UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~28, 2019~~26, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ____ to ____

Commission File Number 0-17795

CIRRUS LOGIC, INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0024818

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

800 W. 6th Street

Austin,

Texas

78701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(512)

851-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, $0.001 par value

CRUS

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares of the registrant's common stock, $0.001 par value, outstanding as of October ~~28, 2019~~29, 2020 was ~~57,799,337.~~57,964,907.

CIRRUS LOGIC, INC.

FORM 10-Q QUARTERLY REPORT

QUARTERLY PERIOD ENDED SEPTEMBER ~~28, 2019~~26, 2020

TABLE OF CONTENTS

໿


PART I - FINANCIAL INFORMATION








Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets - September ~~28, 2019~~26, 2020 (unaudited) and March ~~30, 2019~~	28, 2020	3

	Consolidated Condensed Statements of Income (unaudited) - Three and Six Months Ended September ~~28, 2019~~26, 2020 and September ~~29, 2018~~	28, 2019	4

	Consolidated Condensed Statements of Comprehensive Income (unaudited) - Three and Six Months Ended September ~~28, 2019~~26, 2020 and September ~~29, 2018~~	28, 2019	5

	Consolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended September ~~28, 2019~~26, 2020 and September ~~29, 2018~~	28, 2019	6

	Consolidated Condensed Statements of Stockholders' Equity (unaudited) - Three and Six Months Ended September ~~28, 2019~~26, 2020 and September ~~29, 2018~~	28, 2019	7

	Notes to Consolidated Condensed Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1816

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2422

Item 4.	Controls and Procedures	2422

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2523

Item 1A.	Risk Factors	2523

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	2726

Item 4.	Mine Safety Disclosures	2726

Item 5.	Other Information	2726

Item 6.	Exhibits	27

	Signatures	27

໿

Part I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIRRUS LOGIC, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)


		September 28,		March 30,			September 26,		March 28,
		2019		2019			2020		2020
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	221,937	$	216,172	Cash and cash equivalents	$	247,536	$	292,119
Marketable securities	Marketable securities	22,563		70,183		Marketable securities	36,641		22,008
Accounts receivable, net	Accounts receivable, net	217,962		120,656		Accounts receivable, net	181,496		153,998
Inventories	Inventories	144,829		164,733		Inventories	209,050		146,725
Prepaid assets	Prepaid assets	28,454		30,794		Prepaid assets	20,853		23,594
Other current assets	Other current assets	16,275		22,445		Other current assets	13,655		11,752
Total current assets	Total current assets	652,020		624,983		Total current assets	709,231		650,196

Long-term marketable securities	Long-term marketable securities	238,741		158,968		Long-term marketable securities	328,255		283,573
Right-of-use lease assets	Right-of-use lease assets	142,834		—		Right-of-use lease assets	137,045		141,274
Property and equipment, net	Property and equipment, net	178,420		186,185		Property and equipment, net	153,640		158,244
Intangibles, net	Intangibles, net	54,780		67,847		Intangibles, net	27,898		34,430
Goodwill	Goodwill	285,321		286,241		Goodwill	287,673		287,088
Deferred tax assets	Deferred tax assets	9,026		8,727		Deferred tax assets	7,899		10,052
Other assets	Other assets	22,489		19,689		Other assets	48,223		27,820
Total assets	Total assets	$	1,583,631	$	1,352,640	Total assets	$	1,699,864	$	1,592,677

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	109,374	$	48,398	Accounts payable	$	99,105	$	78,412
Accrued salaries and benefits	Accrued salaries and benefits	34,870		29,289		Accrued salaries and benefits	41,707		42,439
Software license agreements	Software license agreements	17,915		21,514		Software license agreements	7,785		10,888
Lease liabilities		13,751		—
Current lease liabilities						Current lease liabilities	13,994		13,580
Other accrued liabilities	Other accrued liabilities	16,886		16,339		Other accrued liabilities	15,452		13,318
Total current liabilities	Total current liabilities	192,796		115,540		Total current liabilities	178,043		158,637

Long-term liabilities:	Long-term liabilities:					Long-term liabilities:

Software license agreements	Software license agreements	2,258		8,662		Software license agreements	9,917		3,806
Non-current income taxes	Non-current income taxes	76,847		78,309		Non-current income taxes	66,503		71,143
Non-current lease liabilities	Non-current lease liabilities	133,105		—		Non-current lease liabilities	128,570		129,312
Other long-term liabilities		—		9,889

Total long-term liabilities	Total long-term liabilities	212,210		96,860		Total long-term liabilities	204,990		204,261

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Capital stock	Capital stock	1,392,650		1,363,736		Capital stock	1,466,978		1,434,929
Accumulated deficit	Accumulated deficit	(213,274)		(222,430)		Accumulated deficit	(155,260)		(201,681)
Accumulated other comprehensive loss		(751)		(1,066)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	5,113		(3,469)
Total stockholders' equity	Total stockholders' equity	1,178,625		1,140,240		Total stockholders' equity	1,316,831		1,229,779
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,583,631	$	1,352,640	Total liabilities and stockholders' equity	$	1,699,864	$	1,592,677

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

໿

CIRRUS LOGIC, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share amounts; unaudited)


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		September 28,		September 29,		September 28,		September 29,			September 26,		September 28,		September 26,		September 28,
		2019		2018		2019		2018			2020		2019		2020		2019
Net sales	Net sales	$	388,912	$	366,305	$	627,165	$	620,788	Net sales	$	347,325	$	388,912	$	589,898	$	627,165
Cost of sales	Cost of sales	180,979		181,186		296,738		311,110		Cost of sales	167,115		180,979		282,216		296,738
Gross profit	Gross profit	207,933		185,119		330,427		309,678		Gross profit	180,210		207,933		307,682		330,427
Operating expenses	Operating expenses									Operating expenses
Research and development	Research and development	88,239		96,381		177,069		194,313		Research and development	84,810		88,239		163,551		177,069
Selling, general and administrative	Selling, general and administrative	33,018		33,160		62,538		65,944		Selling, general and administrative	31,247		33,018		60,951		62,538

Restructuring costs										Restructuring costs	0		0		352		0
Total operating expenses	Total operating expenses	121,257		129,541		239,607		260,257		Total operating expenses	116,057		121,257		224,854		239,607
Income from operations	Income from operations	86,676		55,578		90,820		49,421		Income from operations	64,153		86,676		82,828		90,820
Interest income	Interest income	2,530		1,805		5,074		3,511		Interest income	1,658		2,530		3,493		5,074
Interest expense	Interest expense	(280)		(280)		(539)		(539)		Interest expense	(280)		(280)		(539)		(539)

Other expense		(568)		(378)		(946)		(168)
Other income (expense)										Other income (expense)	784		(568)		895		(946)
Income before income taxes	Income before income taxes	88,358		56,725		94,409		52,225		Income before income taxes	66,315		88,358		86,677		94,409
Provision (benefit) for income taxes		12,148		(1,448)		13,581		(1,676)
Provision for income taxes										Provision for income taxes	6,829		12,148		8,982		13,581
Net income	Net income	$	76,210	$	58,173	$	80,828	$	53,901	Net income	$	59,486	$	76,210	77,695		$	80,828

Basic earnings per share	Basic earnings per share	$	1.31	$	0.96	$	1.39	$	0.88	Basic earnings per share	$	1.02	$	1.31	$	1.33	$	1.39
Diluted earnings per share	Diluted earnings per share	$	1.27	$	0.93	$	1.34	$	0.86	Diluted earnings per share	$	0.99	$	1.27	$	1.29	$	1.34
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	58,011		60,472		58,276		60,967		Basic weighted average common shares outstanding	58,191		58,011		58,252		58,276
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	60,213		62,431		60,260		62,810		Diluted weighted average common shares outstanding	60,127		60,213		60,203		60,260

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

CIRRUS LOGIC, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands; unaudited)


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		September 28,		September 29,		September 28,		September 29,			September 26,		September 28,		September 26,		September 28,
		2019		2018		2019		2018			2020		2019		2020		2019
Net income	Net income	$	76,210	$	58,173	$	80,828	$	53,901	Net income	$	59,486	$	76,210	$	77,695	$	80,828
Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax									Other comprehensive income (loss), before tax
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	(1,427)		204		(1,403)		(1,986)		Foreign currency translation gain (loss)	651		(1,427)		1,665		(1,403)
Unrealized gain on marketable securities		385		198		2,500		239

Unrealized gain (loss) on marketable securities										Unrealized gain (loss) on marketable securities	(733)		385		8,755		2,500

Cumulative effect of adoption of ASU 2018-02	Cumulative effect of adoption of ASU 2018-02	—		—		(257)		—		Cumulative effect of adoption of ASU 2018-02	0		0		0		(257)
Provision for income taxes		(81)		(42)		(525)		(50)
(Provision) benefit for income taxes										(Provision) benefit for income taxes	154		(81)		(1,838)		(525)
Comprehensive income	Comprehensive income	$	75,087	$	58,533	$	81,143	$	52,104	Comprehensive income	$	59,558	$	75,087	$	86,277	$	81,143

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

CIRRUS LOGIC, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands; unaudited)


		Six Months Ended							Six Months Ended
		September 28,		September 29,			September 26,		September 28,
		2019		2018			2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	80,828	$	53,901	Net income	$	77,695	$	80,828
Adjustments to reconcile net income to net cash generated by operating activities:	Adjustments to reconcile net income to net cash generated by operating activities:					Adjustments to reconcile net income to net cash generated by operating activities:
Depreciation and amortization	Depreciation and amortization	37,911		45,296		Depreciation and amortization	23,845		37,911
Stock-based compensation expense	Stock-based compensation expense	25,540		25,925		Stock-based compensation expense	28,782		25,540
Deferred income taxes	Deferred income taxes	(1,919)		(1,497)		Deferred income taxes	(1,221)		(1,919)
Loss on retirement or write-off of long-lived assets	Loss on retirement or write-off of long-lived assets	5		883		Loss on retirement or write-off of long-lived assets	11		5

Other non-cash adjustments	Other non-cash adjustments	453		216		Other non-cash adjustments	124		453
MEMS restructuring charges						MEMS restructuring charges	352		0
Net change in operating assets and liabilities:	Net change in operating assets and liabilities:					Net change in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(97,305)		(100,448)		Accounts receivable, net	(27,498)		(97,305)
Inventories	Inventories	19,904		63,054		Inventories	(62,325)		19,904
Other assets	Other assets	(6,816)		(4,001)		Other assets	(4,630)		(6,816)
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	61,525		(516)		Accounts payable and other accrued liabilities	19,351		61,525

Income taxes payable	Income taxes payable	(2,291)		(3,863)		Income taxes payable	(12,348)		(2,291)
Net cash generated by operating activities	Net cash generated by operating activities	117,835		78,950		Net cash generated by operating activities	42,138		117,835

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Maturities and sales of available-for-sale marketable securities	Maturities and sales of available-for-sale marketable securities	90,922		30,295		Maturities and sales of available-for-sale marketable securities	73,458		90,922
Purchases of available-for-sale marketable securities	Purchases of available-for-sale marketable securities	(121,100)		(31,118)		Purchases of available-for-sale marketable securities	(124,016)		(121,100)
Purchases of property, equipment and software	Purchases of property, equipment and software	(9,333)		(18,842)		Purchases of property, equipment and software	(6,967)		(9,333)
Investments in technology	Investments in technology	(4,730)		(2,248)		Investments in technology	(1,189)		(4,730)

Net cash used in investing activities	Net cash used in investing activities	(44,241)		(21,913)		Net cash used in investing activities	(58,714)		(44,241)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Issuance of common stock, net of shares withheld for taxes	Issuance of common stock, net of shares withheld for taxes	3,374		228		Issuance of common stock, net of shares withheld for taxes	3,267		3,374
Repurchase of stock to satisfy employee tax withholding obligations	Repurchase of stock to satisfy employee tax withholding obligations	(1,202)		(2,015)		Repurchase of stock to satisfy employee tax withholding obligations	(1,273)		(1,202)
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(70,001)		(94,997)		Repurchase and retirement of common stock	(30,001)		(70,001)

Net cash used in financing activities	Net cash used in financing activities	(67,829)		(96,784)		Net cash used in financing activities	(28,007)		(67,829)

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	5,765		(39,747)		Net increase (decrease) in cash and cash equivalents	(44,583)		5,765

Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	216,172		235,604		Cash and cash equivalents at beginning of period	292,119		216,172
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	221,937	$	195,857	Cash and cash equivalents at end of period	$	247,536	$	221,937

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

CIRRUS LOGIC, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands; unaudited)


		Common Stock					Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income / (Loss)			Total		Common Stock				Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income / (Loss)			Total
Three Months Ended	Three Months Ended	Shares	Amount														Three Months Ended	Shares								Total
Balance, June 30, 2018		60,990	$	61	$	1,325,226	$	(184,673)	$	(13,518)	$	1,127,096
Net income		—	—		—		58,173		—		58,173
Change in unrealized gain (loss) on marketable securities, net of tax		—	—		—		—		156		156

Change in foreign currency translation adjustments		—	—		—		—		204		204
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes		108	—		169		(957)		—		(788)
Repurchase and retirement of common stock		(1,274)	(1)		—		(54,996)		—		(54,997)
Stock-based compensation		—	—		13,131		—		—		13,131
Balance, September 29, 2018		59,824	$	60	$	1,338,526	$	(182,453)	$	(13,158)	$	1,142,975

Balance, June 29, 2019	Balance, June 29, 2019	58,121	$	58	$	1,375,719	$	(258,899)	$	372	$	1,117,250	Balance, June 29, 2019		58,121	$	58	$	1,375,719	$	(258,899)	$	372	$	1,117,250
Net income	Net income	—	—		—		76,210		—		76,210		Net income		—	—		—		76,210		—		76,210
Change in unrealized gain (loss) on marketable securities, net of tax	Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		304		304		Change in unrealized gain (loss) on marketable securities, net of tax		—	—		—		—		304		304
Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	—	—		—		—		(1,427)		(1,427)		Change in foreign currency translation adjustments		—	—		—		—		(1,427)		(1,427)
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	224	—		3,115		(584)		—		2,531		Issuance of stock under stock option plans and other, net of shares withheld for employee taxes		224	—		3,115		(584)		—		2,531

Repurchase and retirement of common stock	Repurchase and retirement of common stock	(559)	—		—		(30,001)		—		(30,001)		Repurchase and retirement of common stock		(559)	—		—		(30,001)		—		(30,001)
Stock-based compensation	Stock-based compensation	—	—		13,758		—		—		13,758		Stock-based compensation		—	—		13,758		—		—		13,758
Balance, September 28, 2019	Balance, September 28, 2019	57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625	Balance, September 28, 2019		57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625
Six Months Ended
Balance, March 31, 2018		61,960	$	62	$	1,312,372	$	(139,345)	$	(11,361)	$	1,161,728

Balance, June 27, 2020													Balance, June 27, 2020		58,381	$	58	$	1,451,239	$	(184,049)	$	5,041	$	1,272,289
Net income	Net income	—	—		—		53,901		—		53,901		Net income		—	—		—		59,486		—		59,486
Change in unrealized gain (loss) on marketable securities, net of tax	Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		189		189		Change in unrealized gain (loss) on marketable securities, net of tax		—	—		—		—		(579)		(579)

Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	—	—		—		—		(1,986)		(1,986)		Change in foreign currency translation adjustments		—	—		—		—		651		651
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	167	—		229		(2,014)		—		(1,785)		Issuance of stock under stock option plans and other, net of shares withheld for employee taxes		52	—		205		(696)		—		(491)
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(2,303)	(2)		—		(94,995)		—		(94,997)		Repurchase and retirement of common stock		(476)	—		—		(30,001)		—		(30,001)
Stock-based compensation	Stock-based compensation	—	—		25,925		—		—		25,925		Stock-based compensation		—	—		15,476		—		—		15,476
Balance, September 29, 2018		59,824	$	60	$	1,338,526	$	(182,453)	$	(13,158)	$	1,142,975

Balance, September 26, 2020													Balance, September 26, 2020		57,957	$	58	$	1,466,920	$	(155,260)	$	5,113	$	1,316,831
Six Months Ended													Six Months Ended
Balance, March 30, 2019	Balance, March 30, 2019	58,954	$	59	$	1,363,677	$	(222,430)	$	(1,066)	$	1,140,240	Balance, March 30, 2019		58,954	$	59	$	1,363,677	$	(222,430)	$	(1,066)	$	1,140,240
Net income	Net income	—	—		—		80,828		—		80,828		Net income		—	—		—		80,828		—		80,828
Change in unrealized gain (loss) on marketable securities, net of tax	Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—		—		1,975		1,975		Change in unrealized gain (loss) on marketable securities, net of tax		—	—		—		—		1,975		1,975
Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	—	—		—		—		(1,403)		(1,403)		Change in foreign currency translation adjustments		—	—		—		—		(1,403)		(1,403)
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	Issuance of stock under stock option plans and other, net of shares withheld for employee taxes	279	—		3,375		(1,203)		—		2,172		Issuance of stock under stock option plans and other, net of shares withheld for employee taxes		279	—		3,375		(1,203)		—		2,172
Cumulative effect of adoption of ASU 2016-02, net of tax	Cumulative effect of adoption of ASU 2016-02, net of tax	—	—		—		(726)		—		(726)		Cumulative effect of adoption of ASU 2016-02, net of tax		—	—		—		(726)		—		(726)
Cumulative effect of adoption of ASU 2018-02	Cumulative effect of adoption of ASU 2018-02	—	—		—		257		(257)		—		Cumulative effect of adoption of ASU 2018-02		—	—		—		257		(257)		—
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(1,447)	(1)		—		(70,000)		—		(70,001)		Repurchase and retirement of common stock		(1,447)	(1)		—		(70,000)		—		(70,001)
Stock-based compensation	Stock-based compensation	—	—		25,540		—		—		25,540		Stock-based compensation		—	—		25,540		—		—		25,540
Balance, September 28, 2019	Balance, September 28, 2019	57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625	Balance, September 28, 2019		57,786	$	58	$	1,392,592	$	(213,274)	$	(751)	$	1,178,625

Balance, March 28, 2020													Balance, March 28, 2020		58,242	$	58	$	1,434,871	$	(201,681)	$	(3,469)	$	1,229,779
Net income													Net income		—	—		—		77,695		—		77,695
Change in unrealized gain (loss) on marketable securities, net of tax													Change in unrealized gain (loss) on marketable securities, net of tax		—	—		—		—		6,917		6,917
Change in foreign currency translation adjustments													Change in foreign currency translation adjustments		—	—		—		—		1,665		1,665
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes													Issuance of stock under stock option plans and other, net of shares withheld for employee taxes		191	—		3,267		(1,273)		—		1,994
Repurchase and retirement of common stock													Repurchase and retirement of common stock		(476)	—		—		(30,001)		—		(30,001)
Stock-based compensation													Stock-based compensation		—	—		28,782		—		—		28,782
Balance, September 26, 2020													Balance, September 26, 2020		57,957	$	58	$	1,466,920	$	(155,260)	$	5,113	$	1,316,831

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

CIRRUS LOGIC, INC.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The consolidated condensed financial statements have been prepared by Cirrus Logic, Inc. (“Cirrus Logic,” “we,” “us,” “our,” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). The accompanying unaudited consolidated condensed financial statements do not include complete footnotes and financial presentations. As a result, these financial statements should be read along with the audited consolidated financial statements and notes thereto for the year ended March ~~30, 2019,~~28, 2020, included in our Annual Report on Form 10-K filed with the Commission on May ~~24, 2019.~~20, 2020. In our opinion, the financial statements reflect all material adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented. The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses. Actual results could differ from those estimates and assumptions. Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year. ~~Additionally, certain prior period amounts have been reclassified to conform to current year presentation, with no impact to earnings.~~

2. Recently Issued Accounting Pronouncements

In ~~February~~June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~No. 2016-02,~~ ~~Leases~~, which the Company adopted in the first quarter of fiscal year 2020. The new standard provides a number of optional practical expedients in transition. We elected the use-of-hindsight practical expedient and the ‘package of practical expedients’ which permit us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for qualifying leases, which are those with initial terms of less than twelve months, we will not recognize right-of-use ("ROU") assets or lease liabilities. We also do not separate lease and non-lease components for all classes of assets. Most of our operating lease commitments were subject to the new standard and recognized as ROU assets and operating lease liabilities upon adoption, which materially increased the total assets and total liabilities that we reported relative to such amounts prior to adoption.

In applying the use-of-hindsight practical expedient, we re-assessed whether we were reasonably certain to exercise extension options within our lease agreements. This resulted in the lease term being extended on a number of leases. The previously capitalized initial direct costs and accrued lease payments were recalculated assuming these extended lease terms had always applied, resulting in an adjustment of $0.7 million net of tax, to opening retained earnings on transition.

On adoption, we recognized additional operating liabilities, with corresponding ROU assets based on the present value of the lease payments over the lease term under current leasing contracts for existing operating leases. In addition, existing capitalized initial direct costs and accrued lease payments were reclassified from prepayments and accruals to the ROU asset. There was no income statement or material cash flow statement impact on adoption, nor were prior periods adjusted.

~~The effects of the changes made to our balance sheet at adoption were as follows (in thousands):~~

Balance at March 30, 2019 Impact from ASU 2016-02 Adoption Balance at March 31, 2019
Financial statement line item:
Prepaid assets $ 30,794 $ (2,833) $ 27,961
Right-of-use lease assets — 149,746 149,746
Lease liabilities — (14,899) (14,899)
Other accrued liabilities (16,339) 11,071 (5,268)
Non-current lease liabilities — (143,085) (143,085)
Other long-term liabilities (9,889) (965) (10,854)
Accumulated deficit (222,430) 965 (221,465)

~~In June 2016, the FASB issued ASU~~ No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on financial instruments, including available-for-sale debt securities, to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. ~~Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods.~~ The Company ~~is currently evaluating the impact of~~adopted this ASU ~~but does not expect a~~in the first quarter of fiscal year 2021, with no material impact to the financial ~~statements upon adoption.~~statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates step two of the goodwill impairment test. An impairment charge is to be recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods. Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017, and should be applied prospectively. 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, but does not expect a material impact to the financial statements upon adoption.

~~In February 2018, the FASB issued ASU No. 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. This ASU allows for the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This ASU is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The standard should be applied in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in tax rate is recognized. The Company adopted this ASU in the first quarter of fiscal year ~~2020 and elected to reclassify the stranded tax effects of $0.3 million from accumulated other comprehensive income to retained earnings in the period of adoption.~~

~~In June 2018, the FASB issued ASU No. 2018-07,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~. This ASU expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees and will apply to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted. The Company adopted this ASU in the first quarter of fiscal year 2020,2021, with no material impact to the financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adjusts current required disclosures related to fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this ASU in the first quarter of fiscal year 2021, with no material impact to the financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU provides guidance on the accounting for implementation costs related to a cloud computing arrangement that is a service contract. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this ASU in the first quarter of fiscal year 2021,with prospective application and no material impact to the financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the financial statements upon adoption.

In ~~August 2018,~~January 2020, the ~~Commission adopted~~FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321) - Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the ~~final rule under SEC Release No. 33-10532,~~ ~~Disclosure Update~~Interactions between Topic 321, Topic 323, and ~~Simplification~~, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliationTopic 815 (a consensus of the FASB Emerging Issues Task Force). This ASU clarifies the interaction of the accounting for equity securities, investments accounted for under the equity method of accounting, and the accounting for certain forward contracts and purchased options. This ASU is effective for fiscal years beginning ~~balance~~after

December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the ~~ending balance~~financial statements upon adoption.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of ~~each period~~the Effects of Reference Rate Reform on Financial Reporting. The ASU, effective immediately for ~~which~~reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with a ~~statement of comprehensive income~~new alternative reference rate. The guidance is ~~required~~applicable to ~~be filed. The final rule was published in the Federal Register on October 4, 2018, effective November 5, 2018.~~investment securities, receivables, debt, leases, hedging relationships and other contractual arrangements. The Company adopted ~~the amendments~~this ASU in the first quarter of fiscal year ~~2020. See consolidated condensed statements of stockholders' equity.~~2021, with no material impact to the financial statements.

3. 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~~"Marketable securities", within the short-term or long-term ~~marketable securities,~~classification, as appropriate.

The following table is a summary of available-for-sale securities at September ~~28, 2019~~26, 2020 (in thousands):


As of September 28, 2019		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
As of September 26, 2020										As of September 26, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
Corporate debt securities	Corporate debt securities	$	234,115	$	2,810	$	(30)	$	236,895	Corporate debt securities	$	342,943	$	6,136	$	(63)	$	349,016
Non-U.S. government securities	Non-U.S. government securities	14,404		111		(7)		14,508		Non-U.S. government securities	10,520		250		0		10,770
U.S. Treasury securities	U.S. Treasury securities	9,891		32		(22)		9,901		U.S. Treasury securities	1,263		18		0		1,281

Agency discount notes										Agency discount notes	3,824		5		0		3,829
Total securities	Total securities	$	258,410	$	2,953	$	(59)	$	261,304	Total securities	$	358,550	$	6,409	$	(63)	$	364,896

The Company typically invests in highly-rated securities with original maturities generally ranging from one to three years. The Company's specifically identified gross unrealized loss of $0.1 million relatedtosecurities with total amortized ~~cost~~costs of approximately ~~$28.2~~$32.4 million at September ~~28, 2019. Securities~~26, 2020. There were 0 securities that had been in a continuous unrealized loss position for more than 12 months as of September ~~28, 2019 had an aggregate amortized cost of $5.5 million and an immaterial amount of aggregate unrealized loss.~~26, 2020. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipated or actual changes in credit rating and duration management. The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors. When evaluating an investment for ~~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 ~~28, 2019,~~26, 2020, the Company ~~did~~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 ~~30, 2019~~28, 2020 (in thousands):

໿


As of March 30, 2019		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
As of March 28, 2020										As of March 28, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
Corporate debt securities	Corporate debt securities	$	215,098	$	1,027	$	(600)	$	215,525	Corporate debt securities	$	286,668	$	1,157	$	(3,993)	$	283,832
Non-U.S. government securities	Non-U.S. government securities	13,209		8		(40)		13,177		Non-U.S. government securities	12,483		260		0		12,743
U.S. Treasury securities										U.S. Treasury securities	8,839		167		0		9,006

Agency discount notes		450		—		(1)		449

Total securities	Total securities	$	228,757	$	1,035	$	(641)	$	229,151	Total securities	$	307,990	$	1,584	$	(3,993)	$	305,581

The ~~Company’s~~Company's specifically identified gross unrealized ~~losses~~loss of ~~$0.6~~$4.0 million relatedtosecurities with total amortized ~~cost~~costs of approximately ~~$123.1~~$172.9 million at March ~~30, 2019. Securities~~28, 2020. There were 0 securities that had been in a continuous unrealized loss position for more than 12 months as of March ~~30, 2019 had an aggregate amortized cost of $120.3 million and an aggregate unrealized loss of $0.6 million.~~28, 2020. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipated or actual changes in credit rating and duration management. 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 ~~30, 2019,~~28, 2020, 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):

໿


		September 28, 2019						March 30, 2019							September 26, 2020				March 28, 2020
		Amortized		Estimated		Amortized		Estimated			Amortized		Estimated		Amortized		Estimated
		Cost		Fair Value		Cost		Fair Value			Cost		Fair Value		Cost		Fair Value
Within 1 year	Within 1 year	$	22,527	$	22,563	$	70,490	$	70,183	Within 1 year	$	36,020	$	36,641	$	22,012	$	22,008
After 1 year	After 1 year	235,883		238,741		158,267		158,968		After 1 year	322,530		328,255		285,978		283,573
Total	Total	$	258,410	$	261,304	$	228,757	$	229,151	Total	$	358,550	$	364,896	$	307,990	$	305,581

໿

4. Fair Value of Financial Instruments

The Company has determined that the only material assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents and marketable securities portfolio. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and marketable securities portfolio consist of money market funds, debt securities, non-U.S. government securities, U.S. Treasury securities and securities of U.S. government-sponsored enterprises and are reflected on our consolidated condensed balance sheets under the headings cash and cash equivalents, marketable securities, and long-term marketable securities. The Company determines the fair value of its marketable securities portfolio by obtaining non-binding market prices from third-party pricing providers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.

The Company's long-term revolving credit facility, described in Note 8, bears interest at a base rate plus applicable margin or LIBOR plus applicable margin. As of September ~~28, 2019~~26, 2020, there are 0 amounts drawn under the credit facility and the fair value is 0.

As of September 26, 2020 and March ~~30, 2019,~~28, 2020, the ~~Company classified all investment portfolio assets as Level 1 or Level 2 assets. The~~ Company has no material Level 3 ~~assets.~~assets or liabilities. There were no transfers between Level 1, Level 2, or Level 3 measurements for the three months ~~ending~~ended September ~~28, 2019.~~ 26, 2020.

The following summarizes the fair value of our financial instruments at September 26, 2020 (in thousands):


	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Assets:
Cash equivalents
Money market funds	$	208,821	$	0	$	0	$	208,821



Available-for-sale securities
Corporate debt securities	$	0	$	349,016	$	0	$	349,016
Non-U.S. government securities	0		10,770		0		10,770
Agency discount notes	0		3,829		0		3,829
U.S. Treasury securities	1,281		0		0		1,281


	$	1,281	$	363,615	$	0	$	364,896

໿

The following summarizes the fair value of our financial instruments at ~~September~~March 28, ~~2019~~2020 (in thousands):

Quoted Prices
in Active
Markets for
Identical
Assets
Level 1 Significant
Other
Observable
Inputs
Level 2 Significant
Unobservable
Inputs
Level 3 Total
Assets:
Cash equivalents
Money market funds $ 186,669 $ — $ — $ 186,669
Available-for-sale securities
Corporate debt securities $ — $ 236,895 $ — $ 236,895
Non-U.S. government securities — 14,508 — 14,508
U.S. Treasury securities 9,901 — — 9,901
$ 9,901 $ 251,403 $ — $ 261,304

໿

~~The following summarizes the fair value of our financial instruments at March 30, 2019 (in thousands):~~


		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total			Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents									Cash equivalents
Money market funds	Money market funds	$	174,214	$	—	$	—	$	174,214	Money market funds	$	237,714	$	0	$	0	$	237,714

Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
Corporate debt securities	Corporate debt securities	$	—	$	215,525	$	—	$	215,525	Corporate debt securities	$	0	$	283,832	$	0	$	283,832
Non-U.S. government securities	Non-U.S. government securities	—		13,177		—		13,177		Non-U.S. government securities	0		12,743		0		12,743

Agency discount notes		—		449		—		449
U.S. Treasury securities										U.S. Treasury securities	9,006		0		0		9,006
		$	—	$	229,151	$	—	$	229,151

											$	9,006	$	296,575	$	0	$	305,581

໿

5. Derivative Financial Instruments

Foreign Currency Forward Contracts

~~Beginning in the first quarter of fiscal year 2020, the~~The Company ~~began using~~uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on ~~non-U.S. dollar~~non-functional currency balance sheet exposures. The Company recognizes both the gains and losses on foreign currency forward contracts and the gains and losses on the remeasurement of ~~non-U.S. dollar denominated~~non-functional currency assets and liabilities within "Other ~~expense~~income (expense)" in the consolidated condensed statements of income. The Company does not apply hedge accounting to these foreign currency derivative instruments.

As of September ~~28, 2019,~~26, 2020, the Company held 1 foreign currency forward contract denominated in British Pound Sterling with a notional value of ~~$57.0~~$19.1 million. The fair value of this contract was not material as of September ~~28, 2019.~~26, 2020.

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


		Three Months Ended						Six Months Ended								Three Months Ended				Six Months Ended
		September 28,		September 29,		September 28,		September 29,				September 26,		September 28,		September 26,		September 28,
		2019		2018		2019		2018		Location		2020		2019		2020		2019		Location
Gain (loss) recognized in income:	Gain (loss) recognized in income:										Gain (loss) recognized in income:
Foreign currency forward contracts	Foreign currency forward contracts	$	(1,852)	$	—	$	(4,215)	$	—	Other expense	Foreign currency forward contracts	$	735	$	(1,852)	$	1,918	$	(4.215)	Other income (expense)

6. Accounts Receivable, net

The following are the components of accounts receivable, net (in thousands):


		September 28,		March 30,			September 26,		March 28,
		2019		2019			2020		2020
Gross accounts receivable	Gross accounts receivable	$	217,962	$	120,926	Gross accounts receivable	$	181,496	$	153,998
Allowance for doubtful accounts	Allowance for doubtful accounts	—		(270)		Allowance for doubtful accounts	0		0
Accounts receivable, net	Accounts receivable, net	$	217,962	$	120,656	Accounts receivable, net	$	181,496	$	153,998

~~The significant increase in accounts receivable is due primarily to the volume and timing of shipments in the second quarter of fiscal year 2020.~~

7. Inventories

Inventories are comprised of the following (in thousands):


		September 28,		March 30,			September 26,		March 28,
		2019		2019			2020		2020
Work in process	Work in process	$	100,781	$	80,100	Work in process	$	125,082	$	82,494
Finished goods	Finished goods	44,048		84,633		Finished goods	83,968		64,231
		$	144,829	$	164,733		$	209,050	$	146,725

໿

8. Revolving Credit Facility

On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto, for the purpose of refinancing an existing credit facility and providing ongoing working capital. The Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Credit Facility”). The Credit Facility matures on July 12, 2021. The Credit Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Credit Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.

Borrowings under the Credit Facility may, at our election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR rate plus the applicable margin (“LIBOR Rate Loans”). The applicable margin ranges from 0% to 0.50% per annum for Base Rate Loans and 1.25% to 2.00% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below). A commitment fee accrues at a rate per annum ranging from 0.20% to 0.30% (based on the Leverage Ratio) on the average daily unused portion of the commitment of the lenders. The Credit Agreement contains certain financial covenants providing that (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four fiscal quarters must not be greater than 3.00 to 1.00 (the “Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive fiscal quarters to consolidated fixed charges (including amounts paid in cash for consolidated interest expenses, capital expenditures, scheduled principal payments of indebtedness, and income taxes) for the prior four consecutive fiscal quarters must not be less than 1.25 to 1.00 as of the end of each fiscal quarter. The Credit Agreement also contains negative covenants limiting the Company’s or any Subsidiary’s ability to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.

As of September ~~28, 2019,~~26, 2020, the Company had 0 amounts outstanding under the Credit Facility and was in compliance with all covenants under the Credit Agreement.

9.~~Leases~~

The Company has operating leases for corporate offices and certain office equipment. Our leases have remaining lease terms of 1 year to 28 years, some of which include options to extend the leases that are considered reasonably certain to be exercised. Our leases generally contain fixed rental payments, with additional variable payments linked to actual common area maintenance costs incurred by the landlord. These variable payments are therefore not included within the lease liability and ROU asset, but are recognized as an expense when incurred. As our leases typically do not provide an implicit rate, the Company determined the Incremental Borrowing Rate ("IBR") for each lease based on the information available at the commencement date, taking into consideration necessary adjustments for collateral, currency, and lease term. There are no residual value guarantees in any of our leases. No restrictions or covenants have been imposed on the Company as a result of the lease agreements in place.

The Company also leases a small portion of our office space to tenants under operating leases, receiving monthly rental payments. Payments are generally fixed, with variable payments linked to actual common area maintenance costs incurred. Total fixed lease payments to be received over the life of the lease are recognized on a straight-line basis over the lease term.

All of the Company’s leases have been classified as operating leases. Operating leases in excess of 12 months are recognized on the balance sheet, with 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 is recognized in the income statement over the lease term.

~~The components of operating lease expense were as follows (in thousands):~~

Three Months Ended Six Months Ended
September 28, September 28,
2019 2019
Operating lease - in excess of 12 months $ 3,334 $ 6,797
Variable lease 1,166 2,262
Short-term lease 8 14
Total operating lease expense $ 4,508 $ 9,073

~~Other information related to operating leases was as follows:~~

~~Six Months Ended~~

~~September 28,~~

~~2019~~

~~Cash paid for amounts included in the measurement of lease liabilities (in thousands)~~

~~Operating cash flows from operating leases~~

~~7,161~~

~~Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands)~~

—

~~Weighted-average remaining lease term - operating leases (in years)~~

~~20.0~~

~~Weighted-average discount rate - operating leases~~

~~As of September 28, 2019, there are no leases that have not yet commenced that would create significant rights and obligations on the Company.~~

~~Future lease commitments under non-cancellable leases, including extension options reasonably anticipated to be exercised as of September 28, 2019, are as follows (in thousands):~~

Fiscal Year Operating Lease Expense Operating Lease Income
2020 $ 7,092 $ 561
2021 13,743 1,322
2022 13,253 1,356
2023 12,649 535
2024 12,387 264
Thereafter 161,044 338
Total $ 220,168 $ 4,376
Less imputed interest (73,312) —
Total $ 146,856 $ 4,376

~~Operating lease liabilities consisted of the following (in thousands):~~


	~~September 28,~~
	~~2019~~
~~Current lease liabilities~~	$	~~13,751~~
~~Non-current lease liabilities~~	~~133,105~~
~~Total operating lease liabilities~~	$	~~146,856~~

~~10.~~9. Revenues

Disaggregation of revenue

We disaggregate revenue from contracts with customers based on the ship to location of the customer. The geographic regions that are reviewed are the United States and countries outside of the United States (primarily located in Asia).

Total net sales based on the disaggregation criteria described above are as follows:

Three Months Ended Six Months Ended
September 28, September 29, September 28, September 29,
2019 2018 2019 2018
Non-United States $ 385,222 $ 359,685 $ 619,263 $ 605,307
United States 3,690 6,620 7,902 15,481
$ 388,912 $ 366,305 $ 627,165 $ 620,788


	Three Months Ended				Six Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Non-United States	$	343,114	$	385,222	$	581,611	$	619,263
United States	4,211		3,690		8,287		7,902
	$	347,325	$	388,912	$	589,898	$	627,165

Performance obligations

The Company's single performance obligation is the delivery of promised goods to the customer. The promised goods are explicitly stated in the customer contract and are comprised of either a single type of good or a series of goods that are substantially the same, have the same pattern of transfer to the customer, and are neither capable of being distinct nor separable from the other promised goods in the contract. This performance obligation is satisfied upon transfer of control of the promised goods to the customer, as defined per the shipping terms within the customer's contract. The vast majority of the Company's contracts with customers have an original expected term length of one year or less. As allowed by ~~ASC~~Accounting Standards Codification ("ASC") 606,Revenue from Contracts with Customers, the Company has not disclosed the value of any unsatisfied performance obligations related to these contracts.

The Company’s products ~~primarily~~typically include a warranty period of one to three years. These warranties qualify as assurance-type warranties, as goods can be returned for product non-conformance and defect only. As such, these warranties are accounted for under ASC 460, Guarantees, and are not considered a separate performance obligation.

Contract balances

Payments are typically due within 30 to 60 days of invoicing and terms do not include a significant financing components or noncash consideration. There have been no material impairment losses on accounts receivable. There are no material contract assets or contract liabilities recorded on the consolidated condensed balance sheets.

Transaction price

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods to the customer. Fixed pricing is the consideration that is agreed upon in the customer contract. Variable pricing includes rebates, rights of return, warranties, price protection and stock rotation. Rebates are granted as a customer account credit, based on agreed-upon sales thresholds. Rights of return and warranty costs are estimated using the "most likely amount" method by reviewing historical returns to determine the most likely customer return rate and applying materiality thresholds. Price protection includes price adjustments available to certain distributors based upon established book price and a stated adjustment period. Stock rotation is also available to certain distributors based on a stated maximum of prior billings.

The Company estimates all variable consideration at the most likely amount that it expects to be entitled. The estimate is based on current and historical information, including recent sales activity and pricing, available to the Company. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company defers all variable consideration that does not meet the revenue recognition criteria.

1513

10. Restructuring Costs

During the fourth quarter of fiscal year 2020, the Company approved a restructuring plan (the “MEMS Restructuring”), including discontinuing efforts relating to the microelectromechanical systems ("MEMS") microphone product line, which allowed the Company to concentrate resources on projects with an anticipated larger return on investment. The MEMS Restructuring was substantially complete as of the first quarter of fiscal year 2021 with a $352 thousand "Restructuring Costs" charge to the income statement. No additional restructuring charges were incurred during the second quarter of fiscal year 2021.

Restructuring liabilities are presented in the “Other accrued liabilities” line item of our consolidated condensed balance sheet. The activity related to restructuring liabilities is detailed below (in thousands):


	Restructuring Liability
Beginning balance as of March 28, 2020	$	982
Other exit costs	222
Cash payments	(1,025)
Ending balance as of September 26, 2020	$	179

11. Income Taxes

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Our provision ~~(benefit)~~ for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items, and any applicable income tax credits.

The following table presents the provision ~~(benefit)~~ for income taxes (in thousands) and the effective tax rates:


		Three Months Ended									Six Months Ended										Three Months Ended						Six Months Ended
		September 28,			September 29,			September 28,			September 29,				September 26,			September 28,			September 26,			September 28,
		2019			2018			2019			2018				2020			2019			2020			2019
Income before income taxes	Income before income taxes	$	88,358		$	56,725		$	94,409		$	52,225		Income before income taxes	$	66,315		$	88,358		$	86,677		$	94,409
Provision (benefit) for income taxes		$	12,148		$	(1,448)		$	13,581		$	(1,676)
Provision for income taxes														Provision for income taxes	$	6,829		$	12,148		$	8,982		$	13,581
Effective tax rate	Effective tax rate	13.7		%	(2.6)		%	14.4		%	(3.2)		%	Effective tax rate	10.3		%	13.7		%	10.4		%	14.4		%

Our income tax expense was $6.8 million and $12.1 million for the second ~~quarter~~quarters of fiscal ~~year~~years 2021 and 2020, ~~was $12.1 million compared to $1.4 million of income tax benefit for the second quarter of fiscal year 2019,~~respectively, resulting in effective tax rates of ~~13.7%~~10.3% and ~~(2.6)% for the second quarter of fiscal year 2020 and 2019,~~13.7%, respectively. Our income tax expense was $9.0 million and $13.6 million for the first six months of fiscal ~~year~~years 2021 and 2020, ~~compared to income~~respectively, resulting in effective tax ~~benefit~~rates of ~~$1.7 million~~10.4% and 14.4%, respectively. Our effective tax rates for the second quarter and first six months of fiscal year ~~2019, resulting~~2021 were lower than the federal statutory rate primarily due to the effect of income earned in ~~effective~~certain foreign jurisdictions that is taxed below the federal statutory rate and the remeasurement of previously unrecognized tax ~~rates of 14.4% and (3.2)%, respectively.~~

benefits recognized as a discrete item in the current quarter. Our effective tax rates for the second quarter and first six months of fiscal year 2020 were lower than the federal statutory rate primarily due to the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate, the U.S. deduction for foreign derived intangible income, and the release of prior year unrecognized tax benefits due to the closure of the tax audit of the Company's U.K. subsidiaries in the second quarter of fiscal year 2020. Our effective tax rates for the second quarter and first six months of fiscal year 2019 were lower than the federal statutory rate primarily due to adjustments recorded in the second quarter of fiscal year 2019 to reduce the provisional amount of the Tax Act's transition tax, the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate, and the U.S. federal research and development tax credit.

The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At September ~~28, 2019,~~26, 2020, the Company had unrecognized tax benefits of ~~$39.0~~$32.9 million, all of which ~~$38.8 million~~ would impact the effective tax rate if recognized. We recorded ~~gross increases of $0.3 million and $0.1 million to current year unrecognized tax benefits in the first and second quarters of fiscal year 2020, respectively, as well as~~ a gross decrease of ~~$1.1~~$3.3 million to ~~prior year~~ unrecognized tax benefits in the second quarter of fiscal year 2020. The Company believes it is reasonably possible that the gross unrecognized tax benefits could decrease by approximately $3.0 million in the next 12 months due to the lapse of the statute of limitations applicable to tax positions taken on a prior year tax return.2021. The Company’s total unrecognized tax benefits are classified as “Non-current income taxes" in the consolidated condensed balance sheets.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September ~~28, 2019,~~26, 2020, the balance of accrued interest and penalties, net of tax, was ~~$3.4~~$3.7 million.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. et al. v. Commissioner which concluded that the regulations relating to the treatment of stock-based compensation expense in intercompany cost-sharing arrangements were

invalid. In 2016 the U.S. Internal Revenue Service appealed the decision to the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”). On July 24, 2018, the Ninth Circuit issued a decision that was subsequently withdrawn and a reconstituted panel ~~has~~ conferred on the appeal. On June 7, 2019, the Ninth Circuit reversed the decision of the U.S. Tax Court and upheld the cost-sharing regulations. ~~The final resolution~~On February 10, 2020, Altera Corp. filed a Petition for a Writ of Certiorari with ~~respect to cost-sharing~~the Supreme Court of ~~stock-based compensation and~~ the United States, which was denied by the Supreme Court on June 22, 2020. Although the issue is now resolved in the Ninth Circuit, the Ninth Circuit's opinion is not binding in other circuits. The potential impact of this issue on the Company, which is not located within the jurisdiction of the Ninth Circuit, is unclear at this time. We will continue to monitor developments related to this ~~decision~~issue and the potential impact of those developments on the Company's current and prior fiscal years.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. Fiscal years ~~2016~~2017 through ~~2019~~2020 remain open to examination by the major taxing jurisdictions to which the Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year ~~2016~~2017 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company's federal income tax returns for fiscal years 2017, 2018, and ~~2018~~2019 are under examination by the U.S. Internal Revenue Service. The Company believes it has accrued adequate reserves related to the matters under examination. The Company is not under an income tax audit in any other major taxing jurisdiction.

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12. Net Income Per Share

Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. These potentially dilutive items consist primarily of outstanding stock options and restricted stock ~~units.~~grants.

The following table details the calculation of basic and diluted earnings per share for the three and six months ended September ~~28, 2019~~26, 2020 and September ~~29, 2018~~28, 2019 (in thousands, except per share amounts):

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		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		September 28,		September 29,		September 28,		September 29,			September 26,		September 28,		September 26,		September 28,
		2019		2018		2019		2018			2020		2019		2020		2019
Numerator:	Numerator:									Numerator:
Net income	Net income	$	76,210	$	58,173	$	80,828	$	53,901	Net income	$	59,486	$	76,210	$	77,695	$	80,828
Denominator:	Denominator:									Denominator:
Weighted average shares outstanding	Weighted average shares outstanding	58,011		60,472		58,276		60,967		Weighted average shares outstanding	58,191		58,011		58,252		58,276
Effect of dilutive securities	Effect of dilutive securities	2,202		1,959		1,984		1,843		Effect of dilutive securities	1,936		2,202		1,951		1,984
Weighted average diluted shares	Weighted average diluted shares	60,213		62,431		60,260		62,810		Weighted average diluted shares	60,127		60,213		60,203		60,260
Basic earnings per share	Basic earnings per share	$	1.31	$	0.96	$	1.39	$	0.88	Basic earnings per share	$	1.02	$	1.31	$	1.33	$	1.39
Diluted earnings per share	Diluted earnings per share	$	1.27	$	0.93	$	1.34	$	0.86	Diluted earnings per share	$	0.99	$	1.27	$	1.29	$	1.34

The weighted outstanding shares excluded from our diluted calculation for the three and six months ended September ~~28, 2019,~~26, 2020 were ~~455~~247 thousand and ~~615~~226 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 ~~29, 2018,~~28, 2019 were ~~609~~455 thousand and ~~1,277~~615 thousand, respectively, as the shares were anti-dilutive.

13. 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.

14. Stockholders’ Equity

Common Stock

The Company issued a net ~~0.2~~0.1 million and ~~0.3~~0.2 million shares of common stock during each of the three and six months ~~ending~~ended September ~~28, 2019, respectively,~~26, 2020, pursuant to the Company's equity incentive plans. The Company issued a net ~~0.1~~0.2 million and ~~0.2~~0.3 million shares of common stock during each of the three and six months ~~ending~~ended September ~~29, 2018, respectively,~~28, 2019, pursuant to the Company's equity incentive plans.

Share Repurchase Program

Since inception, approximately ~~$30~~$110 million of the Company’s common stock has been repurchased under the Company’s 2019 $200 million share repurchase program, leaving approximately ~~$170~~$90 million available for repurchase under this plan as of September ~~28, 2019~~26, 2020. During the three and six months ended September ~~28, 2019,~~26, 2020, the Company repurchased ~~0.6~~0.5 million shares of its common stock, for $~~30.0~~30 million, at an average cost of ~~$53.64~~$63.06 per ~~share and 1.4 million shares of its common stock, for~~ ~~$70.0 million, at an average cost of $48.37 per share, respectively.~~ ~~The repurchased shares in the second quarter of fiscal year 2020 include an immaterial amount of shares that closed out the Company's 2018 share repurchase program.~~ 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 ~~28, 2019.~~26, 2020.

15. 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 1 reportable segment, but reports revenue in 2 product lines, Portable and Non-Portable 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):

Three Months Ended Six Months Ended
September 28, September 29, September 28, September 29,
2019 2018 2019 2018
Portable Products $ 349,379 $ 324,049 $ 552,317 $ 536,309
Non-Portable and Other Products 39,533 42,256 74,848 84,479
$ 388,912 $ 366,305 $ 627,165 $ 620,788


	Three Months Ended				Six Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Portable Products	$	312,911	$	349,379	$	523,572	$	552,317
Non-Portable and Other Products	34,414		39,533		66,326		74,848
	$	347,325	$	388,912	$	589,898	$	627,165

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read along with the unaudited consolidated condensed financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, as well as 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 ~~30, 2019,~~28, 2020, contained in our fiscal year ~~2019~~2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) on May ~~24, 2019.~~20, 2020. We maintain a website at investor.cirrus.com, which makes available free of charge our most recent annual report and all other filings we have made with the Commission.

This quarterly report on Form 10-Q including Management’s Discussion and Analysis of Financial Condition and Results of Operations and certain information incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and

Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on ~~current~~ expectations, estimates, forecasts and projections and the beliefs and assumptions of our ~~management.~~management as of the filing of this Form 10-Q. In some cases, forward-looking statements are identified by words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “estimates,” “intend,” and variations of these types of words and similar expressions which are intended to identify these forward-looking statements. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and readers should not place undue reliance on such statements. We undertake no obligation, and expressly disclaim any duty, to revise or update publicly any forward-looking statement for any reason.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see “Item 1A – Risk Factors” in our ~~2019~~2020 Annual Report on Form 10-K filed with the Commission on May ~~24, 2019,~~20, 2020, and in Part II, Item 1A “Risk Factors” within this quarterly report on Form 10-Q. Readers should carefully review these risk factors, as well as those identified in other documents filed by us with the Commission.

Overview

Cirrus Logic, Inc. (“Cirrus Logic,” “We,” “Us,” “Our,” or the “Company”) is a leader in ~~high-performance,~~ low-power, ~~integrated circuits (“ICs”) for audio, voice and other signal-processing applications. Cirrus Logic’s products span the entire audio signal chain, from capture to playback, providing~~high-precision mixed-signal processing solutions that create innovative ~~products~~user experiences for the world’s top ~~smartphones, tablets, digital headsets, wearables~~mobile and ~~emerging smart home~~consumer applications.

Impact of COVID-19

The Company remains committed to the safety and well-being of our employees, their families and our communities across the globe, while maintaining business continuity and continuing to provide outstanding support to our customers. At this time, the majority of our employees worldwide continue to work remotely and remain subject to travel restrictions, due to COVID-19. Despite these challenges, all teams across the organization remain highly productive and we currently anticipate that the Company will be able to continue to maintain a similar level of productivity for the foreseeable future. Our technical marketing and engineering teams executed on key product development efforts and our supply chain team continued to meet production schedules. Although we have not experienced a significant reduction in our overall productivity during fiscal year 2021 to date, any increased or additional disruptions to our business operations due to these restrictions would likely impact our ability to continue to maintain current levels of productivity.

The COVID-19 pandemic is likely to continue to cause volatility and uncertainty in customer demand, worldwide economies and financial markets for some period of time. To date, any negative impact of COVID-19 on the overall demand for our products, cash flow from operations, need for capital expenditures, and our liquidity position has been limited. The Company has not accessed its revolving credit facility or raised capital in the public or private markets. Given our strong net cash position we believe the Company has sufficient liquidity to satisfy our cash needs for the foreseeable future.

Critical Accounting Policies

Our discussion and analysis of the Company’s financial condition and results of operations are based upon the unaudited consolidated condensed financial statements included in this report, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts. We evaluate the estimates on an on-going basis. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

~~The Company adopted ASC Topic 842,~~ ~~Leases~~ ~~as of March 31, 2019. The impact of this new guidance on our accounting policies and operating results is described below, in Note 2 -~~ Recently Issued Accounting Pronouncements ~~as well as in Note 9 - Leases. During the six months ended September 28, 2019, there have been no other significant changes in our “Critical Accounting Policies” included in our fiscal year 2019 Annual Report on Form 10-K for the fiscal year ended March 30, 2019.~~

~~Recently Issued Accounting Pronouncements~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~, which the Company adopted in the first quarter of fiscal year 2020. The new standard provides a number of optional practical expedients in transition. We elected the use-of-hindsight practical expedient and the ‘package of practical expedients’ which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for qualifying leases, which are those with terms of less than twelve months, we will not recognize ROU assets or lease liabilities. We also do not separate lease and non-lease components for all classes of assets. Most of our operating lease commitments were subject to the new standard and recognized as ROU assets and operating lease liabilities upon adoption, which materially increased the total assets and total liabilities that we report relative to such amounts prior to adoption.

On adoption, we recognized additional operating liabilities, with corresponding ROU assets based on the present value of the remaining minimum rental payments under current leasing contracts for existing operating leases. In addition, existing capitalized initial direct costs and accrued lease payments were reclassified from prepayments and accruals to the ROU asset. There was no income statement or cash flow statement impact on adoption, nor were prior periods adjusted.

~~The effects of the changes made to our balance sheet at adoption were as follows (in thousands):~~

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on financial instruments, including available-for-sale debt securities, to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. ~~Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods.~~ The Company ~~is currently evaluating the impact of~~adopted this ASU ~~but does not expect a~~in the first quarter of fiscal year 2021, with no material impact to the financial ~~statements upon adoption.~~statements.

recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods. Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017, and should be applied prospectively. 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, but does not expect a material impact to the financial statements upon adoption.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU provides guidance on the accounting for implementation costs related to a cloud computing arrangement that is a service contract. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted this ASU in the first quarter of fiscal year 2021, with prospective application and no material impact to the financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321) - Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). This ASU clarifies the interaction of the accounting for equity securities, investments accounted for under the equity method of accounting, and the accounting for certain forward contracts and purchased options. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the financial statements upon adoption.

In ~~August 2018,~~March 2020, the ~~Commission adopted the final rule under SEC Release~~FASB issued ASU No. ~~33-10532,~~2020-04, ~~Disclosure Update and Simplification~~, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliationReference Rate Reform (Topic 848): Facilitation of the ~~beginning balance~~Effects of Reference Rate Reform on Financial Reporting. The ASU, effective immediately for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with a new alternative reference rate. The guidance is applicable to the ending balance of each period for which a statement of comprehensive income is required to be filed. The final rule was published in the Federal Register on October 4, 2018, effective November 5, 2018.investment securities, receivables, debt, leases, hedging relationships and other contractual arrangements. The Company adopted ~~the amendments~~this ASU in the first quarter of fiscal year ~~2020. See consolidated condensed statements of stockholders' equity.~~2021, with no material impact to the financial statements.

Results of Operations

Our fiscal year is the 52- or 53-week period ending on the last Saturday in March. Fiscal years ~~2020~~2021 and ~~2019~~2020 are both 52-week fiscal years.

The following table summarizes the results of our operations for the first three and six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively, as a percentage of net sales. All percentage amounts were calculated using the underlying data in thousands, unaudited:

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		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		September 28,		September 29,		September 28,		September 29,			September 26,		September 28,		September 26,		September 28,
		2019		2018		2019		2018			2020		2019		2020		2019
Net sales	Net sales	100	%	100	%	100	%	100	%	Net sales	100	%	100	%	100	%	100	%
Gross margin	Gross margin	53	%	51	%	53	%	50	%	Gross margin	52	%	53	%	52	%	53	%
Research and development	Research and development	23	%	27	%	29	%	31	%	Research and development	24	%	23	%	28	%	29	%
Selling, general and administrative	Selling, general and administrative	8	%	9	%	10	%	11	%	Selling, general and administrative	9	%	8	%	10	%	10	%
Restructuring costs										Restructuring costs	—	%	—	%	—	%	—	%

Income from operations	Income from operations	22	%	15	%	14	%	8	%	Income from operations	19	%	22	%	14	%	14	%
Interest income	Interest income	1	%	1	%	1	%	1	%	Interest income	—	%	1	%	1	%	1	%
Interest expense	Interest expense	—	%	—	%	—	%	—	%	Interest expense	—	%	—	%	—	%	—	%

Other income (expense)	Other income (expense)	—	%	—	%	—	%	—	%	Other income (expense)	—	%	—	%	—	%	—	%
Income before income taxes	Income before income taxes	23	%	16	%	15	%	9	%	Income before income taxes	19	%	23	%	15	%	15	%
Provision (benefit) for income taxes		3	%	—	%	2	%	—	%
Provision for income taxes										Provision for income taxes	2	%	3	%	2	%	2	%
Net income	Net income	20	%	16	%	13	%	9	%	Net income	17	%	20	%	13	%	13	%

໿

Net Sales

Net sales for the second quarter of fiscal year ~~2020 increased $22.6~~2021 decreased $41.6 million, or 611 percent, to ~~$388.9~~$347.3 million from ~~$366.3~~$388.9 million in the second quarter of fiscal year ~~2019.~~2020. Net sales from our portable products ~~increased $25.4~~decreased $36.5 million, primarily ~~due~~driven by a reduction in unit volumes for components shipping in smartphones and certain wired headset products, and, to ~~increased boosted amplifier~~a lesser extent, a decline in smart codec sales ~~predominantly at Android customers, along with increased sales of digital headsets~~in Android. This decline was partially offset by new content in smartphones, wearables and ~~haptic drivers.~~tablets. Non-portable and other product sales decreased ~~$2.8~~$5.1 million for the quarter versus the ~~comparable period in the prior~~first quarter of fiscal ~~year.~~year 2020.

Net sales for the first six months of fiscal year ~~2020 increased $6.4~~2021 decreased $37.3 million, or ~~1.0%~~6 percent, to ~~$627.2~~$589.9 million from ~~$620.8~~$627.2 million in the first six months of fiscal year ~~2019.~~2020. Net sales from our portable products ~~increased $16.0~~decreased $28.7 million, primarily due to ~~increased boosted amplifier sales, predominantly at Android customers, in addition~~lower wired headset volumes and, to ~~digital headsets and haptic drivers, offset in part by lower~~a lesser extent, smart codec ~~sales.~~sales in Android, offset by new content in smartphones, wearables and tablets. Non-portable and other product sales decreased ~~$9.6~~$8.5 million for the first six months of fiscal year ~~2020~~2021 versus the comparable period in the prior fiscal year.

Sales to non-U.S. customers, principally located in Asia, including sales to U.S.-based end customers that manufacture products through contract manufacturers or plants located overseas, were approximately 99 percent ~~and 98 percent~~ of net sales for each of the second ~~quarter~~quarters of fiscal years ~~2020~~2021 and ~~2019, respectively~~2020, and 99 percent ~~and 98 percent~~ for each of the first six ~~months~~month periods of fiscal years ~~2020~~2021 and ~~2019, respectively.~~2020. Our sales are denominated primarily in U.S. dollars.

Since the components we produce are largely proprietary, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may purchase our products directly from us, through distributors or third-party manufacturers contracted to produce their designs. For each of the second ~~quarter~~quarters of fiscal years ~~2020~~2021 and ~~2019,~~2020, our ten largest end customers represented approximately 94percent of our net sales. For each of thefirst six month periods of fiscal years 2021and 2020, our ten largest end customers represented approximately ~~94 percent and 92~~93 percent of our net ~~sales, respectively. For thefirst six~~

~~months of fiscal years 2020and 2019, our ten largest end customers represented approximately93 percent and 91percent of our net sales, respectively.~~sales.

We had one end customer, Apple Inc., that purchased through multiple contract manufacturers and represented approximately 8182 percent and 8281 percent, of the Company’s total net sales for the second ~~quarter~~quarters of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively and 7882 percent and 7978 percent for the first six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. Samsung represented 10 percent of the Company's total net sales for the first six months of fiscal year 2020.

No other end customer or distributor represented more than 10 percent of net sales for the three and six months ~~ending~~ended September ~~28, 2019~~26, 2020 or September ~~29, 2018.~~28, 2019.

For more information, please see Part II—Item 1A—Risk Factors— “We depend on a limited number of customers and distributors for a substantial portion of our sales, and the loss of, or a significant reduction in orders from, or pricing on products sold to, any key customer or distributor could significantly reduce our sales and our profitability.”

Gross Margin

Gross margin was 51.9 percent in the second quarter of fiscal year 2021, down from 53.5 percent in the second quarter of fiscal year ~~2020, up from 50.5 percent in the second quarter of fiscal year 2019.~~2020. The ~~increase~~decrease was primarily driven by ~~favorable~~a shift in product mix, ~~and to a lesser extent,~~which was offset by supply chain efficiencies, ~~and~~partially due to cost reductions ~~on certain products in~~associated with exiting the ~~current fiscal quarter versus the second quarter of fiscal year 2019.~~MEMS product line.

Gross margin was 52.2 percent for the first six months of fiscal year 2021, down from 52.7 percent for the first six months of fiscal year ~~2020, up from 49.9 percent for the first six months of fiscal year 2019.~~2020. The ~~increase~~decrease was primarily driven by ~~favorable~~a shift in product mix, ~~and lower reserve expense, and to a lesser extent,~~which was offset by supply chain efficiencies, ~~and~~partially due to cost reductions ~~on certain products, in~~associated with exiting the ~~first six months of fiscal year 2020 versus the first six months of fiscal year 2019.~~MEMS product line.

Research and Development Expense

Research and development expense for the second quarter of fiscal year ~~2020~~2021 was ~~$88.2~~$84.8 million, a decrease of ~~$8.2~~$3.4 million, ~~or 8.5 percent,~~ from ~~$96.4~~$88.2 million in the second quarter of fiscal year ~~2019.~~2020. The primary drivers were decreased amortization ofcosts associated with acquisition-related intangibles, reduced product development costs, and amortization and depreciation of non-acquisition-related intangibles, offset by increased ~~R&D incentives.~~employee-related expenses and stock-based compensation.

Research and development expense for the first six months of fiscal year ~~2020~~2021 was ~~$177.1~~$163.6 million, a decrease of ~~$17.2~~$13.5 million, ~~or 8.9% percent,~~ from ~~$194.3~~$177.1 million for the first six months of fiscal year ~~2019.~~2020. The primary drivers were decreased amortization ofcosts associated with acquisition-related intangibles, ~~increased R&D incentives and lower~~reduced product development costs, ~~partially~~amortization and depreciation of non-acquisition-related intangibles and facilities-related costs, offset by ~~increased employee-related costs, including~~increases in stock-based compensation and variable compensation ~~and higher facilities-related~~ costs.

Selling, General and Administrative Expense

Selling, general and administrative expense for the second quarter of fiscal year ~~2020~~2021 was ~~$33.0~~$31.2 million, a ~~slight~~ decrease of ~~$0.2~~$1.8 million, from ~~$33.2~~$33.0 million in the second quarter of fiscal year ~~2019.~~2020. The decrease was primarily driven by reduced employee-related expenses and variable compensation costs.

Selling, general and administrative expense for the first six months of fiscal year ~~2020~~2021 was ~~$62.5~~$61.0 million, a decrease of ~~$3.4~~$1.5 million, or~~5.2%percent,~~ from ~~$65.9~~$62.5 million for the first six months of fiscal year ~~2019,~~2020. The decrease was primarily ~~due to lower~~driven by reduced employee-related expenses, ~~facilities-related~~partially offset by increased maintenance and supplies costs.

Restructuring Costs

During the fourth quarter of fiscal year 2020, the Company approved the MEMS Restructuring, including discontinuing efforts relating to the MEMS microphone product line. The Company recorded charges of approximately $0.4 million in the first quarter of fiscal year 2021, which included equipment disposal costs and ~~professional fees.~~other nonrecurring costs. See Note 10 - Restructuring Costs for additional details.

Interest Income

The Company reported interest income of $1.7 million and $3.5 million, for the three and six months ended September 26, 2020, respectively, and $2.5 million and $5.1 million for the three and six months ended September 28, 2019, ~~respectively and $1.8 million and $3.5 million for the three and six months ended September 29, 2018,~~respectively. Interest income ~~increased~~decreased in the current ~~period~~periods due to ~~higher~~lower yields on ~~higher~~ average cash, cash equivalent and marketable securities balances, compared to the prior ~~period.~~periods.

Interest Expense

The Company reported interest expense of $0.3 million and $0.5 million for the three and six months ended September ~~28, 2019,~~26, 2020, respectively, and $0.3 million and $0.5 million for the three and six months ended and September ~~29, 2018,~~28, 2019, respectively. Interest expense consists primarily of unused commitment fees.

Other Income (Expense)

~~Other Expense~~

For the three and six months ended September ~~28, 2019,~~26, 2020, the Company reported $0.8 million and $0.9 million in other income, respectively, and $0.6 million and $0.9 million ~~respectively,~~ in other expense ~~and $0.4 million and $0.2 million~~ for the three and six months ended September ~~29, 2018,~~28, 2019, respectively, primarily related to remeasurement on foreign currency denominated monetary assets and liabilities.

Income Taxes

The following table presents the provision ~~(benefit)~~ for income taxes (in thousands) and the effective tax rates:


		Three Months Ended									Six Months Ended										Three Months Ended						Six Months Ended
		September 28,			September 29,			September 28,			September 29,				September 26,			September 28,			September 26,			September 28,
		2019			2018			2019			2018				2020			2019			2020			2019
Income before income taxes	Income before income taxes	$	88,358		$	56,725		$	94,409		$	52,225		Income before income taxes	$	66,315		$	88,358		$	86,677		$	94,409
Provision (benefit) for income taxes		$	12,148		$	(1,448)		$	13,581		$	(1,676)
Provision for income taxes														Provision for income taxes	$	6,829		$	12,148		$	8,982		$	13,581
Effective tax rate	Effective tax rate	13.7		%	(2.6)		%	14.4		%	(3.2)		%	Effective tax rate	10.3		%	13.7		%	10.4		%	14.4		%

Our income tax expense for the second quarter of fiscal year ~~2020~~2021 was ~~$12.1~~$6.8 million compared to ~~$1.4~~$12.1 million ~~of income tax benefit for the second quarter of fiscal year 2019, resulting in effective tax rates of 13.7% and (2.6)%~~ for the second quarter of fiscal year 2020, resulting in effective tax rates of 10.3% and ~~2019,~~13.7%, respectively. Our income tax expense for the first six months of fiscal year ~~2020~~2021 was ~~$13.6~~$9.0 million compared to ~~income tax benefit of $1.7~~$13.6 million for the second quarter of fiscal year 2020, resulting in effective tax rates of 10.4% and 14.4%, respectively. Our effective tax rates for the second quarter and first six months of fiscal year ~~2019, resulting~~2021 were lower than the federal statutory rate primarily due to the effect of income earned in ~~effective~~certain foreign jurisdictions that is taxed below the federal statutory rate and the remeasurement of previously unrecognized tax ~~rates of 14.4% and (3.2)%, respectively.~~

Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including outlays for inventory, capital expenditures, share repurchases, and strategic acquisitions. Our principal sources of liquidity are cash on hand, cash generated from operations, cash generated from the sale and maturity of marketable securities, and available borrowings under our $300 million senior secured revolving credit facility.

Cash generated by operating activities is net income adjusted for certain non-cash items and changes in working capital. Cash flow from operations was $~~117.8~~42.1 million for the first six months of fiscal year ~~2020~~2021 ~~as compared to $79.0~~versus $117.8 million for the corresponding period of fiscal year ~~2019.~~2020. The cash flow from operations during the first six months of fiscal year 2021 was related to the cash components of our net income and a $87.5 million unfavorable change in working capital, primarily as a result of increases in inventories and accounts receivable, partially offset by an increase in accounts payable. The cash flowfrom operations during the corresponding period of fiscal year 2020 was related to the cash components of our net income ~~offset by~~and a $25.0 million unfavorable change in working capital, primarily as a result of an increase in accounts receivable, partially offset by an increase in accounts payable and decrease in inventory.~~The cash flowfrom operations during the corresponding period of fiscal year 2019 was related to the cash components of our net income, offset by a $45.8 millionunfavorable change in working capital, primarily as a result of increases in accounts receivable, partially offset by decreases in inventories.~~

Net cash used in investing activities was $58.7 million during the first six months of fiscal year 2021 versus $44.2 million during the first six months of fiscal year ~~2020 as compared to $21.9 million used in investing activities during the first six months of fiscal year 2019.~~2020. The cash used in investing activities in the first six months of fiscal year 2021 is related to net purchases of marketable securities of $50.6 million and capital expenditures and technology investments

of $8.2 million. The cash used in investing activities in the corresponding period in fiscal year 2020 ~~is primarily~~was related to net purchases of marketable securities of $30.2 million and capital expenditures and technology investments of $14.1 million. The cash used in investing activities in the corresponding period in fiscal year 2019 was primarily related to capital expenditures and technology investments of $21.1 million and net purchases of marketable securities of $0.8 million.

Net cash used in financing activities was ~~$67.8~~$28.0 million during the first six months of fiscal year ~~2020. The cash used during the first six months of fiscal year 2020 was~~2021, primarily associated with stock repurchases during the period of ~~$70.0~~$30.0 million. The cash used in financing activities was ~~$96.8~~$67.8 million for the first six months of fiscal year ~~2019. The use of cash during the first six months of fiscal year 2019 was~~2020, primarily associated with stock repurchases during the period of ~~$95.0~~$70.0 million.

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, potential acquisitions of companies or technologies 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 Credit Facility will be sufficient to meet our capital requirements through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time.

Revolving Credit Facilities

As of September ~~28, 2019,~~26, 2020, the Company had no amounts outstanding under the Credit Facility and was in compliance with all covenants under the Credit Agreement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks associated with interest rates on our debt securities, currency movements on ~~non-U.S. dollar denominated~~non-functional currency assets and liabilities, and the effect of market factors on the value of our marketable securities. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. Beginning in the first quarter of fiscal year 2020, we began using forward contracts to manage exposure to foreign currency exchange risk attributable to ~~non-U.S. dollar~~certain non-functional currency balance sheet exposures. Gains and losses from these foreign currency forward contracts are recognized currently in earnings along with the gains and losses resulting from remeasuring the underlying exposures. For further description of our market risks, see “Part II – Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our fiscal year ~~2019~~2020 Annual Report on Form 10-K filed with the Commission on May ~~24, 2019.~~20, 2020. For related financial statement impact see Note 5 - Derivative Financial Instruments.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our chief executive officer (CEO) and chief financial officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and

15d-15(e) of the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures

are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Commission rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based upon the evaluation, our management, including our CEO and CFO, has concluded that our disclosure controls and procedures were effective as of September ~~28, 2019.~~26, 2020.

Changes in control over financial reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended September ~~28, 2019,~~26, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings to which the Company is a party is set forth in Note 13 – Legal Matters to our unaudited consolidated condensed financial statements and is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In evaluating all forward-looking statements, you should specifically consider risk factors that may cause actual results to vary from those contained in the forward-looking statements. Various risk factors associated with our business are included in our Annual Report on Form 10-K for the year ended March ~~30, 2019,~~28, 2020, as filed with the Commission on May ~~24, 2019,~~20, 2020, and available at www.sec.gov. Other than as set forth below, there have been no material changes to those risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March ~~30, 2019.~~28, 2020.

We face risks related to global health epidemics that could impact our sales, supply chain and operations, resulting in significantly reduced revenue and operating results.

On March 11, 2020, the World Health Organization declared a pandemic related to a novel coronavirus (now termed COVID-19). While we expect the impacts of COVID-19 to have an adverse effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time. The COVID-19 pandemic will likely heighten or exacerbate many of the other risks described in the risk factors listed in our filings with the Securities and Exchange Commission.

Although we have not experienced any significant disruptions to our supply chain in fiscal year 2021 to date, any increase in the severity of the outbreak or additional government measures restricting movement or business operations, could cause a disruption to our supply of products to our customers – particularly with respect to the manufacture of semiconductor wafers that would have to go through extensive qualification to relocate manufacturing to a different fabrication facility. Even if our suppliers and service providers are operational, other third-party suppliers may be closed or not fully operational, resulting in a shortage of some components needed for our products or our customers’ end products. Any disruption of our suppliers or customers and their contract manufacturers would likely impact our inventory, backlog, sales and operating results, as customers may cancel or reschedule orders on short notice. In addition, we have seen some reductions in commercial airline and cargo flights, and disruption to ports and other shipping infrastructure that resulted in increased transport times and costs, which, if those disruptions were to intensify, could affect our ability to timely deliver our products.

Although we have not experienced a significant reduction in our overall productivity during fiscal year 2021 to date, we have experienced, and expect to continue to experience, disruptions to our business operations resulting from remote work arrangements for the majority of our employees, the implementation of certain measures at our facilities worldwide to protect our employees’ health and safety, government stay-at-home directives, quarantines, self-isolations, travel restrictions, or other restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products in a timely manner, meet required milestones, or win new business. Any increased or additional disruptions to our business operations due to these restrictions would likely impact our ability to continue to maintain current levels of productivity.

In the longer term, the COVID-19 pandemic is likely to continue to adversely affect the economies and financial markets of many countries, leading to a global economic downturn and potentially a recession. This would also likely continue

to adversely affect the demand environment for our products and those of our customers, particularly consumer products such as smartphones, which may, in turn, negatively affect our revenue and operating results.

We depend on a limited number of customers and distributors for a substantial portion of our sales, and the loss of, or a significant reduction in orders from, or pricing on products sold to, any key customer or distributor could significantly reduce our sales and our profitability.

While we generate sales from a broad base of customers worldwide, the loss of any of our key customers, or a significant reduction in sales or selling prices to any key customer, or reductions in selling prices made to retain key customer relationships, would significantly reduce our revenue, margins and earnings and adversely affect our business. For each of the second ~~quarter~~quarters of fiscal years ~~2020~~2021 and ~~2019,~~2020, our ten largest end customers represented approximately94 ~~percent and 92~~ percent of our net sales, respectively. For each of the first six ~~months~~month periods of fiscal years ~~2020~~2021 and ~~2019,~~2020, our ten largest end customers represented approximately93 ~~percent and 91~~ percent of our net sales, respectively. We had one end customer, Apple Inc., that purchased through multiple contract manufacturers and represented approximately ~~approximately 81~~82 percent and 8281 percent of the Company’s total net sales for the second quarter of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively, and 7882 percent and 7978 percent ~~of the Company’s totalnetsales~~ for the first six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. Samsung represented 10 percent of the Company's total net sales for the first six months of fiscal year 2020. No other end customer or distributor represented more than 10 percent of net sales for the three and six months ~~ending~~ended September 26, 2020, or September 28, ~~2019, or September 29, 2018.~~2019.

We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:

•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;

•many of our customers have sufficient resources to internally develop technology solutions and semiconductor components that could replace the products that we currently supply in our customers' end 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.

In addition, our dependence on a limited number of key customers may make it easier for key customers to pressure us to reduce the prices of the products we sell to them. We have experienced pricing pressure from certain key customers, and we expect that the average selling prices for certain of our products will decline, reducing our revenue, our margins, and our earnings.

Our key customer relationships often require us to develop new products that may involve significant technological challenges. Our customers frequently place considerable pressure on us to meet their tight development schedules. In addition, we may from time to time enter into customer agreements providing for exclusivity periods during which we may only sell specified products or technologies to that customer. Even without exclusivity periods, the products that we develop are often specific to our customer's system architecture and frequently cannot be sold to other customers. Accordingly, we may have to devote a substantial amount of resources to strategic relationships, which could detract from or delay our completion of other important development projects or the development of next generation products and technologies.

~~Although we~~Moreover, our reliance on certain customers may continue to ~~evaluate options~~increase, which could heighten the risks associated with having key customers, including making us more vulnerable to significant reductions in revenue, margins and earnings, pricing pressure, and other adverse effects on our business.

If we fail to attract, hire and retain qualified personnel, we may not be able to develop, market, or sell our products or successfully manage our business.

Competition for highly qualified personnel in our ~~remaining MEMS microphone efforts,~~industry, particularly for employees with technical backgrounds, is intense. The number of technology companies in the geographic areas in which we operate is greater than it has been

historically and we expect competition for qualified personnel to intensify because there is only a limited number of individuals in the job market with the requisite skills.

In addition, there is a risk that changes in immigration laws and regulations, or the administration or enforcement of such laws or regulations, can also impair our ability to attract and retain qualified engineering personnel. In the United States, where the majority of our research and development teams are located, future tightening of immigration controls may adversely affect the employment status of non-U.S. engineers and other key technical employees or further impact our ability to hire new non-U.S. employees. Moreover, recent changes to existing immigration policies in the United States may make it more difficult for us to recruit and retain highly skilled foreign national graduates of universities in the United States, additionally limiting the pool of available talent. In the U.K., where we maintain several design centers, anticipated changes to the immigration system brought about by Brexit will likely make it more difficult to employ E.U. nationals to work in the U.K., also limiting our ability to attract and retain qualified technical personnel.

There are significant costs to the Company associated with attracting and retaining qualified personnel in key technology positions. The loss of the services of key personnel or our inability to hire new personnel with the requisite skills or to assimilate talent could restrict our ability to develop new products or enhance existing products in a timely manner, sell products to our customers, or manage our business effectively.

If we do not successfully manage the transition associated with our new Chief Executive Officer, it could be ~~successful with these efforts~~viewed negatively by our customers and ~~may have additional expenses or impairment charges that~~shareholders and could have ~~a material~~an adverse ~~effect~~impact on our ~~financial results.~~business.

On October 30, 2020, our Board of Directors appointed John Forsyth, who was then Cirrus Logic’s President, to succeed Jason Rhode as Chief Executive Officer effective January 1, 2021. Leadership transitions can be inherently difficult to manage, and an inadequate transition of our CEO may cause disruption to our business, including our relationships with customers and employees. If we do not successfully manage our CEO transition, it could be viewed negatively by our customers and shareholders and could have an adverse impact on our business.

System security risks, data protection breaches, cyber-attacks and other related cyber security issues could disrupt our internal operations and/or supply chain, and any such disruption could increase our expenses, damage our reputation and adversely affect our stock price.

Security measures at Cirrus Logic and/or within our manufacturing and supply chain are subject to third- party security breaches, employee error, malfeasance, faulty password management, and other irregularities. We manage and store various proprietary information and sensitive or confidential data relating to our business. In addition, we manage and store a significant amount of proprietary and sensitive or confidential information from third parties, such as our customers. Hackers may be able to penetrate our security controls and misappropriate or compromise such confidential information, create system disruptions or cause shutdowns. Hackers also may be able to develop and deploy viruses, worms, phishing attempts, ransomware and other malicious software programs that attack our websites, computer systems, access to critical information, products or otherwise exploit any security vulnerabilities. This risk may be heightened when our employees are working remotely.

Our development and sale of security-related products, such as user authentication solutions, may make us a particularly attractive target of cyber-attacks. Sophisticated individuals or entities acting maliciously may attempt to penetrate our networks in an effort to undermine or disclose information related to the design and security of our user authentication products. Any failure to prevent or mitigate security breaches and improper access to the algorithms, techniques, or authentication keys used in our user authentication solution could harm our business reputation, diminish our competitive position in that market, and expose us to significant expense and liability associated with a customer’s implementation of our solution.

The ~~MEMS microphone market is a competitive market characterized by customers who frequently source components for their end products from multiple suppliers~~costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, phishing attempts, ransomware, malicious software programs and ~~by historically lower gross margins than~~security vulnerabilities could be significant, and our existing product lines. In addition, the development and production of MEMS microphones involves different manufacturing technologies, materials, and processes than our traditional semiconductor businesses. Therefore, our investment in new markets in which we have limited experience in high volume manufacturing in those markets increases risks relatedefforts to ~~technology, customers, competitors, and other industry specific issues. Further, we~~address these problems may not be successful ~~in this market or we may incur costs in excess of what we anticipate, which~~and could result in ~~lower gross margins and/~~interruptions, delays, an inability to access critical information, cessation of service and loss of existing or ~~profitability than~~potential customers that may impede our ~~existing product lines.~~sales, manufacturing, distribution or other critical functions.

~~These risks are further compounded by~~Any breach of our ~~recent decision to reallocate~~security measures or the loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers, including the potential loss or disclosure of such information or data as a ~~significant percentage~~result of the engineering resources from our MEMS microphone efforts to projects that we expect to have a larger return on investment. We are evaluating options related to our MEMS microphone efforts and we expect to be able to provide an update on those efforts in the January timeframe. There can be no assurance that we will be successful with these efforts, which mayransomware, fraud, trickery or other forms of deception, could result in ~~expenses~~litigation and potential liability for us, damage our brand and reputation or ~~impairment charges that could have a material adverse effect on~~otherwise harm our financial results. We currently have approximately $30 million dollars of assets, including equipment and intangible assets associated with our MEMS microphone efforts. Although these assets are not impaired at this time, a material charge for impairment or disposition of these assets could be required in the future.business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the three months ended September ~~28, 2019~~26, 2020 (in thousands, except per share amounts):

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 30, 2019 - July 27, 2019 — $ — — $ —
July 28, 2019 - August 24, 2019 371 53.87 371 180,003
August 25, 2019 - September 28, 2019 188 53.19 188 170,001
Total 559 $ 53.64 559 $ 170,001


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	Approximately Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
June 28, 2020 - July 25, 2020	—	$	—	—	$	—
July 26, 2020 - August 22, 2020	311	64.41		311	100,001
August 23, 2020 - September 26, 2020	165	60.54		165	90,000
Total	476	$	63.06	476	$	90,000

(1) The Company currently has one active share repurchase program, the $200 million share repurchase program authorized by the Board of Directors in January 2019. ~~The repurchased shares reported above include an immaterial amount of shares that closed out the Company's 2018 share repurchase program.~~ The repurchases are to be funded from existing cash and intended to be effected from time to time in accordance with applicable securities laws through the open market or in privately negotiated transactions. The timing of the repurchases and the actual amount purchased depend on a variety of factors including general market and economic conditions and other corporate considerations. The program does not have an expiration date, does not obligate the Company to repurchase any

particular amount of common stock, and may be modified or suspended at any time at the Company's discretion. The Company repurchased ~~0.6~~0.5 million shares of its common stock for ~~$30~~$30 million during the second quarter of fiscal year ~~2019~~. 2021. 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 ~~28, 2019.~~26, 2020.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of or incorporated by reference into this Report:

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3.1		Certificate of Incorporation of Registrant, filed with the Delaware Secretary of State on August 26, 1998. (1)
3.2		Amended and Restated Bylaws of Registrant. (2)
31.1		Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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~~January 29, 2020 (Registration No. 000-17795).

The exhibits required to be filed pursuant to the requirements of Item 601 of Regulation S-K are set forth in the Exhibit Index list noted above and are incorporated herein by reference.

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CIRRUS LOGIC, INC.

Date:

~~October 30, 2019~~November 2, 2020

/s/ Thurman K. Case

Thurman K. Case

Vice President, Chief Financial Officer and Principal Accounting Officer


	Balance at March 30, 2019		Impact from ASU 2016-02 Adoption		Balance at March 31, 2019
Financial statement line item:
Prepaid assets	$	30,794	$	(2,833)	$	27,961
Right-of-use lease assets	—		149,746		149,746
Lease liabilities	—		(14,899)		(14,899)
Other accrued liabilities	(16,339)		11,071		(5,268)
Non-current lease liabilities	—		(143,085)		(143,085)
Other long-term liabilities	(9,889)		(965)		(10,854)
Accumulated deficit	(222,430)		965		(221,465)


Fiscal Year	Operating Lease Expense		Operating Lease Income
2020	$	7,092	$	561
2021	13,743		1,322
2022	13,253		1,356
2023	12,649		535
2024	12,387		264
Thereafter	161,044		338
Total	$	220,168	$	4,376
Less imputed interest	(73,312)		—
Total	$	146,856	$	4,376