Company Quick10K Filing
Cirrus Logic
Price53.86 EPS2
Shares60 P/E28
MCap3,246 P/FCF25
Net Debt-222 EBIT136
TEV3,024 TEV/EBIT22
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-09-26 Filed 2020-11-02
10-Q 2020-06-27 Filed 2020-08-03
10-K 2020-03-28 Filed 2020-05-20
10-Q 2019-12-28 Filed 2020-01-29
10-Q 2019-09-28 Filed 2019-10-30
10-Q 2019-06-29 Filed 2019-07-31
10-K 2019-03-30 Filed 2019-05-24
10-Q 2018-12-29 Filed 2019-01-30
10-Q 2018-09-29 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-01
10-K 2018-03-31 Filed 2018-05-30
10-Q 2017-12-30 Filed 2018-02-05
10-Q 2017-09-23 Filed 2017-11-02
10-Q 2017-06-24 Filed 2017-08-02
10-K 2017-03-25 Filed 2017-05-24
10-Q 2016-12-24 Filed 2017-02-01
10-Q 2016-09-24 Filed 2016-10-27
10-Q 2016-06-25 Filed 2016-07-27
10-K 2016-03-26 Filed 2016-05-25
10-Q 2015-12-26 Filed 2016-01-27
10-Q 2015-09-26 Filed 2015-10-28
10-Q 2015-06-27 Filed 2015-07-22
10-K 2015-03-28 Filed 2015-05-27
10-Q 2014-12-27 Filed 2015-01-28
10-Q 2014-09-27 Filed 2014-10-30
10-Q 2014-06-28 Filed 2014-07-23
10-K 2014-03-29 Filed 2014-05-28
10-Q 2013-12-28 Filed 2014-01-28
10-Q 2013-09-28 Filed 2013-10-29
10-Q 2013-06-29 Filed 2013-07-25
10-K 2013-03-30 Filed 2013-05-29
10-Q 2012-12-29 Filed 2013-01-24
10-Q 2012-09-29 Filed 2012-10-31
10-Q 2012-06-30 Filed 2012-07-30
10-K 2012-03-31 Filed 2012-05-30
10-Q 2011-12-31 Filed 2012-01-26
10-Q 2011-09-24 Filed 2011-10-24
10-Q 2011-06-25 Filed 2011-07-25
10-K 2011-03-26 Filed 2011-05-25
10-Q 2010-12-25 Filed 2011-01-27
10-Q 2010-09-25 Filed 2010-10-21
10-Q 2010-06-26 Filed 2010-07-20
10-K 2010-03-27 Filed 2010-06-01
10-Q 2009-12-26 Filed 2010-01-28
8-K 2020-10-30
8-K 2020-08-03
8-K 2020-07-31
8-K 2020-05-04
8-K 2020-04-21
8-K 2020-01-27
8-K 2019-10-30
8-K 2019-08-02
8-K 2019-07-31
8-K 2019-05-20
8-K 2019-05-01
8-K 2019-03-12
8-K 2019-01-30
8-K 2018-12-12
8-K 2018-12-03
8-K 2018-11-01
8-K 2018-08-17
8-K 2018-08-03
8-K 2018-08-01
8-K 2018-05-02
8-K 2018-02-05

CRUS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex311-crus9262020.htm
EX-31.2 ex312-crus9262020.htm
EX-32.1 ex321-crus9262020.htm
EX-32.2 ex322-crus9262020.htm

Cirrus Logic Earnings 2020-09-26

Balance SheetIncome StatementCash Flow
1.61.31.00.60.30.02012201420172020
Assets, Equity
0.60.50.30.20.0-0.12012201420172020
Rev, G Profit, Net Income
0.30.1-0.0-0.2-0.3-0.52012201420172020
Ops, Inv, Fin

crus-20200926
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 StreetAustin,Texas78701
(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 classTrading SymbolName of each exchange on which registered
Common stock, $0.001 par valueCRUSThe 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 preceding 12 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 ENDED SEPTEMBER 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
  
Consolidated Condensed Statements of Income (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 2019
  
Consolidated Condensed Statements of Comprehensive Income (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 2019
  
Consolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended September 26, 2020 and September 28, 2019
Consolidated Condensed Statements of Stockholders' Equity (unaudited) - Three and Six Months Ended September 26, 2020 and September 28, 20197
Notes to Consolidated Condensed Financial Statements (unaudited)
  
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3.Quantitative and Qualitative Disclosures about Market Risk
  
Item 4.Controls and Procedures
  
PART II - OTHER INFORMATION
  
Item 1.Legal Proceedings
  
Item 1A.Risk Factors
  
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 3.Defaults Upon Senior Securities
  
Item 4.Mine Safety Disclosures
  
Item 5.Other Information
  
Item 6.Exhibits
  
Signatures
໿
໿

2


Part I. FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
September 26,March 28,
20202020
(unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$247,536 $292,119 
Marketable securities36,641 22,008 
Accounts receivable, net181,496 153,998 
Inventories209,050 146,725 
Prepaid assets20,853 23,594 
Other current assets13,655 11,752 
Total current assets709,231 650,196 
  
Long-term marketable securities328,255 283,573 
Right-of-use lease assets137,045 141,274 
Property and equipment, net153,640 158,244 
Intangibles, net27,898 34,430 
Goodwill287,673 287,088 
Deferred tax assets7,899 10,052 
Other assets48,223 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 benefits41,707 42,439 
Software license agreements7,785 10,888 
Current lease liabilities13,994 13,580 
Other accrued liabilities15,452 13,318 
Total current liabilities178,043 158,637 
  
Long-term liabilities:  
Software license agreements9,917 3,806 
Non-current income taxes66,503 71,143 
Non-current lease liabilities128,570 129,312 
Total long-term liabilities204,990 204,261 
  
Stockholders' equity:  
Capital stock1,466,978 1,434,929 
Accumulated deficit(155,260)(201,681)
Accumulated other comprehensive income (loss)5,113 (3,469)
Total stockholders' equity1,316,831 1,229,779 
Total liabilities and stockholders' equity$1,699,864 $1,592,677 

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 EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019
Net sales$347,325 $388,912 $589,898 $627,165 
Cost of sales167,115 180,979 282,216 296,738 
Gross profit180,210 207,933 307,682 330,427 
Operating expenses  
Research and development84,810 88,239 163,551 177,069 
Selling, general and administrative31,247 33,018 60,951 62,538 
Restructuring costs  352  
Total operating expenses116,057 121,257 224,854 239,607 
Income from operations64,153 86,676 82,828 90,820 
Interest income1,658 2,530 3,493 5,074 
Interest expense(280)(280)(539)(539)
Other income (expense) 784 (568)895 (946)
Income before income taxes66,315 88,358 86,677 94,409 
Provision for income taxes6,829 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 outstanding58,191 58,011 58,252 58,276 
Diluted weighted average common shares outstanding60,127 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 EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019
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 taxes154 (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,
20202019
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 amortization23,845 37,911 
Stock-based compensation expense28,782 25,540 
Deferred income taxes(1,221)(1,919)
Loss on retirement or write-off of long-lived assets11 5 
Other non-cash adjustments124 453 
MEMS restructuring charges352  
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 liabilities19,351 61,525 
Income taxes payable(12,348)(2,291)
Net cash generated by operating activities42,138 117,835 
  
Cash flows from investing activities:  
Maturities and sales of available-for-sale marketable securities73,458 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 taxes3,267 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 period292,119 216,172 
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 StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income / (Loss)Total
Three Months EndedSharesAmount
Balance, June 29, 201958,121 $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 taxes224 — 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, 201957,786 $58 $1,392,592 $(213,274)$(751)$1,178,625 
Balance, June 27, 202058,381 $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 taxes52 — 205 (696)— (491)
Repurchase and retirement of common stock(476)— — (30,001)— (30,001)
Stock-based compensation— — 15,476 — — 15,476 
Balance, September 26, 202057,957 $58 $1,466,920 $(155,260)$5,113 $1,316,831 
Six Months Ended
Balance, March 30, 201958,954 $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 taxes279 — 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, 201957,786 $58 $1,392,592 $(213,274)$(751)$1,178,625 
Balance, March 28, 202058,242 $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 taxes191 — 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, 202057,957 $58 $1,466,920 $(155,260)$5,113 $1,316,831 

The accompanying notes are an integral part of these consolidated condensed financial statements.

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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
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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, 2020Amortized
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 securities10,520 250  10,770 
U.S. Treasury securities1,263 18  1,281 
Agency discount notes3,824 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 at September 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):
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As of March 28, 2020Amortized
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 securities12,483 260  12,743 
U.S. Treasury securities8,839 167  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 at March 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 of March 28, 2020, the Company did not consider any of its investments to be impaired.  


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The cost and estimated fair value of available-for-sale securities by contractual maturities were as follows (in thousands):
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September 26, 2020March 28, 2020
AmortizedEstimatedAmortizedEstimated
CostFair ValueCostFair Value
Within 1 year$36,020 $36,641 $22,012 $22,008 
After 1 year322,530 328,255 285,978 283,573 
Total$358,550 $364,896 $307,990 $305,581 

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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 securities1,281   1,281 
$1,281 $363,615 $ $364,896 
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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 securities9,006   9,006 
$9,006 $296,575 $ $305,581 
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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.


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The before-tax effect of derivative instruments not designated as hedging instruments was as follows (in thousands):

Three Months EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019Location
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,
20202020
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,
20202020
Work in process$125,082 $82,494 
Finished goods83,968 64,231 
$209,050 $146,725 

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8. Revolving Credit 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.  

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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 EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019
Non-United States$343,114 $385,222 $581,611 $619,263 
United States4,211 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.


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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 costs222 
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 EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019
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 rate10.3 %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.

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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):

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Three Months EndedSix Months Ended
September 26,September 28,September 26,September 28,
2020201920202019
Numerator:    
Net income$59,486 $76,210 $77,695 $80,828 
Denominator:    
Weighted average shares outstanding58,191 58,011 58,252 58,276 
Effect of dilutive securities1,936 2,202 1,951 1,984 
Weighted average diluted shares60,127 60,213 60,203 60,260 
Basic earnings per share$1.02 $1.31 $