Months Ended
September 26,
September 28,
September 26,
September 28,
2020
2019
2020
2019
Non-United States
$
343,114
$
385,222
$
581,611
$
619,263
United States
4,211
3,690
8,287
7,902
$
347,325
$
388,912
$
589,898
$
627,165
Performance obligations
The Company's single performance obligation is the delivery of promised goods to the customer. The promised goods are explicitly stated in the customer contract and are comprised of either a single type of good or a series of goods that are substantially the same, have the same pattern of transfer to the customer, and are neither capable of being distinct nor separable from the other promised goods in the contract. This performance obligation is satisfied upon transfer of control of the promised goods to the customer, as defined per the shipping terms within the customer's contract. The vast majority of the Company's contracts with customers have an original expected term length of one year or less. As allowed by Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, the Company has not disclosed the value of any unsatisfied performance obligations related to these contracts.
The Company’s products typically include a warranty period of one to three years. These warranties qualify as assurance-type warranties, as goods can be returned for product non-conformance and defect only. As such, these warranties are accounted for under ASC 460, Guarantees, and are not considered a separate performance obligation.
Contract balances
Payments are typically due within 30 to 60 days of invoicing and terms do not include significant financing components or noncash consideration. There have been no material impairment losses on accounts receivable. There are no material contract assets or contract liabilities recorded on the consolidated condensed balance sheets.
Transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods to the customer. Fixed pricing is the consideration that is agreed upon in the customer contract. Variable pricing includes rebates, rights of return, warranties, price protection and stock rotation. Rebates are granted as a customer account credit, based on agreed-upon sales thresholds. Rights of return and warranty costs are estimated using the "most likely amount" method by reviewing historical returns to determine the most likely customer return rate and applying materiality thresholds. Price protection includes price adjustments available to certain distributors based upon established book price and a stated adjustment period. Stock rotation is also available to certain distributors based on a stated maximum of prior billings.
The Company estimates all variable consideration at the most likely amount that it expects to be entitled. The estimate is based on current and historical information, including recent sales activity and pricing, available to the Company. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company defers all variable consideration that does not meet the revenue recognition criteria.
13
10. Restructuring Costs
During the fourth quarter of fiscal year 2020, the Company approved a restructuring plan (the “MEMS Restructuring”), including discontinuing efforts relating to the microelectromechanical systems ("MEMS") microphone product line, which allowed the Company to concentrate resources on projects with an anticipated larger return on investment. The MEMS Restructuring was substantially complete as of the first quarter of fiscal year 2021 with a $352 thousand "Restructuring Costs" charge to the income statement. No additional restructuring charges were incurred during the second quarter of fiscal year 2021.
Restructuring liabilities are presented in the “Other accrued liabilities” line item of our consolidated condensed balance sheet. The activity related to restructuring liabilities is detailed below (in thousands):
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
11.Income Taxes
Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items, and any applicable income tax credits.
The following table presents the provision for income taxes (in thousands) and the effective tax rates:
Three Months Ended
Six Months Ended
September 26,
September 28,
September 26,
September 28,
2020
2019
2020
2019
Income before income taxes
$
66,315
$
88,358
$
86,677
$
94,409
Provision for income taxes
$
6,829
$
12,148
$
8,982
$
13,581
Effective tax rate
10.3
%
13.7
%
10.4
%
14.4
%
Our income tax expense was $6.8 million and $12.1 million for the second quarters of fiscal years 2021 and 2020, respectively, resulting in effective tax rates of 10.3% and 13.7%, respectively. Our income tax expense was $9.0 million and $13.6 million for the first six months of fiscal years 2021 and 2020, respectively, resulting in effective tax rates of 10.4% and 14.4%, respectively. Our effective tax rates for the second quarter and first six months of fiscal year 2021 were lower than the federal statutory rate primarily due to the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate and the remeasurement of previously unrecognized tax benefits recognized as a discrete item in the current quarter. Our effective tax rates for the second quarter and first six months of fiscal year 2020 were lower than the federal statutory rate primarily due to the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate, the U.S. deduction for foreign derived intangible income, and the release of prior year unrecognized tax benefits due to the closure of the tax audit of the Company's U.K. subsidiaries in the second quarter of fiscal year 2020.
The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At September 26, 2020, the Company had unrecognized tax benefits of $32.9 million, all of which would impact the effective tax rate if recognized. We recorded a gross decrease of $3.3 million to unrecognized tax benefits in the second quarter of fiscal year 2021. The Company’s total unrecognized tax benefits are classified as “Non-current income taxes" in the consolidated condensed balance sheets. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September 26, 2020, the balance of accrued interest and penalties, net of tax, was $3.7 million.
On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. et al. v. Commissioner which concluded that the regulations relating to the treatment of stock-based compensation expense in intercompany cost-sharing arrangements were
14
invalid. In 2016 the U.S. Internal Revenue Service appealed the decision to the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”). On July 24, 2018, the Ninth Circuit issued a decision that was subsequently withdrawn and a reconstituted panel conferred on the appeal. On June 7, 2019, the Ninth Circuit reversed the decision of the U.S. Tax Court and upheld the cost-sharing regulations. On February 10, 2020, Altera Corp. filed a Petition for a Writ of Certiorari with the Supreme Court of the United States, which was denied by the Supreme Court on June 22, 2020. Although the issue is now resolved in the Ninth Circuit, the Ninth Circuit's opinion is not binding in other circuits. The potential impact of this issue on the Company, which is not located within the jurisdiction of the Ninth Circuit, is unclear at this time. We will continue to monitor developments related to this issue and the potential impact of those developments on the Company's current and prior fiscal years.
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 2017 through 2020 remain open to examination by the major taxing jurisdictions to which the Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year 2017 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company's federal income tax returns for fiscal years 2017, 2018, and 2019 are under examination by the U.S. Internal Revenue Service. The Company believes it has accrued adequate reserves related to the matters under examination. The Company is not under an income tax audit in any other major taxing jurisdiction.
12.Net Income Per Share
Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. These potentially dilutive items consist primarily of outstanding stock options and restricted stock grants.
The following table details the calculation of basic and diluted earnings per share for the three and six months ended September 26, 2020 and September 28, 2019 (in thousands, except per share amounts):