The following discussion should be read along with the unaudited consolidated condensed financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 31, 2012, contained in our fiscal year 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("Commission") on May 30, 2012. We maintain a web site at investor.cirrus.com, which makes available free of charge our most recent annual report and all other filings we have made with the SEC.

This Management's Discussion and Analysis of Financial Condition and Results of Operations and certain information incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates, forecasts and projections and the beliefs and assumptions of our management. In some cases, forward-looking statements are identified by words such as "expect," "anticipate," "target," "project," "believe," "goals," "estimates," "intend," and variations of these types of words and similar expressions which are intended to identify these forward-looking statements. In addition, any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see "Item 1A - Risk Factors" in our 2012 Annual Report on Form 10-K filed with the Commission on May 30, 2012, and in Part II, Item 1A "Risk Factors" within this quarterly report. Readers should carefully review these risk factors, as well as those identified in other documents filed by us with the Commission.

Overview

Cirrus Logic, Inc. ("Cirrus Logic," "We," "Us," "Our," or the "Company") develops high-precision, analog and mixed-signal integrated circuits ("ICs") for a broad range of consumer and industrial markets. Building on our diverse analog and mixed-signal patent portfolio, Cirrus Logic delivers highly optimized products for consumer and commercial audio, automotive entertainment, and targeted industrial applications including energy control, energy management and energy exploration.

Critical Accounting Policies

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

There were no material changes in the first three months of fiscal year 2013 to the information provided under the heading "Critical Accounting Policies" included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (ASC Topic 220) - Presentation of Comprehensive Income. With this update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in this ASU should be applied retrospectively, and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company has adopted this guidance in the current quarter. Our adoption of this ASU affects financial statement presentation only, and does not have a material impact on our consolidated financial position, results of operations or cash flows.

Results of Operations

   The following table summarizes the results of our operations for the first
three months of fiscal years 2013 and 2012 as a percentage of net sales. All
percentage amounts were calculated using the underlying data in thousands,
unaudited:

                                       Three Months Ended
                                    June 30,        June 25,
                                      2012            2011
Net sales                              100 %            100 %
Gross Margin                            54 %             52 %
Research and development                25 %             20 %
Selling, general and administrative     18 %             16 %
Income from operations                  11 %             16 %
Interest income                          0 %              0 %
Other income (expense), net              0 %              0 %
Income before income taxes              11 %             16 %
Provision for income taxes               4 %              6 %
Net income                               7 %             10 %

Net Sales

Net sales for the first quarter of fiscal year 2013 increased $6.8 million, or 7 percent to $99.0 million from $92.2 million in the first quarter of fiscal year 2012. Net sales from our audio products increased $9.6 million, or 14 percent, primarily due to continued increases in portable sales in the current quarter versus the same time period in the prior fiscal year. Energy product sales decreased $2.9 million, or 14 percent, during the first quarter of fiscal year 2013 versus the comparable quarter of the prior fiscal year due primarily to sales reductions of our power amplifier and power meter products.

Export sales, principally to Asia, including sales to U.S.-based customers with manufacturing plants overseas, were 86 percent of net sales during the first quarter of each of fiscal years 2013 and 2012, respectively. Our sales are denominated primarily in U.S. dollars. As a result, we have not entered into foreign currency hedging contracts.

Since the components we produce are largely proprietary and generally not available from second sources, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, from an external sales representative or distributor, or through a third party manufacturer contracted to produce their designs. For the first quarter of fiscal years 2013 and 2012, our ten largest end customers represented approximately 72 percent and 68 percent of our sales, respectively.

We had one end customer, Apple Inc. that purchased through multiple contract manufacturers and represented approximately 59 percent and 53 percent of the Company's total sales for the first quarter of fiscal years 2013 and 2012, respectively.

We had one distributor, Avnet Inc., which represented approximately 13 percent and 20 percent of our sales for the three month periods ending June 30, 2012 and June 25, 2011, respectively.

For more information, please see Part II-Item 1A-"We depend on a limited number of customers and distributors for a substantial portion of our sales, and the loss of, or a significant reduction in orders from, any key customer or distributor could significantly reduce our sales."

No other end customer or distributor represented more than 10 percent of net sales for the three month periods ending June 30, 2012, or June 25, 2011.

Gross Margin

Gross margin was 54.0 percent in the first quarter of fiscal year 2013, up from 51.7 percent in the first quarter of fiscal year 2012. Much of the year over year increase in gross margin was attributable to a production issue which deteriorated gross margin in the first quarter of fiscal year 2012. The increase in gross margin was slightly offset by a decrease in the gross margin and mix of some of our energy products.

Research and Development Expense

Research and development expense for the first quarter of fiscal year 2013 was $24.9 million, an increase of $6.1 million, or 33 percent, from $18.8 million in the first quarter of fiscal year 2012. This increase was primarily due to a 22 percent increase in research and development headcount and the associated product development and employee-related expenses.

Selling, General and Administrative Expense

Selling, general and administrative ("SG&A") expense in the first quarter of fiscal year 2013 was $18.1 million, an increase of $3.5 million, or 24 percent, from $14.6 million in the first quarter of fiscal year 2012. The increase was primarily attributable to increased employee-related expenses, partially due to increases in SG&A headcount, specifically in the sales and marketing and information technology areas.

Income Taxes

We recorded income tax expense of $3.6 million and $5.3 million for the first quarter of fiscal years 2013 and 2012, respectively, both of which were primarily non-cash charges, on pre-tax income of $10.6 million and $14.5 million, respectively, yielding effective tax rates of 34.5 percent and 36.6 percent, respectively. Our income tax expense for the first quarter of fiscal year 2013 is based on estimated effective tax rates derived from an estimate of consolidated earnings before taxes, adjusted for nondeductible expenses and other permanent differences for fiscal year 2013. The estimated effective tax rates were impacted primarily by the worldwide mix of consolidated earnings before taxes. Our income tax expense for the first quarter of fiscal year 2013 was slightly below the federal statutory rate primarily due to the effect of permanent differences that are deductible for tax purposes.

Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including outlays for research and development, capital expenditures, stock repurchases, investments in marketable securities, and strategic acquisitions. Our principal sources of liquidity are cash on hand, cash generated from operations, cash generated from the sale and maturity of marketable securities, and funds from equity issuances.

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain current assets and current liabilities. Our operational cash flows are affected by the ability of our operations to generate cash, and our management of our assets and liabilities, including both working capital and long-term assets and liabilities. Net cash used in operating activities was $0.6 million for the first quarter of fiscal year 2013 as compared to $10.6 million provided by operating activities for the corresponding period of fiscal year 2012. The primary use of cash in operations during the current period was related to a $19.1 million net decrease in working capital. Working capital fluctuates depending on end-market demand and our management of certain items such as receivables, inventory and payables. In times of anticipated escalating demand, such as in the current period, our working capital requirements increase as we purchase additional manufacturing materials and increase production; this activity increased our inventory balances significantly in the first quarter of 2013. The primary source of cash from operations during the corresponding period of fiscal year 2012 was related to the cash components of our net income, which was partially offset by an $8.2 million increase in working capital.

Net cash provided by investing activities was $17.9 million during the first quarter of fiscal year 2013 as compared to $50.0 million during the first quarter of fiscal year 2012, primarily as a result of net proceeds from the sale of marketable securities of $36.4 million, offset by capital expenditures of $18.4 million. We utilized $17.3 million for the purchase of property, equipment, and software, including approximately $12.0 million in our new headquarters facility construction costs and $5.0 million for testing-related equipment for our products in the current quarter. For the corresponding period in fiscal year 2012, a net $63.9 million was received from the sale and maturity of marketable securities. Further, we utilized $14.3 million for the purchase of property, equipment, software, and technology assets.

Net cash provided by financing activities was $1.0 million during the first quarter of fiscal year 2013 as compared to a $56.1 million use in cash from financing activities during the first quarter of fiscal year 2012. The cash provided during the first three months of fiscal year 2013 was due to the issuance of common stock, net of fees. The use of cash during the first three months of fiscal year 2012 was primarily driven by the repurchase and retirement of $56.5 million of Company stock.

The Company continued construction of our new headquarters facility in Austin, Texas, with completion expected in the second quarter of fiscal year 2013. We estimate that total facility construction costs and the costs related to furniture, fixtures, and equipment to fully move our headquarters employees into this new facility will be approximately $46.8 million. Through June 30, 2012, we have paid $35.0 million related to the new building, leaving an anticipated $11.8 million to be paid of which approximately $3 million is accrued at June 30, 2012, under the caption "Other accrued liabilities" on the consolidated condensed balance sheet. We have funded the costs related to this project with cash flows from operations and expect the remainder of the project will be funded internally from existing and future cash flows.

We have not paid cash dividends on our common stock and currently intend to continue our policy of retaining any earnings for reinvestment in our business. Although we cannot give assurance that we will be able to generate cash in the future, we anticipate that our existing capital resources and cash flow generated from future operations will enable us to maintain our current level of operations for at least the next 12 months.

Revolving Credit Facility

On April 19, 2012 (the "Closing Date"), we entered into a Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as Administrative Agent and Issuing Lender, Barclays Bank, as Syndication Agent, Wells Fargo Securities, LLC and Barclays Capital, as Joint Lead Arrangers and Co-Book Managers, and the lenders referred to therein (the "Lenders").

The Credit Agreement provides for a $100 million unsecured revolving credit facility (the "Credit Facility") with a $15 million letter of credit sublimit. The Credit Facility matures on the earliest to occur of (a) the first anniversary of the Closing Date, (b) the date of termination of the Commitments as a result of a permanent reduction of all of the Commitments by the Company or
(c) the date of termination of the Commitments as a result of an Event of Default (the "Maturity Date"). The Company must repay the outstanding principal amount of all borrowings, together with all accrued but unpaid interest thereon, on the Maturity Date.

Borrowings under the Credit Facility may, at the Company's election, bear interest at either (a) a Base Rate plus the Applicable Margin ("Base Rate Loans"), where the Base Rate is determined by reference to the highest of (i) the prime rate publicly announced from time to time by the Administrative Agent,
(ii) the Federal Funds Rate plus 0.50% and (iii) if available and not less than 0%, LIBOR for an interest period of one month plus the difference between the Applicable Margin for LIBOR Rate Loans and the Applicable Margin for Base Rate Loans at such time; or (b) a LIBOR Rate plus the Applicable Margin ("LIBOR Rate Loans"), where the Libor Rate is determined by the Administrative Agent pursuant to a formula under which the LIBOR Rate is equal to LIBOR divided by an amount equal to 1.00 minus the Eurodollar Reserve Percentage. The Applicable Margin ranges from 0% to .25% per annum for Base Rate Loans and 1.25% to 1.75% per annum for LIBOR Rate Loans.

A Commitment Fee accrues at a rate per annum equal to the Applicable Margin, which ranges from 0.20% to 0.30% per annum, on the average daily unused portion of the Commitment of the non-defaulting Lenders.

The exact Applicable Margin and Commitment Fee will depend upon the Company's performance under specified financial criteria.

With certain exceptions relating to LIBOR Rate Loans, the Company may prepay borrowings, in whole or in part, at any time upon prior written notice to the Administrative Agent. If, at any time, the total of outstanding borrowings and outstanding letters of credit exceeds the Commitments under the Credit Facility, the Company must prepay the amount of the excess immediately upon notice from the Administrative Agent.

The Credit Agreement contains customary affirmative covenants, including, among others, covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further, the Credit Agreement contains customary negative covenants limiting the ability of the Company or any Subsidiary Guarantors to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, make certain restricted payments, enter into certain transactions with Affiliates and permit aggregate Capital Expenditures to exceed $90.0 million on a rolling four-quarter basis. The Credit Facility also contains certain negative financial covenants providing that (a) the ratio of Consolidated funded indebtedness to Consolidated EBITDA for the prior four consecutive quarters must not be greater than 1.75 to 1.00 and (b) the ratio of Consolidated EBITDA for the prior four consecutive quarters to Consolidated interest expense for the prior four consecutive quarters must not be less than 3.50 to 1.00.

Upon an Event of Default, the Lenders may declare all outstanding principal and accrued but unpaid interest under the Credit Facility immediately due and payable and may exercise the other rights and remedies provided for under the Credit Agreement. Events of Default under the Credit Agreement include payment defaults, cross defaults with certain other indebtedness, breaches of covenants or representations, warranties, certifications or statements of fact, Changes in Control and bankruptcy events. In certain circumstances, upon the occurrence and during the continuance of an Event of Default, the Credit Agreement provides that all outstanding obligations will bear interest at the Default Rate.

At July 27, 2012, the Company had no outstanding amounts under the Credit Facility.