Exhibit 99.1
Cirrus Logic Announces Results of Special
Committee's Stock Option Grant Investigation
Michael L. Hackworth, Co-founder and Former President and CEO,
Named Acting President and CEO
AUSTIN, Texas--(BUSINESS WIRE)--March 7, 2007--Cirrus Logic Inc.
(Nasdaq:CRUS) today announced the principal findings of a Special
Committee of the Company's Board of Directors relating to its
investigation into the Company's historical stock option granting
practices and related accounting. The Company further announced
certain actions it is taking in response to the principal findings of
the Special Committee, including changes to its executive management.
As previously announced on March 2, 2007, the Board of Directors
concluded that the accounting measurement dates for certain stock
options granted between January 1, 1997, and December 31, 2005 differ
from the recorded measurement dates previously used for such awards.
The Company expects to record material non-cash charges for
stock-based compensation expenses in certain reporting periods and
expects to restate its financial statements for fiscal years 2001
through 2006 and for the first quarter of fiscal year 2007. The
Company currently estimates that the cumulative additional non-cash
stock-based compensation expense to be recorded is likely to be in the
range of $22 to $24 million.
Background of the Review
In September 2006, the Company, at the direction of its Audit
Committee, performed an internal review of selected stock option
grants. In the course of that review, the Company discovered
information that raised potential questions about the measurement
dates used to account for certain stock option grants. In October
2006, at the recommendation of the Audit Committee, a Special
Committee of the Board of Directors was formed to investigate the
historical stock option grants, the timing of those grants and related
accounting matters. During the five month investigation, the Special
Committee reviewed all stock option grants from 1997 through 2006,
encompassing approximately 42.3 million stock options granted to
employees and non-employee directors on 148 different grant dates. The
Special Committee's legal and accounting advisors identified,
preserved, collected and reviewed over 104 gigabytes of electronic
information, including approximately 1.6 million pages of electronic
and hard copy files, and conducted 25 interviews of current and former
employees and members of the Board of Directors.
Summary of Findings
The Special Committee has arrived at the following principal
findings with respect to the stock option grant practices of the
Company:
-- The Company's stock plan administrative deficiencies between
1997 and 2006 led to a number of misdated option grants.
-- New hire and other promotion and retention option grants
were generally made the first Wednesday of each month
through the use of unanimous written consents ("UWCs") of
the Company's Compensation Committee. However, prior to
2006, many of these monthly grants were misdated, as grant
dates were routinely established before the receipt of all
the signed UWCs authorizing those grants.
-- Many other off-cycle and broad-based annual option grants
that were granted through Board or Compensation Committee
resolutions were also misdated due to administrative
issues in that grant dates were sometimes established
before the list of option award recipients had been
finalized.
-- Beginning in late 2002, the Company formally documented
and updated its existing processes and procedures with
respect to the granting of options. In 2005, the Company
further refined the process and, in 2006, a formal written
policy was approved by the Compensation Committee.
-- Approximately 97% of the potential stock-based
compensation charges identified as a result of the Special
Committee investigation resulted from grants that were
made prior to December 31, 2002.
-- Prior to 2003, the limited controls and the lack of definitive
processes for stock option granting and approval allowed for
potential abuse, including the use of hindsight, in the
establishment of more favorable grant dates for certain
options.
-- The Special Committee identified three grant dates prior
to 2003 on which three management-level employees received
new-hire option grants on dates other than when they began
rendering services to the Company.
-- The grant date for one grant in 2000 is different from the
date the grant appears to have been approved by the Board.
While no definitive evidence has been identified to
clarify this inconsistency, the selected grant date was at
a lower closing stock price than the price on the date of
apparent board approval.
-- The Special Committee believes based on the evidence
developed in the investigation that certain executive
officers had knowledge of and participated in the
selection of three grant dates for broad-based employee
option grants in the 2000 through 2002 timeframe, either
with hindsight or prior to completing the formal approval
process.
-- The executive officers involved in the option grant
process prior to 2003, and in particular the grants
described above in the 2000 through 2002 timeframe, are no
longer with the Company with the exception of David D.
French, the Company's President and Chief Executive
Officer.
-- The Special Committee believes that Mr. French was
significantly involved in the grant approval process for
certain grants and that he influenced the grant process
with a view toward the stock price, and therefore the
selection of grant dates, through his control over how
quickly or slowly the process was completed. However, the
Special Committee does not believe that Mr. French
appreciated the significance of the procedural
inadequacies or the accounting implications of the grant
approval process or grant date selections, or that he was
advised by his executive staff of any such inadequacies or
implications.
-- The Special Committee did not find any irregularities
associated with any grants to independent directors or the
Company's two broad-based options exchanges during the
relevant period.
-- The Special Committee found no documentary or testimonial
evidence that the Company's independent directors were aware
of any attempts by the Company's executive officers to
backdate or to otherwise select a favorable grant date, and
consequently, had no reason to and did not believe that the
accounting or other disclosures were inaccurate.
Resignation of President and Chief Executive Officer
In light of the findings of the Special Committee, Mr. David D.
French has resigned as President and Chief Executive Officer and as a
director of the Company. The Company has entered into a resignation
agreement with Mr. French, which is included as an exhibit to the
Company's Form 8-K filed today with the Securities and Exchange
Commission.
Appointment of Acting President and Chief Executive Officer
The Board of Directors has appointed Michael L. Hackworth as the
Company's Acting President and CEO. He will continue to serve as
Chairman of the Board - a position he has held since 1997
Mr. Hackworth, age 66, who co-founded the Company, previously served
as President and Chief Executive Officer of Cirrus Logic from
January 1985 to June 1998, and continued to serve as Chief Executive
Officer until February 1999. Under his leadership, Cirrus Logic grew
from a start-up venture to become a major fabless semiconductor
supplier. Mr. Hackworth is also the Chief Executive Officer of
Tymphany Corporation, as well as a director of Virage Logic
Corporation, a provider of semiconductor intellectual property
platforms and development tools.
Other Remedial Actions and Recommendations
Based on the results of its investigation, the Special Committee
has recommended a number of remedial actions. The Company is currently
reviewing these recommendations and developing and implementing a
remediation plan associated with historical option grants and the
grant of future equity awards. Based on its initial review of the
Special Committee's findings, the Company does not believe that in the
few instances when stock option grant dates were selected by
management either with hindsight or prior to receiving all required
approvals, that any employee, who at the time of the grant was an
executive officer, has exercised or made any profit from those grants.
The Company is committed to remedying any internal control or
reporting deficiencies or weaknesses that may exist. In addition, the
Company has informed the staff of the Division of Enforcement of the
Securities and Exchange Commission of the Special Committee's
investigation and will continue to cooperate fully in the event of any
further inquiry.
Safe Harbor Statement:
Except for historical information contained herein, the matters
set forth in this news release contain forward-looking statements. In
some cases, forward-looking statements are identified by words such as
we "expect," "anticipate," "target," "project," "believe," "goals,"
"estimates," and "intend," variations of these types of words and
similar expressions are intended to identify these forward-looking
statements. In particular ,statements regarding the status of the
Special Committee's investigation, the timing of the filing of any
required restated financial statements or whether the Company will be
able to file all delinquent reports and restatements by the deadlines
prescribed by Nasdaq, our estimates for the non-cash stock-based
compensation expense associated with the results of the Special
Committee's review, and the timing and effect of remedial actions or
any remediation plan associated with the grant of future equity awards
are forward-looking statements. These forward-looking statements are
based on our current expectations, estimates and assumptions and are
subject to certain risks and uncertainties that could cause actual
results to differ materially. These risks and uncertainties include,
but are not limited to, the final timing and outcome Ernst & Young's
audit or review of the Special Committee's findings, any additional
findings by the Special Committee, the impact of any adverse tax or
accounting adjustments resulting from the review, our ability to file
required reports with the SEC on a timely basis, our ability to meet
the requirements of Nasdaq for continued listing of our stock, future
rule-making, pronouncements, decisions, interpretations or guidance by
the SEC, the PCAOB, Nasdaq or other regulatory agencies, the on-going
SEC inquiry relating to the Company's historical stock option grants
and practices, and the risk factors listed in our Form 10-K for the
year ended March 25, 2006, and in our other filings with the SEC,
which are available at www.sec.gov
Cirrus Logic, Inc.
Cirrus Logic develops high-precision, analog and mixed-signal
integrated circuits for a broad range of consumer and industrial
markets. Building on its diverse analog mixed-signal patent portfolio,
Cirrus Logic delivers highly optimized products for consumer and
commercial audio, automotive entertainment and industrial
applications. The company operates from headquarters in Austin, Texas,
with offices in Europe, Japan and Asia. More information about Cirrus
Logic is available at www.cirrus.com.
Cirrus Logic and Cirrus are trademarks of Cirrus Logic Inc.
CONTACT: Cirrus Logic Inc., Austin
Investor Contact:
Thurman K. Case, 512-851-4000
Chief Financial Officer
InvestorRelations@cirrus.com