UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 26, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exhange 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.)
CALIFORNIA 77-0024818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 West Warren Avenue, Fremont, CA 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(510) 623-8300
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 [X] NO [ ]
The number of shares of the registrant's common stock, no par value, was
60,617,076 as of December 26, 1998.
Part 1. Financial Information
Item 1. Financial Statements
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Quarter Ended Three Quarters Ended
----------------------- --------------------
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1998 1997 1998 1997
----------- ----------- ---------- ---------
Net sales $153,062 $240,843 $500,682 $666,426
Costs and expenses and gain on sale of assets:
Cost of sales 171,477 146,586 444,907 404,104
Research and development 31,105 47,737 100,772 136,563
Selling, general and administrative 22,678 29,244 76,578 87,145
Restructuring costs, gain on sale of assets and other, net 18,037 (1,617) 43,553 (1,617)
----------- ----------- ---------- ---------
Total costs and expenses and gain on sale of assets 243,297 221,950 665,810 626,195
----------- ----------- ---------- ---------
Income (loss) from operations (90,235) 18,893 (165,128) 40,231
Interest and other (expense) income, net (2,316) (426) (1,218) (5,454)
----------- ----------- ---------- ---------
Income (loss) before provision for income taxes (92,551) 18,467 (166,346) 34,777
Provision for income taxes - 5,541 46,698 10,433
----------- ----------- ---------- ---------
Net Income (loss) ($92,551) $12,926 ($213,044) $24,344
=========== =========== ========== =========
Net income (loss) per share:
Basic ($1.50) $0.19 ($3.33) $0.36
Diluted ($1.50) $0.18 ($3.33) $0.35
Weighted average common share outstanding:
Basic 61,807 67,593 64,068 67,080
Diluted 61,807 70,561 64,068 69,650
<FN>
See Notes to the Unaudited Consolidated Condensed Financial Statements.
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
Dec. 26, March 28,
1998 1998
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $189,678 $347,421
Short-term investments 113,991 125,378
Accounts receivable, net 78,232 103,073
Inventories 53,652 103,703
Deferred tax assets - 28,505
Equipment and leasehold improvement
advances to joint ventures 79,679 97,711
Other current assets 18,730 10,402
----------- -----------
Total current assets 533,962 816,193
Property and equipment, net 55,835 99,364
Manufacturing agreements, net
and investments in joint ventures 165,011 166,953
Deposits and other assets 41,240 55,032
----------- -----------
$796,048 $1,137,542
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $235,987 $233,600
Accrued salaries and benefits 15,738 41,832
Current maturities of long-term
and capital lease obligations 24,398 26,554
Income taxes payable 29,027 38,053
----------- -----------
Total current liabilities 305,150 340,039
Capital lease obligations and long term debt 17,804 38,034
Other long-term obligations 10,313 3,126
Convertible subordinated notes 300,000 300,000
Commitments and contingencies 0 0
Shareholders' equity:
Capital stock 329,076 366,914
Retained earnings (accumulated deficit) (166,295) 89,429
----------- -----------
Total shareholders' equity 162,781 456,343
----------- -----------
$796,048 $1,137,542
=========== ===========
<FN>
See Notes to the Unaudited Consolidated Condensed Financial Statements.
CIRRUS LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Quarters Ended
-----------------------
Dec. 26, Dec. 27,
1998 1997
----------- -----------
Cash flows from operations:
Net income (loss) ($213,044) $24,344
Adjustments to reconcile net income (loss) to net
cash flows from (used for) operations:
Depreciation and amortization 52,787 56,094
Deferred tax asset valuation allowance 46,402 -
Non-cash portion of restructuring charges 16,470 4,405
Write-off and write-down of property and equipment 5,029 -
Gain on sale of assets and other (2,241) (11,082)
Compensation related to the issuance of
certain employee stock 1,313 -
Net change in operating assets and liabilities 68,988 33,349
----------- -----------
Net cash flows provided by (used for) operations (24,296) 107,110
----------- -----------
Cash flows used for investing activities:
Purchase of short-term investments (183,608) (355,851)
Proceeds from sales and maturities of short-term investments 194,995 310,625
Additions to property and equipment (12,623) (21,714)
Proceeds from termination of UMC agreement 20,543
Joint venture manufacturing agreements and
investment in joint ventures (7,500) (32,500)
Net proceeds from sale of assets 2,241 16,142
Increase in deposits and other assets (23,035) (16,771)
----------- -----------
Net cash flows used for investing activities (29,530) (79,526)
----------- -----------
Cash flows used for financing activities:
Proceeds from issuance of common stock 11,280 14,344
Borrowings on long-term debt 5,980
Payments on long-term debt and capital lease obligations (22,086) (26,503)
Repurchase and retirement of common stock (93,111) -
----------- -----------
Net cash flows used for financing activities (103,917) (6,179)
----------- -----------
Increase (decrease) in cash and cash equivalents (157,743) 21,405
Cash and cash equivalents - beginning of period 347,421 151,540
----------- -----------
Cash and cash equivalents - end of period 189,678 172,945
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $22,652 $25,561
Income taxes paid $9,012 $2,454
<FN>
See Notes to the Unaudited Consolidated Condensed Financial Statements.
CIRRUS LOGIC, INC.
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated condensed financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the Company,
the financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
financial position, operating results and cash flows for those periods
presented. These consolidated condensed financial statements should be
read in conjunction with the consolidated financial statements, and
notes thereto for the year ended March 28, 1998, included in the
Company's 1998 Annual Report on Form 10-K. The results of operations
for the interim periods presented are not necessarily indicative of the
results that may be expected for the entire year.
Certain reclassifications have been made to the 1998 financial statements
to conform to the 1999 presentation. Such reclassfications had no effect
on the results of operations or shareholders' equity.
2. Inventories
Inventories are comprised of the following:
Dec. 26, March 28,
1998 1998
--------- ---------
(In thousands)
Work-in-process $ 37,866 $ 66,558
Finished goods 15,786 37,145
--------- ---------
Total $ 53,652 $103,703
========= =========
During the third quarter of fiscal 1999 and for the first three quarters of
fiscal 1999, the Company recorded $10.6 million and $30.7 million of charges
respectively, to cost of sales for inventory write-downs associated with
products being phased out in connection with the Company's 1999 restructuring
plan.
3. Shareholders' Equity
Stock Repurchase
During the first three quarters of fiscal 1999, pursuant to the
Company's Board of Directors previously approved plan to repurchase up
to 10 million shares of its common stock, the Company repurchased
approximately 9.0 million shares of common stock at a cost of $93.1
million.
4. Income Taxes
In the third fiscal quarter of 1999, the Company did not provide for any
income tax. Excluding the valuation allowance provided against the net
deferred tax assets in the second quarter, the Company expects no net
income tax provision in the current year. The Company expects foreign
income taxes will be offset by the benefits of U.S. net operating
losses.
5. Wafer Purchase Commitments
The Company has firm commitments to purchase wafers from joint venture
partnerships in which it is a minority owner (MiCRUS and Cirent Semiconductor)
and from other third party suppliers and will accrue losses to the extent
firm wafer purchase commitments exceed its estimated wafer needs for the
next six months. During the third quarter of fiscal 1999, and the first
three quarters of fiscal 1999, the Company recorded $62.2 million and
$89.8 million of charges, respectively to cost of sales related to these
commitments.
6. Restructuring Costs, Gain on Sale of Assets and Other, Net
In September 1998, the Company announced a program to restructure its
business to fully concentrate on its precision linear and mixed-signal
positions in the mass storage, audio and high-precision data conversion
markets. The program entailed a workforce reduction of 400 to 500
employees and restructuring charges of up to $500 million. In January
1999, the Company subsequently indicated that these charges may exceed
$500 million. The Company indicated in the announcement that the
timing of recording the restructuring charges was uncertain and
dependent upon a number of different factors, including negotiations
related to its joint ventures.
During the second quarter of fiscal 1999, the Company commenced certain
activities related to its previously announced restructuring and
recorded charges in the second quarter of fiscal 1999 related to those
activities. These actions included an immediate workforce reduction
along with write-downs and write-offs of obsolete inventory, equipment
and facilities. In connection with these actions, the Company recorded
a net restructuring charge of $28.5 million consisting of $4.3 million
for workforce reductions, $8.2 million for write-downs or write-offs of
equipment, intangibles and other assets, $10.0 million for facility
commitments (net of $2.2 million reversal of previously accrued losses
on facilities in connection with the third quarter, fiscal 1998
discontinuation of certain product development efforts in graphics
products), and the remaining amount representing other committed
liabilities and expenses. Approximately $21.0 million of the accrual
is expected to be discharged through cash payments, of which
approximately $10.6 million is expected to be paid in fiscal 1999.
During the third quarter of fiscal 1999, restructuring costs, gain on
sale of assets and other, net, of $18.0 million includes $13.0
million related to the Company's continuation of its restructuring
activities previously announced in the second quarter of fiscal 1999 and
$5.0 million for write-downs and write-offs of property and equipment.
The Company's restructuring activities for the third quarter of
fiscal 1999 included the divestiture of non-core businesses
and the outsourcing of the Fremont manufacturing test floor. In
connection with these actions, the Company recorded a net restructuring
charge of $13.0 million consisting of $4.2 million for work force
reductions, $8.3 million for write-downs and write-offs of equipment
and other assets relating to the Fremont manufacturing test floor, and
the remaining amount representing other committed liabilities and
expenses. Approximately $4.7 million of this third quarter accrual is
expected to be discharged through cash payments in fiscal 1999.
In connection with the restructuring, the Company currently expects an
additional workforce reduction of approximately 35 employees consisting
of involuntary terminations, voluntary terminations, spin-offs and
transfers with the sale of business segments. As of February 9, 1999,
approximately 410 employees have been terminated. The Company
anticipates that the implementation of the restructuring plan will be
substantially complete by the end of fiscal 1999 and may consist of
additional charges in subsequent periods related to the restructuring
of the Company's wafer fabrication capacity and other fixed costs. In
addition, to date the Company has made cash payments related to its fiscal
1999 restructuring charges of approximately $9.0 million.
During the first quarter of fiscal 1999, restructuring costs, gain on
sale of assets and other, net, of $3.0 million, included $2.2 million
relating to the recovery of a holdback from the fiscal 1997 sale of the
PCSI's Infrastructure Product Group to ADC Telecommunications, Inc. and
reversal of $0.8 million that had been previously accrued for losses on
facilities in connection with the third quarter fiscal 1998 discontinuation
of certain strategies and product development efforts in graphics products.
7. Net Income Per Share
The following table sets forth the computation of basic and diluted
earnings per share (In thousands, except per share amounts):
Quarter Ended Three Quarters Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1998 1997 1998 1997
----------- --------- ----------- ----------
Numerator:
Net income (loss) ($92,551) $12,926 ($213,044) $24,344
Denominator:
Denominator for basic net income (loss) per share - weighted-average shares 61,807 67,593 64,068 67,080
Dilutive common stock equivalents, using treasury stock method 0 2,968 0 2,570
----------- --------- ----------- ----------
Denominator for diluted net income (loss) per share 61,807 70,561 64,068 69,650
=========== ========= =========== ==========
Basic net income (loss) per share ($1.50) $0.19 ($3.33) $0.36
=========== ========= =========== ==========
Diluted net income (loss) per share ($1.50) $0.18 ($3.33) $0.35
=========== ========= =========== ==========
Incremental common shares attributable to exercise of outstanding
options of 3,634,000 and 5,350,000 for the three and nine months ended
December 26, 1998, respectively, were excluded from the computation of
diluted net income per share because the effect would be antidilutive.
As of December 26, 1998, the Company had outstanding convertible notes
to purchase 12,387,000 shares of common stock that were not included in
the computation of diluted net income per share because the effect
would be antidilutive.
8. Commitments
As of December 26, 1998, the Company is contingently liable for MiCRUS
and Cirent equipment leases which have remaining payments of
approximately $511 million, payable through fiscal 2005.
As of December 26, 1998, the Company had approximately $13 million of
forward exchange contracts denominated in yen, which expire in
March 1999.
9. Recently Issued Accounting Standards
As of March 29, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes new rules for the reporting and display
of comprehensive income and its components; however, the adoption of
SFAS 130 has no impact on the Company's net income or shareholders'
equity. SFAS 130 requires foreign currency translation adjustments,
which prior to adoption was reported in shareholders' equity, to be
included in the other comprehensive income.
The components of comprehensive income, net of tax, are as follows (in
thousands):
Quarter Ended Three Quarters Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1998 1997 1998 1997
------------ ----------- ---------- ----------
Net income (loss) ($92,551) $12,926 ($213,044) $24,344
Change in unrealized (gain) loss on foreign
currency translation adjustments 1,772 (459) 1,477 (403)
------------ ----------- ---------- ----------
Total ($90,779) $12,467 ($211,567) $23,941
============ =========== ========== ==========
In June 1998, the Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities", was issued and is effective for fiscal years commencing
after June 15, 1999. SFAS 133 provides a comprehensive and consistent
standard for the recognition and measurement of derivatives and hedging
activities. The Company does not believe SFAS 133 will have a material
impact on earnings or the financial condition of the Company.
10. Subsequent Events
Subsequent to December 26, 1998 and through February 1, 1999, the
Company has repurchased approximately 0.7 million shares of common
stock at a total cost of approximately $7.0 million. The repurchases
were made under a common stock repurchase program approved by the Board
of Directors for the repurchase of up to 10 million shares of its
Common Stock in the open market from time to time, depending upon
market conditions, share price and other conditions. Through February 1,
1999, the Company has repurchased approximately 9.7 million shares of
common stock at a total cost of approximately $100 million.
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This information should be read along with the unaudited consolidated
condensed financial statements and the notes thereto included in Item 1
of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations for the fiscal year
ended March 28, 1998, contained in the 1998 Annual Report on Form 10-K
(the "1998 Form 10-K"). This Discussion and Analysis contains forward-
looking statements. Such statements are subject to certain risks and
uncertainties, including those discussed below or in the 1998 Form 10-K
that could cause actual results to differ materially from the Company's
expectations. Readers are cautioned not to place undue reliance on any
forward-looking statements, as they reflect management's analysis only
as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking
statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
Results of Operations
The following table discloses the percentages that income statement
items are of net sales and the percentage change in the dollar amounts
for the same items compared to the corresponding period in the prior
fiscal year.
Percentage of Net Sales Percentage of Net Sales
Quarter Ended Three Quarters Ended
--------- --------- --------- ---------
Dec. 26, Dec. 27, Percent Dec. 26, Dec. 27, Percent
1998 1997 change 1998 1997 change
--------- --------- --------- --------- --------- ---------
Net sales 100% 100% -36% 100% 100% -25%
Gross margin -12% 39% -120% 11% 39% -79%
Research and development 20% 20% -35% 20% 20% -26%
Selling, general and administrative 15% 12% -22% 15% 13% -12%
Restructuring costs, gain on sale of assets and other, net 12% -1% -1215% 9% 0% -2793%
Income (loss) from operations -59% 8% -578% -33% 6% -510%
Income (loss) before income taxes -60% 8% -601% -33% 5% -578%
Provision for income taxes - 2% -100% 9% 2% 348%
Net income (loss) -60% 5% -816% -43% 4% -975%
Net Sales
Net sales for the third quarter of fiscal 1999 were $153.1 million, a
decrease of 36% from $240.8 million for the third quarter of fiscal
1998. Revenues in the third quarter of fiscal 1998 included amounts
from businesses subsequently divested by the Company. Revenues from
divested businesses in the third quarter of fiscal 1999 were $22.2 million
compared to $65.7 million in the third quarter of fiscal 1998. Excluding
revenues from divested businesses, net sales from core businesses,
consisting of mass storage, audio and high-precision data conversion,
decreased approximately $43.9 million due primarily to decreased unit
volumes and selling prices from the Company's mass storage products
which were somewhat offset by increased unit volume sales from the
Company's audio products.
Net sales for the first three quarters of fiscal 1999 were $500.7
million, a decrease of 25% from $666.4 million for the first three
quarters of fiscal 1998. Revenues from divested businesses in the
first three quarters of fiscal 1999 were $98.4 million compared to
$177.9 million in the first three quarters of fiscal 1998. Excluding
revenues from divested businesses, net sales from core businesses
decreased by $86.2 million due primarily to decreased unit volumes and
selling prices from the Company's mass storage products which were
somewhat offset by increased unit volume sales from the Company's audio
products.
Export sales (including sales to U.S.-based customers with
manufacturing plants overseas) were 78% and 53% of total sales in the
third quarter of fiscal 1999 and fiscal 1998, respectively, and were 72%
and 54% for the first three quarters of fiscal 1999 and 1998,
respectively. The increases in export sales as a percentage of total
sales were related primarily to a reduction in sales to certain U.S. -
based mass storage customers.
The Company's sales are currently denominated primarily in U.S.
dollars. The Company currently enters into foreign currency forward
exchange and option contracts to hedge certain of its foreign currency
exposures.
Sales to two customers comprised each of approximately 13% of sales in
the first three quarters of fiscal 1999. Sales to two customers were
approximately 21% and 11% of sales in the first three quarters of
fiscal 1998.
Gross Margin
Gross margin was negative 12% in the third quarter of fiscal 1999
compared to 39% for the third quarter of fiscal 1998. Gross margin was
11% in the first three quarters of fiscal 1999 compared to 39% in the
first three quarters of fiscal 1998. Included in the gross margin for
the third quarter of fiscal 1999 was $62.2 million of charges related
to wafer purchase commitments for MiCRUS and Cirent, the Company's
joint ventures, $10.6 million of inventory write-downs associated with
products related to businesses being phased out. Gross margin for the
second quarter of fiscal 1999 included $20.1 million of inventory write
downs associated with products related to businesses in the process of
being phased out and $27.7 million of charges related to wafer purchase
commitments for MiCRUS. Excluding these charges, gross margin would have
been 39% in the third quarter of fiscal 1999 and 36% for the first three
quarters of fiscal 1999. Gross margin for the third quarter of fiscal 1999
compared to the third quarter of fiscal 1998 remained flat primarily due
to increases in unit volumes of the Company's audio products offset by lower
demand in the Company's divested business products. The decrease in gross
margins for the first three quarters of fiscal 1999 compared to the same
period of fiscal 1998 were due to lower demand in the fiscal 1999 divested
businesses.
Research and Development
Research and development expenses for the third quarter of fiscal 1999
were $31.1 million, a decrease of 35% from $47.7 million in the third
quarter of fiscal 1998, and were consistent at 20% of sales in each of
these quarters. Research and development expenses for the first three
quarters of fiscal 1999 were $100.8 million, a decrease of 26% from
$136.6 million in the first three quarters of fiscal 1998 and were also
consistent at 20% of sales. The decreases in research and development
expense for each of the third quarter and first three quarters of fiscal
1999 compared to the same period of fiscal 1998 were due to the Company
restructuring efforts to concentrate research and development efforts
related to its mass storage, audio and high-precision data conversion
markets.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the third quarter of
fiscal 1999 were $22.7 million, a decrease of 22% from $29.2 million in
the third quarter of fiscal 1998 and increased from 12% to 15% of sales.
Selling, general and administrative expenses in the first three quarters
of fiscal 1999 were $76.6 million, a decrease of 12% from $87.1 million
in the first three quarters of fiscal 1998 and increased from 13% to 15%
of sales. Increases in selling, general and administrative expenses as a
percentage of sales is primarily due to sales decreasing at a rate faster
than selling, general and administrative expenses.
Restructuring Costs, Gain on Sale of Assets and Other, Net
During the third quarter of fiscal 1999, restructuring costs, gain on
sale of assets and other, net, of $18.0 million includes $13.0
million related to the Company's continuation of its restructuring
activities previously announced in the second quarter of fiscal 1999 and
$5.0 million for write-downs and write-offs of property and equipment.
The Company's restructuring activities for the third quarter of
fiscal 1999 included the divestiture of non-core businesses
and the outsourcing of the Fremont manufacturing test floor. In
connection with these actions, the Company recorded a net restructuring
charge of $13.0 million consisting of $4.2 million for work force
reductions, $8.3 million for write-downs and write-offs of equipment
and other assets relating to the Fremont manufacturing test floor, and
the remaining amount representing other committed liabilities and
expenses. Approximately $4.7 million of this third quarter accrual is
expected to be discharged through cash payments in fiscal 1999. The
Company anticipates that the implementation of the restructuring plan
will be substantially complete by the end of fiscal 1999 and may
consist of additional charges in subsequent periods related to the
restructuring of the Company's wafer fabrication capacity, sale and
divestiture of certain business segments and other fixed costs.
During the second quarter of fiscal 1999, the Company commenced certain
activities related to its previously announced restructuring and
recorded charges in the second quarter of fiscal 1999 related to those
activities. These actions included an immediate workforce reduction
along with write-downs and write-offs of obsolete inventory, equipment
and facilities. In connection with these actions, the Company recorded
a net restructuring charge of $28.5 million consisting of $4.3 million
for workforce reductions, $8.2 million for write-downs or write-offs of
equipment, intangibles and other assets, $10.0 million for facility
commitments (net of $2.2 million reversal of previously accrued losses
on facilities in connection with the third quarter, fiscal 1998
discontinuation of certain product development efforts in graphics
products), and the remaining amount representing other committed
liabilities and expenses. Approximately $21.0 million of the accrual
is expected to be discharged through cash payments, of which
approximately $10.6 million is expected to be paid in fiscal 1999.
During the first quarter of fiscal 1999, restructuring costs, gain on
sale of assets and other, net, of $3.0 million included $2.2 million
relating to the recovery of a holdback from the fiscal 1997 sale of the
Infrastructure Product Group of the Company's PCSI subsidiary to ADC
Telecommunications, Inc. and $0.8 million that had been previously
accrued for losses on facilities in connection with the third quarter of
fiscal 1998 discontinuation of certain strategies and product development
efforts in the graphics products.
Income Taxes
The provision for income taxes for the third fiscal quarter of 1999 is
zero. Excluding the valuation allowance provided against the net
deferred tax assets in the second quarter, the Company expects no net
income tax provision in the current year. The Company expects foreign
income taxes will be offset by the benefits of U.S. net operating
losses.
FASB Statement 109 provides for the recognition of deferred tax assets
if realization of such assets is more likely than not. In the second
quarter the Company provided a valuation allowance equal to its net
deferred tax assets due to uncertainties regarding their realization.
The realizability of the deferred tax assets will be evaluated on a
quarterly basis.
Liquidity and Capital Resources
The Company used approximately $24.3 million of cash and cash
equivalents in its operating activities during the first three quarters
of fiscal 1999 and generated approximately $107.1 million during the
first three quarters of fiscal 1998. The cash used by operations in
the first three quarters of fiscal 1999 was primarily due to a net loss
of $213.0 million of which $93.7 million was related to non-cash
transactions unique to the first three quarters of fiscal 1999 compared
to net income of $24.3 million in the first three quarters of fiscal
1998.
The Company used $30.0 million in cash in investing activities during
the first three quarters of fiscal 1999 compared to $79.5 million
during the comparable period of fiscal 1998. The primary reason for
the change is that in the first three quarters of fiscal 1999 the
Company had a net positive inflow of cash due to maturities of short-
term investments while in the first three quarters of fiscal 1998 the
Company had a net outflow of cash due to the investment of cash and cash
equivalents in short-term investments.
Financing activities used $103.9 million in cash during the first three
quarters of fiscal 1999 while using $6.2 million during the comparable
period of fiscal 1998. The primary reason for the change is that during
the first three quarters of fiscal 1999,the Company repurchased $93.1
million worth of its common stock.
The semiconductor industry is extremely capital intensive. The Company
has made investments in various external manufacturing arrangements and
in its own facilities. The Company obtained most of the necessary
capital through direct or guaranteed equipment lease financing with the
balance through debt, equity financing, and cash balances. The Company
remains contingently liable as guarantor or co-guarantor for equipment
leases at its semiconductor fabrication joint ventures, MiCRUS and
Cirent, which have remaining payments of approximately $511 million due
through fiscal 2005. As of December 26, 1998, the Company does not
have any other commitments related to its joint venture relationship
with MiCRUS or Cirent. However, as part of the restructuring announced
in September 1998, the Company indicated that it intended to reduce by
up to 70% its fixed wafer manufacturing capacity at its joint venture
facilities. Currently the Company has commenced negotiations related
to both joint ventures in an attempt to restructure, sell or reduce its
current fixed commitments. There can be no assurance that the Company
will be able to successfully negotiate the reduction of fixed
commitments at its joint ventures or that it will be able to do so on
terms favorable to the Company. Should the Company not be able to
restructure or reduce its existing equipment lease commitments with its
joint ventures, the Company will remain obligated under such
commitments.
The Company is highly leveraged. As of December 26, 1998, the
Company's ratio of total debt to equity (expressed as a percentage) was
210%.
Future Operating Results
Quarterly Fluctuations
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from
quarter to quarter in the future. The Company's operating results are
affected by a wide variety of factors, many of which are outside of the
Company's control, including but not limited to, economic conditions
and overall market demand in the United States and worldwide, the
Company's ability to introduce new products and technologies on a
timely basis, changes in product mix, fluctuations in manufacturing
costs which affect the Company's gross margins, declines in market
demand for the Company's and its customers' products, sales timing, the
level of orders which are received and can be shipped in a quarter, the
cyclical nature of both the semiconductor industry and the markets
addressed by the Company's products, product obsolescence, price
erosion, and competitive factors. The Company's operating results in
the rest of fiscal 1999 are likely to be affected by these factors as
well
as others.
The Company must order wafers and build inventory well in advance of
product shipments. Because the Company's markets are volatile and
subject to rapid technology and price changes, there is a risk that the
Company will forecast inaccurately and produce excess or insufficient
inventories of particular products. This inventory risk is heightened
because many of the Company's customers place orders with short lead
times. Such inventory imbalances have occurred in the past and in fact
contributed significantly to the Company's operating losses in fiscal
1997 and 1996. These factors increase not only the inventory risk but
also the difficulty of forecasting quarterly operating results.
Moreover, as is common in the semiconductor industry, the Company
frequently ships more products in the third month of each quarter than
in either of the first two months of the quarter, and shipments in the
third month are higher at the end of that month. The concentration of
sales in the last month of the quarter contributes to difficulty in
predicting the Company's quarterly revenues and results of operations.
The Company's success is highly dependent upon its ability to develop
complex new products, to introduce them to the marketplace ahead of the
competition, and to have them selected for design into products of
leading system manufacturers. Both revenues and margins may be
affected quickly if new product introductions are delayed or if the
Company's products are not designed into successive generations of
products of the Company's customers. These factors have become
increasingly important to the Company's results of operations because
the rate of change in the markets served by the Company continues to
accelerate.
Issues Relating to Manufacturing and Manufacturing Investment
The Company participates in joint ventures with International Business
Machines Corp. ("IBM"), the MiCRUS joint venture, and Lucent
Technologies, the Cirent Semiconductor joint venture, under a series of
agreements intended to secure a committed supply of wafers from
manufacturing facilities operated by the joint ventures. The joint
ventures are controlled by IBM and Lucent Technologies, respectively,
and are dependent on the controlling partners' advanced proprietary
manufacturing process technologies and manufacturing expertise. These
agreements include wafer purchase agreements under which the Company is
committed to purchase a fixed percentage of the output of the joint
venture manufacturing facilities. As a result, the operating results
of the Company may be more sensitive to changing business conditions,
as anticipated decreases in revenues could cause the Company to decide
to not fulfill its wafer purchase obligations. This would result in
charges to the Company from the joint ventures in amounts intended to
cover the joint ventures fixed costs related to the shortfall in wafer
orders from the Company. The Company determines any estimated
shortfalls in such purchase commitments over the short-term (six-
months) and accrues such amounts to the extent they would result in
inventory losses were the Company to fulfill the commitment and take
delivery of the related inventory. The Company's gross margins and
earnings were adversely impacted by such charges in the amounts of
$62.2 million, $27.7 million, $53.0 million, $22.0 million, $12.1
million, $7.8 million and $6.2 million in the third and second quarters
of fiscal 1999, fourth quarter of fiscal 1998, the fourth and second
quarters of fiscal 1997 and the second and first quarters of fiscal
1996, respectively. With its other foundry sources, the Company
becomes committed upon placing orders and is subject to penalties for
cancellations.
During fiscal 1998 and the first three quarters of fiscal 1999, excess
production capacity in the industry led to significant price
competition between merchant semiconductor foundries and the Company
believes that in some cases this resulted in pricing from certain
foundries that was lower than the Company's cost of production from its
manufacturing joint ventures. The Company experienced pressures on its
selling prices during fiscal 1998, which had a negative impact on its
results of operations and it believes that this was partially due to
the fact that certain of its competitors were able to obtain more
favorable pricing from such foundries.
Certain provisions of the MiCRUS and Cirent Semiconductor agreements
may cause the termination of the joint venture in the event of a change
in control of the Company. Such provisions could have the effect of
delaying, deferring or preventing a change of control of the Company.
In connection with the financing of its operations, the Company has
borrowed money and entered into substantial equipment lease
obligations. The Company's ability to meet its debt service and other
obligations will be dependent upon the Company's future performance,
which will be subject to financial, business, and other factors
affecting the operations of the Company, many of which are beyond its
control.
As part of the restructuring announced in September 1998, the Company
announced its goal to reduce by up to 70% its fixed wafer manufacturing
capacity at its joint venture facilities. Currently, the Company has
commenced negotiations related to both joint ventures in an attempt to
restructure, sell or reduce its current fixed commitments. It might be
necessary for the Company to take further material restructuring
charges as the result of these negotiations once they are concluded.
The timing and size of any such charges, however, is uncertain at this
time. There can be no assurance that the Company will be able to
successfully negotiate the reduction of fixed commitments at its joint
ventures or that it will be able to do so on terms favorable to the
Company. Until the Company is able to restructure or reduce its
existing fixed wafer commitments at its joint venture facilities, the
Company's future results of operations will be adversely impacted.
The Company's current strategy is to fulfill its wafer requirements
using a balance of secured wafer supply from its joint ventures and
from outside merchant wafer suppliers. The Company also uses other
outside vendors to package the wafer die into integrated circuits and
to perform the majority of the Company's product testing.
The Company's results of operations could be adversely affected in the
future, as they have been so affected in the past, if particular
suppliers are unable to provide a sufficient and timely supply of
product, whether because of raw material shortages, capacity
constraints, unexpected disruptions at the plants, delays in qualifying
new suppliers or other reasons, or if the Company is forced to purchase
wafers or packaging from higher cost suppliers or to pay expediting
charges to obtain additional supply, or if the Company's test
facilities are disrupted for an extended period of time. Because of
the concentration of sales at the end of each quarter, a disruption in
the Company's production or shipping near the end of a quarter could
materially reduce the Company's revenues for that quarter. Production
may be constrained even though capacity is available at one or more
wafer manufacturing facilities because of the difficulty of moving
production from one facility to another. Any supply shortage could
adversely affect sales and operating profits. The Company's reliance
upon outside vendors for assembly and test could also adversely impact
sales and operating profits if the Company was unable to secure
sufficient access to the services of these outside vendors.
Product development in the Company's markets is becoming more focused
on the integration of functionality on individual devices and there is
a general trend towards increasingly complex products. The greater
integration of functions and complexity of operations of the Company's
products increase the risk that latent defects or subtle faults could
be discovered by customers or end users after volumes of product have
been shipped. If such defects were significant, the Company could
incur material recall and replacement costs for product warranty. The
Company's relationship with customers could also be adversely impacted
by the recurrence of significant defects.
Dependence on PC Market
Although the Company's future direction is to emphasize market
opportunities in mass storage, consumer electronics and industrial
automation, sales of many of the Company's products will continue to
depend largely on sales of personal computers (PCs). Reduced growth in
the PC market could affect the financial health of the Company as well
as its customers. Moreover, as a component supplier to PC OEMs and to
peripheral device manufacturers, the Company is likely to experience a
greater magnitude of fluctuations in demand than the Company's
customers themselves experience. In addition, many of the Company's
products are used in PCs for the consumer market, and the consumer PC
market is more volatile than other segments of the PC market.
Issues Relating to Mass Storage Market
The disk drive market has historically been characterized by a
relatively small number of disk drive manufacturers and by periods of
rapid growth followed by periods of oversupply and contraction. Growth
in the mass storage market is directly affected by growth in the PC
market. Furthermore, the price competitive nature of the disk drive
industry continues to put pressure on the price of all disk drive
components. Recent market demands for sub-$1,000 PCs puts further
pressure on the price of disk drives and disk drive components. In
addition, consolidation in the disk drive industry has reduced the
number of customers for the Company's mass storage products and
increased the risk of large fluctuations in demand.
The Company believes that constraints in supply of certain read-head
components to the disk drive industry limited sales of its mass storage
products in the fourth quarter of fiscal 1997. In addition, the
Company believes that excess inventories held by its customers limited
sales of the Company's mass storage products in the second quarter of
fiscal 1997 and limited sales of the Company's optical disk drive
products in the third quarter of fiscal 1997. Revenues from mass
storage products for the remainder of fiscal 1999 are likely to depend
heavily on the success of certain 3.5 inch disk drive products selected
for use by various customers, which in turn depends upon obtaining
timely customer qualification of the new products and bringing the
products into volume production timely and cost effectively.
The Company's revenues from mass storage products are dependent on the
successful introduction by its customers of new disk drive products and
can be impacted by the timing of customers' transition to new disk
drive products. Recent efforts by certain of the Company's customers
to develop their own ICs for mass storage products could in the future
reduce demand for the Company's mass storage products, which could have
an adverse effect on the Company's revenues and gross margins from such
products. In addition, in response to the current market trend towards
integrating hard disk controllers with microcontrollers, the Company's
revenues and gross margins from its mass storage products will be
dependent on the Company's ability to introduce such integrated
products in a commercially competitive manner.
During the last half of fiscal 1998, major companies in the disk drive
industry, including certain of the Company's customers, reported
declines in business. In addition, the Company's mass storage products
were not designed into a major customer's next generation product which
is expected to run in fiscal 1999. Consequently, these factors have
had an adverse impact on the mass storage division's revenue for the
first nine months of fiscal 1999 and are expected to continue
throughout at least the rest of fiscal 1999.
Issues Relating to Consumer Electronics Products
Most of the Company's revenues in the consumer electronics arena are in
the multimedia audio market and are derived from the sales of audio
codecs and integrated 16-bit codec-plus-controller solutions for the PC
market and consumer electronics equipment. In the PC market, pricing
pressures have forced a transition from multi-chip solutions to
products that integrate the codec, controller and synthesis functions
into a single IC. The Company's revenues from the sale of PC audio
products in fiscal 1999 are likely to be significantly affected by the
introduction of cost reduced, fully-integrated, single-chip audio ICs.
Moreover, aggressive competitive pricing pressures have adversely
affected and may continue to adversely affect the Company's revenues
and gross margins from the sale of audio ICs. In addition, the
introduction of new audio products from the Company's competitors, the
introduction of media processors and the introduction of MMX processors
with multimedia features by Intel Corporation could adversely affect
revenues and gross margins from the sale of the Company's audio
products.
Three-dimensional, spatial-effects audio became an important feature in
fiscal 1998, primarily in products for the consumer electronics
marketplace. If the Company's spatial-effects audio products do not
meet the cost or performance requirements of the market, revenues from
the sale of audio products could be adversely affected.
Issues Relating to Industrial Products
Industrial Products is a very broad market with many well established
competitors. The Company's ability to compete in this market will be
adversely affected if it cannot establish broad sales channels or if it
does not develop and maintain a broad enough product line to compete
effectively. In addition, the customer product design-in time is long.
Customer delays in product development and introductions create risk
relative to the Company's revenue plans. Further, the Company's
products in this market are technically very complex. The complexity
of the products contributes to risks in getting products to market on a
timely basis, which could impact the Company's revenue plans. The
scarcity of analog engineering talent also contributes to risks related
to product development and introduction timing in this market.
During the last half of fiscal 1999, there has been a significant
change in the Company's data converter business related to the seismic
industry. As oil reserves are at a record high and oil prices have
fallen to historical lows, capital investment in oil field exploration
and monitoring has been dramatically curtailed. Consequently, these
factors are expected to have an adverse impact on the Industrial
Products revenues through at least the first half of fiscal year 2000.
Intellectual Property Matters
The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights. The Company
and certain of its customers from time to time have been notified that
they may be infringing certain patents and other intellectual property
rights of others. In addition, customers have been named in suits
alleging infringement of patents or other intellectual property rights
by customer products. Certain components of these products have been
purchased from the Company and may be subject to indemnification
provisions made by the Company to its customers. Although licenses
are generally offered in situations where the Company or its customers
are named in suits alleging infringement of patents or other
intellectual property rights, there can be no assurance that any
licenses or other rights can be obtained on acceptable terms. An
unfavorable outcome occurring in any such suit could have an adverse
effect on the Company's future operations and/or liquidity.
Foreign Operations and Markets
Because many of the Company's subcontractors and several of the
Company's key customers, such customers collectively accounting for a
significant percentage of the Company's revenues, are located in Japan
and other Asian countries, the Company's business is subject to risks
associated with many factors beyond its control. International
operations and sales may be subject to political and economic risks,
including political instability, currency controls, exchange rate
fluctuations, and changes in import/export regulations, tariff and
freight rates. Although the Company buys hedging instruments to reduce
its exposure to currency exchange rate fluctuations, the Company's
competitive position can be affected by the exchange rate of the U.S.
dollar against other currencies, particularly the Japanese yen.
Further, to the extent that volatility in foreign financial markets was
to have an adverse impact on economic conditions in a country or
geographic region in which the Company does business, demand for and
supply of the Company's products could be adversely impacted, which
would have a negative impact on the Company's revenues and earnings.
A significant number of the Company's customers and suppliers are in
Asia. The Company believes that the recent turmoil in the Asian
financial markets has not had a direct material adverse effect on its
financial condition or results of operations to date. However, the
financial instability in these regions may have an adverse impact on
the financial position of end users in the region which could impact
future orders and/or the ability of such users to pay the Company or
the Company's customers, which could also impact the ability of such
customers to pay the Company. The Company performs financial due
diligence on customers and potential customers and generally requires
material sales to Asia to either be secured by letters of credit or
transacted on a cash on demand basis. Given the current situation in
Asia, the Company has begun to require that letters of credit to be
established through American banking institutions. During this
volatile period, the Company expects to carefully evaluate the
collection risk related to the financial position of customers and
potential customers. The results of such evaluations will be
considered in structuring the terms of sale, in determining whether to
accept sales orders, in evaluating the recognition of revenue on sales
in the area and in evaluating the collectability of outstanding
accounts receivable from the region. In situations where significant
collection risk exists, the Company will either not accept the sales
order, defer the recognition of related revenues, or, in the case of
previously transacted sales, establish appropriate bad debt reserves.
Despite these precautions, should the current volatility in Asia have a
material adverse impact on the financial position on end users of the
customers products in Asia, the Company could experience a material
adverse impact on its results of operations.
Competition
The Company's business is intensely competitive and is characterized by
new product cycles, price erosion, and rapid technological change.
Competition typically occurs at the design stage, where the customer
evaluates alternative design approaches that require integrated
circuits. Because of shortened product life cycles and even shorter
design-in cycles, the Company's competitors have increasingly frequent
opportunities to achieve design wins in next generation systems. In
the event that competitors succeed in supplanting the Company's
products, the Company's market share may not be sustainable and net
sales, gross margin, and results of operations would be adversely
affected. Competitors include major domestic and international
companies, many of which have substantially greater financial and other
resources than the Company with which to pursue engineering,
manufacturing, marketing and distribution of their products. Emerging
companies are also increasing their participation in the market, as
well as customers who develop their own integrated circuit products.
Competitors include manufacturers of standard semiconductors,
application-specific integrated circuits and fully customized
integrated circuits, including both chip and board-level products. The
ability of the Company to compete successfully in the rapidly evolving
area of high-performance integrated circuit technology depends
significantly on factors both within and outside of its control,
including, but not limited to, success in designing, manufacturing and
marketing new products, wafer supply, protection of Company products by
effective utilization of intellectual property laws, product quality,
reliability, ease of use, price, diversity of product line, efficiency
of production, the pace at which customers incorporate the Company's
integrated circuits into their products, success of the customers'
products, and general economic conditions. Also the Company's future
success depends, in part, upon the continued service of its key
engineering, marketing, sales, manufacturing, support, and executive
personnel, and on its ability to continue to attract, retain, and
motivate qualified personnel. The competition for such employees is
intense, and the loss of the services of one or more of these key
personnel could adversely affect the Company. Because of these and
other factors, past results may not be a useful predictor of future
results.
Impact of Year 2000
The "Year 2000 Issue" is the result of computer programs being
written using two digits rather than four to define the applicable
year. If the Company's computer programs with date-sensitive functions
are not Year 2000 compliant, they may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing incorrect reporting and disruptions
of operations, including, among other things, a temporary inability to
process transactions, send invoices, or engage in similar normal
business activities. The issue spans both information technology and
non-information technology systems that use date data. In addition to
the Company's own systems, the Company relies, directly and indirectly,
on external systems of its customers, suppliers, creditors, financial
organizations, utilities providers and government entities, both
domestic and international ("Third Parties").
The Company currently has a project plan in place to address the Year
2000 Issue with its internal systems and Third Parties which is
designed to deal with its most critical systems and processes first.
Those identified as "mission critical" are systems and/or processes
whose failure would cause a material impact on the Company's operations
and financial statements. The project plan includes the
identification, assessment, testing, remediation/validation and the
development of contingency plans of the Company's Year 2000 issues
primarily through the use of internal personnel. In addition, the
Company has engaged the services of external consultants to provide
Year 2000 progress assessment of the Company's efforts. The external
consultants reviews the Company's activities regarding Year 2000
readiness and will provide recommendations designed to improve the
Company's Year 2000 readiness.
In the third quarter of calendar year 1996, the Company began a program
to replace mission-critical internal business systems. The decision to
purchase software to replace these systems was made primarily in order
to meet the Company's future business requirements, which included
consideration of Year 2000 Issues. The Company is currently in the
process of installing software licensed from SAP America, Inc. The
first phase of this project was completed in June of 1998 and included
finance, sales and logistics. The second phase of the project will
include manufacturing and human resource systems is estimated to be
completed by July of 1999. This multi-phased implementation is
expected to cover all major internal business systems used by the
Company. While the Year 2000 compliance is an important software
feature the Company considered when purchasing the software
replacement, the Company's decision to replace mission critical
business systems was primarily to make important functional
improvements necessary to remain competitive in the current business
environment. Therefore, the Company has not allocated a portion of the
total project cost as a Year 2000 Issue. The Company does not believe
that any incremental project costs associated with Year 2000 compliance
to be material, as this feature was included with the software
purchased by the Company to satisfy its business needs. The Company
presently believes that with the installation of this software into its
internal business systems, the Year 2000 Issue will not pose
significant operational problems for its computer systems. However, if
such modifications and conversions are not made, or are not completed
timely, the Year 2000 Issue could have a material impact on the
operations of the Company. Therefore, the Company is currently
developing contingency plans in the event mission critical systems are
not Year 2000 compliant.
All product related assessments and testing are expected to be
completed by April, 1999. To date, 70% of products have been tested
and found to be Year 2000 compliant. A list of compliant products is
available on the Company's web site (www.cirrus.com). The Company
considers a product or system to be Year 2000 compliant if the
date/time data is accurately processed (included, but not limited to,
calculating, comparing, and sequencing) from, into and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 along
with leap year calculations. To date, the Company has not identified
any non-compliant products and therefore, no material cost have been
incurred with respect to remediation. The Company expects to complete
a preliminary estimate of Year 2000 costs related to product compliance
during the first quarter of calendar 1999. The Company believes that
it is unlikely to experience a material adverse impact on its financial
condition or results of operations due to product related Year 2000
compliance issues. However, since the assessment process is ongoing,
Year 2000 implications are not fully known, and potential liability
issues are not clear. Therefore, the full potential impact of the Year
2000 on the Company is not known at this time.
Another consequence related to the Company's products is the impact
upon the Company's ability to ship to or collect payment from customers
who themselves have business operational problems as a result of the
Year 2000 Issue. Although the Company believes that it is unlikely to
experience a material adverse impact on its financial conditions or
results of operations due to customer-related problems, the Company
could experience such an impact if any of its major customers or a
large number of its other customers suffer a material disruption in
their ability to accept or pay for the Company's product shipments.
The Company's project plan also includes a comprehensive program to
assess the Year 2000 compliance of its key suppliers. The Company has
initiated formal communications with its significant suppliers and
financial institutions to determine the extent to which the Company is
vulnerable to those Third Parties who fail to remedy their own Year
2000 Issues. As of January 1999, the Company has contacted its
significant suppliers and financial institutions and has received
assurances of Year 2000 compliance from a number of those contacted.
To date Company has received responses to its initial inquiries from
100% of its mission critical suppliers. However, failure of these
mission critical suppliers to be compliant would result in
manufacturing shut-downs for a certain period of time. The Company is
currently taking steps to assess whether these suppliers are taking all
the appropriate actions to fix any year 2000 issues they might have and
to be prepared to continue functioning effectively as a supplier to the
Company. However, as there can be no guarantee that the Company's
suppliers will be Year 2000 compliant prior to the millennium, many
significant suppliers have been second sourced and contingency plans
are being during the first calendar quarter of 1999. Contingency plans
related to mission critical suppliers that are not considered to be
making adequate steps to ensure Year 2000 compliance consist of the
identification of substitutes and second-source suppliers, and in
certain situations includes a planned increase in the level of
inventory carried. No material cost related to Year 2000 compliance of
Third Parties have been incurred to date. The Company believes that its
reasonably most likely worst case Year 2000 scenario would involve
problems with the systems of its Third Parties rather than with the
Company's internal systems or its products. However, based upon
information communicated to the Company from Third Parties, management
believes that it is unlikely to experience a material adverse impact
due to problems related to Third Parties and expects that the cost of
these projects over the next two years will not have a material effect
on the Company's financial position or overall trends in results of
operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 5. Other Information
On February 8, 1999, the Company announced that David D. French, president
and chief operating officer, was added to the board of directors of the
Company and named president and chief executive officer. Michael L.
Hackworth, former chief executive officer, remains chairman of the board.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 12.1 Statement Regarding Computation of Ratios of
Earnings to Fixed Charges
b. Reports on Form 8-K
None.
CIRRUS LOGIC, INC.
(Registrant)
February 9, 1999 /s/ Ronald K. Shelton
Date Ronald K. Shelton
Vice President, Finance, Chief Financial Officer,
Principal Accounting Officer, and Treasurer