Title: Directors and Officers
1Directors and Officers Underwriter Meetings
Cirrus Logic, Inc. September 9-13, 2004
Confidential
2Safe Harbor Statement
- Except for historical information contained
herein, the matters set forth in this
presentation, including estimates and assumptions
regarding our revenue growth rate and
opportunities, future RD and SGA expenses,
gross margins, and operating income opportunities
are forward-looking statements. These
forward-looking statements are based on our
current expectations, estimates and assumptions
and are subject to certain risks and
uncertainties that could cause actual results to
differ materially from our current expectations,
estimates and assumptions and the forward-looking
statements made in this presentation. These
risks and uncertainties include, but are not
limited to, the risk factors listed in our Form
10-K for the year ended March 27, 2004, and in
other filings with the Securities and Exchange
Commission. The foregoing information concerning
our business outlook represents our outlook as of
the date of this presentation, and we undertake
no obligation to update or revise any
forward-looking statements, whether as a result
of new developments or otherwise.
3Meeting Agenda
- Introductions
- Financial performance review
- Growth drivers
- Improving risk profile
- Company prospects
- Stockholder base
- Board of directors
- Mergers acquisition
- Financial analysis
- Litigation issues
- Sarbanes-Oxley
- Governance other policies/procedures
- Investor communications
- Questions answers
4Attendee Introductions
- Dave Allen, Treasurer and VP of Investor
Relations - Joined Cirrus in Sept. 2002
- Over 20 years corporate finance experience
- Scott Uhl, Account Executive
- Joined Lockton in Oct. 2003
- Prior to joining Lockton Companies, Mr. Uhl was
an Assistant Vice-President and West Coast
Underwriting Manager for Liberty International
Underwriters Specialty Casualty division,
underwriting Directors and Officers Liability,
Employment Practices Liability, Fiduciary
Liability, and Professional Liability for
publicly traded and privately held middle market,
commercial and financial institution firms. Mr.
Uhl was a Branch Manager at American
International Group (AIG) Middle Market DO
Technology practice and served as a Workers
Compensation Risk Manager for Contractors Labor
Pool (CLP), a 100M construction staffing
company with over 5,000 employees in over 50
branch offices throughout the Western United
States.
5Cirrus Logic Introduction
Expanding proprietary analog/mixed-signal product
line
Merchant market leadership in emerging DVD
recorder market
Solid year-over-year growth expected in FY 05
with increasing profit opportunities
6 Cirrus Logics Customers Include the Worlds
Most Popular Brands
7Improving Financial MetricsJune Quarter PL
Comparisons
June 03 June 04
Revenue 40.7 59.1 million Gross
Margin 48.5 53.6 RD
Expenses 20.6 18.7 million SGA
Expenses 12.5 12.5 million Operating
expenses 12.9 5.7 million not
related to ongoing business Net Income (Loss)
(24.3) ( 3.4) million
Includes expenses for acquisition- and
restructuring-related items.
845Year-over-Year Revenue Growth in June After
Seasonally Soft March Quarter
70
60
50
40
Sales in millions
Video
30
Analog
20
10
0
June 03 Sept. 03 Dec. 03
March 04 June 04
Previously designated as the Audio products.
9Q1 Strong Start for FY 05
- Increasing sales, up 45 over 1Q FY 04
- June quarter sales up 18 sequentially over March
FY 04 quarter - Analog sales up 12 sequentially
- Video sales up 65 sequentially
- Gaining traction with analog and mixed-signal ICs
- 70 of June quarter sales from audio converters
analog ICs - New industrial ICs showing strong growth
- 35 new audio mixed-signal ICs added in past two
years - Improving financial metrics
- New products and strong demand fuel sales growth
opportunities - Focused on achieving sustainable and growing
profitability - Continued strong balance sheet management
Previously designated as the Audio products,
this category includes audio converters,
industrial analog ICs, DSPs and Embedded
processors.
10June 2004 Balance Sheet Continues to Strengthen
June 03 June 04
Cash, securities investments 116 198
million and no debt
Receivables
24 28 million
53
43 DSO Inventory
21 41 million
4.0 2.7 turns Shareholders equity
140 212 million
11Growth Led by Strong Analog Portfolio
DSP and Embedded Processors
Video
- Expanding proprietary product line
- Cirrus Logic has strong IP in analog and
mixed-signal technologies - Refreshed and expanded product line
- Leader in diverse niche markets
- Highly fragmented customer base
- Leader in audio applications
- Broad set of growth drivers including industrial
data acquisition, power measurement and energy
exploration
Analog (Primarily Industrial)
Audio Converters (Primarily Consumer)
Analog
Video
12Large, Growing and Diversified
Analog/Mixed-Signal IC Markets
in millions of dollars
Industrial
Consumer Automotive
Telecom
Computer
12,000
10,000
8,000
In millions of dollars
6,000
4,000
2,000
2002
2003
2004
2005
2006
2007
Source IMS Research 2003
13Targeting the Fastest GrowingAnalog Market
Segments
in million dollars 2003 2004 2005 2006 2007 CAGR
Telecom 1,900 2,100 2,200 2,400 2,500 7.1
Computer 1,400 1,500 1,700 1,800 2,000 9.3
Consumer Automotive 1,800 2,000 2,300 2,500 2,800 11.7
Industrial 2,700 3,000 3,300 3,600 3,900 9.6
Total 7,800 8,600 9,500 10,300 11,200 9.5
Source IMS Research 2003
14Audio Converters
- Highest revenue product category
- Leading market position
- Attractive growth opportunities in consumer
audio, DTV, digital satellite radio and
automotive entertainment markets
15Targeting Analog/Mixed-Signal Consumer Market
Segments
Home Video
Home Car Audio
Professional Audio
High Performance Audio ADC, DAC, CODEC,
Interface IC,PWM Controller
High Performance Audio ADC, DAC, CODEC and Video
ADC
High Performance Audio ADC, DAC, CODEC,
Interface IC,
AVR, DVD Receiver, Car Amplifier and
Radio, Digital Satellite Radio
DVD Player, DVD Recorder, Digital STB
Keyboard, Mixer, Guitar, Amplifier, Effect
Processor
16Industrial Analog
- Second highest revenue category
- Growing sales in diverse niche markets
- Attractive growth opportunities in industrial
data acquisition, power measurement and energy
exploration markets
Oil Field Evaluation
Data Acquisition Applications Load cells/Weigh
scales
3 Phase Power Meters
17Targeting Analog/Mixed-Signal Industrial Market
Segments
18Video Solutions
- Approximately 15 of June revenue
- Leadership technology in emerging consumer
entertainment category - Cirrus Logic surpassed one million video encoder
chip sales in Jan. 2004 - Flexible software with modular structure allows
for easy customer product upgrades and feature
additions - Customer expansion strategy
- Initially targeted engineering-capable customers
in Taiwan - Now expanding customer base to branded companies
in Korea and Japan - Aggressively expand sales to Chinese OEMs as
retail prices decline - Cost-reduction and integration roadmap
- Attractive growth opportunities in digital video
recording applications
DVD Recorders
Home Theater Systems
USB PC Video Encoders
19Targeting Digital Video Applications That Provide
Growth Opportunities in Emerging Markets
USB /PC Peripherals
DVD Receiver
DVD Recorder
Audio/Video encoder IC and mixed-signal ICs
Audio/Video decoder ICs and mixed-signal ICs
Audio/Video encoder and decoder and mixed-signal
ICs
DVD Recorders, HDD- Enabled DVD Recorders,
DVD playback units
PC video record functionality
Home Theater Systems
20Emerging DVD Recording ProductsCreates
Additional IC Opportunities
21Improving Risk Profile
- Changed historical market focus
- Exited commodity PC graphics/storage markets
- Focused on leadership positions in diversified,
high-growth analog markets with expanded and
refreshed product portfolio - Established early merchant market lead in
emerging DVD recording applications - Expanding blue-chip customer base
- Defended successfully broad portfolio of
intellectual property - Enhanced business model
- Increasing use of outsourcing to provide more
flexibility and lower capital requirements with
fabless manufacturing model - De-leveraged company, now with debt-free balance
sheet
22Financial Trends Model
Historical Results
Strategic Model
FY 03 FY 04 FY 05 Q1
Sales in millions 262 196 59
Audio/Analog 82 86 86
Video 7 14 14
Other 11 - -
Gross Margins 50.5 51.3 53.6
SGA RD 64.5 65.0 52.7
Operating Income -77.8 13.0 -7.9
25-35 CAGR
65 - 75 of sales
25 - 35 of sales
-
50 - 55
30 - 35
20
Excluding favorable patent and legal
settlements, operating margins in FY 04 would
have been -25.9
23Stockholder Base
- Institutional 62
- Non-institutional (retail) 38
- Insiders 11
Options Fully Market
Pct Indirect Diluted Date Source Value
O/S Shares Shares Reported
Position Holder
Affiliation to Cirrus
Held
24Stockholder Base Majority of Institutional
Investors Have Low Portfolio Turnover
Source FactSet Research Systems Inc. as reported
on Nasdaq.net on Sept. 1, 2004
25Stockholder Base Investment Style of
Institutional Investors
Source FactSet Research Systems Inc. as reported
on Nasdaq.net on Sept. 1, 2004
26Stockholder Base
Market Pct of Stock Invest
Turnover Value Outstanding Style
Style
Position Ranking Holder
Held
Ex-board member
Founder, board member and current employee
Source FactSet Research Systems Inc. as reported
on Nasdaq.net on Sept. 1, 2004
27Stockholder BaseAlfred Teo
Former CRUS Board member 1998-2001
Filed Aug. 8, 03 5,205,274 shares 6
subsequently increased position to 10
28Stockholder BaseAlfred Teo
Cirrus purchased shares in 2001
Former CRUS Board member 1998-2001
29Stockholder BaseAlfred Teo
SEC CHARGES ALFRED TEO, SR. AND OTHERS WITH
INSIDER TRADING The Commission announced today
that it filed securities fraud charges against
Alfred S. Teo, Sr., and ten of his relatives,
friends and colleagues who collectively received
approximately 1.8 million in illicit profits
from insider trading in the securities of
Musicland Stores Corporation (Musicland) and
C-Cube Microsystems, Inc. (C-Cube). The
Commission charged violations of Sections 10(b),
13(d), 14(e) and 16(a) of the Securities Exchange
Act of 1934 and Rules 10b-5, 12b-20, 13d-1,
13d-2, 14e-3, and 16a-3 thereunder. The
Commission seeks the following relief from the
defendants (a) permanent injunctions (b)
disgorgement of all illicit profits (c) civil
penalties and (d) and officer and director bars
against Teo and Rosen. The Commission filed its
complaint in the U.S. District Court for the
District of New Jersey. The Commission also
announced that it reached settlements with
Fortune, Johnston and Rosen. Without admitting or
denying the allegations in the Commission's
complaint, Fortune Johnston and Rosen each
consented to final judgments that permanently
enjoined them, ordered them to disgorge their
illicit profits plus prejudgment interest, and
imposed a civil penalty equal to the illicit
profits they obtained. Rosen also agreed to the
entry of an order barring him from serving as an
officer or director for five years. The
Commission expresses its appreciation to the New
York Stock Exchange, Inc. for their substantial
assistance in the investigation of this matter.
SEC v. Alfred S. Teo, Sr., et al., Civil Action
No. CV 04- 1815 (WGB) (LR-18673)
Source SEC NEWS DIGEST Issue 2004-78 April 22,
2004 http//www.sec.gov/news/digest/dig042204.txt
Cirrus Logic note No other member of Cirrus
Logics management or board of directors was
charged with any violations associated with these
matters. Mr. Teo was a member of Cirrus Logics
board of directors at the time that Cirrus Logic
evaluated acquiring C-Cube prior to the
acquisition of that company by LSI Logic.
30Board of Directors
- 5 of 7 members are independent
- Michael Hackworth
- David French
- D. James Guzy
- Suhas Patil
- Walden Rhines
- William Sherman
- Robert Smith
- Experienced board with continuity of service
- 5 current or former board chairpersons or CEOs
- 1 attorney
- 1 retired CFO
- Board convened 10 and 7 times in FY 04 and FY 03,
respectively - 75-plus attendance for each member for Board
meetings - As defined by the relevant Nasdaq rules
- Employee directors per Rule 4200(a)(15) of the
NASD
31Board of Directors
- Board committees
- Audit
- 3 independent members, including retired CFO of
Novellus - Board annually reviews committee membership
compliance in accordance with NASD rules - Committee reviews independence and performance of
external auditors and internal audit scope and
procedures - Committee reviews earnings press releases and
significant accounting, audit, finance or ethics
developments - Committee serves reviews and assess the code of
business conduct and ethics. - Internal audit function provides quarterly update
to audit committee - Charter established for board audit committee
- Committee annually reviews charter for compliance
with NASD rules - Committee convened 9 and 8 times in FY 04 and FY
03, respectively, with management and separately
with external auditors - Annual committee report to stockholders in proxy
statement
Available on http//www.cirrus.com/en/ethics.ht
ml
32Board of Directors
- Board committees
- Compensation
- 4 independent members, including retired CFO of
Novellus - Charter established for board compensation
committee - Committee convened 4 and 5 times in FY 04 and FY
03, respectively - Governance and Nominating
- 5 independent members, including retired CFO of
Novellus - Charter established for board governance and
nominating committee - Committee convened 2 times in both FY 04 and FY
03 - Annual and periodic independence reviews
- Independent director executive sessions conducted
at the end of each BOD session
Available on http//www.cirrus.com/en/ethics.ht
ml
33Recent Mergers and Acquisitions
- Peak Audio (commercial audio networking products)
- Acquired assets in April 2001
- 9.8 million (cash, options issued, direct
acquisition costs) - ShareWave (wireless home networking products)
- Acquired 100 of outstanding stock in October
2001 - 76.6 million (including 2.8 million shares,
options issued, direct acquisition costs, cash
for fractional shares) - Operation shut down in FY 03 as part of Cirrus
Logics cost containment efforts - LuxSonor Semiconductors (DVD video processors and
audio/video semiconductor solutions) - Acquired 100 of outstanding stock in October
2001 - 51.3 million (including 1.8 million shares,
options issued, direct acquisition costs, cash
for fractional shares) - Recovered 8.9 million from escrow account due to
breach of reps and warranties by LuxSonor
34Recent Mergers and Acquisitions
- Stream Machine (supplier of MPEG-2 video
recording technology) - Acquired 100 of outstanding stock in December
2001 - 72.1 million (including 3.6 million shares,
options issued, direct acquisition costs, cash
for fractional shares) - Recovered 740,000 shares of Cirrus Logic from
escrow account due to breach of reps, warranties
and revenue commitments by Stream Machine - eMicro (a fabless joint manufacturing venture
between Cirrus, Creative Technology, Ltd and
Vertex Technology Fund (II) Ltd.) - Announced creation of Singaporean JV in May 2000
- JV partners voted to dissolve eMicro in June 2002
- Operations ceased in Q1 FY 03
- Final cash distributions to shareholders in Q1 FY
04
35Financial AnalysisFocused on Growing Revenues
and Cutting Costs
- Strong balance sheet
- 198 million
- No debt
- No off-balance sheet GAAP liabilities (See Form
10-K, pp. 55-56, note 10 for Commitments and
Contingencies) - No special purpose companies
- Profitable in FY 04 after losses in FY 02 and FY
03 - Completed repositioning company away from PC
focus in FY 02 - Improved gross margins from 24 in FY 02 to 51
in FY 04 - Experienced gained in DVD players, now helping in
the emerging DVD recorder market - Expanding analog product portfolio
- Successfully defended IP and commercial
litigation in FY 04 - FY 05 sales expected to be up strongly
- June quarter sales up 45 over the prior year
- June quarter sales up 18 sequentially over March
FY 04 quarter - Analog sales up 12 sequentially
- Video sales up 65 sequentially
36Financial AnalysisFocused on Growing Revenues
and Cutting Costs
- Cost reductions continue
- 47 reduction in headcount since April 2001
implemented - Retired 299 million convertible debt in FY 01
- Decreasing fixed costs via outsourcing
- Returned to 100 fabless model in FY 00
- Transitioning test operations to ChipPAC expected
to save
5-7 million a year, starting in calendar 2004 - Clean financials
- No restatements, other than reclassifications
- No regulatory investigations
- No auditor changes
37Litigation Issues
- No DO litigation in past 5 years
- Received 18 million before expenses in nVidia
and ATI patent lawsuit settlements in FY 04 - Reached favorable settlement with WDC in FY 04
- WDC paid Cirrus 45 million to settle outstanding
claims - Cirrus Logic initiated litigation and ITC action
against Wolfson in FY 04 for alleged IP
infringement - AVT withdrew patent suit it filed against Cirrus
Logic on June 23, 2004 within 90 days of the
suits original filing
38Litigation Issues
- Fujitsu lawsuit currently scheduled to go to
trial in January 2005 - Breach of contract complaint and counter
complaint - Cirrus Logic is seeking damages in excess of 46
million - Cirrus filed a complaint against St. Paul Fire
and Marine in June 2005 relating to a coverage
dispute on a General Liability policy - St. Paul answered on July 3rd with affirmative
defenses and denied the companys allegations
(still open) - Additional information on legal matters is
included in Cirrus Logics latest Form 10-Q filed
with the SEC
39Early Adopter of Sarbanes-Oxley Provisions
- GAAP only
- Certifications implemented
- CEO and CFO
- Executive, and certain Legal and Financial staff
- SEC filings
- Reviewed by external counsel
- Insider filings on cirrus.com
- Disclosure review committee established
- Internal audit function established and process
to review key functions underway - Anonymous whistle blower hotline implemented
40FY 04 Internal Audit Plan
- Status
- Cash Receipts Completed Apr 2003
- Accounts Receivable Allow for Bad
Debt Completed Apr 2003 - Sales Deferred Revenue Completed Jul 2003
- Accounts Payable Cash Disbursements Completed Ju
l 2003 - Income Tax Provision and Valuation Completed Jul
2003 - Inventory Receiving Completed Sep 2003
- Inventory Valuation (Standard Costing) Completed S
ep 2003 - Payroll Completed Sep 2003
- Travel Expense Reimbursement Completed Sep 2003
- Inventory Reserves (EO and LCM) Completed Feb
2004 - Purchases (Inventory Non-inventory) Completed Fe
b 2004 - Information Systems Security Control Completed A
pr 2004 - Calculation of Accrued Liabilities Completed Apr
2004 - Marketable Securities Investments Completed Apr
2004 - Physical Invent Completed Apr 2004
- Fixed Intangible Assets Postponed to FY 05 due
to resource constraints - Financial Statement Closure Disclosure Postponed
to FY 05 due to resource constraints
41FY 05 Internal Audit Plan
- Status Target Date
- Cash Receipts, A/R and Allow for Bad
Debt Completed Jul 2004 - Sales Deferred Revenue Completed Nov 2004
- Accounts Payable Cash Disbursements Completed
Nov 2004 - Income Tax Provision and Valuation Oct 2004 Nov
2004 - Purchases (Inventory Non-inventory) Oct
2004 Feb 2005 - Inventory Valuation Reserves Nov 2004 Feb 2005
- Marketable Securities Investments Dec 2004 Feb
2005 - Calculation of Accrued Liabilities Feb 2005 Apr
2005 - Physical Inventory Counts Scrap April 2005 Apr
2005 -
42FY 05 Internal Audit Plan
- Status Target Date
- Fixed Intangible Assets Sept 2004 Nov 2004
- Financial Statement Closure Disclosure Oct 2004
Nov 2004 - Payroll/Human Resources Nov 2004 Nov 2004
- Information Systems Security Control Oct
2004 Feb 2005 - IT Change Management Access Oct 2004 Feb 2005
- IT Applications Controls (SAP Camstar) Dec
2004 Feb 2005 - Inventory Receiving Movements Jan 2005 Feb
2005 -
43Internal Audit Process
- Identify the Key Audit Contact (Manager for that
process) and Sponsor (VP) - Communicate and clarify audit scope with Key
Audit Contact and Sponsor - Conduct interviews with process owners to gain
an understanding of the system - Flowchart the process and identify key control
points - Develop what can go wrong questions and
identify any gaps not addressed by control
points - Test control points to determine if they are
effective or functioning as designed - Conduct Closing Meeting with auditees
- Confirm process documentation and flowcharts
- Agreement on issue and how management plans to
respond to recommendation (specifics on who, what
and when) - Review audit results and key objectives of
testing with EY - Issue Final Audit Report
- Conduct formal 3-month follow up on all
recommendations
44Governance Other Policies/Procedures
- Corporate governance guidelines
- Insider trading policy
- Directors and Section 16 officers are restricted
from trading in the companys securities for the
last calendar month of each fiscal quarter.
Trading may commence 2 business days after the
company publicly announces its financial results.
Prior to the execution of trades, these
individuals must notify the Corporate Counsel. - Company has implemented processes to comply with
SEC Form 4 two- business day reporting
requirements, insider activity posted on
www.cirrus.com - Adopted policy to permit 10b5-1 plans in April
2004 - CEO 10b5-1 trading plan
- Revenue recognition policy
- External communication policy
- Whistle blower procedures
- Independent violation reporting process in affect
by calling 1-866-384-4277 or www.ethicspoint.com
Available on http//www.cirrus.com/en/ethics.ht
ml Not available on the internet, but provided
with broker submission
45Governance Other Policies/Procedures
- Corporate code of conduct addresses conflicts of
interest, insider information, integrity of
records and compliance with laws (e.g. antitrust,
securities, environmental, harassment,
discrimination and other important areas) and
corrective action process. - Comprehensive ethics and compliance questionnaire
distributed annually to Directors and Officers
and the results reported to and discussed with
the audit committee - Human resources policies and procedures reviewed
by legal department - Company intranet includes all human resource and
other significant corporate policies
Available on http//www.cirrus.com/en/ethics.htm
l
46Governance Other Policies/ProceduresNew
cirrus.com Page
47Governance Other Policies/ProceduresNew
Intranet Tool
48Investor Communications
- Practices comply with Regulation FD
- Experienced designated spokespersons
- Quarterly financial results press releases, SEC
10Q and 10K filings reviewed in advance by the
Boards Audit Committee, external legal and
auditors - All material financial guidance presented in
press releases, 8-K filings and conference calls - Investor materials (press releases,
presentations, conference call remarks) reviewed
by General Counsel prior to presentations or
conference calls - Conference call remarks scripted by CEO, CFO,
VP Investor Relations - Comprehensive web site quarterly financial
results remarks, presentations, press releases,
and SEC filings posted at www.cirrus.com - Quarterly financial results conference calls and
investor conferences are publicized in advance
via press releases and are available through web
casts
49Designated Investor Spokespersons
- President CEO (David French)
- 20 years of semiconductor experience (ADI, TI,
Fairchild) - Bachelor of science degree in Electrical
Engineering from the University of Rochester - Member of the Board of Directors of the Fabless
Semiconductor Association - Joined Cirrus Logic as president and COO in June
1998 - Named CEO in February 1999
- SVP CFO (John Kurtzweil), CPA, CMA
- 20 years of financial management experience
(OnSemiconductor, ReadRite, Maxtor, Honeywell) - Degrees in accounting from Arizona State
University and a masters degree in Business
Administration from the University of St. Thomas
in St. Paul, Minnesota - Joined Cirrus Logic as CFO in March 2004
- Member of Disclosure Review Committee
- VP Investor Relations/Treasurer (Dave Allen)
- 20 years of financial management experience
(Palm, Infoseek, Komag, Atari) - Extensive investor relations experience
- MBA from Duke Universitys J.B. Fuqua Graduate
School of Business - Bachelor's degree in Economics from the State
University of New York at Binghamton - Joined Cirrus Logic in current capacity in
September 2002 - Member of Disclosure Review Committee
- Team leader for sales and deferred revenue
internal audit control cycle in FY 04
50Investor Communications Comprehensive Website
Easy to find quarterly info
Text of quarterly conference calls
Web cast of stock-holders meeting
Web cast of quarterly con- ference calls
51Investor Communications Easy to Use Site
Easy to find/request financial documents
Easy to request financial documents
DO filings easy to find
Link to SEC filings
Online documents
52Investor Communications Web Casts Accessible
Accessible conference calls live and replays
53Investor CommunicationsGuidance, Conference
Calls Conferences Well Publicized
Conference call notices disseminated via press
releases
54 Questions Answers
55 Thank you for your participation in todays
meeting and interest in Cirrus Logics DO
program.