UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended Dec ember 27 ,   2014
 
☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from ____ to ____
 
Commission File Number 0-17795

CIRRUS LOGIC, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	 	77-0024818	
( State or other jurisdiction of incorporation or organization)	 	(I.R.S. Employer Identification No.)	
 	800 W. 6 th Street, Austin, TX 78701
(Address of principal executive offices)	 	
Registrant’s telephone number, including area code:   (512) 851-4000
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  YES ☑    NO ☐  
 
Ind icate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding   12 months (or for such shorter period that the registrant was required to submit and post such files).  YES     ☑    N O   ☐  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☑	Accelerated filer  ☐	Non-accelerated filer  ☐	Smaller reporting company  ☐	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐    NO ☑
 
The number of shares of the registrant's common stock, $0. 00 1 par value, outstanding as of January   23 ,   201 5  w as 6 2 , 733,868.  

 

CIRRUS LOGIC, INC.
 
FORM 10-Q QUARTERLY REPORT
 
QUARTERLY PERIOD ENDED DEC EMBER 27 ,   201 4
 
TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION	
 	 	 	
Item 1.	Financial Statements	 	
 	 	 	
 	Consolidated Condensed Balance Sheets - December 27, 2014 (unaudited) and March 29, 2014	3	
 	 	 	
 	Consolidated Condensed Statements of Income (unaudited) - Three and Nine Months Ended December 27, 2014 and December 28, 2013	4	
 	 	 	
 	Consolidated Condensed Statements of Comprehensive Income (unaudited) - Three and Nine Months Ended December 27, 2014 and December 28, 2013	5	
 	 	 	
 	Consolidated Condensed Statements of Cash Flows (unaudited) - Nine Months Ended December 27, 2014 and December 28, 2013	6	
 	 	 	
 	Notes to Consolidated Condensed Financial Statements (unaudited)	7	
 	 	 	
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18	
 	 	 	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24	
 	 	 	
Item 4.	Controls and Procedures	24	
 	 	 	
PART II - OTHER INFORMATION	
 	 	 	
Item 1.	Legal Proceedings	25	
 	 	 	
Item 1A.	Risk Factors	25	
 	 	 	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26	
 	 	 	
Item 3.	Defaults Upon Senior Securities	27	
 	 	 	
Item 4.	Mine Safety Disclosures	27	
 	 	 	
Item 5.	Other Information	27	
 	 	 	
Item 6.	Exhibits	27	
 	 	 	
 	Signatures	28	

2

 
 
Part I. FINANCIAL INFORMATION
 
ITEM 1 .  FINANCIAL STATEMENTS 

 	 	 	 	 	 	 	
CIRRUS LOGIC, INC.	
CONSOLIDATED CONDENSED BALANCE SHEETS	
(in thousands)	
 	 	 	 	 	 	 	
 	 	December 27,	 	March 29,	
 	 	2014	 	2014	
 	 	(unaudited)	 	 	 	
Assets	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	
66,607 	 	$	
31,850 	
Marketable securities	 	 	
106,061 	 	 	
263,417 	
Accounts receivable, net	 	 	
148,386 	 	 	
63,220 	
Inventories	 	 	
73,896 	 	 	
69,743 	
Deferred tax assets	 	 	
14,143 	 	 	
22,024 	
Other current assets	 	 	
27,081 	 	 	
25,079 	
Total current assets	 	 	
436,174 	 	 	
475,333 	
 	 	 	 	 	 	 	
Long-term marketable securities	 	 	
3,404 	 	 	
89,243 	
Property and equipment, net	 	 	
137,291 	 	 	
103,650 	
Intangibles, net	 	 	
181,675 	 	 	
11,999 	
Goodwill	 	 	
264,879 	 	 	
16,367 	
Deferred tax assets	 	 	
24,991 	 	 	
25,065 	
Other assets	 	 	
16,654 	 	 	
3,087 	
Total assets	 	$	
1,065,068 	 	$	
724,744 	
 	 	 	 	 	 	 	
Liabilities and Stockholders' Equity	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	
Accounts payable	 	$	
77,195 	 	$	
51,932 	
Accrued salaries and benefits	 	 	
20,164 	 	 	
13,388 	
Deferred income	 	 	
5,417 	 	 	
5,631 	
Other accrued liabilities	 	 	
27,402 	 	 	
11,572 	
Total current liabilities	 	 	
130,178 	 	 	
82,523 	
 	 	 	 	 	 	 	
Long-term liabilities:	 	 	 	 	 	 	
Debt	 	 	
200,439 	 	 	 -	
Other long-term liabilities	 	 	
21,073 	 	 	
4,863 	
 	 	 	 	 	 	 	
Stockholders' equity:	 	 	 	 	 	 	
Capital stock	 	 	
1,135,719 	 	 	
1,078,878 	
Accumulated deficit	 	 	
(421,514)	 	 	
(440,634)	
Accumulated other comprehensive loss	 	 	
(827)	 	 	
(886)	
Total stockholders' equity	 	 	
713,378 	 	 	
637,358 	
Total liabilities and stockholders' equity	 	$	
1,065,068 	 	$	
724,744 	

The ac company ing notes are an integral part of these consolidated condensed financial statements.

3

 

 

 	 	 	 	 	 	 	 	 	 	 	 	
CIRRUS LOGIC, INC.	
CONSOLIDATED CONDENSED STATEMENTS OF INCOME	
(in thousands, except per share amounts; unaudited)	
 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Net sales	$	
298,606 	 	$	
218,883 	 	$	
661,385 	 	$	
564,679 	
Cost of sales	 	
167,775 	 	 	
115,034 	 	 	
354,612 	 	 	
281,884 	
Gross profit	 	
130,831 	 	 	
103,849 	 	 	
306,773 	 	 	
282,795 	
Operating expenses	 	 	 	 	 	 	 	 	 	 	 	
Research and development	 	
55,474 	 	 	
32,426 	 	 	
139,808 	 	 	
90,678 	
Selling, general and administrative	 	
27,783 	 	 	
18,625 	 	 	
69,011 	 	 	
57,038 	
Acquisition related costs	 	
3,200 	 	 	 -	 	 	
18,137 	 	 	 -	
Restructuring and other	 	 -	 	 	
12 	 	 	
1,455 	 	 	
(572)	
Patent infringement settlements, net	 	 -	 	 	 -	 	 	 -	 	 	
695 	
Total operating expenses	 	
86,457 	 	 	
51,063 	 	 	
228,411 	 	 	
147,839 	
Income from operations	 	
44,374 	 	 	
52,786 	 	 	
78,362 	 	 	
134,956 	
Interest income	 	
89 	 	 	
222 	 	 	
419 	 	 	
581 	
Interest expense	 	
(1,131)	 	 	 -	 	 	
(4,598)	 	 	 -	
Other expense	 	
(1,071)	 	 	
(45)	 	 	
(12,564)	 	 	
(100)	
Income before income taxes	 	
42,261 	 	 	
52,963 	 	 	
61,619 	 	 	
135,437 	
Provision for income taxes	 	
19,532 	 	 	
11,463 	 	 	
27,790 	 	 	
39,928 	
Net income	 	
22,729 	 	 	
41,500 	 	 	
33,829 	 	 	
95,509 	
 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	$	
0.36 	 	$	
0.66 	 	$	
0.54 	 	$	
1.51 	
Diluted earnings per share	$	
0.35 	 	$	
0.63 	 	$	
0.52 	 	$	
1.45 	
Basic weighted average common shares outstanding	 	
62,885 	 	 	
62,854 	 	 	
62,386 	 	 	
63,170 	
Diluted weighted average common shares outstanding	 	
65,214 	 	 	
65,368 	 	 	
65,024 	 	 	
65,894 	

 
The ac company ing notes are an integral part of these consolidated condensed financial statements.

4

 

 

CIRRUS LOGIC, INC.	
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME	
(in thousands, except per share amounts; unaudited)	
 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Net income	 	
22,729 	 	 	
41,500 	 	 	
33,829 	 	 	
95,509 	
Other comprehensive income (loss), before tax	 	 	 	 	 	 	 	 	 	 	 	
Net changes to available-for-sale securities	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gain (loss) on marketable securities	 	
(51)	 	 	
(65)	 	 	
91 	 	 	
151 	
Net changes to foreign currency derivatives	 	 	 	 	 	 	 	 	 	 	 	
Reclassification of unrealized loss to net income	 	
29 	 	 	 -	 	 	 -	 	 	 -	
Benefit (provision) for income taxes	 	
18 	 	 	
23 	 	 	
(32)	 	 	 -	
Comprehensive income	$	
22,725 	 	$	
41,458 	 	$	
33,888 	 	$	
95,660 	
 
The ac company ing notes are an integral part of these consolidated condensed financial statements.

5

 

 	 	 	 	 	 	
 	 	 	 	 	 	
CIRRUS LOGIC, INC.	
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS	
(in thousands; unaudited)	
 	 	 	 	 	 	
 	Nine Months Ended	
 	December 27,	 	December 28,	
 	2014	 	2013	
Cash flows from operating activities:	 	 	 	 	 	
Net income	$	
33,829 	 	$	
95,509 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	
Depreciation and amortization	 	
21,978 	 	 	
10,846 	
Stock compensation expense	 	
29,813 	 	 	
17,713 	
Deferred income taxes	 	
24,931 	 	 	
36,914 	
Loss on retirement or write-off of long-lived assets	 	
949 	 	 	
165 	
Excess tax benefit from employee stock options	 	
(24,508)	 	 	
(5,113)	
Other non-cash charges	 	
16,129 	 	 	
3,996 	
Net change in operating assets and liabilities:	 	 	 	 	 	
Accounts receivable, net	 	
(73,122)	 	 	
(39,500)	
Inventories	 	
26,377 	 	 	
49,315 	
Other current assets	 	
2,733 	 	 	
(5,785)	
Accounts payable and other accrued liabilities	 	
888 	 	 	
(1,062)	
Deferred income	 	
(765)	 	 	
27 	
Income taxes payable	 	
484 	 	 	 -	
Net cash provided by operating activities	 	
59,716 	 	 	
163,025 	
 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	
Proceeds from sale of available for sale marketable securities	 	
272,510 	 	 	
69,394 	
Purchases of available for sale marketable securities	 	
(29,256)	 	 	
(152,005)	
Purchases of property, equipment and software	 	
(19,927)	 	 	
(10,703)	
Investments in technology	 	
(1,346)	 	 	
(2,082)	
Loss on foreign exchange hedging activities	 	
(11,976)	 	 	 -	
Acquisition of Wolfson, net of cash obtained	 	
(444,138)	 	 	 -	
Acquisition of Acoustic Technologies, net of cash obtained	 	 -	 	 	
(20,432)	
Increase in deposits and other assets	 	
(692)	 	 	
(2,385)	
Net cash used in investing activities	 	
(234,825)	 	 	
(118,213)	
 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	
Proceeds from long-term revolver	 	
226,439 	 	 	 -	
Principal payments on long-term revolver	 	
(26,000)	 	 	 -	
Debt issuance costs	 	
(2,825)	 	 	 -	
Issuance of common stock, net of shares withheld for taxes	 	
2,454 	 	 	
754 	
Repurchase of stock to satisfy employee tax withholding obligations	 	
(4,175)	 	 	 -	
Repurchase and retirement of common stock	 	
(10,535)	 	 	
(42,391)	
Excess tax benefit from employee stock options	 	
24,508 	 	 	
5,113 	
Net cash provided by (used in) financing activities	 	
209,866 	 	 	
(36,524)	
 	 	 	 	 	 	
Net increase in cash and cash equivalents	 	
34,757 	 	 	
8,288 	
 	 	 	 	 	 	
Cash and cash equivalents at beginning of period	 	
31,850 	 	 	
66,402 	
Cash and cash equivalents at end of period	$	
66,607 	 	$	
74,690 	

 
The ac company ing notes are an integral part of these consolidated condensed financial statements .

6

 
CIRRUS LOGIC, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
 
1.     Basis of Presentation
 
The consolidated condensed financial statements have been prepared by Cirrus Logic, Inc. (“Cirrus Logic,” “we,” “us,” “our,” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission ( the “Commission”).  The accompanying unaudited consolidated condensed financial statements do not include complete footnotes and financial presentations.  As a result, these financial statements should be read along with the audited consolidated financial statements and notes thereto for the year ended March 29 , 201 4 , included in our Annual Report on Form 10-K filed with the Commission on May 2 8 , 201 4 .  In our opinion, the financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented.  The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities.  Actual results could differ from those estimates and assumptions.  Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.  Additionally, prior period amounts have been adjusted to conform to current year presentation.   
 
2.     Recently Issued Accounting Pronouncements
 
In August 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern .  The amendments in this AS U   provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  The amendments are effective for the annual period ending after   December 15, 2016, and for annual periods and interim periods thereafter.   Early   application is permitted.  The Company is currently evaluating the impact of this ASU and expects no material modifications to its financial statements.
 
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) .  The purpose of th is ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption not permitted by the FASB.  The Company is currently evaluating the impact of this ASU on its consolidated financial position, results of operations and cash flows.
 
3 .     Marketable Securities
 
The Company’s investments that have original maturities greater than 90 days have been classified as available-for-sale securities in accordance with U.S. GAAP.  Marketable securities are categorized on the consolidated condensed balance sheet as short- and long-term marketable securities, as appropriate .  
 
The following table is a summary of available-for-sale securities at Dec ember 27 , 201 4 (in thousands):

7

 

 

 	 	 	 	 	 	 	 	 	 	Estimated	
 	 	 	 	Gross	 	Gross	 	Fair Value	
 	Amortized	 	Unrealized	 	Unrealized	 	(Net Carrying	
As of December 27, 2014	Cost	 	Gains	 	Losses	 	Amount)	
Corporate debt securities	$	
81,551 	 	$	
11 	 	$	
(92)	 	$	
81,470 	
Commercial paper	 	
11,498 	 	 	
4 	 	 	
(7)	 	 	
11,495 	
U.S. Treasury securities	 	
16,505 	 	 	 -	 	 	
(5)	 	 	
16,500 	
Total securities	$	
109,554 	 	$	
15 	 	$	
(104)	 	$	
109,465 	
 
The Company’s specifically identified gross unrealized losses of $ 104 thousand relates to 26 different securities with total amortized cost of approximately $ 104.6 million at Dec ember 27 , 2014 .  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than -temporarily impaired at Dec ember 27 , 2014 .  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of Dec ember 27 , 2014 . 
 
The following table is a summary of availabl e-for-sale securities at March 29 , 201 4 (in thousands):  

 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	Estimated	
 	 	 	Gross	 	Gross	 	Fair Value	
 	Amortized	 	Unrealized	 	Unrealized	 	(Net Carrying	
As of March 29, 2014	Cost	 	Gains	 	Losses	 	Amount)	
Corporate debt securities	$	
246,878 	 	$	
52 	 	$	
(245)	 	$	
246,685 	
U.S. Treasury securities	 	
56,986 	 	 	
10 	 	 	
(2)	 	 	
56,994 	
Agency discount notes	 	
2,008 	 	 	
1 	 	 	 -	 	 	
2,009 	
Commercial paper	 	
41,962 	 	 	
10 	 	 	
(2)	 	 	
41,970 	
Certificates of deposit	 	
5,006 	 	 	 -	 	 	
(4)	 	 	
5,002 	
Total securities	$	
352,840 	 	$	
73 	 	$	
(253)	 	$	
352,660 	
 
The Company’s specifically identified gross unrealized losses of $ 253 thousand relates to 74 different securities with total amortized cost of approximately $ 207.8 million at March 29, 2014 .  Because the Company d id   not intend to sell the investments at a loss and the Company did   not expect to be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than- temporarily impaired at March 29, 2014 .  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of March 29, 2014 .  
 
The cost and estimated fair value of available-for-sale securities by contractual maturities were as follows (in thousands) :

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 27, 2014	 	March 29, 2014	
 	 	Amortized	 	Estimated	 	Amortized	 	Estimated	
 	 	Cost	 	Fair Value	 	Cost	 	Fair Value	
Within 1 year	 	$	
106,136 	 	$	
106,061 	 	$	
263,418 	 	$	
263,417 	
After 1 year	 	 	
3,418 	 	 	
3,404 	 	 	
89,422 	 	 	
89,243 	
Total	 	$	
109,554 	 	$	
109,465 	 	$	
352,840 	 	$	
352,660 	

 

8

 

4.     Derivative Financial Instruments
 
Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk.
 
Currency Exchange Rate Risk
 
We are exposed to currency exchange rate risk and generally hedge our exposures with currency forward contracts.  Substantially all of our revenue is transacted in U.S. dollars.  However, a portion of our operating expenditures are incurred in or exposed to other currencies, primarily the British   pound.  We have established a   forecasted transaction currency risk management program to protect against fluctuations in the volatility of the functional currency equivalent of future cash flows caused by changes in exchange rates.  Th is program may reduce, but not eliminate, the impact of currency exchange movements. 
 
Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets
 
The fair value of our derivative instruments at the end of each period were as follows (in thousands ) :

 	 	 	 	 	 	
 	Other Accrued Liabilities	
 	December 27,	 	March 29,	
 	2014	 	2014	
 	 	 	 	 	 	
Currency forwards	$	
233 	 	$	 -	
 
Changes in the fair value of derivative instruments as well as recognized gains / losses are included in the line item “ Other expense ” in the consolidated condensed statements of income.

5 .     Fair Value of Financial Instruments
 
The Company has determined that the only assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents ,   investment portfolio , and foreign currency derivative assets/liabilities .   The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.     The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

 	 	 	
   	•	Level 1 - Quoted prices in active markets for identical assets or liabilities.	
   	•	Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.	
   	•	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.	

The Company’s cash equivalents and investment portfolio assets consist of corporate debt securities, money market funds, U.S. Treasury securities, obligations of certain U.S. government-sponsored enterprises ,   commercial paper, and certificates of deposit and are reflected on our consolidated condensed balance sheet s under the headings cash and cash equivalents, marketable securities, and long-term marketable securities.   The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party portfolio managers on the last day of the quarter,

9

 
whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.    
 
The fair value of the foreign currency derivative is included in “ Other accrued liabilities ” on the consolidated condensed balance sheet.
 
The Company’s long-term revolving facility, described in Note 9, bears interest at a base rate plus applicable margin or LIBOR plus applicable margin.  As of Dec ember 27, 2014, the fair value of the Company’s long-term revolving facility approximates carrying value based on estimated mar g in.
 
As of Dec ember 27 ,   2014, the Company classified certain of its assets and liabilities based upon the Level 1 or Level 2 inputs.  The Company has no   assets or liabilities based upon the Level 3   inputs .  There were no transfers between Level 1, Level 2, or Level 3 measurements for the three month period ending Dec ember 27 , 201 4 .
 
The fair value of our financial assets and liabilities at Dec ember 27 , 201 4 , was determined using the following inputs (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	Quoted Prices	 	 	 	 	 	 	
 	in Active	 	Significant	 	 	 	 	
 	Markets for	 	Other	 	Significant	 	 	
 	Identical	 	Observable	 	Unobservable	 	 	
 	Assets	 	Inputs	 	Inputs	 	 	
 	Level 1	 	Level 2	 	Level 3	 	Total	
Assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash equivalents	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	$	
1,077 	 	$	 -	 	$	 -	 	$	
1,077 	
 	 	 	 	 	 	 	 	 	 	 	 	
Available-for-sale securities	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	$	 -	 	$	
81,470 	 	$	 -	 	$	
81,470 	
U.S. Treasury securities	 	
16,500 	 	 	 -	 	 	 -	 	 	
16,500 	
Commercial paper	 	 -	 	 	
11,495 	 	 	 -	 	 	
11,495 	
 	$	
16,500 	 	$	
92,965 	 	$	 -	 	$	
109,465 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Other accrued liabilities	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange derivative	$	 -	 	$	
233 	 	$	 -	 	$	
233 	

The fair value of our financial assets at March 29 , 201 4 , was determined using the following inputs (in thousands):

10

 

 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	Quoted Prices	 	 	 	 	 	 	
 	in Active	 	Significant	 	 	 	 	
 	Markets for	 	Other	 	Significant	 	 	
 	Identical	 	Observable	 	Unobservable	 	 	
 	Assets	 	Inputs	 	Inputs	 	 	
 	Level 1	 	Level 2	 	Level 3	 	Total	
Cash equivalents	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	$	
20,456 	 	$	 -	 	$	 -	 	$	
20,456 	
Commercial paper	 	 -	 	 	
1,878 	 	 	 -	 	 	
1,878 	
 	$	
20,456 	 	$	
1,878 	 	$	 -	 	$	
22,334 	
 	 	 	 	 	 	 	 	 	 	 	 	
Available-for-sale securities	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	$	 -	 	$	
246,685 	 	$	 -	 	$	
246,685 	
U.S. Treasury securities	 	
56,994 	 	 	 -	 	 	 -	 	 	
56,994 	
Agency discount notes	 	 -	 	 	
2,009 	 	 	 -	 	 	
2,009 	
Commercial paper	 	 -	 	 	
41,970 	 	 	 -	 	 	
41,970 	
Certificates of deposit	 	 -	 	 	
5,002 	 	 	 -	 	 	
5,002 	
 	$	
56,994 	 	$	
295,666 	 	$	 -	 	$	
352,660 	

 
6 .     Accounts Receivable, net
 
The following are the components of accounts receivable, net (in thousands):

 	 	 	 	 	 	
 	December 27,	 	March 29,	
 	2014	 	2014	
Gross accounts receivable	$	
148,742 	 	$	
63,449 	
Allowance for doubtful accounts	 	
(356)	 	 	
(229)	
Accounts receivable, net	$	
148,386 	 	$	
63,220 	

7 .     Inventories
 
Inventories are comprised of the following (in thousands):

 	 	 	 	 	 	
 	December 27,	 	March 29,	
 	2014	 	2014	
Work in process	$	
51,716 	 	$	
37,967 	
Finished goods	 	
22,180 	 	 	
31,776 	
 	$	
73,896 	 	$	
69,743 	

8 .    Acquisition
On August 21, 2014, Cirrus Logic completed the acquisition of Wolfson Microelectronics plc (the “Acquisition”) , a public limited company incorporated in Scotland (“Wolfson”).  Upon completion of the acquisition, Wolfson was re-registered as a private limited company .  Wolfson is a supplier of high performance, mixed-signal audio solutions for the con sumer electronics market.  The A cquisition   accelerate s Cirrus Logic’s strategic roadmap, further strengthen s our technology portfolio with the addition of MEMS microphones and extensive software capabilities , while significantly expanding our development capacity.    
The enterprise value   for Wolfson in connection with the Acquisition was approximately £2 83 million (approximately $46 9 million based on a U.S. dollar to pound sterling exchange rate of 1.6 5 9 ) , and was based on the agreed upon offer of £2.35 per share (the “Offer”) for the entire issued and to be issued share

11

 
capital of Wolfson.     Cirrus Logic financed the Acquisition through a combination of existing cash on Cirrus Logic’s balance sheet and $225 million in debt funding from Wells Fargo Bank, Nati onal Association , as discussed below in Note 9 .     Upon the completion of the Acquisition ,   in the second quarter of fiscal year 2015 , the Company recorded approximately $12.0 million   of realized losses on foreign currency fluctuations in the initial valuation exchange rate of 1.68 2 (U.S. dollar to pound sterling) and the actual exchange rate at Acquisition date of 1.65 9 .  The loss is included in the consolidated condensed statements of income under the caption “ Other expense ” for the nine months ended December 27, 2014 .  
The Acquisition was accounted for as a business purchase pursuant to ASC Topic 805, Business Combinations, and the operations of Wolfson have been included in the Company’s consolidated financial statements since August 21, 2014, the date of acquisition. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition as of December 27, 2014 (in thousands):

 	 	Amount	
Cash and cash equivalents	$	
25,342 	
Inventory	 	
30,530 	
Other current assets	 	
16,226 	
Property, plant and equipment	 	
27,634 	
Intangible assets	 	
175,987 	
Pension assets	 	
1,625 	
Total identifiable assets acquired	$	
277,344 	
 	 	 	
Deferred tax liability - current	 	
(11,958)	
Deferred revenue	 	
(551)	
Other accrued liabilities	 	
(41,417)	
Other long-term liabilities	 	
(2,449)	
Total identifiable liabilities assumed	$	
(56,375)	
Net identifiable assets acquired	$	
220,969 	
Goodwill	 	
248,512 	
Net assets acquired	$	
469,481 	
 
The goodwill of $ 24 8 . 5   million arising from the Acquisition is attributable primarily to expected synergies and the product and customer base of Wolfson.  None of the goodwill is expected to be deductible for income tax purposes.  As of Dec ember 27, 2014, the changes in the recognized amounts of goodwill resulting from the A cquisition are as follows:

 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	September 27,	 	 	Fair Value	 	 	December 27,	
 	 	 	2014	 	 	Adjustments	 	 	2014	
Inventory	 	$	
28,658 	 	$	
1,872 	 	$	
30,530 	
Other current assets	 	 	
15,633 	 	 	
593 	 	 	
16,226 	
Property, plant and equipment	 	 	
29,093 	 	 	
(1,459)	 	 	
27,634 	
Deferred tax liability - current	 	 	
(11,483)	 	 	
(475)	 	 	
(11,958)	
 	 	 	 	 	 	 	 	 	 	
Total Goodwill	 	$	
249,043 	 	$	
(531)	 	$	
248,512 	

The components of the acquired intangible assets and related weighted average amortization periods are detailed below (in thousands):

 	 	 	 	 	

12

 

Intangible assets	 	Amount	 	Weighted-average Amortization Period (years)	
Developed technology	$	
74,247 	 	6.2	
Technology intellectual property	 	
14,572 	 	5.3	
Trademark	 	
1,437 	 	1.3	
In-process research & development	 	
72,750 	 	7.3	
Customer relationships	 	
12,981 	 	10.0	
Total	$	
175,987 	 	 	
 
The initial allocation of the purchase price is preliminary and subject to completion, including the areas of taxation, inventory, real property, intangible assets, other assets, deferred revenue, and other liabilities , where valuation assessments are in progress .  The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting and would be retroactively reflected in the financial statements as of Dec ember 27, 2014 , and for the interim periods then ended.
 
The Company recognized a total of $ 1 8.1 million of acquisition related costs that were expensed in the second and third quarters of fiscal year 2015 .   These costs are included in the consolidated condensed statements of income in the line item entitled “ Acquisition related costs. ”  Restructuring costs related to the Acquisition were $1.5 million for the nine months ended December 27, 201 4 , primarily related to severance payments and the consolidation of our sales functions .  These costs are included in the line item “ Restructuring and other ” on the consolidated condensed statements of income.  Prior year credits related to changes in estimates for the Tucson, Arizo n a design center facility, due to a new sublease on the vacated property in connection with the closing of this facility.  
 
The Company’s consolidated condensed statements of income for the nine months ending Dec ember 27, 2014 included $ 43.8 million of revenue attributable to Wolfson, from the a cquisition date to the end of the period .  E arnings disclosure related to Wolfson for the period ending Dec ember 27, 2014, is   excluded as it would be impracticable ,   due to the integration of Wolfson’s operations with the Company’s operations ,   primarily the allocat ion of  c osts and services shared across both companies’ product lines .  
 
Giving p ro forma effect to the Acquisition as if it had occurred as of March 30, 2014, the beginning of the Company’s fiscal year, and after applying the Company’s accounting policies and adjusting the results to reflect these changes since March 30, 2014, $ 88.0 million of pro forma revenue would have been attributable to Wolfson for the nine months ended December 27, 2014 .  Disclosure of p ro forma earnings attributable to Wolfson is excluded as it would be impracticable , due to the integration of Wolfson’s operations with the Company’s operations, primarily the allocat ion of   c osts and services shared across both companies’ product lines.  

9 .     Revolving Credit Facilities
On August 29, 2014, Cirrus Logic entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent , and the Lenders party thereto.  The Credit Agreement provides for a $250 million senior secured revolving credit facility (the “Credit Facility”).  The Credit Facility replaced Cirrus Logic’s Interim Credit Facility   described below , and may be used for general corporate purposes.  The Credit Facility matures on August 29, 2017.
 
The Credit Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Credit Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.  Borrowings under the Credit Facility may, at Cirrus Logic’s election, bear interest at either (a) a Base Rate plus the Applicable Margin (“Base Rate Loans”) or (b) a LIBOR Rate plus the Applicable Margin (“LIBOR Rate Loans”).  The Applicable Margin ranges from 0% to .25 % per annum for Base Rate Loans and 1.50% to 2.00% per annum for LIBOR Rate Loans based on Cirrus Logic’s Leverage Ratio (discussed below).

13

 
A Commitment Fee accrues at a rate per annum ranging from 0.25 % to 0.35 % (based on the Leverage Ratio) on the average daily unused portion of the Commitment of the Lenders.     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 Cirrus Logic or any Subsidiary to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.  The Credit Facility also contains certain 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 2.00 to 1.00 (the “Leverage Ratio”) and (b) the sum of cash and Cash Equivalents of Cirrus Logic and its Subsidiaries on a consolidated basis must not be less than $ 100 million.     At Dec ember  2 7 , 2014, the Company was in compliance with all covenants under the Credit Agreement .     A s of Dec ember 27, 2014, t he Company had $ 200.4 million of indebtedness outstanding under th e Credit   F acility ,   which is included in long-term liabilities on the c onsolidated c ondensed b alance s heets.  The borrowings were primarily used for financing the Acquisition.
Cirrus Logic entered into a credit agreement (the “ Interim Credit Agreement”) with Wells Fargo Bank, National Association as administrative agent and lender, on April 29, 2014, in connection with the Acquisition.  The Interim Credit Agreement provided for a $225 million senior secured revolving credit facility (the “ Interim Facility”).  The Interim Facility was to be used for, among other things, payment of the o ffer c onsideration in connection with the Acquisition.  The Interim Facility would have matured on the earliest to occur of (a) January 23, 2015, (b) the date of termination of the Commitments as a result of a permanent reduction of all of the Commitments (as defined in the Interim Credit Agreement) by Cirrus Logic or (c) the date of termination of the Commitments as a result of an event of default.  The Interim Facility was replaced with the Credit Facility described above and matured under scenario (b) above with no outstanding borrowings or accrued interest on the m aturity d ate. 
 
10 .   Income Taxes
 
Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items and any applicable credits. Our income tax expense is primarily a non-cash charge due to the utilization of U.S. net operating losses.
 
The following table presents the provision for income taxes and the effective tax rates (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Income before income taxes	$	
42,261 	 	$	
52,963 	 	$	
61,619 	 	$	
135,437 	
Provision for income taxes	$	
19,532 	 	$	
11,463 	 	$	
27,790 	 	$	
39,928 	
Effective tax rate	 	
46.2% 	 	 	
21.6% 	 	 	
45.1% 	 	 	
29.5% 	
 
Our income tax expense for the third quarter and first nine months of fiscal year 2015 was above the federal statutory rate primarily due to the inclusion of foreign losses in the period from the close of the Acquisition to the end of the period at foreign statutory rates below the U.S. federal statutory rate .   The impact of these foreign losses was partially offset by the federal research development credit , which was extended through December 31, 2014 by the Tax Increase Prevention Act of 2014 , which was enacted on December 19, 2014 .  Our income tax expense for the third quarter and first nine months of fiscal year 2014 was below the federal statutory rate primarily due to the effect of a one-time tax benefit of $6.3 million related to export benefits provided by the Extraterritorial Income Exclusion Act, an elective provision of the Internal Revenue Code that was in effect for prior years .   Our income tax expense for the third quarter and first nine months of fiscal year 2014 was further reduced by the federal research development credit , which was extended through December 31, 2013 by the American Taxpayer Relief Act of 2012 , which was enacted on January 2, 2013.

14

 
We had no unrecognized tax benefits as of Dec ember 27 , 2014.   
 
We accrue interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.  As of Dec ember 27 , 2014, the balance of accrued interest and penalties was zero .  No interest or penalties were incurred during the first nine months of fiscal year 2015 or 2014.
 
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions.  Fiscal years 201 2 through 2014 remain open to examination by the major taxing jurisdictions to which we are subject.
 
11.   Pension Plan
 
As a result of the Acquisition, t he Company now fully funds a defined benefit pension scheme (“the Plan”) maintained by Wolfson , for non-U.S. employees, which was closed to new participants as of July 2, 2002.  As of April 30, 2011 , the participants in the Plan no longer accrue benefits and therefore the Company will not be required to pay contributions in respect to future accrual.
Prior to the A cquisition, Wolfson paid deficit contributions of approximately $1.65 million in Apr il 201 4 .  The Company will be obligated to pay approximately   $1.65 million by April 30, 2015 and approximately   $0.6 million by April 30, 2016 .     The Company expects to completely close the Plan over the next ten   years.
 
The components of the Company’s net periodic pension expense (income) for the three and nine months ended Dec ember 27, 2014 are as follows (in thousands ):

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	 	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	 	
 	2014	 	2013	 	2014	 	2013	 	
Interest cost	$	 -	 	$	 -	 	$	
254 	 	$	 -	 	
Expected return on plan assets	 	 -	 	 	 -	 	 	
(370)	 	 	 -	 	
 	 	 -	 	 	 -	 	 	
(116)	 	 	 -	 	
Based on an actuarial study performed a s   of September 27, 2014 , the plan is over funded and a long-term   asset is reflected in the Company’s consolidated condensed balance sheet   under the caption “ Other assets ” .    
 
1 2 .   Net Income Per Share
 
Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period.  Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.  These potentially dilutive items consist primarily of outstanding stock options and restricted stock awards.
 
The following table details the calculation of basic and diluted earnings per share for the three and nine months ended Dec ember 27 , 2014 and Dec ember 28 , 2013 (in thousands, except per share amounts):

15

 

 

 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	
Net income	$	
22,729 	 	$	
41,500 	 	$	
33,829 	 	$	
95,509 	
Denominator:	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding	 	
62,885 	 	 	
62,854 	 	 	
62,386 	 	 	
63,170 	
Effect of dilutive securities	 	
2,329 	 	 	
2,514 	 	 	
2,638 	 	 	
2,724 	
Weighted average diluted shares	 	
65,214 	 	 	
65,368 	 	 	
65,024 	 	 	
65,894 	
Basic earnings per share	$	
0.36 	 	$	
0.66 	 	$	
0.54 	 	$	
1.51 	
Diluted earnings per share	$	
0.35 	 	$	
0.63 	 	$	
0.52 	 	$	
1.45 	
 
The weighted outstanding shares excluded from our diluted calculation for the three and nine months ended Dec ember 27 , 2014 were 911 thousand and 715 thousand, respectively, as the shares were anti-dilutive.  The weighted outstanding shares excluded from our diluted calculation for the three and nine months ended Dec ember 28, 2013 were approximately 1 . 2   million   and 1 . 3   million , respectively.
 
1 3 .   Legal Matters
From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities.  We regularly evaluate the status of legal proceedings in which we are involved in order to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred and determine if accruals are appropriate.  We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made.    
 
On June 4, 2012, U.S. Ethernet Innovations, LLC (the “Plaintiff”) filed suit against Cirrus Logic and two other defendants in the U.S. District Court, Eastern District of Texas.  The Plaintiff alleges that Cirrus Logic infringed four U.S. patents relating to Ethernet technology.  In its complaint, the Plaintiff indicated that it is seeking unspecified monetary damages, including up to treble damages for willful infringement.  We answered the complaint on June 29, 2012 , denying the allegations of infringement and seeking a declaratory judgment that the patents in suit were invalid and not infringed.  The parties entered into a settlement agreement on May 30, 2013.  In exchange for a full release of claims as it relates to the asserted patent, we paid the Plaintiff $0.7 million .  This amount is recorded as a separate line item on the consolidated condensed statements of comprehensive income under the caption “ Patent infringement settlements, net . ”
 
For the case described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified ; (iii) damages are unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties.   For th is case, however, management does not believe, based on currently available information, that the outcome of th is proceeding will have a material adverse effect on our financial condition.  However, the ultimate resolutions of th is proceeding and matters are inherently difficult to predict; as such, our operating results could be materially affected  by the unfavorable resolution of th is proceeding or matters for any particular period, depending, in part, upon the operating results for such period.  We intend to vigorously defend ourselves against the allegations made in the legal case described below.
 
On June 17, 2014, Enterprise Systems Technologies S.a.r.l. (the “Plaintiff”) filed suit against Cirrus Logic, Inc. in the U.S. District Court, District of Delaware.  The Plaintiff alleges that Cirrus Logic indirectly infringes two U.S. patents through the manufacture and sale of digital signal processors, audio codecs, audio processors, and other components included in communications and consumer electronic devices such as smartphones and computers.  The Plaintiff is seeking unspecified monetary damages.  On July 23, 2014, the Plaintiff filed an amended complaint removing allegations associated with one of the two

16

 
patents.  On August 25, 2014, the lawsuit was stayed pending resolution of the proceedings in the International Trade Commission described below. 
 
On July 16, 2014, the Plaintiff requested the International Trade Commission to investigate the impact of certain products that allegedly infringe the same patent asserted in the District Court of Delaware.  The Plaintiff is seeking a limited exclusion order against certain Apple, Inc. products that incorporate the Company’s components .  The target date for completion of the investigation is December 21, 2015.
 
1 4 .   Stockholders’ Equity
Common Stock
 
The Company issued a net 0. 7 million and 1 . 3 million shares of common stock during the three and nine   month periods ending Dec ember 27 , 2014 , respectively, in connection with stock issuances pursuant to the Company’s 2006 Stock Incentive Plan.  The Company issued a net 0. 8 million and 1 . 1 million shares of common stock during the three and nine month periods ending   Dec ember 28 , 2013, respectively, in connection with stock issuances pursuant to the Company’s 2006 Stock Incentive Plan. 
 
Share Repurchase Program  
   
Since inception, $1 4 8. 3 million of the Company’s common stock has been repurchased under the Company’s share repurchase program , leaving $ 51.7 million available for repurchase u nder this plan as of December 27 , 201 4 .  During the three and nine months ended December 2 7 , 201 4 , the Company repurchased 0.6 million shares of its common stock for $ 10.5 million, at an average cost of $1 8.17 .    All of these shares were repurchased in the open market and were funded from existing cash.  All shares of our common stock that were repurchased were retired as of December 2 7 , 201 4 .      
 
1 5 .   Segment Information
 
We determine our operating segments in accordance with Financial Accounting Standards Board guidelines.  Our Chief Executive Officer (“CEO”)   has been identified as the chief operating decision maker under these guidelines. 
 
The Company operates and tracks its results in one reportable segment , but reports revenue performance in two product lines .  Beginning in the second quarter of the current fiscal year, w e adjust ed how we present product line revenue to better reflect our business model.  W e report revenue by Portable Audio Products, which includes devices selling into such end applications as tablets and smartphones.  The remainder of the revenue is defined as Non-Portable Audio and Other Products , which   target high-end home entertainment, automotive, energy, industrial and various general market s .     Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level.  Additionally, our product lines have similar characteristics and customers.  They share operations support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative functions of human resources, legal, finance and information technology.  Therefore, no complete, discrete financial information is maintained for these product lines.
 
Revenue s from our product lines are as follows (in thousands) :

 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Portable Audio Products	$	
253,355 	 	$	
181,749 	 	$	
529,487 	 	$	
449,305 	
Non-Portable Audio and Other Products	 	
45,251 	 	 	
37,134 	 	 	
131,898 	 	 	
115,374 	
 	$	
298,606 	 	$	
218,883 	 	$	
661,385 	 	$	
564,679 	

17

 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
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 29, 2014, contained in our fiscal year 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) on May 28, 2014.  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 Commission . 
 
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 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 2014 Annual Report on Form 10-K filed with the Commission on May 28, 2014, and in Part II, Item 1A “ Risk Factors ” within this quarterly report on Form 10-Q.  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”) that primarily target the audio and voice market .     Cirrus Logic delivers highly optim ized products for a variety of applications including smartphones, tablets, consumer and automotive entertainments systems, industrial and energy .    
 
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 nine months of fiscal year 2015 to the information provided under the heading “ Critical Accounting Policies ” included in our Annual Report on Form 10-K for t he fiscal year ended March 29, 2014, with the exception of the following as a result of the Acquisition .
 
Pension

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Defined benefit pension plans are accounted for based upon the provisions of Accounting Standards Codification (“ ASC ”) Topic 715, “ Compensation – Retirement Benefits. ”
 
The funded status of the plan is recognized in the consolidated condensed balance sheets .     Subsequent re-measurement of plan assets and benefit obligations are reflected in the consolidated condensed balance sheets in the subsequent interim period to reflect the overfunded or underfunded status of the plan.
 
The Company will engage external actuaries on at least an annual basis to provide a valuation of the plan’s assets and projected benefit obligation and to record the net periodic pension cost.   On a quarterly basis, the Company will evaluate current information available to us to determine whether the plan’s assets and projected benefit obligation should be re-measured.
 
Hedging and Forwards
 
Hedging and forward contracts are accounted for based upon the provisions of ASC Topic 815, “ Derivatives and Hedging” and ASC Topic 820, “ Fair Value Measurements and Disclosures. ”
 
All derivative instruments shall be carried at fair value per ASC 820.  If a derivative instrument meets certain hedge accounting criteria, the provisions of ASC 815 may be applied.  The Company regularly reviews all financial instruments and contracts.  When a derivative is identified, it is evaluated against the criteria in ASC 815 to determine the appropriate accounting methodology.  Derivatives that qualify for hedge accounting per ASC 815 are classified as one of the following: fair value hedge, cash flow hedge or foreign currency hedge.    
 
Recently Issued Accounting Pronouncements
 
In August 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014 -15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern .  The amendments in this AS U   provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  The amendments are effective for the annual period ending after   December 15, 2016, and for annual periods and interim periods thereafter.   Early   application is permitted.  The Company is currently evaluating the impact of this ASU and expects no material modifications to its financial statements.
 
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) .  The purpose of th is ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS).  “ The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”  The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption not permitted by the FASB.  The Company is currently evaluating the impact of this ASU on its consolidated financial position, results of operations and cash flows.
 
Results of Operations  
 
The following table summarizes the results of our operations for the three and nine months o f   fiscal years   2015 and 2014 as a percentage of net sales.  All percentage amounts were calculated using the underlying data in thousands , unaudite d:  

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 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Net sales	
100% 	 	
100% 	 	
100% 	 	
100% 	
Gross margin	
44% 	 	
47% 	 	
46% 	 	
50% 	
Research and development	
19% 	 	
15% 	 	
21% 	 	
16% 	
Selling, general and administrative	
9% 	 	
8% 	 	
10% 	 	
10% 	
Acquisition related costs	
1% 	 	
0% 	 	
3% 	 	
0% 	
Restructuring and other	
0% 	 	
0% 	 	
0% 	 	
0% 	
Patent infringement settlements, net	
0% 	 	
0% 	 	
0% 	 	
0% 	
Income from operations	
15% 	 	
24% 	 	
12% 	 	
24% 	
Interest income	
0% 	 	
0% 	 	
0% 	 	
0% 	
Interest expense	-1%	 	
0% 	 	-1%	 	
0% 	
Other expense	
0% 	 	
0% 	 	-2%	 	
0% 	
Income before income taxes	
14% 	 	
24% 	 	
9% 	 	
24% 	
Provision for income taxes	
6% 	 	
5% 	 	
4% 	 	
7% 	
Net income	
8% 	 	
19% 	 	
5% 	 	
17% 	

Net Sales  
 
Net sales for the third quarter of fiscal year 2015 in crease d $ 79.7 million, or 36 percent, to $ 298.6 million from $ 218.9 million in t he third quarter of fiscal year 201 4 .  Revenue from the Wolfson acquisition contributed $ 30.8 million in the current quarter.  Net sales from our portable audio products increased $71.6 million, or 39 percent, primarily from additional volumes in   certain portable products, coupled with the contribution of revenue from Wolfson .  Non-portable audio and other product sales in creased $ 8.1 million, or 22 percent, during the third quarter of fiscal year 2015 versus the comparable quarter of the prior fiscal year , primarily due to the additional revenue contribution from Wolfson after the acquisition .
 
Net sales for the first nine months of fiscal year 2015 increased $ 96.7 million, or 17 percent to $ 661.4 million from $ 564.7 million for the first nine months of fiscal year 2014.  Net sales from our portable audio products increased $ 80.2 million for the first nine months of fiscal year 2015 , or 18 percent, primarily due to additional revenue contribution from Wolfson after the Acquisition as well as increased volume of sales in certain portable products .  Non-portable audio and other products increased $16.5 million, or 14 percent, for the first nine months of fiscal year 2015 due to increased revenues resulting from the acquisitions of Wolfson and Acoustic Technologies.  With the addition of Acoustic Technologies, Inc. in the third quarter of fiscal year 2014, the Company acquired Soundclear ™ software, experiencing a full nine months of revenue from this product in the current fiscal year.  The Company also had growth from our DAC and computer products for the nine months ending December 27, 2014 compared to the prior period .  
 
Export sales, principally to Asia, including sales to U.S.-based customers with manufacturing plants overseas, were 96 percent and 95 percent of net sales during the third quarter of fiscal years 2015 and 2014 , respectively and 95 percent of net sales for each of the first nine months of fiscal years 2015 and 2014. Our sales are denominated primar ily in U.S. dollars.  W e   do, however, enter into foreign currency hedging contracts from time to time .    
 
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 third quarter of fiscal years 2015 and 2014, our ten largest end customers represented approximately 88 percent and 90 percent of our net sales, respectively.  For the first nine months of fiscal years 2015 and 2014, our ten largest end customers represented approximately 87 percent and 89 percent of our net sales, respectively.

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We had one end customer, Apple Inc. that purchased through multiple contract manufacturers and represented approximately 78 percent and 84 percent of the Company’s total net sales for the third quarter of fiscal years 2015 and 2014, respectively.  This same customer represented approximately 75 percent and 81 percent of the Company’s total sales for the first nine months of fiscal years 2015 and 2014, 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, or pricing on products sold to, any key customer or distributor could significantly reduce our sales or profitability . ”
 
No other end customer or distributor represented more than 10 percent of net sales for the three or nine month periods ending December 27, 2014 and December  2 8 , 2013 .
 
Gross Margin
 
Gross margin was 43.8 percent in the third quarter of fiscal year 2015, down from 47.4 percent in the third quarter of fiscal year 2014 , primarily due to the impact related to the sell-through of previously fair-valued inventory related to the Acquisition in the quarter, which negatively impacted gross margin by approximately 2.3%.  Further, gross margin decre ased due to a change in product mix with a higher mix of custom   p ortable products compared to prior fiscal year.
 
Gross margin was 46.4 percent for the first nine months of fiscal year 2015, down from 50.1 percent for the first nine months of fiscal year 2014.  During the nine months of fiscal year 2014, gross margin was positively impacted by a large sale of previously reserved inventory that did not reoccur during the current fiscal period.  During the current period, additional costs associated with the Acquisition , coupled with lower margin portable product introductions ramping in the latter half of fiscal year 2014, also contributed to this decline.  
 
Research and Development Expense
 
Research and development expense for the third quarter of fiscal year 201 5 was $ 55.5 million, an increase of $ 23.1 million, or 71   percent, from $32.4 million in the third quarter of fiscal year 2014.  The increase was primarily due to salary and employee-related expenses resulting from increased headcount,   both at Cirrus and due to the Acquisition, increased amortization on acquisition-related intangibles, and increased product development expenses, including tape outs. 
 
Research and development expense for the first nine months of fiscal year 2015 was $139.8 million, an increase of $49.1 million, or 54 percent, from $90.7 million for the first nine months of fiscal year 2014.  This increase was primarily due to the salary and employee-related expenses resulting from increased headcount,   both at Cirrus and due to the Acquisition, increased amortization on acquisition-related intangibles, CAD software investment, and increased product development expenses, including tape outs.
 
Selling, General and Administrative Expense  
 
Selling, general and ad ministrative (“SG&A”) expense for the third quarter of fiscal year 201 5 was $ 27.8 million, a n   in crease of $ 9.2 million , or 49 percent, from $18.6 million in the third quarter of fiscal year 2014.  The increase was primarily attributable to the Acquisition, result ing in increase d SG&A headcount and higher costs associated with outside professional services.
 
SG&A expense for the first nine months of fiscal year 2015 was $69.0 million, an increase of $12.0 million, or 21 percent, from $57.0 million for the first nine months of fiscal year 2014.  With the Company’s Acquisition, outside professional services and increased headcount contributed to the overall increase.
 
Acquisition related costs

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The Company reported $3.2 million and $18.1 million in conjunction with the Acquisition for the three and nine months ended December 27, 2014, respectively.  The majority of the costs included in this amount were associated with bank and legal fees, as well as certain expenses for stock compensation related to the Acquisition. 
 
Restructuring and other
 
Restructuring costs related to the Acquisition were $1.5 million for the nine months ended December 27, 2014, primarily made up of severance payments associated with the Acquisition in the current fiscal year and the consolidation of our sales functions.  The credits included in this line item for the prior fiscal year related to changes in estimates for the Tucson, Arizona design center facility, due to a new sublease on the vacated property in connection with the closing of this facility.
 
Patent Infringement Settlements, net
The Company reported a $0.7 million expense in the first q uarter of fiscal year 2014 in connection with the settlement of the U.S. Ethernet Innovations, LLC case discussed in Note 1 3 – Legal Matters.  This item is presented as a separate line item within operating expenses in the consolidated condensed statements of income.
 
Interest expense
The Company reported interest expense of $1.1 million and $4.6 million for the three and nine months ended December 27, 2014, respectively, as a result of the new $250 million revolving credit facility described in Note 9.
 
Other expense
For the three and nine months ended December 27, 2014, the Company reported $1.1 million and $12.6 million, respectively, in other expense primarily related to recognized losses on expired contracts during the current quarter and the foreign currency exchange losses on hedges purchased in relation to the Acquisition during the second quarter of the current fiscal year .  The corresponding amounts in the prior fiscal year are immaterial.
 
Income Taxes
Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items and any applicable credits.  Our income tax expense is primarily a non-cash charge due to the utilization of U.S. net operating losses.
 
The following table presents the provision for income taxes and the effective tax rates (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Nine Months Ended	
 	December 27,	 	December 28,	 	December 27,	 	December 28,	
 	2014	 	2013	 	2014	 	2013	
Income before income taxes	$	
42,261 	 	$	
52,963 	 	$	
61,619 	 	$	
135,437 	
Provision for income taxes	$	
19,532 	 	$	
11,463 	 	$	
27,790 	 	$	
39,928 	
Effective tax rate	 	
46.2% 	 	 	
21.6% 	 	 	
45.1% 	 	 	
29.5% 	
 
Our income tax expense for the third quarter and first nine months of fiscal year 2015 was above the federal statutory rate primarily due to the inclusion of foreign losses from the close of the Acquisition to the end of the period at foreign statutory rates below the U.S. federal statutory rate.  The impact of these foreign losses was partially offset by the federal research development credit, which was extended through December 31, 2014 by the Tax Increase Prevention Act of 2014, which was enacted on December 19,

22

 
2014.  Our income tax expense for the third quarter and first nine months of fiscal year 2014 was below the federal statutory rate primarily due to the effect of a one-time tax benefit of $6.3 million related to export benefits provided by the Extraterritorial Income Exclusion Act, an elective provision of the Internal Revenue Code that was in effect for prior years.  Our income tax expense for the third quarter and first nine months of fiscal year 2014 was further reduced by the federal research development credit, which was extended through December 31, 2013 by the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013. 
 
Liquidity and Capital Resources  
 
We require cash to fund our operating expenses and working capital requirements, including outlays for research and development, capital expenditures, share repurchase s , investments in marketable securities, and strategic acquisitions.   Our principal sources of liquidity are cash on hand, cash generated from operatio ns, cash generated from the sale and maturity of marketable securities, funds from equity issuances and borrowings under our new $250 million senior secured revolving credit facility.  
 
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 provided by operating activities was $ 59.7 million for the first nine months of fiscal year 2015 as compared to $163.0 million   for the c orresponding period of fiscal year 201 4.  The source of cash in operations during the current period of fiscal year 2015 was related to the cash components of our net income, offset by a $43.4 million decrease in working capital, primarily in accounts receivable .  The primary source of cash in operations during the corresponding period of fiscal year 201 4 was primarily related to the cash components of our net income.       
 
Net cash used in investing activities was $234.8 million during the first nine months of fiscal year 201 5 as compared to $ 118.2 million during the first nine months of fiscal year 201 4.  The in crease i s primarily related to movements that occurred in the first quarter of fiscal year 2015, toward more liquid investments in anticipation of financing the Wolfson acquisition, which was completed in the second quarter of fiscal year 2015.  See Note 8 – Acquisition and Note 9 – Revolving Credit Facilities for additional details.  Net proceeds from the sale of marketable securities of $243.3 million made up the majority of the movement toward more liquid assets for the period.  This inflow was primarily offset by the $444.1 million paid, net of cash obtained, in conjunction with the Acquisition discussed in Note 8, and purchases of proper ty, equipment and software of $21.3 million .  For the cor responding period in fiscal year 201 4, the Company had net purchases of marketable securities of $ 82.6 million and $12.8 million for the purchase of property, equipment and software .   Additionally, the Company acquired Acoustic Technologies, Inc. for $20. 4 million , net of cash obtained, in the third quarter of the prior fiscal year .  
 
Net cash provided by financing activities was $ 209.9 million during   the first nine months of fiscal year 201 5.  The cash provided during the current period of fiscal year 201 5 was primarily   associated with the $226.4 million obtained from the new long-term revolving credit facility in the second quarter, discussed in Note 9, excess tax benefit from employee stock option exercises of $24.5 million and $2.5 million for the issuance of common stock, net of shares withheld for taxes , partially offset by payments against the long-term revolver balance of $26.0 million in the current quarter, payments for debt issuance costs related to the Acquisition of $2.8 million and common stock repurchase activity of $14.7 million ($10.5 million from repurchased and retired common stock, $4.2 million from stock repurchases to satisfy employee tax withholdings). The cash used during the first nine months of fisc al year 2014 was du e to a stock repurchase of $42.4 million, partially offset by excess tax benefit from employee stock option exercises of $5.1 million proceeds and  $ 0.8 million from the issuance of common stock, net of shares withheld for taxes.
 
The Company continued expansion of operations in fiscal year 2015   with continued work on additional facilities in Austin.  In fiscal year 2015, the Company spent approximately $13 million on facility expansions.  We anticipate future costs related to the current expansion   efforts to be approximately $8 million over the next year.  We anticipate these cash uses to be funded from current cash sources.  

23

 
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 assur ance that we will be able to generate cash in the future, we anticipate that our future cash earnings, existing cash, cash equivalents, investments and credit under our Credit Facility are sufficient to meet our capital requirements for at least the next 12 months , although we could be required, or could elect, to seek additional funding prior to that time . 
Revolving Credit Facilities
 
On August 29, 2014, Cirrus Logic entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto.  The Credit Agreement provides for a $250 million senior secured revolving credit facility (the “Credit Facility”).  The Credit Facility replaced Cirrus Logic’s Interim Credit Facility, and may be used for general corporate purposes.  The Credit Facility matures on August 29, 2017.  The Credit Facility also contains certain 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 2.00 to 1.00 (the “Leverage Ratio”) and (b) the sum of cash and Cash Equivalents of Cirrus Logic and its Subsidiaries on a consolidated basis must not be less than $100 million.     At Dec ember 2 7 , 2014, the Company was in compliance with all covenants under the C redit Facility.     A s of Dec ember 2 7 , 2014 , t he Company owes  $ 200.4 million under this facility .  See Note 9 for additional details regarding this facility.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to market risks associated with interest rates on our debt securities , currency movements on non-U.S. dollar denominated assets and liabilities , currency fluctuations of USD to GBP in relation to the Acquisition, and the effect of market factors on the value of our marketable securities.  We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures.  For a description of our market risks, see “ Part II – Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our fiscal year 2014 Annual Report on Form 10-K filed with the Commission on May 28, 201 4.  There have been no significant changes to our exposure to market risks since we filed our fiscal year 2014 Annual Report on Form 10-K.  
 
I TEM 4.  CONTROLS AND PROCEDURES
Evaluation of disclosure control s and procedures
 
As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission. Based upon the evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of December 27, 2014, at the reasonable assurance level.
 
Changes in control over financial reporting
 
There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.  The Acquisition’s internal controls will be excluded from management’s annual assessment and report on internal control over financial reporting.

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PART II . OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
Information regarding legal proceedings to which the Company is a party is set forth in Note 13 – Legal Matters to our unaudited consolidated condensed financial statements and is incorporated herein by reference.  
 
ITEM 1A. RISK FACTORS
 
In evaluating all forward-looking statements, readers should specifically consider risk factors that may cause actual results to vary from those contained in the forward-looking statements.  Various risk factors associated with our business are included in our Annual Report on Form 10-K for the fiscal year ended March 29 , 20 14 , as filed with the Commission on May 28, 2014, and available at www.sec.gov .  Other than as set forth below, there have been no material changes to those risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 29, 2014 .
 
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, or pricing on products sold to, any key customer or distributor could significantly reduce our sale s and our profitability .  
 
While we generate sales from a broad base of customers worldwide, the loss of any of our key customers, or a significant reduction in sales or selling prices to any key customer ,   or reductions in selling prices made to retain key customer relationships, would significantly reduce our revenue, margins and earnings and adversely affect our business.     For the first nine months of fiscal years 201 5 and 201 4 ,   our ten largest end custom ers represented approximately 87 percent and 89 percent , respectively, of our net sales.  We had one end customer, Apple Inc. that purchased through multiple contract manufacturers and represented approximately 75 percent and 81 percent of the Company’s total net sales for the first nine months of fiscal years 2015 and 201 4 , respectively. 
 
We had no distributor s that represented more than 10 percent of our sales for the nine month periods ending December   27 , 201 4 or December 28 , 2013.   No other end customer or distributor represented more than 10 percent of net sales for the nine month periods ending December   27 , 201 4 or December 28 , 2013.
 
We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:  
 
	§		most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty;	
	§		our agreements with our customers typically do not require them to purchase a minimum quantity of our products;	
	§		many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers’ decisions to purchase our products;	
	§		our customers face intense competition from other manufacturers that do not use our products; and	
	§		our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and their ability to obtain components from alternative sources.	
 
In addition ,   our dependence on a limited number of key customers may make it easier for key customers to pressure us to reduce the prices of the products we sell to them.  We have experienced pricing pressure from certain key customers , and we expect that the average selling prices for certain of our products will decline, reducing our revenue, our margins, and our earnings.

25

 
Our key customer relationships often require us to develop new products that may involve significant technological challenges.  Our customers frequently place considerable pressure on us to meet their tight development schedules.  In addition, we may from time to time enter into customer agreements providing for exclusivity periods during which we may only sell specified products or technologies to that customer.     Accordingly, we may have to devote a substantial amount of resources to strategic relationships, which could detract from or delay our completion of other important development projects or the development of next generation products and technologies. 
Our debt obligations may be a burde n on our future cash flows and cash resources.
 
On August 29, 2014, we entered into a credit agreement (the “Credit Agreement”), which provides for a $250 million senior secured revolving credit facility.  As of Dec ember 2 7 , 2014, the Company owed  $ 200.4 million under the facility.   Our ability to repay the principal of, to pay interest on or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors.  Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations or to make necessary capital expenditures.   If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the indebtedness will depend on the capital markets and our financial condition at such time.   We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the Credit Agreement.
 
Our Credit Agreement contains restrictions that limit our flexibility in operating our business.
 
Our Credit Agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

	§		pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;	
	§		incur additional indebtedness or issue certain preferred shares;	
	§		make certain investments;	
	§		sell certain assets;	
	§		create liens;	
	§		consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and	
	§		enter into certain transactions with our affiliates.	
 
A breach of any of these covenants could result in a default under one or more of these agreements.  In the event of default under our debt agreements, the lenders could elect to declare all amounts outstanding to be immediately due and payable. If we were unable to repay amounts due to the lenders under our credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. If our   lenders accelerate the repayment of borrowings, we may not have sufficient assets to repay our debt obligations. 
 
I TEM 2.  U NREGISTERED SALES OF EQUITY SECURITIES AND USE OF P ROCEEDS 
 
The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the three months ended December 27, 2014 (in thousands, except per share amounts):

 	 	 	 	 	 	 	 	 	 	

26

 

Monthly Period	Total Number of Shares Purchased	 	Average Price Paid Per Share	 	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	 	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)	
September 28, 2013 -
October 25, 2014	 -	 	$	 -	 	 -	 	$	 -	
October 26, 2014 -
November 22, 2014	
198 	 	 	
18.15 	 	
198 	 	 	
58,662 	
November 23, 2014 -
December 27, 2014	
382 	 	 	
18.19 	 	
382 	 	 	
51,719 	
Total	
580 	 	$	
18.17 	 	
580 	 	$	
51,719 	

 	(1)  	 	The Company currently has a $200 million share repurchase program.  The repurchases are to be funded from existing cash and intended to be effected from time to time in accordance with applicable securities laws through the open market or in privately negotiated transactions.  The timing of the repurchases and the actual amount purchased depend on a variety of factors including the market price of the Company’s shares, general market and economic conditions, and other corporate considerations.  The program does not have an expiration date, does not obligate the Company to repurchase any particular amount of common stock, and may be modified or suspended at any time at the Company's discretion.  The Company repurchased 0.6 million shares of its common stock for $10.5 million during the third quarter of fiscal year 2015.  All of these shares were repurchased in the open market and were funded from existing cash.  All shares of our common stock that were repurchased were retired as of December 27, 2014.	
 
I TEM   3 .  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
I TEM   4 .  MINE SAFETY DISCLOSURES
 
Not applicable .
 
I TEM   5 .  OTHER INFORMATION
 
None.
 
ITEM 6.  EXHIBITS
 
The following exhibits are filed as part of or incorporated by reference into this Report:

 	 	
2.1	Cooperation Agreement dated April 29, 2014 between Registrant and Wolfson Microelectronics plc. (1)	
3.1	Certificate of Incorporation of Registrant, filed with the Delaware Secretary of State on August 26, 1998.  (2)	
3.2	Amended and Restated Bylaws of Registrant. (3)	
31.1 *	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
31.2 *	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
32.1 *#	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
32.2 *#	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
101.INS #	XBRL Instance Document	
101.SCH #	XBRL Taxonomy Extension Schema Document	
101.CAL #	XBRL Taxonomy Extension Calculation Linkbase Document	
101.LAB #	XBRL Taxonomy Extension Label Linkbase Document	
101.PRE #	XBRL Taxonomy Extension Presentation Linkbase Document	
101.DEF #	XBRL Taxonomy Extension Definition Linkbase Document	

27

 
 
*   Filed with this Form 10-Q.
#   Not considered to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
 
	(1)		Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on April 29, 2014 (Registration No. 000-17795).	
	(2)		Incorporated by reference from Registrant’s Report on Form 10-K for the fiscal year ended March 31, 2001, filed with the Commission on June 22, 2001 (Registration No. 000-17795) .	
	(3)		Incorporated by reference from Registrant’s Report on Form 8-K filed with the Commission on September 20 ,   2013 (Registration No. 000-17795) .	
	(4)		Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on September 3, 2014 (Registration No. 000-17795).	
 
The exhibits required to be filed pursuant to the requirements of Item 601 of Regulation S-K are set forth in the Exhibit Index list noted above and are incorporated herein by reference.

 
SIGNATURE S
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
CIRRUS LOGIC, INC.

 	 	 	
Date:	January 28, 2015	By:  /s/   Thurman K. Case	
 	 	Thurman K. Case	
 	 	Vice President, Chief Financial Officer   and Principal Accounting Officer	

28

Exhibit 31.1
 
CERTIFICATION
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Jason P. Rhode , certify that:

	1.		I have reviewed this Quarterly   R eport on Form 10- Q of Cirrus Logic, Inc.;	
	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
	5.		The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Date:	January 28 , 201 5	/s/ Jason P. Rhode	
 	 	Jason P. Rhode	
 	 	President and Chief Executive Officer	

Exhibit 31.2
 
CERTIFICATION
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Thurman K. Case, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of Cirrus Logic, Inc.;	
	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
	5.		The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Date:	January 28 , 201 5	/s/ Thurman K. Case	
 	 	Thurman K. Case	
 	 	Chief Financial Officer and Chief Accounting Officer	

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly   R eport of Cirrus Logic, Inc. (the “ Company ”) on Form 10- Q for the period ended Dec ember 27 , 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jason P. Rhode , Chief Executive Officer of the Company , hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:

	1.		T he Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, as amended; and	
	2.		T he information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company .	
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
 
Date:	January 28 , 201 5	/s/ Jason P. Rhode	
 	 	Jason P. Rhode	
 	 	President and Chief Executive Officer	

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly   R eport of Cirrus Logic, Inc. (the “ Company ”) on Form 10- Q for the period ended Dec ember 27 , 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thurman K. Case , Chief Financial Officer of the Company , hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:
 
1. T he Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, as amended; and
2. T he information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company .
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
 
Date:	January 28 , 201 5	/s/ Thurman K. Case	
 	 	Thurman K. Case	
 	 	Chief Financial Officer and Chief Accounting Officer