CIRRUS LOGIC, INC. Please read the following discussion in conjunction with our audited historical
consolidated financial statements and notes thereto, which are included
elsewhere in this Form 10-K. Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that are
forward-looking. These statements are based on current expectations and
assumptions that are subject to risk, uncertainties and other factors. Actual
results could differ materially because of the factors discussed in Part I,
Item 1A. "Risk Factors" of this Form 10-K and elsewhere in this report, as well
as in the documents we file with the
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Our discussion and analysis of the Company's financial condition and results of
operations are based upon the consolidated financial statements included in this
report, which have been prepared in accordance with
The Company considers the following accounting policies to involve the highest degree of judgment in the preparation of the consolidated financial statements:
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. The Company writes down inventories to net realizable value based on forecasted customer unit demand while taking into account product release schedules and product life cycles. The Company also reviews and writes down inventory, as appropriate, based on the age and condition of the inventory. Actual demand and market conditions may be different from those projected by management, which could have a material effect on our operating results and financial position.
Uncertain Tax Positions
The calculation of our tax liabilities involves assessing uncertainties with respect to the application of complex tax rules. Uncertain tax positions must meet a more likely than not threshold to be recognized in the financial statements and the tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon final settlement. The ultimate settlement of uncertain tax positions may differ from our estimates, which could result in the recognition of a tax benefit or an additional charge to the income tax provision in the relevant period. See Note 19 - Income Taxes of the Notes to Consolidated Financial Statements contained in Item 8 for additional details.
Accounting for Acquisitions
The Company accounts for business combinations using the acquisition method of accounting and allocates the fair value of acquisition consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The fair value of identifiable intangible assets was determined primarily using the income approach, which required the Company to project discounted future cash flows. The significant estimation uncertainty is primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business and the limited historical data and market data on which those assumptions are based. The Company's estimates are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable. Incorrect estimates could result in future impairment charges, and those charges could be material to the results of operations. See Note 8 - Acquisition of the Notes to Consolidated Financial Statements contained in Item 8 for additional details.
Recently Adopted and Issued Accounting Pronouncements
For a discussion of recently adopted and issued accounting pronouncements, refer to Note 2 of the Notes to the Consolidated Financial Statements.
Overview
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existing and incremental demand and provides customers with much-needed supply assurance, while also providing the company with the flexibility to pursue additional capacity.
Additionally, the Company has observed increased competition in hiring and retaining qualified executives and employees, which is expected to result in increased research and development costs in future periods. For more information, please see Item 1A. "Risk Factors".
Fiscal Year 2022
Fiscal year 2022 net sales of
Overall, gross margin for fiscal year 2022 was 51.8 percent. The increase in
gross margin for fiscal year 2022 was primarily attributable to the impact of
higher ASPs, which were mostly offset by increased supply chain costs. The
Company's number of employees increased to 1,591 as of
Fiscal Year 2021
Fiscal year 2021 net sales of
Overall, gross margin for fiscal year 2021 was 51.7 percent. The decrease in
gross margin for fiscal year 2021 was primarily due to a shift in product mix
and pricing reductions on certain products, partially offset by cost reductions
associated with exiting the MEMS product line. The Company's number of employees
increased to 1,481 as of
Results of Operations
The following table summarizes the results of our operations for each of the past three fiscal years as a percentage of net sales. All percentage amounts were calculated using the underlying data, in thousands:
Fiscal Years Ended
March 26, 2022 March 27, 2021 March 28, 2020
Net sales 100 % 100 % 100 %
Gross margin 52 % 52 % 53 %
Research and development 23 % 25 % 27 %
Selling, general and administrative 8 % 10 % 10 %
Restructuring - % - % 2 %
Income from operations 21 % 17 % 14 %
Interest income - % 1 % - %
Interest expense - % - % - %
Other expense - % - % - %
Income before income taxes 21 % 18 % 14 %
Provision for income taxes 3 % 2 % 2 %
Net income 18 % 16 % 12 %
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Table of ContentsNet Sales We report sales in two product categories: audio products and high-performance mixed-signal products. Our sales by product line are shown in the table below (in thousands). Fiscal Years Ended March 26, March 27, March 28, 2022 2021 2020 Audio Products$ 1,187,126 $ 1,104,060 $ 1,109,958
High-Performance Mixed-Signal Products 594,334 265,170 171,166
$ 1,781,460 $ 1,369,230 $ 1,281,124
Net sales for fiscal year 2022 increased by 30.1 percent, to
Net sales for fiscal year 2021 increased by 6.9 percent, to
International sales, including sales to
Gross Margin
Overall gross margin of 51.8 percent for fiscal year 2022 reflects a slight increase from fiscal year 2021 gross margin of 51.7 percent. The increase was primarily attributable to the impact of higher ASPs, which were mostly offset by increased supply chain costs. Changes in excess and obsolete inventory charges, including scrapped inventory, and sales of product written down in prior periods did not have a material impact on margin in fiscal year 2022.
Overall gross margin of 51.7 percent for fiscal year 2021 reflects a decrease from fiscal year 2020 gross margin of 52.6 percent. The decrease was primarily attributable to a shift in product mix and pricing reductions on certain products. This was partially offset by cost reductions associated with exiting the MEMS product line. Changes in excess and obsolete inventory charges, including scrapped inventory, and sales of product written down in prior periods did not have a material impact on margin in fiscal year 2021.
Research and Development Expenses
Fiscal year 2022 research and development expenses of
Fiscal year 2021 research and development expenses of
Selling, General and Administrative Expenses
Fiscal year 2022 selling, general and administrative expenses of
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Fiscal year 2021 selling, general and administrative expenses of
Restructuring Costs
During the fourth quarter of fiscal year 2020, the Company approved a
restructuring plan (the "MEMS Restructuring"), including discontinuing efforts
relating to the MEMS microphone product line. The Company recorded charges of
approximately
Interest Income
Interest income in fiscal years 2022, 2021, and 2020, was
Interest Expense
The Company reported interest expense of
Other Income (Expense)
In fiscal years 2022, 2021, and 2020 the Company reported
Provision for Income Taxes
We recorded income tax expense of
We recorded income tax expense of
We recorded income tax expense of
For additional discussion about our income taxes, see Note 19 - Income Taxes.
Outlook
Given the wide array of uncertainties surrounding the implications of the
COVID-19 pandemic, industry-wide supply constraints and the timing of when these
challenges will be alleviated, it is difficult to predict our revenue, gross
margin and operating expense outlook for fiscal year 2023. However,
Liquidity and Capital Resources
Operating Activities
In fiscal year 2022, cash flow from operations was
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Statements), accounts receivables and other assets (a portion of which resulted
from terms of the Capacity Reservation Agreement with GlobalFoundries),
partially offset by increases in acquisition-related liabilities and decreases
in inventory for the period. In fiscal year 2021, cash flow from operations was
Investing Activities
In fiscal year 2022, the Company used
Financing Activities
In fiscal year 2022, the Company used
Revolving Credit Facility
On
As of
See Note 9 - Revolving Credit Facility for additional information including material terms and related covenants.
Capital Requirements
Our future capital requirements will depend on many factors, including the rate
of sales growth, market acceptance of our products, the timing and extent of
research and development projects, the Acquisition (discussed further in Note 8
- Acquisition of the Notes to the Consolidated Financial Statements and Item 1A.
Risk Factors) and potential future acquisitions of companies or technologies,
commitments under the Capacity Reservation Agreement with GlobalFoundries
(discussed further in Note 15 - Commitments and Contingencies of the Notes to
the Consolidated Financial Statements and Item 1A. Risk Factors) and the
expansion of our sales and marketing activities. We believe our expected future
cash earnings, existing cash, cash equivalents, investment balances, and
available borrowings under our Revolving Credit Facility will be sufficient to
meet our capital requirements both domestically and internationally, through at
least the next 12 months, although we could be required, or could elect, to seek
additional funding prior to that time. As of
Contractual Cash Obligations
In our business activities, we incur certain commitments to make future payments under contracts such as debt agreements, purchase orders, operating leases and other long-term contracts. See Part II, Item 8 Notes to Consolidated Financial Statements Note 9 - Revolving Credit Facility, Note 11 - Leases and Note 15 - Commitments and Contingencies for additional information related to these contractual obligations.
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