☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 77-0024818 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
800 W. 6th Street, Austin, TX 78701 (Address of principal executive offices) Registrant’s telephone number, including area code: (512) 851-4000 |
Large accelerated filer þ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | Emerging growth company ☐ |
(Do not check if a smaller reporting company) |
PART I - FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | |
| Consolidated Condensed Balance Sheets - September 23, 2017 (unaudited) and March 25, 2017 | |
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| Consolidated Condensed Statements of Income (unaudited) - Six Months Ended September 23, 2017 and September 24, 2016 | |
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| Consolidated Condensed Statements of Comprehensive Income (unaudited) - Six Months Ended September 23, 2017 and September 24, 2016 | |
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| Consolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended September 23, 2017 and September 24, 2016 | |
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| Notes to Consolidated Condensed Financial Statements (unaudited) | |
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |
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Item 4. | Controls and Procedures | |
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PART II - OTHER INFORMATION | ||
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Item 1. | Legal Proceedings | |
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Item 1A. | Risk Factors | |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
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Item 3. | Defaults Upon Senior Securities | |
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Item 4. | Mine Safety Disclosures | |
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Item 5. | Other Information | |
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Item 6. | Exhibits | |
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| Signatures |
| September 23, | March 25, | |||||
2017 | 2017 | ||||||
| (unaudited) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 180,198 | $ | 351,166 | |||
Marketable securities | 15,446 | 99,813 | |||||
Accounts receivable, net | 232,380 | 119,974 | |||||
Inventories | 210,791 | 167,895 | |||||
Prepaid assets | 20,923 | 24,987 | |||||
Other current assets | 10,262 | 12,093 | |||||
Total current assets | 670,000 | 775,928 | |||||
| |||||||
Long-term marketable securities | 133,547 | — | |||||
Property and equipment, net | 177,523 | 168,139 | |||||
Intangibles, net | 131,235 | 135,188 | |||||
Goodwill | 289,248 | 286,767 | |||||
Deferred tax assets | 30,511 | 32,841 | |||||
Other assets | 23,703 | 14,607 | |||||
Total assets | $ | 1,455,767 | $ | 1,413,470 | |||
| |||||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 131,125 | $ | 73,811 | |||
Accrued salaries and benefits | 35,651 | 40,190 | |||||
Software license agreements | 10,827 | 14,990 | |||||
Other accrued liabilities | 13,587 | 15,084 | |||||
Total current liabilities | 191,190 | 144,075 | |||||
| |||||||
Long-term liabilities: | |||||||
Debt | — | 60,000 | |||||
Software license agreements | 7,245 | 3,146 | |||||
Other long-term liabilities | 57,416 | 54,557 | |||||
Total long-term liabilities | 64,661 | 117,703 | |||||
| |||||||
Stockholders' equity: | |||||||
Capital stock | 1,288,669 | 1,259,279 | |||||
Accumulated deficit | (92,180 | ) | (107,014 | ) | |||
Accumulated other comprehensive income (loss) | 3,427 | (573 | ) | ||||
Total stockholders' equity | 1,199,916 | 1,151,692 | |||||
Total liabilities and stockholders' equity | $ | 1,455,767 | $ | 1,413,470 |
| Three Months Ended | Six Months Ended | |||||||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
Net sales | $ | 425,537 | $ | 428,619 | $ | 746,272 | $ | 688,047 | |||||||
Cost of sales | 214,255 | 216,920 | 373,274 | 349,663 | |||||||||||
Gross profit | 211,282 | 211,699 | 372,998 | 338,384 | |||||||||||
Operating expenses | |||||||||||||||
Research and development | 90,353 | 75,673 | 173,910 | 149,607 | |||||||||||
Selling, general and administrative | 30,041 | 32,089 | 60,900 | 62,629 | |||||||||||
Total operating expenses | 120,394 | 107,762 | 234,810 | 212,236 | |||||||||||
Income from operations | 90,888 | 103,937 | 138,188 | 126,148 | |||||||||||
Interest income | 1,005 | 296 | 1,934 | 563 | |||||||||||
Interest expense | (280 | ) | (1,299 | ) | (615 | ) | (2,255 | ) | |||||||
Other expense | (1,116 | ) | (261 | ) | (1,135 | ) | (114 | ) | |||||||
Income before income taxes | 90,497 | 102,673 | 138,372 | 124,342 | |||||||||||
Provision for income taxes | 17,197 | 16,634 | 22,160 | 20,232 | |||||||||||
Net income | 73,300 | 86,039 | 116,212 | 104,110 | |||||||||||
| |||||||||||||||
Basic earnings per share | $ | 1.16 | $ | 1.37 | $ | 1.82 | $ | 1.66 | |||||||
Diluted earnings per share | $ | 1.10 | $ | 1.30 | $ | 1.74 | $ | 1.58 | |||||||
Basic weighted average common shares outstanding | 63,431 | 62,787 | 63,764 | 62,618 | |||||||||||
Diluted weighted average common shares outstanding | 66,360 | 66,410 | 66,761 | 66,101 |
| Three Months Ended | Six Months Ended | |||||||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income | $ | 73,300 | $ | 86,039 | $ | 116,212 | $ | 104,110 | |||||||
Other comprehensive income (loss), before tax | |||||||||||||||
Foreign currency translation | 3,021 | 65 | 3,311 | 253 | |||||||||||
Unrealized gain (loss) on marketable securities | 14 | (76 | ) | 48 | (9 | ) | |||||||||
Actuarial gain on pension plan | — | — | 792 | — | |||||||||||
Reclassification of actuarial gain to net income | — | (26 | ) | — | (53 | ) | |||||||||
(Provision) benefit for income taxes | (1 | ) | 21 | (151 | ) | 20 | |||||||||
Comprehensive income | $ | 76,334 | $ | 86,023 | $ | 120,212 | $ | 104,321 |
| Six Months Ended | ||||||
| September 23, | September 24, | |||||
| 2017 | 2016 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 116,212 | $ | 104,110 | |||
Adjustments to reconcile net income to net cash generated by operating activities: | |||||||
Depreciation and amortization | 39,031 | 32,961 | |||||
Stock compensation expense | 23,695 | 19,234 | |||||
Deferred income taxes | 346 | 3,845 | |||||
Loss on retirement or write-off of long-lived assets | 377 | 251 | |||||
Other non-cash adjustments | (3,819 | ) | (2,985 | ) | |||
Net change in operating assets and liabilities: | |||||||
Accounts receivable, net | (112,406 | ) | (181,027 | ) | |||
Inventories | (42,896 | ) | (19,239 | ) | |||
Other assets | 5,714 | 4,584 | |||||
Accounts payable and other accrued liabilities | 49,658 | 64,475 | |||||
Income taxes payable | 4,797 | 10,638 | |||||
Net cash generated by operating activities | 80,709 | 36,847 | |||||
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Cash flows from investing activities: | |||||||
Maturities and sales of available-for-sale marketable securities | 109,069 | 91,531 | |||||
Purchases of available-for-sale marketable securities | (158,216 | ) | (128,415 | ) | |||
Purchases of property, equipment and software | (25,781 | ) | (18,119 | ) | |||
Investments in technology | (21,809 | ) | (5,743 | ) | |||
Net cash used in investing activities | (96,737 | ) | (60,746 | ) | |||
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Cash flows from financing activities: | |||||||
Principal payments on long-term revolver | (60,000 | ) | (20,439 | ) | |||
Debt issuance costs | — | (2,152 | ) | ||||
Payments on capital lease agreements | — | (699 | ) | ||||
Issuance of common stock, net of shares withheld for taxes | 5,695 | 9,131 | |||||
Repurchase of stock to satisfy employee tax withholding obligations | (5,085 | ) | (2,031 | ) | |||
Repurchase and retirement of common stock | (95,550 | ) | (15,440 | ) | |||
Net cash used in financing activities | (154,940 | ) | (31,630 | ) | |||
| |||||||
Net decrease in cash and cash equivalents | (170,968 | ) | (55,529 | ) | |||
| |||||||
Cash and cash equivalents at beginning of period | 351,166 | 168,793 | |||||
Cash and cash equivalents at end of period | $ | 180,198 | $ | 113,264 |
As of September 23, 2017 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value (Net Carrying Amount) | |||||||||||
Corporate debt securities | $ | 135,219 | $ | 103 | $ | (89 | ) | $ | 135,233 | ||||||
Non-US government securities | 11,817 | — | (14 | ) | 11,803 | ||||||||||
US Treasury securities | 998 | — | — | 998 | |||||||||||
Certificates of deposit | 500 | — | — | 500 | |||||||||||
Agency discount notes | 459 | — | — | 459 | |||||||||||
Total securities | $ | 148,993 | $ | 103 | $ | (103 | ) | $ | 148,993 |
As of March 25, 2017 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value (Net Carrying Amount) | |||||||||||
Corporate debt securities | 33,350 | $ | — | $ | (20 | ) | $ | 33,330 | |||||||
Commercial paper | 66,518 | — | (35 | ) | 66,483 | ||||||||||
Total securities | $ | 99,868 | $ | — | $ | (55 | ) | $ | 99,813 |
September 23, 2017 | March 25, 2017 | ||||||||||||||
Amortized | Estimated | Amortized | Estimated | ||||||||||||
Cost | Fair Value | Cost | Fair Value | ||||||||||||
Within 1 year | $ | 15,454 | $ | 15,446 | $ | 99,868 | $ | 99,813 | |||||||
After 1 year | 133,539 | 133,547 | — | — | |||||||||||
Total | $ | 148,993 | $ | 148,993 | $ | 99,868 | $ | 99,813 |
• | 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. |
| 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 | $ | 152,329 | $ | — | $ | — | $ | 152,329 | |||||||
Available-for-sale securities | |||||||||||||||
Corporate debt securities | $ | — | $ | 135,233 | $ | — | $ | 135,233 | |||||||
Non-US government securities | — | 11,803 | — | 11,803 | |||||||||||
U.S. Treasury securities | 998 | — | — | 998 | |||||||||||
Certificates of deposit | — | 500 | — | 500 | |||||||||||
Agency discount notes | — | 459 | — | 459 | |||||||||||
| $ | 998 | $ | 147,995 | $ | — | $ | 148,993 | |||||||
Liabilities: | |||||||||||||||
Other accrued liabilities | |||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 659 | $ | 659 |
| 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 | $ | 313,982 | $ | — | $ | — | $ | 313,982 | |||||||
Available-for-sale securities | |||||||||||||||
Corporate debt securities | $ | — | $ | 33,330 | $ | — | $ | 33,330 | |||||||
Commercial paper | 66,483 | — | 66,483 | ||||||||||||
$ | — | $ | 99,813 | $ | — | $ | 99,813 | ||||||||
Liabilities: | |||||||||||||||
Other accrued liabilities | |||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 4,695 | $ | 4,695 |
| Maximum Value if Milestones Achieved (in thousands) | Estimated Discount Rate (%) | Fair Value (in thousands) | |||||||
Tranche B - 30 month earn out period | $ | 5,000 | 7.7 | % | $ | 659 |
| Six Months Ended | ||
| September 23, | ||
| 2017 | ||
| (in thousands) | ||
Beginning balance | $ | 4,695 | |
Adjustment to estimates (research and development expense) | (4,049 | ) | |
Fair value charge recognized in earnings (research and development expense) | 13 | ||
Ending balance | $ | 659 |
| September 23, | March 25, | |||||
| 2017 | 2017 | |||||
Gross accounts receivable | $ | 232,824 | $ | 120,408 | |||
Allowance for doubtful accounts | (444 | ) | (434 | ) | |||
Accounts receivable, net | $ | 232,380 | $ | 119,974 |
| September 23, | March 25, | |||||
| 2017 | 2017 | |||||
Work in process | $ | 112,335 | $ | 83,332 | |||
Finished goods | 98,456 | 84,563 | |||||
| $ | 210,791 | $ | 167,895 |
| Three Months Ended | Six Months Ended | ||||||||||||
| September 23, | September 24, | September 23, | September 24, | ||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
Income before income taxes | $ | 90,497 | $ | 102,673 | $ | 138,372 | $ | 124,342 | ||||||
Provision for income taxes | $ | 17,197 | $ | 16,634 | $ | 22,160 | $ | 20,232 | ||||||
Effective tax rate | 19.0 | % | 16.2 | % | 16.0 | % | 16.3 | % |
| Three Months Ended | Six Months Ended | |||||||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
Numerator: | |||||||||||||||
Net income | $ | 73,300 | $ | 86,039 | $ | 116,212 | $ | 104,110 | |||||||
Denominator: | |||||||||||||||
Weighted average shares outstanding | 63,431 | 62,787 | 63,764 | 62,618 | |||||||||||
Effect of dilutive securities | 2,929 | 3,623 | 2,997 | 3,483 | |||||||||||
Weighted average diluted shares | 66,360 | 66,410 | 66,761 | 66,101 | |||||||||||
Basic earnings per share | $ | 1.16 | $ | 1.37 | $ | 1.82 | $ | 1.66 | |||||||
Diluted earnings per share | $ | 1.10 | $ | 1.30 | $ | 1.74 | $ | 1.58 |
| Three Months Ended | Six Months Ended | |||||||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
Portable Audio Products | $ | 381,761 | $ | 383,410 | $ | 662,449 | $ | 599,478 | |||||||
Non-Portable Audio and Other Products | 43,776 | 45,209 | 83,823 | 88,569 | |||||||||||
| $ | 425,537 | $ | 428,619 | $ | 746,272 | $ | 688,047 |
| Three Months Ended | Six Months Ended | |||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||
| 2017 | 2016 | 2017 | 2016 | |||||||
Net sales | 100 | % | 100 | % | 100 | % | 100 | % | |||
Gross margin | 50 | % | 49 | % | 50 | % | 49 | % | |||
Research and development | 22 | % | 18 | % | 23 | % | 22 | % | |||
Selling, general and administrative | 7 | % | 7 | % | 8 | % | 9 | % | |||
Income from operations | 21 | % | 24 | % | 19 | % | 18 | % | |||
Interest income | 0 | % | 0 | % | 0 | % | 0 | % | |||
Interest expense | 0 | % | 0 | % | 0 | % | 0 | % | |||
Other expense | 0 | % | 0 | % | 0 | % | 0 | % | |||
Income before income taxes | 21 | % | 24 | % | 19 | % | 18 | % | |||
Provision for income taxes | 4 | % | 4 | % | 3 | % | 3 | % | |||
Net income | 17 | % | 20 | % | 16 | % | 15 | % |
| Three Months Ended | Six Months Ended | |||||||||||||
| September 23, | September 24, | September 23, | September 24, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
Income before income taxes | $ | 90,497 | $ | 102,673 | $ | 138,372 | $ | 124,342 | |||||||
Provision for income taxes | $ | 17,197 | $ | 16,634 | $ | 22,160 | $ | 20,232 | |||||||
Effective tax rate | 19.0 | % | 16.2 | % | 16.0 | % | 16.3 | % |
• | most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty; |
• | our agreements with our customers typically do not require them to purchase a minimum quantity of our products; |
• | many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers’ decisions to purchase our products; |
• | our customers face intense competition from other manufacturers that do not use our products; and |
• | our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and their ability to obtain components from alternative sources. |
Monthly Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | |||||||||
June 25, 2017 - July 22, 2017 | — | $ | — | — | $ | — | |||||||
July 23, 2017 - August 19, 2017 | 890 | 56.19 | 890 | 80,227 | |||||||||
August 20, 2017 - September 23, 2017 | — | — | — | — | |||||||||
Total | 890 | $ | 56.19 | 890 | $ | 80,227 |
3.1 | |
3.2 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
(1) | Incorporated by reference from Registrant’s Report on Form 10-K for the fiscal year ended March 31, 2001, filed with the Commission on June 22, 2001 (Registration No. 000-17795). |
(2) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the Commission on September 20, 2013 (Registration No. 000-17795). |
Date: | November 2, 2017 | /s/ Thurman K. Case | |
Thurman K. Case | |||
Vice President, Chief Financial Officer and Principal Accounting Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cirrus Logic, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 2, 2017 | /s/ Jason P. Rhode | |
Jason P. Rhode | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cirrus Logic, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 2, 2017 | /s/ Thurman K. Case | |
Thurman K. Case | |||
Chief Financial Officer and Principal Accounting Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 2, 2017 | /s/ Jason P. Rhode | |
Jason P. Rhode | |||
President and Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 2, 2017 | /s/ Thurman K. Case | |
Thurman K. Case | |||
Chief Financial Officer and Principal Accounting Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Sep. 23, 2017 |
Oct. 27, 2017 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Entity Registrant Name | CIRRUS LOGIC INC | |
Entity Central Index Key | 0000772406 | |
Entity Filer Category | Large Accelerated Filer | |
Document Period End Date | Sep. 23, 2017 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --03-31 | |
Entity Common Stock, Shares Outstanding | 63,665,099 |
Consolidated Condensed Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Income Statement [Abstract] | ||||
Net sales | $ 425,537 | $ 428,619 | $ 746,272 | $ 688,047 |
Cost of sales | 214,255 | 216,920 | 373,274 | 349,663 |
Gross profit | 211,282 | 211,699 | 372,998 | 338,384 |
Operating expenses | ||||
Research and development | 90,353 | 75,673 | 173,910 | 149,607 |
Selling, general and administrative | 30,041 | 32,089 | 60,900 | 62,629 |
Total operating expenses | 120,394 | 107,762 | 234,810 | 212,236 |
Income from operations | 90,888 | 103,937 | 138,188 | 126,148 |
Interest income | 1,005 | 296 | 1,934 | 563 |
Interest expense | (280) | (1,299) | (615) | (2,255) |
Other expense | (1,116) | (261) | (1,135) | (114) |
Income before income taxes | 90,497 | 102,673 | 138,372 | 124,342 |
Provision for income taxes | 17,197 | 16,634 | 22,160 | 20,232 |
Net income | $ 73,300 | $ 86,039 | $ 116,212 | $ 104,110 |
Basic earnings per share (in dollars per share) | $ 1.16 | $ 1.37 | $ 1.82 | $ 1.66 |
Diluted earnings per share (in dollars per share) | $ 1.10 | $ 1.30 | $ 1.74 | $ 1.58 |
Basic weighted average common shares outstanding (in shares) | 63,431 | 62,787 | 63,764 | 62,618 |
Diluted weighted average common shares outstanding (in shares) | 66,360 | 66,410 | 66,761 | 66,101 |
Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Thousands |
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Sep. 24, 2016 |
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Sep. 24, 2016 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 73,300 | $ 86,039 | $ 116,212 | $ 104,110 |
Other comprehensive income (loss), before tax | ||||
Foreign currency translation | 3,021 | 65 | 3,311 | 253 |
Unrealized gain (loss) on marketable securities | 14 | (76) | 48 | (9) |
Actuarial gain on pension plan | 0 | 0 | 792 | 0 |
Reclassification of actuarial gain to net income | 0 | (26) | 0 | (53) |
(Provision) benefit for income taxes | (1) | 21 | (151) | 20 |
Comprehensive income | $ 76,334 | $ 86,023 | $ 120,212 | $ 104,321 |
Basis of Presentation |
6 Months Ended |
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Sep. 23, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 25, 2017, included in our Annual Report on Form 10-K filed with the Commission on May 24, 2017. 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, as well as disclosure of contingent assets and liabilities. 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. Additionally, prior period amounts have been adjusted to conform to current year presentation. |
Recently Issued Accounting Pronouncements |
6 Months Ended |
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Sep. 23, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The purpose of this ASU is to converge revenue recognition requirements per U.S. GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently in the process of reviewing our customers’ contracts in respect of performance obligation identification and satisfaction, pricing, warranties, and return rights, among other considerations. Though we have not completed the process, the Company currently expects no material modifications to its financial statements upon adoption of this ASU. The standard may be adopted by full retrospective method, which applies retrospectively to each prior period presented, or by modified retrospective method with the cumulative effect adjustment recognized in beginning retained earnings as of the date of adoption. We anticipate using the modified retrospective adoption method. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details. Lessees would recognize operating leases on the balance sheet under this ASU — with the future lease payments recognized as a liability, measured at present value, and the right-of-use asset recognized for the lease term. A single lease cost would be recognized over the lease term. For terms less than twelve months, a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on 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. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods. The Company is currently evaluating the impact of the adoption of this ASU on our financial statements. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU relates to income tax consequences of non-inventory intercompany asset transfers. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, as of the beginning of an annual reporting period. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. The Company early adopted this ASU in the first quarter of fiscal year 2018 with a $0.7 million impact to beginning retained earnings. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, and should be treated as an asset acquisition instead. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted under specific circumstances, including in an interim period, with prospective application. The Company adopted this ASU and applied the related guidance to an asset acquisition in the first quarter of fiscal year 2018. In January 2017, the FASB issued ASU 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. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. The Company is currently evaluating the impact of this ASU, which will be applied prospectively. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU applies to any company that changes the terms or conditions of a share-based award, considered a modification. Modification accounting would be applied unless certain conditions were met related to the fair value of the award, the vesting conditions and the classification of the modified award. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The standard should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the financial statement impact of this ASU. |
Marketable Securities |
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities The Company’s investments that have original maturities greater than 90 days 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 short- and long-term marketable securities, as appropriate. The following table is a summary of available-for-sale securities at September 23, 2017 (in thousands):
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 $103 thousand related to securities with total amortized cost of approximately $78.2 million at September 23, 2017. No securities have been in a continuous unrealized loss position for more than 12 months as of September 23, 2017. 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. When evaluating an investment for other-than-temporary 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 23, 2017, the Company does not consider any of its investments to be other-than-temporarily impaired. The following table is a summary of available-for-sale securities at March 25, 2017 (in thousands):
The Company’s specifically identified gross unrealized losses of $55 thousand related to securities with total amortized cost of approximately $99.9 million at March 25, 2017. Four securities had been in a continuous loss position for more than 12 months as of March 25, 2017. The gross unrealized loss on these securities was less than one percent of the position value. 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. When evaluating an investment for other-than-temporary 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 March 25, 2017, the Company did not consider any of its investments to be other-than-temporarily impaired. The cost and estimated fair value of available-for-sale securities by contractual maturities were as follows (in thousands):
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company has determined that the only 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, investment portfolio, pension plan assets / liabilities and contingent consideration. 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).
The Company’s cash equivalents and investment portfolio assets consist of debt securities, money market funds, and commercial paper 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 investment portfolio assets by obtaining non-binding market prices from its 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. In connection with one of the Company’s prior acquisitions accounted for as a business combination, the Company reported contingent consideration based upon achievement of certain milestones. This liability is classified as Level 3 and valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow include discount rate estimates and cash flow amounts. See additional details below. Prior to paying off the Company’s long-term revolving facility in the prior fiscal quarter, interest was applied at a base rate plus applicable margin or LIBOR plus applicable margin and the fair value of the revolving facility approximated carrying value. As of September 23, 2017 and March 25, 2017, the Company classified all investment portfolio and pension plan assets and liabilities as Level 1 or Level 2 assets and liabilities. The only Level 3 liability is the contingent consideration described above and below. The Company has no Level 3 assets. There were no transfers between Level 1, Level 2, or Level 3 measurements for the three months ending September 23, 2017. The following summarizes the fair value of our financial instruments at September 23, 2017, exclusive of pension plan assets and liabilities (in thousands):
The following summarizes the fair value of our financial instruments at March 25, 2017, exclusive of pension plan assets and liabilities (in thousands):
Contingent consideration The following summarizes the fair value of the liability for contingent consideration at September 23, 2017:
The valuation of contingent consideration was initially based on a weighted-average discounted cash flow model. The fair value is reviewed and estimated on a quarterly basis based on the probability of achieving defined milestones and current interest rates. Significant changes in any of the unobservable inputs used in the fair value measurement of contingent consideration could result in a significantly lower or higher fair value. An increase or decrease in the probability of achieving certain milestones within the earn out period would be accompanied by a directionally similar change in the fair value of the recorded liability. A change in discount rate would be accompanied by a directionally opposite change in fair value. Changes in the fair value of the recorded liability are reported in research and development expense in the consolidated condensed statements of income. In the first quarter of the current fiscal year, changes in the probability of achieving certain milestones associated with Tranche B of the earn out were determined following a review of product shipment forecasts within the earn out period. The revised estimates reduced the fair value of the liability as of September 23, 2017 as shown in the table below.
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Accounts Receivable, net |
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Accounts Receivable, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, net | Accounts Receivable, net The following are the components of accounts receivable, net (in thousands):
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Inventories |
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Inventories | Inventories Inventories are comprised of the following (in thousands):
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Revolving Credit Facilities |
6 Months Ended |
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Sep. 23, 2017 | |
Line of Credit Facility [Abstract] | |
Revolving Credit Facilities | Revolving Credit Facilities On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Amended 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 Amended Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Amended Facility”). The Amended Facility matures on July 12, 2021. The Amended Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Amended 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 Amended 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 Amended 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 Amended 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 23, 2017, the Company had no amounts outstanding under the Amended Facility and was in compliance with all covenants under the Amended Credit Agreement. |
Pension Plan |
6 Months Ended |
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Sep. 23, 2017 | |
Retirement Benefits [Abstract] | |
Pension Plan | Pension Plan As a result of the fiscal year 2015 acquisition of Wolfson Microelectronics, the Company now fully funds a defined benefit pension scheme (the “Scheme”), formerly maintained by Wolfson, for some of the employees in the United Kingdom. The participants in the Scheme no longer accrue benefits and therefore the Company will not be required to make contributions in respect of future accruals. The Company elected to make a contribution of £1.5 million based on the latest triennial actuarial valuation in the prior fiscal quarter. As of September 23, 2017, the Scheme is in a net funded position (included within “Other assets” in the consolidated condensed balance sheet). |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | 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 credits. The following table presents the provision for income taxes (in thousands) and the effective tax rates:
Our income tax expense was $17.2 million and $16.6 million for the second quarter of fiscal year 2018 and 2017, respectively, resulting in effective tax rates of 19.0% and 16.2% for the second quarter of fiscal year 2018 and 2017, respectively. Our income tax expense was $22.2 million and $20.2 million for the first six months of fiscal year 2018 and 2017, respectively, resulting in effective tax rates of 16.0% and 16.3% for the first six months of fiscal year 2018 and 2017, respectively. Our effective tax rate for the second quarter and first six months of fiscal year 2018 was lower than the federal statutory rate primarily due to income earned in certain foreign jurisdictions taxed below the federal statutory rate, excess tax benefits from stock-based compensation, and the U.S. R&D tax credit. Our effective tax rate for the second quarter and first six months of fiscal year 2017 was below the federal statutory rate primarily due to income earned in certain foreign jurisdictions taxed below the federal statutory rate, excess tax benefits from stock-based compensation, and the U.S. R&D tax credit. The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At September 23, 2017, the Company had unrecognized tax benefits of $33.6 million, all of which would impact the effective tax rate if recognized. The Company recorded a gross decrease of $2.3 million due to the lapse of the statute of limitations in the first quarter of fiscal year 2018 applicable to a tax deduction claimed on a prior year tax return, as well as gross increases to its current year unrecognized tax benefits of $2.2 million and $2.8 million for the first and second quarters of fiscal year 2018, respectively. The Company believes it is reasonably possible that the gross unrecognized tax benefits could decrease by approximately $1.1 million in the next 12 months due to the lapse of the statute of limitations applicable to a tax position taken on a prior year tax return. The Company’s total unrecognized tax benefits are classified as “Other long-term liabilities” 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 23, 2017, the balance of accrued interest and penalties, net of tax, was $0.5 million. 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 2014 through 2017 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 2014 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company is not currently under an income tax audit in any major taxing jurisdiction. |
Net Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | 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 awards (including restricted stock units and market stock units). The following table details the calculation of basic and diluted earnings per share for the three and six months ended September 23, 2017 and September 24, 2016 (in thousands, except per share amounts):
The weighted outstanding shares excluded from our diluted calculation for the three and six months ended September 23, 2017 were 236 thousand and 222 thousand, respectively, as the shares were anti-dilutive. The weighted outstanding shares excluded from our diluted calculation for the three and six months ended September 24, 2016 were 4 thousand and 8 thousand, respectively, as the shares were anti-dilutive. |
Legal Matters |
6 Months Ended |
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Sep. 23, 2017 | |
Loss Contingency, Information about Litigation Matters [Abstract] | |
Legal Matters | Legal Matters From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities. We regularly evaluate the status of legal proceedings in which we are involved in order to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred, and to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. Based on current knowledge, management does not believe that there are any pending matters that could potentially have a material adverse effect on our business, financial condition, results of operations or cash flows. However, we are engaged in various legal actions in the normal course of business. There can be no assurances in light of the inherent uncertainties involved in any potential legal proceedings, some of which are beyond our control, and an adverse outcome in any legal proceeding could be material to our results of operations or cash flows for any particular reporting period. |
Stockholders' Equity |
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Sep. 23, 2017 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Common Stock The Company issued a net 0.2 million and 0.4 million shares of common stock during the three and six month periods ending September 23, 2017, respectively, primarily pursuant to the Company's 2006 Stock Incentive Plan. The Company issued a net 0.8 million and 1.1 million shares of common stock during the three and six month periods ending September 24, 2016, respectively, primarily pursuant to the Company’s 2006 Stock Incentive Plan. Share Repurchase Program Since inception, $119.8 million of the Company’s common stock has been repurchased under the Company’s 2015 $200 million share repurchase program, leaving $80.2 million available for repurchase under this plan as of September 23, 2017. During the three and six months ended September 23, 2017, respectively, the Company repurchased 0.9 million shares of its common stock, for $50.0 million, at an average cost of $56.19 per share and 1.6 million shares of its common stock, for $95.6 million, at an average cost of $59.77 per share. All of these shares were repurchased in the open market and were funded from existing cash. All shares of our common stock that were repurchased were retired as of September 23, 2017. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information We determine our operating segments in accordance with FASB guidelines. Our Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker under these guidelines. The Company operates and tracks its results in one reportable segment, but reports revenue performance in two product lines, Portable Audio and Non-Portable Audio and Other. Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level. Additionally, our product lines have similar characteristics and customers. They share support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative functions of human resources, legal, finance and information technology. Therefore, there is no complete, discrete financial information maintained for these product lines. Revenues from our product lines are as follows (in thousands):
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Recently Issued Accounting Pronouncements (Policies) |
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Sep. 23, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The purpose of this ASU is to converge revenue recognition requirements per U.S. GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently in the process of reviewing our customers’ contracts in respect of performance obligation identification and satisfaction, pricing, warranties, and return rights, among other considerations. Though we have not completed the process, the Company currently expects no material modifications to its financial statements upon adoption of this ASU. The standard may be adopted by full retrospective method, which applies retrospectively to each prior period presented, or by modified retrospective method with the cumulative effect adjustment recognized in beginning retained earnings as of the date of adoption. We anticipate using the modified retrospective adoption method. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details. Lessees would recognize operating leases on the balance sheet under this ASU — with the future lease payments recognized as a liability, measured at present value, and the right-of-use asset recognized for the lease term. A single lease cost would be recognized over the lease term. For terms less than twelve months, a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on 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. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods. The Company is currently evaluating the impact of the adoption of this ASU on our financial statements. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU relates to income tax consequences of non-inventory intercompany asset transfers. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, as of the beginning of an annual reporting period. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. The Company early adopted this ASU in the first quarter of fiscal year 2018 with a $0.7 million impact to beginning retained earnings. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, and should be treated as an asset acquisition instead. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted under specific circumstances, including in an interim period, with prospective application. The Company adopted this ASU and applied the related guidance to an asset acquisition in the first quarter of fiscal year 2018. In January 2017, the FASB issued ASU 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. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. The Company is currently evaluating the impact of this ASU, which will be applied prospectively. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU applies to any company that changes the terms or conditions of a share-based award, considered a modification. Modification accounting would be applied unless certain conditions were met related to the fair value of the award, the vesting conditions and the classification of the modified award. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The standard should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the financial statement impact of this ASU. |
Marketable Securities (Tables) |
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities | The following table is a summary of available-for-sale securities at September 23, 2017 (in thousands):
The following table is a summary of available-for-sale securities at March 25, 2017 (in thousands):
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Schedule of Cost and Estimated Fair Value of Available-for-sale Securities by Contractual Maturity | The cost and estimated fair value of available-for-sale securities by contractual maturities were as follows (in thousands):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Financial Assets and Liabilities | The following summarizes the fair value of our financial instruments at September 23, 2017, exclusive of pension plan assets and liabilities (in thousands):
The following summarizes the fair value of our financial instruments at March 25, 2017, exclusive of pension plan assets and liabilities (in thousands):
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Schedule of Fair Value of Financial Instruments - Contingent Consideration | The following summarizes the fair value of the liability for contingent consideration at September 23, 2017:
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The revised estimates reduced the fair value of the liability as of September 23, 2017 as shown in the table below.
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Accounts Receivable, net (Tables) |
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Accounts Receivable, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accounts Receivable, net | The following are the components of accounts receivable, net (in thousands):
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Inventories (Tables) |
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Schedule of Inventories | Inventories are comprised of the following (in thousands):
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Provision for Income Taxes and Effective Tax Rates | The following table presents the provision for income taxes (in thousands) and the effective tax rates:
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Net Income Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table details the calculation of basic and diluted earnings per share for the three and six months ended September 23, 2017 and September 24, 2016 (in thousands, except per share amounts):
|
Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 23, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Revenue from Product Lines | Revenues from our product lines are as follows (in thousands):
|
Recently Issued Accounting Pronouncements (Narrative) (Details) $ in Millions |
Jun. 24, 2017
USD ($)
|
---|---|
Accounting Standards Update 2016-16 | New Accounting Pronouncement, Early Adoption, Effect | Retained Earnings | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Impact to beginning retained earnings from adoption of ASU 2016-16 | $ 0.7 |
Marketable Securities (Narrative) (Details) $ in Thousands |
6 Months Ended | |
---|---|---|
Sep. 23, 2017
USD ($)
security
|
Mar. 25, 2017
USD ($)
security
|
|
Schedule of Available-for-sale Securities [Line Items] | ||
Gross unrealized losses | $ 103 | $ 55 |
Amortized cost on available for sale securities held at gross unrealized loss | $ 78,200 | $ 99,900 |
Number of securities in unrealized loss position greater than one year | security | 0 | 4 |
Percentage of gross unrealized loss to position (less than) | 1.00% | |
Minimum | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Maturity period for highly-rated securities | 1 year | |
Maximum | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Maturity period for highly-rated securities | 3 years |
Marketable Securities (Schedule of Cost and Estimated Fair Value of Available-for-sale Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands |
Sep. 23, 2017 |
Mar. 25, 2017 |
---|---|---|
Amortized Cost | ||
Within 1 year | $ 15,454 | $ 99,868 |
After 1 year | 133,539 | 0 |
Amortized Cost | 148,993 | 99,868 |
Estimated Fair Value | ||
Within 1 year | 15,446 | 99,813 |
After 1 year | 133,547 | 0 |
Estimated Fair Value | $ 148,993 | $ 99,813 |
Fair Value of Financial Instruments (Schedule of Contingent Consideration) (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Sep. 23, 2017 |
Mar. 25, 2017 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value (in thousands) | $ 659 | $ 4,695 |
Tranche B - 30 month earn out period | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Maximum Value if Milestones Achieved (in thousands) | $ 5,000 | |
Estimated Discount Rate (%) | 7.70% | |
Fair Value (in thousands) | $ 659 |
Fair Value of Financial Instruments (Schedule of Fair Value of Contingent Consideration) (Details) $ in Thousands |
6 Months Ended |
---|---|
Sep. 23, 2017
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance | $ 4,695 |
Adjustment to estimates (research and development expense) | (4,049) |
Fair value charge recognized in earnings (research and development expense) | 13 |
Ending balance | $ 659 |
Accounts Receivable, net (Components of Accounts Receivable, net) (Details) - USD ($) $ in Thousands |
Sep. 23, 2017 |
Mar. 25, 2017 |
---|---|---|
Accounts Receivable, Net [Abstract] | ||
Gross accounts receivable | $ 232,824 | $ 120,408 |
Allowance for doubtful accounts | (444) | (434) |
Accounts receivable, net | $ 232,380 | $ 119,974 |
Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands |
Sep. 23, 2017 |
Mar. 25, 2017 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Work in process | $ 112,335 | $ 83,332 |
Finished goods | 98,456 | 84,563 |
Total inventories | $ 210,791 | $ 167,895 |
Pension Plan Pension Plan (Details) £ in Millions |
3 Months Ended |
---|---|
Jun. 24, 2017
GBP (£)
| |
Retirement Benefits [Abstract] | |
Contributions by employer | £ 1.5 |
Income Taxes (Provision for Income Taxes) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Income Tax Disclosure [Abstract] | ||||
Income before income taxes | $ 90,497 | $ 102,673 | $ 138,372 | $ 124,342 |
Provision for income taxes | $ 17,197 | $ 16,634 | $ 22,160 | $ 20,232 |
Effective tax rate | 19.00% | 16.20% | 16.00% | 16.30% |
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Sep. 23, 2017 |
Jun. 24, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Income Tax Disclosure [Abstract] | |||||
Provision for income taxes | $ 17,197 | $ 16,634 | $ 22,160 | $ 20,232 | |
Effective tax rate | 19.00% | 16.20% | 16.00% | 16.30% | |
Unrecognized tax benefits | $ 33,600 | $ 33,600 | |||
Unrecognized tax benefits, gross decrease due to lapse of the statute of limitations applicable to a prior year tax deduction | 2,300 | ||||
Unrecognized tax benefits, gross increase due to current year unrecognized tax benefits | 2,800 | $ 2,200 | |||
Decrease in unrecognized tax benefits is reasonably possible | 1,100 | 1,100 | |||
Balance of accrued interest and penalties, net of tax | $ 500 | $ 500 |
Net Income Per Share (Calculation Of Basic And Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Numerator: | ||||
Net income | $ 73,300 | $ 86,039 | $ 116,212 | $ 104,110 |
Denominator: | ||||
Weighted average shares outstanding (in shares) | 63,431 | 62,787 | 63,764 | 62,618 |
Effect of dilutive securities (in shares) | 2,929 | 3,623 | 2,997 | 3,483 |
Weighted average diluted shares (in shares) | 66,360 | 66,410 | 66,761 | 66,101 |
Basic earnings per share (in dollars per share) | $ 1.16 | $ 1.37 | $ 1.82 | $ 1.66 |
Diluted earnings per share (in dollars per share) | $ 1.10 | $ 1.30 | $ 1.74 | $ 1.58 |
Net Income Per Share (Narrative) (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Earnings Per Share [Abstract] | ||||
Weighted average shares outstanding excluded from diluted calculation (in shares) | 236 | 4 | 222 | 8 |
Stockholders' Equity (Common Stock) (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Stockholders' Equity Note [Abstract] | ||||
Common stock issued as part of stock incentive plan (in shares) | 0.2 | 0.8 | 0.4 | 1.1 |
Stockholders' Equity (Stock Repurchase Program) (Details) $ / shares in Units, shares in Millions |
3 Months Ended | 6 Months Ended | 23 Months Ended |
---|---|---|---|
Sep. 23, 2017
USD ($)
$ / shares
shares
|
Sep. 23, 2017
USD ($)
$ / shares
shares
|
Sep. 23, 2017
USD ($)
|
|
Stockholders' Equity Note [Abstract] | |||
Repurchase and retirement of common stock, value | $ 50,000,000 | $ 95,600,000 | $ 119,800,000 |
Share repurchase program, amount approved | 200,000,000 | 200,000,000 | 200,000,000 |
Remaining amount available for share repurchases under stock repurchase program | $ 80,200,000 | $ 80,200,000 | $ 80,200,000 |
Repurchase and retirement of common stock (in shares) | shares | 0.9 | 1.6 | |
Average cost per share repurchased (in dollars per share) | $ / shares | $ 56.19 | $ 59.77 |
Segment Information (Narrative) (Details) |
6 Months Ended |
---|---|
Sep. 23, 2017
segment
product_line
| |
Segment Reporting [Abstract] | |
Number of reportable segments | segment | 1 |
Number of product lines | product_line | 2 |
Segment Information (Schedule of Segment Revenue from Product Lines) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 23, 2017 |
Sep. 24, 2016 |
Sep. 23, 2017 |
Sep. 24, 2016 |
|
Segment Reporting Information [Line Items] | ||||
Net sales | $ 425,537 | $ 428,619 | $ 746,272 | $ 688,047 |
Portable Audio Products | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 381,761 | 383,410 | 662,449 | 599,478 |
Non-Portable Audio and Other Products | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | $ 43,776 | $ 45,209 | $ 83,823 | $ 88,569 |
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