Cirrus Logic Reports Second Quarter Fiscal Year 1998 Results.

FREMONT, Calif.--(BUSINESS WIRE)--Oct. 16, 1997--Cirrus Logic Inc. (NASDAQ:CRUS) today announced net revenues for the second quarter of fiscal 1998 were $224 million, down 5 percent from $236 million for the second quarter of fiscal 1997.

Net income for the second quarter was $8.9 million, or $0.13 per share, compared to a net income of $3 million, or $0.05 per share in the second quarter of last year. Excluding businesses divested since September 1996, revenues for the second quarter of the prior year were $204 million.

"We are very pleased with the results of our second quarter," said Michael L. Hackworth, president and chief executive officer of Cirrus Logic. "Our renewed focus on core businesses has translated into top- and bottom-line success and we are well positioned going forward." He added that a major highlight of the quarter was the performance of the Mass Storage Products Division which posted record revenues and a record unit volume for the second consecutive quarter.

"Revenues from this division increased by over 150 percent compared with the same quarter last year, driven primarily by the strong demand for our PRML family of read-channel products," said Hackworth.

Commenting on the quarter, Thomas F. Kelly, chief operating officer, office of the president, said, "Our strong financial performance is the most visible sign of a healthier Cirrus Logic. Reduced operating expenses, increased revenue per employee, and rising employee morale each provide solid evidence of our sound recovery."

Another major highlight of the quarter was the realignment of the purchase obligations with Cirent Semiconductor, the company's joint venture with Lucent Technologies. Pursuant to Cirrus Logic's strategy to more evenly balance third party foundry supply with capacity commitments from its joint ventures, the updated agreement reduced Cirrus Logic's wafer purchase obligation at Cirent by 50 percent, or approximately $350 million over the next seven years. The revised agreement reduces the company's exposure to meeting fixed capacity commitments and provides for strong foundry relationships to access upside requirements, if needed.

Specifically, the agreement allows the company to reacquire, at no incremental cost, an additional 10 percent of the total Cirent wafer output as well as to sell any portion of its wafer capacity obligation to third parties on a foundry basis. Cirrus Logic now has more manufacturing flexibility necessary for today's dynamic foundry environment. Additionally, the agreement provides Cirrus Logic with future access to Lucent's advanced process technologies including 0.18 micron process technologies.

In the future, Lucent's flash process modules and BiCMOS process modules will also be available for incorporation into Cirrus Logic's standard logic and SRAM modules already in production.

New product development was strong for the second fiscal quarter, particularly within the company's families of consumer and PC audio products. The Crystal Semiconductor Products Division delivered a highly-integrated Dolby Digital(R) and Dolby Surround Pro Logic(TM) audio decoder which received full certification by Dolby Laboratories Inc.

In addition, Cirrus Logic's industry-leading CrystalClear(TM) ISA audio codec was selected by major OEM's including IBM(R) and Dell(R) Computer Corporation for use in new lines of portable and desktop PCs. IBM also selected the company's PCI audio accelerator and ISA codec for its latest generation Aptiva(TM) personal computers.

FISCAL Q2 1998 BUSINESS REVIEW

-- Overall gross margin for the September quarter increased slightly to 40 percent, compared with 38 percent for the year ago quarter and 39 percent for the previous quarter end.

-- Operating expenses for the second quarter decreased to $73 million, compared with $89 million for the year ago quarter and $74 million for the previous quarter end.

-- Revenue per employee increased to $466,000, compared with $325,000 for the year ago quarter and $402,000 for the previous quarter end.

-- The quarter ended with a cash balance of $366 million compared to $325 million at the previous quarter end. The increase is largely due to cash generated from operations.

-- Revenue breakdown by division for the quarter was as follows:

Q2-FY 1998 Q-FY 1998 Q2-FY 1997 Mass Storage Products 51% 37% 18% PC Products 29% 34% 46% Communications Products 10% 12% 14% Crystal Semiconductor Products 8% 8% 7% Other 2% 9% 15%

-- Revenue breakdown by geographic area for the quarter was as follows:

Q2-FY 1998 Q2-FY 1998 Q2-FY 1997 Americas 44% 46% 36% Pacific Rim 33% 29% 32% Japan 16% 17% 25% Europe 7% 8% 7%

FISCAL Q2 1998 REVIEW BY DIVISION MASS STORAGE PRODUCTS

-- During the quarter, the Mass Storage Products Division achieved record revenues and unit volume which approached 20 million.

-- Cirrus Logic announced that its CL-CR3460 ATAPI CD-Recordable/ Rewritable (CD-R/W) decoder is designed into all three of Sony Electronics' new line of Spressa(TM) 2X/8X CD-Recordable (CD-R) drives. The decoder combines unprecedented disc speed support with the popular and easily implemented ATAPI interface, enabling CD-R drive manufacturers to be competitive in this emerging market.

PC PRODUCTS

-- Cirrus Logic announced that Dell Computer Corporation selected the CrystalClear single-chip audio subsystem (CS4236B) for the new Dell OptiPlex(R) Gxa corporate desktop PC. The CS4236B provides high-quality audio output (85 dB signal-to-noise ratio), full duplex audio capabilities, advanced power management, and Cirrus Logic's patented industry-leading delta-sigma conversion technology. Earlier in the quarter, Cirrus Logic also announced that the CS4236B is the basis for the high-quality sound emanating from the IBM ThinkPad(TM) 380 series (380, 380D and 385D) portable computers.

-- Cirrus Logic announced that its CrystalClear SoundFusion(TM) PCI audio accelerator (CS4610) and ISA audio codec, (CS4236B) are included in the latest generation Aptiva L and S series of personal computers from IBM. The CS4610 is the industry's first PCI bus audio accelerator with integrated Dolby AC-3 decoding for acceleration of DVD playback and 3D sound processing for DVD playback and 3D audio gaming.

-- In August, Cirrus Logic announced that its Laguna 3D(TM)-A (CL-GD5465) graphics controller began shipping in volume and is available in Pentium(R) II processor based systems using Intel's 440LX AGPset. The Laguna3D-A controller was the market's first AGP graphics chip to sample.

-- Cirrus Logic announced that Jaton Corporation, a major video and multimedia PC card supplier, selected both Cirrus Logic's FastPath(TM) 56K modem chipset (CL-MD565X) and CrystalClear single-chip ISA audio subsystem (CS4237B) for its new Explorer(TM) 56 Plus, internal fax/modem/3D audio board. In addition Jaton's Explorer 56, a standalone 56K internal fax/modem and Explorer Plus, a 33.6Kbps modem and 3D audio board, are based on Cirrus Logic modem and audio chip solutions.

-- Cirrus Logic introduced its new high-performance, low cost SoundFusion PCI audio accelerator (CS4611) which targets the cost-sensitive, sub-$1000 PC market by offering OEMs a set of core PCI-based audio features including multiple API support, advanced wavetable synthesis and state-of-the-art 3D positional audio.

COMMUNICATIONS PRODUCTS

-- Cirrus Logic introduced two new PCI-to-CardBus(TM) controllers designed to comply with the latest Advanced Configuration and Power Interface (ACPI) specifications. The controllers, (CL-PD6833 and CL-PD6834) are designed to deliver the advance power management capabilities required by Microsoft's(R) PC 97 and PC 98 "OnNow" design initiative for next-generation portable and desktop PCs supporting Windows(R) 98 and Windows NT(R) version 5.0 operating systems.

-- Cirrus Logic introduced the industry's first sub-50 milliwatt system-on-a-chip microprocessor (CL-PS7111), which enables a new class of low-power wireless voice/data communications products such as smartphones, GPS receivers and two-way messaging products. The new single-chip device draws an average of 45 milliwatts in normal mode (2.7 Volts) and 15 microwatts in standby mode, setting the benchmark for the lowest power consumption of any system-on-a-chip with an embedded microprocessor available on the market today.

-- Cirrus Logic announced the first four-channel serial input/output (SIO) communications controller (CL-CD4400) to integrate the widely accepted industry standard PCI interface, which significantly simplifies OEM development and provides higher system throughput. The CL-CD4400's high-speed, full-duplex simultaneous channel capabilities allow the new controller to support emerging higher data rate communications applications such as xDSL and Sonet.

-- Cirrus Logic announced that its PCI-to-PCMCIA host adapter solution (CL-PD6729) is featured in the IBM ThinkPad 380 series (380, 380D and 385D). The CL-PD6729 is a host solution capable of controlling two fully independent PC Card sockets and enables a complete dual-socket PCMCIA solution, with power-logic, that occupies less than two square inches, excluding connectors.

CRYSTAL SEMICONDUCTOR PRODUCTS

-- In July, Cirrus Logic introduced the first audio analog-to-digital converter to break the 120-dB dynamic range barrier. The CS5396 is also the first 24-bit A/D converter to support the emerging 96-kHz sampling rate requirement for professional audio systems.

-- Cirrus Logic announced that the Crystal Dolby Digital & Dolby Surround Pro-Logic audio decoder (CS4293), which began sampling during the first quarter, received full certification by Dolby Laboratories Inc. This highly integrated decoder is targeted for all emerging Dolby Digital DVD, Home Theater, HDTV and Set-Top entertainment applications, and provides audio performance commonly found only in multi-chip solutions.

-- Cirrus Logic announced the first 20-bit stereo audio codec with integrated volume controls (CS4222). Targeted at consumer audio applications, the CS4222 is the company's lowest-cost, lowest-power and highest-performance audio codec and offers nearly a 20 dB performance improvement over current audio codec solutions.

-- In September, Cirrus Logic introduced the world's most advanced 24-bit stereo D/A converter (CS4390), bringing new levels of audio quality to the professional/semi-professional and high-end consumer market. The converter is an ideal solution for CD players, effects processors, digital mixing consoles and digital audio tape players.

Cirrus Logic

Cirrus Logic is a premier supplier of system-level integrated circuits that demand high-performance mixed-signal processing. The company applies its system expertise to enable high-volume applications in data storage, networking, and multimedia for both computing and consumer electronics markets as well as ultra-precision data acquisition applications for industrial automation and instrumentation markets.

Except for historical information contained herein, the matters set forth in this news release are forward-looking statements that are dependent on certain risks and uncertainties including such factors, among others, as overall conditions in the PC market, customer cancellations of orders, or the failure to place orders consistent with forecasts, unforeseen manufacturing difficulties, or hardware or software deficiencies, or delays in customer qualification of key new products, achieving high utilization of the company's manufacturing resources; final determination of appropriate inventory write-downs based on the outlook at the end of each quarter, actual operational spending, obtaining financing sufficient to meet the company's needs and the risk factors listed in the company's Forms 10-K for the year ended March 29, 1997 and 10-Q for the quarter ended June 28, 1997. -0-

Note To Editors: Cirrus Logic news releases may be obtained by fax by dialing 1/800/359-6414, or by dialing 510/249-4200 from outside the United States, or via Internet on the world wide web at http://www.cirrus.com/

All trademarks are registered to their respective owners.

                        CIRRUS LOGIC, INC.
            CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
         (Amounts in thousands, except per share amounts)
                           (Unaudited)

CONDENSED STATEMENTS OF OPERATIONS

                          Quarter Ended       Two Quarters Ended
                       Sept. 27,  Sept. 28,  Sept. 27,  Sept. 28,
                         1997       1996       1997       1996

Net sales              $223,960   $236,030   $425,583   $450,928
Costs and
expenses and gain on
 sale of assets:
Cost of sales           135,047    145,870    257,518    278,277
Research and
 development             44,644     58,491     88,826    119,709
Selling, general and
 administrative          28,373     30,892     57,900     61,460
Gain on sale of assets       --     (6,913)        --     (6,913)

Total costs and
 expenses, and gain
 on sale of assets      208,064    228,340    404,244    452,533

Income (loss) from
 operations              15,896      7,690     21,339     (1,605)

Interest and other
 (expense) income,
 net                     (3,128)    (3,496)    (5,028)    (4,837)

Income (loss) before
 provision (benefit)
 for income taxes        12,768      4,194     16,311     (6,442)
Provision (benefit)
 for income taxes         3,830      1,196      4,893     (1,835)

Net income (loss)        $8,938     $2,998    $11,418    ($4,607)

Net income (loss) per
 common and common
 equivalent share         $0.13      $0.05      $0.17     ($0.07)

Weighted average common
 and common equivalent
 shares outstanding      70,549     64,776     69,199     64,468


                        CIRRUS LOGIC, INC.
              CONSOLIDATED SUMMARY FINANCIAL STATEMENTS
                     (Amounts in thousands)
                          (Unaudited)

CONDENSED BALANCE SHEETS
                                       Sept. 27,    March 29,
                                        1997         1997

Current assets:
 Cash and cash equivalents             $154,153    $151,540
 Short-term investments                 211,724     188,215
 Accounts receivable, net               150,470     173,743
 Inventories                             93,365     127,252
 Other current assets                   141,255     154,252

 Total current assets                   750,967     795,002

Property and equipment, net             117,657     130,855
Manufacturing agreements, net
 and investment in joint ventures       148,414     151,675
joint ventures
Deposits and other assets                58,357      59,289

 Total assets                        $1,075,395  $1,136,821


Current liabilities:
 Accounts payable and accrued
  liabilities                          $230,923    $304,074
 Obligations under equipment
  loans and capital leases, current      27,677      30,999
 Income taxes payable                    32,125      31,259

 Total current liabilities              290,725     366,332

Long-term obligations and
convertible subordinated notes          357,611     366,292

Shareholders' equity:
 Capital stock                          362,705     351,261
 Retained earnings                       64,354      52,936

 Total shareholders' equity             427,059     404,197


 Total liabilities and
  shareholders' equity               $1,075,395  $1,136,821

CONTACT: Cirrus Logic

CHIEF FINANCIAL OFFICER

Ronald K. Shelton, 510/623-8300

INVESTOR RELATIONS

Bonnie T. McBride, 510/226-2112

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