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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-86561
1,210,228 SHARES
CIRRUS LOGIC, INC.
COMMON STOCK
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This Prospectus relates to the public offering, which is not being
underwritten, of 1,210,228 shares (the "Shares") of Common Stock, $0.001 par
value (the "Common Stock") of Cirrus Logic, Inc. (the "Company"). The Shares
are outstanding shares of Company Common Stock that may be sold from time to
time by or on behalf of certain stockholders of the Company or by pledges,
donees, transferees or other successors in interest that receive such Shares
as a gift, distribution or other non-sale related transfer (the "Selling
Stockholders"). The Selling Stockholders acquired the Shares in a private
transaction in which the Company acquired AudioLogic, Inc., a corporation duly
organized and existing under the laws of Colorado ("AudioLogic").
The Shares may be offered by the Selling Stockholders from time to time in
transactions on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular broker-
dealer might be in excess of customary commissions). See "Selling Stockholders"
and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. In addition, the Company has agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
On September 17, 1999, the closing bid price of the Company's Common
Stock on the Nasdaq National Market was $11.75 per share. The Common Stock is
traded under the Nasdaq symbol "CRUS."
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The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 18, 1999
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files or filed, as the case may be, reports,
proxy statements and other information with the Securities & Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
with the Commission by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 500
West Madison Street, Room 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, Washington, D.C. 20549, at prescribed rates, or on the World Wide Web at
http://www.sec.gov. Copies of other materials concerning the Company can be
inspected at the offices of the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20006.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
000-17795) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended March 27,
1999;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended June
26, 1999;
3. The Company's Current Reports on Form 8-K filed on August 3, 1999
and September 3, 1999; and
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed on May 1, 1989, including any
amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus but prior to
the termination of the offering to which this Prospectus relates shall be deemed
to be incorporated by reference in this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, in its unmodified form, to constitute a part of this
Prospectus.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of this Prospectus is delivered a copy of any of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Requests for such documents should be submitted to Glenn Jones,
Secretary, at the principal executive offices of the Company in writing at
Cirrus Logic, Inc., 3100 W. Warren Ave., Fremont, California 94538 or by
telephone at (510) 623-8300.
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FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements that involve risks and uncertainties. The
statements contained in this Prospectus or incorporated by reference herein that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document or incorporated by reference herein are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth in
"Risk Factors" and elsewhere in this Prospectus.
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THE COMPANY
The Company designs and manufactures integrated circuits that employ
precision linear and advanced mixed-signal processing technologies. The
Company's products, sold under its own name and the Crystal product brand,
enable system-level applications in mass storage (magnetic and optical), audio
(consumer, professional and personal computer) and precision data conversion
(industrial and communications).
The Company serves a broad customer base in the markets of mass storage,
industrial, and audio markets. Key customers among these markets include Acer,
Analogic, Apple, Chesapeake Sciences, Dell, ECI Telecom, Fujitsu, Hewlett
Packard, Hitachi, IBM, Intel, JVC, Nokia, Scientific Atlanta, Seagate, Sony and
Western Digital.
The Company targets large existing markets, as well as emerging markets
that derive value from the Company's expertise in advanced mixed-signal
processing, embedded processors and application-specific algorithms. The
Company applies its analog, digital, and mixed-signal design capabilities,
systems-level engineering and software expertise to create highly integrated
solutions that enable its customers to differentiate their products and reduce
their time to market. These solutions are implemented primarily in Integrated
Circuits (ICs) and related software, but may also include subsystem modules or
system equipment designs and related software.
Within the major markets currently served, represented by mass storage,
audio and industrial electronics, the Company's products address key system-
level applications including magnetic and optical mass storage, consumer audio
and industrial measurement and control, and to a lesser extent product areas
addressing multimedia (graphic, video, and audio), wide area and local area
networking, handheld and portable computing and communication devices.
In the second quarter of fiscal 1999, the Company launched a major
initiative to refine its business strategy and revitalize growth through
concentration on its leadership positions in embedded applications for mass
storage, audio and precision data conversion markets. This initiative included
the phasing out of certain non-profitable and non-strategic businesses along
with reducing the Company's total fixed wafer fabrication capacity by
approximately 70%. The Company has since divested its Communications and PC
Modems businesses in addition to outsourcing its PC graphics support. Further,
the Company's future direction is to de-emphasize new product developments
targeted primarily for the PC motherboard and emphasize non-PC motherboard
market opportunities in mass storage, audio and precision data conversion.
However, sales of many of the Company's products will continue to depend
largely on the sales of PCs.
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During the first quarter of fiscal 2000, the Company substantially
completed the remaining restructuring activities previously announced in the
second quarter of fiscal 1999. The Company finalized negotiations with
International Business Machines Corporation ("IBM") to restructure the Company's
interest in the MiCRUS joint venture and also finalized negotiations with Lucent
Technologies, Inc. ("Lucent") to terminate the Company's interest in the Cirent
joint venture.
The Company was reincorporated in the state of Delaware on February 17,
1999. Prior to this date, the Company had been incorporated in California since
February 3, 1984, as the successor to a research corporation which had been
incorporated in Utah in 1981. The Company's principal executive offices are
located at 3100 W. Warren Ave., Fremont, California 94538. Its telephone number
at that address is (510) 623-8300.
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RISK FACTORS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements that involve risks and uncertainties. The
statements contained in this Prospectus or incorporated by reference herein that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document or incorporated by reference herein are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth in
"Risk Factors" and elsewhere in this Prospectus.
Variability of Quarterly Operating Results. The Company's quarterly
revenues and operating results have varied significantly in the past and are
likely to vary substantially from quarter to quarter in the future. The
Company's operating results are affected by a wide variety of factors, many of
which are outside of the Company's control, including but not limited to,
economic conditions and overall market demand in the United States and
worldwide, the Company's ability to introduce new products and technologies on a
timely basis, changes in product mix, fluctuations in manufacturing costs which
affect the Company's gross margins, declines in market demand for the Company's
and its customers' products, sales timing, the level of orders which are
received and can be shipped in a quarter, the cyclical nature of both the
semiconductor industry and the markets addressed by the Company's products,
product obsolescence, price erosion, and competitive factors. The Company's
operating results in the rest of fiscal 2000 are likely to be affected by these
factors as well as others.
The Company must order wafers and build inventory well in advance of
product shipments. Because the Company's markets are volatile and subject to
rapid technology and price changes, there is a risk that the Company will
forecast inaccurately and produce excess or insufficient inventories of
particular products. This inventory risk is heightened because many of the
Company's customers place orders with short lead times. Such inventory
imbalances have occurred in the past and in fact contributed significantly to
the Company's operating losses in fiscal 1997 and 1996. These factors increase
not only the inventory risk but also the difficulty of forecasting quarterly
operating results. Moreover, as is common in the semiconductor industry, the
Company frequently ships more products in the third month of each quarter than
in either of the first two months of the quarter, and shipments in the third
month are higher at the end of that month. The concentration of sales in the
last month of the quarter contributes to difficulty in predicting the Company's
quarterly revenues and results of operations. The Company's success is highly
dependent upon its ability to develop complex new products, to introduce them to
the marketplace ahead of the competition, and to have them selected for design
into products of leading system manufacturers. Both revenues and margins may be
affected significantly if new product introductions are delayed or if the
Company's products are not designed into successive generations of products of
the Company's customers. These factors have become increasingly important to the
Company's results of operations because the rate of change in the markets served
by the Company continues to accelerate.
Risks Related to Manufacturing and Raw Materials Procurement. During fiscal
1998 and fiscal 1999, excess production capacity in the industry led to
significant price competition between merchant semiconductor foundries and the
Company believes that in some cases this resulted in pricing from certain
foundries that was lower than the Company's cost of production from its
manufacturing joint ventures. The Company experienced pressures on its selling
prices during fiscal 1998 and fiscal 1999, which had a negative impact on its
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results of operations and it believes that this was partially due to the fact
that certain of its competitors were able to obtain more favorable pricing from
such foundries.
The Company's current strategy is to fulfill its wafer requirements using
outside merchant wafer suppliers, including the Company's former joint venture
partners. The Company also uses other outside vendors to package the wafer die
into integrated circuits and to perform the majority of the Company's product
testing.
The Company's results of operations could be adversely affected in the
future, as they have been so affected in the past, if particular suppliers are
unable to provide a sufficient and timely supply of product, whether because of
raw material shortages, capacity constraints, unexpected disruptions at the
plants, delays in qualifying new suppliers or other reasons, or if the Company
is forced to purchase wafers or packaging from higher cost suppliers or to pay
expediting charges to obtain additional supply, or if the Company's test
facilities are disrupted for an extended period of time. Because of the
concentration of sales at the end of each quarter, a disruption in the Company's
production or shipping near the end of a quarter could materially reduce the
Company's revenues for that quarter. Production may be constrained even though
capacity is available at one or more wafer manufacturing facilities because of
the difficulty of moving production from one facility to another. Any supply
shortage could adversely affect sales and operating profits. The Company's
reliance upon outside vendors for assembly and test could also adversely impact
sales and operating profits if the Company was unable to secure sufficient
access to the services of these outside vendors.
In connection with the financing of its operations, the Company has
borrowed money and entered into substantial equipment lease obligations. The
Company's ability to meet its debt service and other obligations will be
dependent upon the Company's future performance, which will be subject to
financial, business, and other factors affecting the operations of the Company,
many of which are beyond its control.
Product development in the Company's markets is becoming more focused on
the integration of functionality on individual devices and there is a general
trend towards increasingly complex products. The greater integration of
functions and complexity of operations of the Company's products increase the
risk that latent defects or subtle faults could be discovered by customers or
end users after volumes of product have been shipped. If such defects were
significant, the Company could incur material recall and replacement costs for
product warranty. The Company's relationship with customers could also be
adversely impacted by the recurrence of significant defects.
Dependence on PC Market. Sales of many of the Company's products will
continue to depend largely on sales of personal computers (PCs). Reduced growth
in the PC market could affect the financial health of the Company as well as its
customers. Moreover, as a component supplier to PC OEMs and to peripheral
device manufacturers, the Company is likely to experience a greater magnitude of
fluctuations in demand than the Company's customers themselves experience. In
addition, many of the Company's products are used in PCs for the consumer
market, and the consumer PC market is more volatile than other segments of the
PC market.
Other integrated circuit (IC) makers, including Intel Corporation, have
expressed their interest in integrating through hardware functions, adding
through special software functions, or kitting components to provide some
multimedia or communications features into or with their microprocessor
products. Successful integration of these functions could substantially reduce
the Company's opportunities for IC sales in these areas. In addition, the
Company's de-emphasis of PC products and its focus on non-PC markets could have
an adverse affect on the Company's PC product sales as customers seek other
supply sources with greater commitments to the PC market.
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A number of PC OEMs buy products directly from the Company and also buy
motherboards, add-in boards or modules from suppliers who in turn buy products
from the Company. Accordingly, a significant portion of the Company's sales may
depend directly or indirectly on the sales to a particular PC OEM. Since the
Company cannot track sales by motherboard, add-in board or module manufacturer,
the Company may not be fully informed as to the extent or even the fact of its
indirect dependence on any particular PC OEM, and, therefore, may be unable to
assess the risks of such indirect dependence.
Risks Related to Mass Storage Market. The mass storage market has
historically been characterized by a relatively small number of magnetic disk
drive manufacturers and by periods of rapid growth followed by periods of
oversupply and contraction. Growth in the mass storage market is directly
affected by growth in the PC market. Furthermore, the price competitive nature
of the disk drive industry continues to put pressure on the price of all disk
drive components. Recent market demands for sub-$1,000 PCs puts further
pressure on the price of disk drives and disk drive components.
Revenues from mass storage products in fiscal 2000 are likely to depend
heavily on the success of certain 3.5 inch magnetic disk drive products selected
for use by various customers, which in turn depends upon obtaining timely
customer qualification of the new products and bringing the products into volume
production timely and cost effectively.
The Company's revenues from mass storage products are dependent on the
successful introduction by its customers of new disk drive products and can be
impacted by the timing of customers' transition to new disk drive products.
Recent efforts by certain of the Company's customers to develop their own ICs
for mass storage products could in the future reduce demand for the Company's
mass storage products, which could have an adverse effect on the Company's
revenues and gross margins from such products. In addition, in response to the
current market trend towards integrating hard disk controllers with
microcontrollers, the Company's revenues and gross margins from its mass storage
products will be dependent on the Company's ability to introduce such integrated
products in a commercially competitive manner. Finally, while the Company
believes it is well positioned for the trend toward integration of HDD
electronic components with the first product on the market to combine the three
primary electronic components, some of the Company's competitors have also
announced plans to introduce integrated drive electronics components. Some of
these competitors have substantially greater resources to accomplish the
technical obstacles of integration and greater access to the advanced
technologies necessary to provide integrated HDD electronic components.
Risks Related to Audio Products. Most of the Company's revenues in the
audio market derive from the sales of audio codecs and integrated 16-bit codec-
plus-controller solutions for the PC market and consumer electronics equipment.
In the PC market, the transition to the AC-link codecs attached to core logic
using the multimedia features of the processor and single chip solutions are
lowering the average selling price in the audio IC market. The Company's
revenues from the sale of PC audio products in fiscal 2000 are likely to be
significantly affected by this transition to core logic connected audio and by
the introduction of cost reduced, fully-integrated, single- chip audio ICs.
Moreover, aggressive competitive pricing pressures have adversely affected and
may continue to adversely affect the Company's revenues and gross margins from
the sale of audio ICs.
Three-dimensional, spatial-effects audio became an important feature in
fiscal 1999, primarily in products for the consumer electronics marketplace. If
the Company's spatial-effects audio products do not meet the cost or performance
requirements of the market, revenues from the sale of audio products could be
adversely affected.
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Risks Related to Precision Mixed-Signal Products. Precision Data Converter
Products is a very broad market with many well established competitors. The
Company's ability to compete in this market will be adversely affected if it
cannot establish broad sales channels or if it does not develop and maintain a
broad enough product line to compete effectively. In addition, the customer
product design in time is long. Customer delays in product development and
introductions creates risk relative to the Company's revenue plans. Further,
the Company's products in this market are technically very complex. The
complexity of the products contributes to risks in getting products to market on
a timely basis, which could impact the Company's revenue plans. The scarcity of
analog engineering talent also contributes to risks related to product
development timing in this market.
Intellectual Property Matters. The semiconductor industry is characterized
by frequent litigation regarding patent and other intellectual property rights.
The Company and certain of its customers from time to time have been notified
that they may be infringing certain patents and other intellectual property
rights of others. In addition, customers have been named in suits alleging
infringement of patents or other intellectual property rights by customer
products. Certain components of these products have been purchased from the
Company and may be subject to indemnification provisions made by the Company to
its customers. Although licenses are generally offered in situations where the
Company or its customers are named in suits alleging infringement of patents or
other intellectual property rights, there can be no assurance that any licenses
or other rights can be obtained on acceptable terms. An unfavorable outcome
occurring in any such suit could have an adverse effect on the Company's future
operations and/or liquidity.
Foreign Operations and Markets. Because many of the Company's
subcontractors and several of the Company's key customers which collectively
account for a significant percentage of the Company's revenues are located in
Japan and other Asian countries, the Company's business is subject to risks
associated with many factors beyond its control. International operations and
sales may be subject to political and economic risks, including political
instability, currency controls, exchange rate fluctuations, and changes in
import/export regulations, tariff and freight rates. Although the Company buys
hedging instruments to reduce its exposure to currency exchange rate
fluctuations, the Company's competitive position can be affected by the exchange
rate of the U.S. dollar against other currencies, particularly the Japanese yen.
Further, to the extent that volatility in foreign financial markets was to have
an adverse impact on economic conditions in a country or geographic region in
which the Company does business, demand for and supply of the Company's products
could be adversely impacted, which would have a negative impact on the Company's
revenues and earnings.
A significant number of the Company's customers and suppliers are in Asia.
The recent turmoil in the Asian financial markets does not appear to have had a
material impact on the Company's sales orders or bookings. However, the
financial instability in these regions may have an adverse impact on the
financial position of end users in the region which could impact future orders
and/or the ability of such users to pay the Company or the Company's customers,
which could also impact the ability of such customers to pay the Company. The
Company performs extensive financial due diligence on customers and potential
customers and generally requires material sales to Asia to either be secured by
letters of credit or transacted on a cash on demand basis. Given the prior
situation in Asia, the Company now requires that the letters of credit be
established through American banking institutions. During this volatile period,
the Company expects to carefully evaluate the collection risk related to the
financial position of customers and potential customers. The results of such
evaluations will be considered in structuring the terms of sale, in determining
whether to accept sales orders, in evaluating the recognition of revenue on
sales in the area and in evaluating the collectability of outstanding accounts
receivable from the region. In situations where significant collection risk
exists, the Company will either not accept the sales order, defer the
recognition of related revenues, or, in the case of previously transacted sales,
establish appropriate bad debt reserves. Despite these precautions, should the
volatility in Asia have a material adverse impact on the financial position of
end users of the
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customers products in Asia, the Company could experience a material adverse
impact on its results of operations.
Competition. The Company's business is intensely competitive and is
characterized by new product cycles, price erosion, and rapid technological
change and new companies entering the markets. Competition typically occurs at
the design stage, where the customer evaluates alternative design approaches
that require integrated circuits. Because of shortened product life cycles and
even shorter design-in cycles, the Company's competitors have increasingly
frequent opportunities to achieve design wins in next generation systems. In
the event that competitors succeed in supplanting the Company's products, the
Company's market share may not be sustainable and net sales, gross margin, and
results of operations would be adversely affected. Competitors include major
domestic and international companies, many of which have substantially greater
financial and other resources than the Company with which to pursue engineering,
manufacturing, marketing and distribution of their products. Emerging companies
are also increasing their participation in the market, as well as customers who
develop their own integrated circuit products. Competitors include manufacturers
of standard semiconductors, application-specific integrated circuits and fully
customized integrated circuits, including both chip and board-level products.
The ability of the Company to compete successfully in the rapidly evolving area
of high- performance integrated circuit technology depends significantly on
factors both within and outside of its control, including, but not limited to,
success in designing, manufacturing and marketing new products, wafer supply,
protection of Company products by effective utilization of intellectual property
laws, product quality, reliability, ease of use, price, diversity of product
line, efficiency of production, the pace at which customers incorporate the
Company's integrated circuits into their products, success of the customers'
products, and general economic conditions. Also the Company's future success
depends, in part, upon the continued service of its key engineering, marketing,
sales, manufacturing, support, and executive personnel, and on its ability to
continue to attract, retain, and motivate qualified personnel. The competition
for such employees is intense, and the loss of the services of one or more of
these key personnel could adversely affect the Company. Because of these and
other factors, past results may not be a useful predictor of future results.
Impact of Year 2000. The "Year 2000 Issue" is the result of computer
programs being written using two digits rather than four to define the
applicable year. If the Company's computer programs with date-sensitive
functions are not Year 2000 compliant, they may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing incorrect reporting and disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The issue spans
both information technology and non-information technology systems that use date
data. In addition to the Company's own systems, the Company relies, directly
and indirectly, on external systems of its customers, suppliers, creditors,
financial organizations, utilities providers and government entities, both
domestic and international ("Third Parties").
The Company currently has a project plan in place to address the Year 2000
Issue with its internal systems and Third Parties which is designed to deal with
its most critical systems and processes first. Those identified as "mission
critical" are systems and/or processes whose failure would cause a material
impact on the Company's operations and financial statements. The project plan
includes the identification, assessment, testing, remediation/validation and the
development of contingency plans of the Company's Year 2000 issues primarily
through the use of internal personnel. In addition, the Company has engaged the
services of external consultants to provide Year 2000 progress assessment of the
Company's efforts. The external consultants review the Company's activities
regarding Year 2000 readiness and provide recommendations designed to improve
the Company's Year 2000 readiness.
In the third quarter of calendar year 1996, the Company began a program to
replace mission-critical internal business systems. The decision to purchase
software to replace these systems was made primarily in
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order to meet the Company's future business requirements, which included
consideration of Year 2000 Issues. The Company is currently in the process of
installing software licensed from SAP America, Inc. The first phase of this
project was completed in June 1998 and included finance, sales and logistics.
The second phase of the project includes a human resource system completed in
June of this year and manufacturing, estimated to complete in October of this
year. This multi-phased implementation is expected to cover all major internal
business systems used by the Company. While Year 2000 compliance is an important
software feature the Company considered when purchasing the software
replacement, the Company's decision to replace mission critical business systems
was primarily to make important functional improvements necessary to remain
competitive in the current business environment. Therefore, the Company has not
allocated a portion of the total project cost as a Year 2000 Issue. The Company
does not believe that any incremental project costs associated with Year 2000
compliance to be material, as this feature was included with the software
purchased by the Company to satisfy its business needs. The Company presently
believes that with the installation of this software into its internal business
systems, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company. Therefore, the Company has completed a
plan to remediate the existing manufacturing system as part of a company wide
contingency plan.
To date, 99.5% of the Company's products have been tested and found to be
Year 2000 compliant. A list of compliant products is available on the Company's
web site (www.cirrus.com). The Company considers a product or system to be Year
2000 compliant if the date/time data is accurately processed (included, but not
limited to, calculating, comparing, and sequencing) from, into and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 along with
leap year calculations. To date, the Company has not identified any non-
compliant products and therefore, no material costs have been incurred with
respect to remediation. The Company believes that it is unlikely to experience
a material adverse impact on its financial condition or results of operations
due to product related Year 2000 compliance issues. However, since the
assessment process is ongoing, Year 2000 implications are not fully known, and
potential liability issues are not clear. Therefore, the full potential impact
of the Year 2000 on the Company is not known at this time.
Another consequence related to the Company's products is the impact upon
the Company's ability to ship to or collect payment from customers who
themselves have business operational problems as a result of the Year 2000
Issue. Although the Company believes that it is unlikely to experience a
material adverse impact on its financial conditions or results of operations due
to customer-related problems, the Company could experience such an impact if any
of its major customers or a large number of its other customers suffer a
material disruption in their ability to accept or pay for the Company's product
shipments.
The Company's project plan also includes a comprehensive program to assess
the Year 2000 compliance of its key suppliers. The Company has initiated formal
communications with its significant suppliers and financial institutions to
determine the extent to which the Company is vulnerable to those Third Parties
who fail to remedy their own Year 2000 Issues. As of June 1999, the Company has
contacted its significant suppliers and financial institutions and has received
assurances of Year 2000 compliance from a number of those contacted. To date
the Company has received responses to its initial inquiries from 100% of its
mission critical suppliers. However, some of these suppliers are still in the
process of completing their work on the Year 2000 Issues and failure of these
mission critical suppliers to be compliant would result in manufacturing
shutdowns for a certain period of time. The Company is currently taking steps
to assess whether these suppliers are taking all the appropriate actions to fix
any Year 2000 Issues they might have and to be prepared to continue functioning
effectively as a supplier to the Company. However, as there can be no guarantee
that the Company's suppliers will be Year 2000 compliant prior to the
millennium, many significant suppliers have been second sourced and most
contingency plans have been developed during the first calendar quarter of 1999.
This process was completed in the second calendar quarter of 1999. Contingency
plans
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<PAGE>
related to mission critical suppliers that are not considered to be making
adequate steps to ensure Year 2000 compliance consist of the identification of
substitutes and second-source suppliers, and in certain situations includes a
planned increase in the level of inventory carried. No material cost related to
Year 2000 compliance of Third Parties has been incurred to date. The Company
believes that its reasonably most likely worst case Year 2000 scenario would
involve problems with the systems of its Third Parties rather than with the
Company's internal systems or its products. However, based upon information
communicated to the Company from Third Parties, management believes that it is
unlikely to experience a material adverse impact due to problems related to
Third Parties and expects that the cost of these projects over the next two
years will not have a material effect on the Company's financial position or
overall trends in results of operations.
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<PAGE>
SELLING STOCKHOLDERS
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owned or had the right to acquire as of
July 27, 1999. Because the Selling Stockholders may offer all or some of the
Shares which they hold pursuant to the offering contemplated by this Prospectus,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the Shares, no estimate can be given as to
the amount of Shares that will be held by the Selling Stockholders after
completion of this offering. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders may offer the
Shares for resale from time to time. See "Plan of Distribution."
The Shares being offered by the Selling Stockholders were acquired from the
Company in connection with the Company's acquisition of 100% of the issued share
capital of AudioLogic, Inc. (the "AudioLogic Acquisition"). The AudioLogic
Acquisition was accomplished pursuant to the terms of an Agreement and Plan of
Reorganization, dated as of June 29, 1999 (the "Reorganization Agreement"),
whereby the Company acquired all of the issued and outstanding share capital of
AudioLogic in exchange for cash and the issuance of the number of shares of the
Company Common Stock equal to $25,000,000. Pursuant to the Reorganization
Agreement, each AudioLogic shareholder has the right to receive a per share pro
rata amount of 1,250,000 shares of Company Common Stock on the Closing Date (as
defined in the Reorganization Agreement) and a per share pro rata amount of up
to an additional 1,750,000 shares of Company Common Stock on the one-year
anniversary of the Closing Date.
The Company has filed with the Commission, under the Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time on the Nasdaq National Market or in
privately-negotiated transactions. Pursuant to the terms of a Registration
Rights Agreement dated July 27, 1999, the Company has agreed to use commercially
reasonable efforts to keep such Registration Statement effective from the date
of effectiveness of the Registration Statement on Form S-3, of which this
Prospectus forms a part, until the first anniversary of the Closing Date,
subject to certain restrictions, or, if earlier, until the distribution
contemplated in this Prospectus has been completed.
The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholders named below.
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Beneficially Owned
Name of Selling Stockholder Prior to the Offering Percentage of Outstanding Shares.
- ----------------------------------- ---------------------------------- -------------------------------------
<S> <C> <C>
John L. Melanson 185,934 *
Leonard Koch 36,640 *
Junsheng Wang 601 *
Jeff Dinapoli 5,953 *
Jason Carlson 79,413 *
Tim B. Trueblood 676 *
Richard Kim 300 *
The Hill Partnership III 428,817 *
Gilde Investment Fund B.V. 4,053 *
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
James Forest 7,071 *
Robert Anderson 9,395 *
Morgan Holland Fund II 401,276 *
Eric Lindemann 19,446 *
Thomas Worrall 6,591 *
Caleb Roberts 8,004 *
Kathleen Adams 659 *
Joel C. McKee Cooper 5,178 *
David Klein 10,221 *
</TABLE>
- ------------------------
* Less than 1%
-15-
<PAGE>
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby by the Selling Stockholders
may be delivered and/or sold from time to time in transactions on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. After the effectiveness of the Registration
Statement of which this Prospectus is a part, the Selling Stockholders may make
short sales of the Company's Common Stock and may use the Shares to cover the
resulting short positions. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such broker-
dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). There is no assurance that any of the Selling
Stockholders will sell any or all of the Shares offered by them. In addition,
certain of the Selling Stockholders have entered into Stock Transfer Restriction
Agreements with the Company that would prevent them from selling more than 25%
of their shares of Company Common Stock in each calendar quarter from July 1,
1999 to June 30, 2000.
Any Selling Stockholder and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of Shares may be deemed to
be underwriting discounts and commissions under the Securities Act. Each Selling
Stockholder may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify in certain circumstances Selling Stockholders
against certain liabilities, including liabilities arising under the Securities
Act and Exchange Act. Selling Stockholders have agreed to indemnify in certain
circumstances the Company and certain related persons against certain
liabilities, including liabilities arising under the Securities Act and Exchange
Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Stockholder (and, if it acts as agent for the
purchase of such Shares, from such purchaser). Broker-dealers may agree with
such Selling Stockholder to sell a specified number of Shares at a stipulated
price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for such Selling Stockholder, to purchase as principal any
unsold Shares. Broker-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other broker-
dealers, including transactions of the nature described above) on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices, and in connection with such resales may pay to
or receive from the purchasers of such Shares commissions computed as described
above.
Each Selling Stockholder will be subject to applicable provisions of the
Exchange Act, and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the time of bids for and
purchases of shares of the Company's Common Stock by such Selling Stockholder.
Each Selling Stockholder will pay all commissions and other expenses
associated with the sale of the Shares by such Selling Stockholder. The Shares
offered hereby are being registered pursuant to contractual obligations of the
Company pursuant to a Registration Rights Agreement dated July 27, 1999, and the
Company has agreed to bear certain expenses in connection with the registration
and sale of the Shares being offered by every such Selling Stockholder. The
Company has not made any underwriting arrangements with respect to the sale of
Shares offered hereby.
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<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The Company's
Bylaws, as amended, provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements require the
Company, among other things to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
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<PAGE>
EXPERTS
The consolidated financial statements of Cirrus Logic, Inc. appearing in
the Cirrus Logic, Inc. Annual Report (Form 10-K) for the year ended March 27,
1999, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THE PROSPECTUS.
-18-
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information 3
Incorporation of Certain Documents by Reference 3
Forward-Looking Statements 4
The Company 5
Risk Factors 7
Selling Stockholders 14
Plan of Distribution 16
Use of Proceeds 17
Indemnification of Directors and Officers 17
Legal Matters 17
Experts 18
1,210,228 SHARES
CIRRUS LOGIC, INC.
Common Stock
__________________
September 18, 1999
____________________
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