Item 2.02 Results of Operations and Financial Condition.
On November 2, 2020, Cirrus Logic, Inc. ("Cirrus Logic" or the "Company") issued
a press release announcing its financial results for its second quarter of
fiscal year 2021. The full text of the press release is furnished as Exhibit
No. 99.1 to this Current Report on Form 8-K.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 30, 2020, John M. Forsyth, the current President of Cirrus Logic, was
appointed by the Board of Directors (the "Board") as the Company's next Chief
Executive Officer ("CEO"), effective January 1, 2021 (the "Effective Date"). In
addition, the Board intends to appoint Mr. Forsyth as a member of the Board upon
the Effective Date, or as soon as practicable thereafter.
Mr. Forsyth, age 47, joined the Company in August 2014 through the acquisition
of Wolfson Microelectronics, where he served as Vice President of Audio
Products. Following that acquisition, from August 2014 until June 2018, Mr.
Forsyth served as the Company's Vice President of Product Marketing. From June
2018 until his appointment as President in January 2020, he served as the
Company's Chief Strategy Officer.
There are no family relationships between Mr. Forsyth and any director or
executive officer of the Company, and Mr. Forsyth has no direct or indirect
material interest in any transaction required to be disclosed pursuant to Item
404(a) of Regulation S-K.
On October 30, 2020, in connection with his appointment, the Board's
Compensation Committee reviewed Mr. Forsyth's compensation and approved a salary
increase to $600,000. In addition, the Committee approved an increase in Mr.
Forsyth's semiannual target bonus under the Company's 2007 Management and Key
Individual Contributor Incentive Plan ("Incentive Plan") to 50% of his base
annual salary. A complete description of the Company's Incentive Plan is
included in the Company's definitive proxy statement dated June 3, 2020 (the
"Proxy Statement").
The Committee increased Mr. Forsyth's base salary in recognition of his
appointment as CEO and believes that his targeted total cash compensation
(including salary and target incentive plan payout) strikes a balance between
providing compensation that is competitive with compensation paid to CEO's of
peer companies while recognizing Mr. Forsyth's level of experience as a public
company CEO. Further, the Committee set his level of compensation such that the
Committee has the opportunity to increase his targeted total cash compensation
towards the 50th percentile range of CEO's of peer companies over time based on
their evaluation of his individual performance and the overall performance of
the Company in the future.
Mr. Forsyth will also continue to participate in the Company's 2007 Executive
Severance and Change of Control Plan ("2007 Severance Plan"). In the event of
Mr. Forsyth's involuntary termination other than for "cause" (as defined in the
2007 Severance Plan) he would be eligible to receive: (i) a continuation of base
salary for a period of up to twelve months following termination, and (ii)
payment in full of a reasonable estimate of COBRA premiums for three months. If
his employment is terminated either by the Company without "cause" or by him for
"good reason" within 12 months following a "change of control" of the Company
(as each quoted term is defined in the 2007 Severance Plan), he would be
eligible to receive a change of control termination payment, which is comprised
of: (i) a lump sum payment equal to 24 months' base salary, (ii) acceleration in
full of any unvested stock options or any other securities or similar incentive
awards that have been granted or issued to him as of the employment termination
date, and (iii) payment in full of a reasonable estimate of COBRA premiums for
12 months. In addition, he would have until six months from the employment
termination date to exercise any vested options, except that no option would be
exercisable after the option's original expiration date.
In view of the timing of Mr. Forsyth's appointment as CEO and the prior award of
an equity grant to Mr. Forsyth to reflect his promotion to President in January
2020, the Committee determined that it would review and propose additional
equity grants for Mr. Forsyth as part of the Committee's standard annual review
of executive compensation. The Committee's next review of executive
compensation is currently expected to take place sometime during the fourth
quarter of fiscal year 2021 as described in the Proxy Statement.
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Further, on October 30, 2020, Cirrus Logic entered into a Transition Agreement
(the "Transition Agreement") with Jason P. Rhode, the current Chief Executive
Officer, pursuant to which Dr. Rhode will transition from his service as Chief
Executive Officer on January 1, 2021 (the "Transition Commencement Date") into
an Executive Fellow role, whereby he will provide certain transition and
advisory services to Cirrus Logic through January 1, 2022 (the "Transition
Completion Date"). Dr. Rhode also resigned from the Company's Board effective
on the Transition Commencement Date. During the period between the Transition
Commencement Date and the Transition Completion Date (the "Transition Period"),
Dr. Rhode will work with Mr. Forsyth following the transition of the CEO
responsibilities, as well as continuing to be directly involved in customer
relationships and talent development within the Company. In exchange for his
services, Dr. Rhode will be entitled to receive an annual base salary of
$300,000 per year and continue to receive his current benefits. He will also be
eligible to participate in the Company's Incentive Plan at a semiannual target
bonus of 37.5% of his base annual salary. For the second Plan Cycle of the
Company's 2021 fiscal year, the Company agreed to prorate Dr. Rhode's Target
Incentive Amount (as described in the Proxy Statement) to reflect (1) Dr.
Rhode's Base Salary and Target Incentive Factor for the portion of the second
Plan Cycle during which Dr. Rhode serves as the Company's Chief Executive
Officer; and (2) Dr. Rhode's Base Salary and Target Incentive Factor for the
portion of the second Plan Cycle during which Dr. Rhode serves as an Executive
Fellow.
In addition to the requirements described above, if Dr. Rhode provides continual
services throughout the Transition Period and signs a release of all claims
against the Company, then any portion of Dr. Rhode's unvested equity awards
pursuant to the Company's 2018 Long Term Incentive Plan (the "LTI Plan") that
were scheduled or would become eligible to vest during the twelve month period
immediately following the Transition Completion Date shall fully vest
automatically. With respect to any Awards (as defined in the LTI Plan) that are
subject to performance-based vesting conditions, performance will be calculated
based upon the actual performance of such Award as of the Transition Completion
Date as calculated in accordance with the terms and conditions of the LTI Plan
and any individual Award agreements governing such Award. The Board believes
that the total compensation, including the acceleration of vesting of Awards if
Dr. Rhode provides continual services through the Transition Period, properly
balances the Board's desire to induce Dr. Rhode to remain engaged with the
leadership of the Company as part of a planned executive succession strategy
. . .
Item 7.01 Regulation FD Disclosure.
On November 2, 2020, in addition to issuing a press release, the Company posted
on its website a shareholder letter to investors summarizing the financial
results for its second quarter of fiscal year 2021. The full text of the
shareholder letter is furnished as Exhibit No. 99.2 to this Current Report on
Form 8-K. On November 2, 2020, the Company issued an additional press release
announcing Mr. Forsyth's appointment as Chief Executive Officer. A copy of the
press release is attached hereto as Exhibit 99.3 and is incorporated herein by
reference.
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Use of Non-GAAP Financial Information
To supplement Cirrus Logic's financial statements presented on a GAAP basis,
Cirrus has provided non-GAAP financial information, including non-GAAP net
income, diluted earnings per share, operating income and profit, operating
expenses, gross margin and profit, tax expense, tax expense impact on earnings
per share, and effective tax rate. A reconciliation of the adjustments to GAAP
results is included in the press release below. Non-GAAP financial information
is not meant as a substitute for GAAP results, but is included because
management believes such information is useful to our investors for
informational and comparative purposes. In addition, certain non-GAAP financial
information is used internally by management to evaluate and manage the
company. The non-GAAP financial information used by Cirrus Logic may differ
from that used by other companies. These non-GAAP measures should be considered
in addition to, and not as a substitute for, the results prepared in accordance
with GAAP.
The information contained in Items 2.02, 5.02, 7.01, and 9.01 in this Current
Report on Form 8-K and the exhibits furnished hereto contain forward-looking
statements regarding the Company and cautionary statements identifying important
factors that could cause actual results to differ materially from those
anticipated. In addition, this information shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise subject to the liabilities of that section, nor
shall they be deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except as expressly set
forth by specific reference in such a filing.
Item 8.01 Other Events.
On October 30, 2020, the Company's Board of Directors selected David Tupman as
Chair of the Board effective January 1, 2021. Dr. Tupman will replace Al
Schuele, who will remain a member of the Board through the Company's next annual
meeting, when he will retire from the Board pursuant to the retirement policy
set forth in the Company's Corporate Governance Guidelines. The full text of
the press release announcing Dr. Tupman's appointment is attached as Exhibit
99.3 to the Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
Exhibit 10.1 Transition Agreement, dated October 30, 2020
Exhibit 99.1 Cirrus Logic, Inc. press release dated November 2, 2020
Exhibit 99.2 Cirrus Logic, Inc. shareholder letter dated November 2, 2020
Exhibit 99.3 Cirrus Logic, Inc. press release dated November 2, 2020
Exhibit 104 Cover Page Interactive Data File (formatted as Inline XBRL)
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