What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-07 compared with 2022-02-07 · 63 added, 78 removed, 180 unchanged (44% of the section changed)

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See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-K.

Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Part I, Item 1A “Risk Factors” and elsewhere in this report.

Business Overview

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Our net revenues were $651.1 million, $703.3 million and $488.3 million in 2022, 2021 and 2020, respectively.

In 2021, revenues increased by $215.0 million, reflecting the strong demand conditions currently prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers, and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications.

We believe that a variety of factors contributed to our ability to gain market share during the year, including:

stricter energy-efficiency standards implemented in China for air conditioners;

our superior product availability and delivery performance relative to many competitors whose lead times have extended much more than ours have;

and the fact that our products require a smaller number of external components compared to competing solutions, as many such components have been in short supply.

In 2020, revenues increased by $67.6 million due to growth across all end markets reflecting increased adoption of higher-power chargers for mobile phones and tablets, increased sales for desktop computers and monitors, as well as a broad range of industrial and consumer-appliance applications.

The decrease in revenues in 2022 was primarily driven by the communications end-market category, in which revenues fell by 36%, reflecting lower global demand for smartphones.

More broadly, we observed a deterioration in demand as the year progressed, reflecting a range of macroeconomic and cyclical factors, including:

lower demand for products such as smartphones, computers and appliances following a period of strong demand during the COVID-19 pandemic, and a shift in consumer spending in favor of services rather than goods as the pandemic waned;

measures implemented in China to control the spread of COVID-19, which affected consumer demand in China as well as the ability of some of our customers to manufacture their products;

the impact of inflation on consumer spending;

economic downturns in local and global economies;

a build-up in the supply chain of inventory of our products, and of intermediate and finished products containing our products.

The latter effect was driven by the efforts of supply-chain participants to overcome component shortages that developed during the pandemic, with the abrupt slowdown in demand leading to oversupply of inventory.

In 2021, revenues increased by $215.0 million, reflecting the strong demand conditions then prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers, and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications.

Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for approximately 76%, 78% and 62% of net revenues in 2022, 2021 and 2020, respectively.

In 2022, 2021 and 2020, t wo customers, which are distributors of our products, each accounted for more than 10% of our net revenues.

In 2019, one of these customers accounted for more than 10% of our net revenues.

International sales represented approximately 96%, 98% and 98% of net revenues in 2022, 2021 and 2020, respectively.

Our business and financial performance depends significantly on worldwide economic conditions.

We face global macroeconomic challenges and risks including the effects of the conflict in Ukraine, potential risks stemming from tensions

between China and Taiwan, the COVID-19 pandemic, volatility in exchange rates, cyclical demand patterns common for our industry, inflation, tariffs and other risks associated with the global trade environment.

Because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours.

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this sensitivity may increase or decrease depending on the percentage of our wafer supply that we purchase from Japanese suppliers.

although our wafer fabrication and assembly operations are outsourced, as are most of our test operations, a portion of our production costs are fixed in nature.

Also, although our wafer fabrication and assembly operations are outsourced, as are most of our test operations, a portion of our production costs are fixed in nature.

As a result, our unit costs and gross profit margin are impacted by the volume of units we produce.

Our gross profit, defined as net revenues less cost of revenues, was $366.9 million or 56% of net revenues in 2022, compared to $360.6 million or 51% of net revenues in 2021, and $243.6 million or 50% of net revenues in 2020.

Our gross margin increased slightly in 2021 as manufacturing efficiencies were mostly offset by an unfavorable change in end-market mix .

Our gross margin decreased in 2020, as compared to 2019, due to an unfavorable change in end-market mix with a greater amount of revenues coming from lower-margin end markets .

Our gross margin increased in 2022 due to a combination of factors, including a more favorable end-market mix, with a greater percentage of sales coming from higher-margin market categories and manufacturing efficiencies including the benefit of higher unit volumes on our manufacturing costs per unit .

Our gross margin also increased in 2021, driven primarily by manufacturing efficiencies partially offset by an unfavorable change in end-market mix .

Total operating expenses in 2022 were $186.5 million, an increase of $0.9 million as compared to 2021 due to higher salary and related expenses driven by increased headcount and product development expenses.

These increases were partially offset by lower stock-based compensation expense related to performance-based awards .

Total operating expenses in 2021 were $185.6 million, an increase of $12.5 million as compared to 2020 due to higher salary and related expenses driven by increased headcount and annual merit increases, increased commission expense driven by increased sales and higher stock-based compensation expense related to performance-based awards .

These increases were partially offset by lower patent-litigation expenses.

Total operating expenses in 2020 were $173.1 million as compared to a net gain of $3.6 million in 2019, stemming from a $169.0 million gain on settlement of our litigation with ON Semiconductor.

Apart from the effects of the 2019 legal settlement, the increase in operating expenses in 2020 was due to higher stock-based compensation expense related mainly to performance-based awards, along with higher salary and related expenses from annual merit increases and the expansion of our workforce.

These increases were partially offset by lower legal expenses following the conclusion of our litigation with ON Semiconductor as well as lower travel expenses, trade event and promotional activities due to COVID-19 pandemic-related restrictions.

COVID-19 Pandemic

The COVID-19 pandemic has disrupted everyday life and markets worldwide, and governments around the world have imposed restrictions aimed at controlling the spread of the virus, including shelter-in-place orders, travel restrictions, business shutdowns and border closures.

Beginning March 16, 2020 our San Jose headquarters location was subject to a shelter-in-place order, under which most of our employees were required to work from home;

other locations around the world have also been subject to such restrictions.

This work from home status continued for many of our employees throughout 2021 and into 2022.

Our employee health and well-being are top priorities.

We are actively monitoring the evolving situation and expect most employees to return to the office when circumstances improve and restrictions are further lifted.

We have implemented a variety of measures to protect the health and safety of our employees, including the provision of masks, gloves and sanitizers, social-distancing rules, and regular deep cleaning of our facilities.

While we have been able to conduct our day-to-day operations effectively in spite of the restrictions caused by the pandemic, the pandemic has caused disruptions in our supply chain.

While our supply of wafers from our foundry partners has not been interrupted, government-mandated closures in China, Malaysia, Sri Lanka and the Philippines have caused temporary shutdowns at our assembly and test sub-contractors at various times.

These disruptions have not materially affected our results due to a variety of mitigation measures including higher-than-normal inventories of wafers and finished goods in the early stages of the pandemic, safety stocks of certain key inputs, and multiple sources for components for most of our products.

Although there are signs of improvement in many areas around the world, the potential for new lockdowns and other mitigation efforts to deal with an increase in infection rates due to the emergence of the omicron variant in certain areas remains a key risk for our supply chain and the results of our business.

While the continuing pandemic brings a greater-than-normal level of uncertainty with respect to the demand for our products, we believe our business is fundamentally sound with strong, long-term growth prospects.

We have increased headcount and intend to continue investing in research and development and other functions necessary to support our future growth.

We also intend to continue our cash dividend and stock-repurchase programs;

however, if the economy deteriorates or our business outlook changes, our board of directors may choose to suspend or alter these programs at its discretion.

For additional discussion regarding COVID-19 business risks refer to Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

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GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis,

we evaluate our estimates, including those listed below.

On an ongoing basis, we evaluate our estimates, including those listed below.

We base our estimates on historical facts and various other assumptions that we believe to be reasonable at the time the estimates are made.

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General and administrative

Litigation settlement

Other operating expenses, net

Total operating expenses

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Net revenues consist of revenues from product sales, which are calculated net of returns and allowances.

In 2021, revenues increased by $215.0 million as compared to 2020, reflecting the strong demand conditions currently prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers, and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications .

In 2020, revenues increased by $67.6 million compared to 2019 due to growth across all end markets reflecting increased adoption of higher-power chargers for mobile phones and tablets, increased sales for desktop computers and monitors, as well as a broad range of consumer appliance and industrial applications.

In 2022, revenues decreased by $52.1 million as compared to 2021, primarily driven by the communications end-market category reflecting lower global demand for smartphones.

We observed a deterioration in demand across other end markets as the year progressed, reflecting a range of macroeconomic and cyclical factors as described above.

In 2021, revenues increased by $215.0 million compared to 2020 reflecting the strong demand conditions then prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers, and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications .

Our approximate net revenue mix by end-markets served in 2022, 2021 and 2020 is as follows:

Communications

Sales to customers outside of the United States were $686.0 million in 2021, compared to $477.3 million in 2020 and $410.0 million in 2019, representing approximately 98% of net revenues in both 2021 and 2020 and 97% of net revenue in 2019.

Sales to customers outside of the United States were $625.6 million, $686.0 million and $477.3 million in 2022, 2021 and 2020, respectively, representing 96% of net revenues in 2022, and 98% of net revenues in both 2021 and 2020.

Although power supplies using our products are designed and distributed worldwide, most of these power supplies are manufactured by our customers in Asia.

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Honestar Technologies Co., Ltd.

*Total customer revenue was less than 10% of net revenues.

No other customers accounted for 10% or more of net revenues during these years.

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(dollars in millions)

Our gross margin increased in 2021 as compared to 2020 as manufacturing efficiencies were mostly offset by an unfavorable change in end-market mix.

Our gross margin decreased in 2020 as compared to 2019 due to an unfavorable change in end-market mix, with a greater amount of revenues coming from lower-margin end markets.

Our gross margin increased in 2022 as compared to 2021 due to a combination of factors, including a more favorable end-market mix, with a greater percentage of sales coming from higher-margin market categories and manufacturing efficiencies including the benefit of higher unit volumes on our manufacturing costs per unit.

Our gross margin increased in 2021 as compared to 2020 as manufacturing efficiencies were partially offset by an unfavorable change in end-market mix.

Research and development expenses.

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We also record R&D expenses for prototype wafers related to new products until the products are released to production.

The following table compares R&D expenses for the years ended December 31, 2021, 2020 and 2019:

The following table compares R&D expenses for the years ended years ended December 31, 2022, 2021 and 2020:

(dollars in millions)

Headcount (at period end)

R&D expenses increased in 2022 compared to 2021 due to higher salary and related expenses driven by increased headcount, increased equipment-related expenses and product-development costs partially offset by decreased stock-based compensation expense related to performance-based awards.

R&D expenses increased in 2021 compared to 2020 due to higher salary and related expenses driven by increased headcount and annual merit increases, higher stock-based compensation expense related to performance-based awards and increased equipment-related expenses .

R&D expenses increased in 2020 compared to 2019 due to higher salary and related expenses driven by expansion of headcount and annual merit increases, increased equipment-related expenses in support of product development as well as higher stock-based compensation expense primarily related to performance-based awards .

Sales and marketing expenses.

Sales and marketing (S&M) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation, and commissions to sales representatives, as well as amortization of acquired intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.

Sales and marketing (S&M) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation, and commissions to sales representatives, as well as

amortization of acquired intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.

The following table compares sales and marketing expenses for the years ended December 31, 2022, 2021 and 2020:

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Headcount (at period end)

S&M expenses increased in 2021 compared to 2020 due to increased commissions expense driven by increased sales, higher salary and related expenses from the expansion of headcount, and higher stock-based compensation expense primarily related to performance-based awards.

S&M expenses increased in 2020 as compared to 2019 due to higher salary and related expenses from the expansion of headcount and higher stock-based compensation expense primarily related to performance-based awards.

These factors were partially offset by lower travel expenses, trade event and promotional activities resulting from restrictions associated with the COVID-19 pandemic, as well as lower amortization of intangibles.

S&M expenses increased in 2022 compared to 2021 due to higher salary and related expenses from the expansion of headcount and increases in travel and trade shows.

These increases were partially offset by decreased commissions expense and lower stock-based compensation expense primarily related to performance-based awards.

S&M expenses increased in 2021 as compared to 2020 due to increased commissions expense driven by increased sales, higher salary and related expenses from the expansion of headcount, and higher stock-based compensation expense primarily related to performance-based awards.

General and administrative expenses.

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Headcount (at period end)

G&A expenses decreased in 2022 due to lower stock-based compensation expense related to performance-based awards and lower patent-litigation expenses.

G&A expenses increased in 2021 due to higher stock-based compensation expense related to performance-based awards partially offset by lower patent-litigation expenses .

G&A expenses decreased in 2020 due to lower patent-litigation expenses partially offset by higher stock-based compensation expense primarily related to performance-based awards .

Litigation settlement.

Litigation settlement in fiscal 2019 represents a $169.0 million gain, net of direct legal fees, due to a favorable legal settlement with ON Semiconductor Corporation, pursuant to which all outstanding legal and administrative disputes were dismissed, withdrawn, and/or terminated.

Other operating expenses, net.

Other operating expenses, net was $1.1 million in fiscal 2022.

This amount consisted of a $2.9 million expense stemming from the settlement of our litigation with Opticurrent LLC (refer to Note 13, Legal Proceedings and Contingencies , in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K ), offset by receipt of a $1.7 million distribution related to the bankruptcy liquidation of SemiSouth Laboratories, Inc.’s of which we were a creditor as a result of investments made in SemiSouth in 2011.

Other income .

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(dollars in millions)

Other income increased in 2022 due primarily to an increase in interest income resu lting from higher yields earned on our investments .

Other income decreased in 2021 due primarily to lower interest income, as lower yields earned on our cash and investments more than offset the impact of higher cash and investment balances .

Other income decreased in 2020 due primarily to lower interest income, reflecting lower yields earned on our cash and investments despite higher cash and investment balances .

Provision for income taxes.

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federal income-tax rates of 21% due to the geographic distribution of our world-wide earnings in lower tax jurisdictions, the impact of federal research tax credits and the recognition of excess tax benefits related to share-based compensation.

Additionally, in 2021, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

Additionally, in 2022 and 2021, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

These benefits were offset by U.S.

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Income earned in other foreign jurisdictions was not material.

We have not been granted any incentivized tax rates and do not operate under any tax holidays in any jurisdiction.

We have not been granted any incentivized tax rates and do not

operate under any tax holidays in any jurisdiction.

For additional details, refer to Note 11, Provision for Income Taxes , in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Liquidity and Capital Resources

We had approximately $530.4 million in cash, cash equivalents and short-term marketable securities at December 31, 2021 compared to $449.2 million at December 31, 2020 and $411.1 million at December 31, 2019.

We had $353.8 million in cash, cash equivalents and short-term marketable securities at December 31, 2022 compared to $530.4 million at December 31, 2021 and $449.2 million at December 31, 2020.

As of December 31, 2022, 2021 and 2020, we had working capital, defined as current assets less current liabilities, of approximately $466.7 million, $614.5 million and $538.7 million, respectively.

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Our ability to borrow under the revolving line of credit is conditioned upon our compliance with specified covenants, including reporting and financial covenants, primarily a minimum liquidity measure and a debt to earnings ratio, with which we are currently in compliance.

The Credit Agreement terminates on

June 7, 2026;

The Credit Agreement terminates on June 7, 2026;

all advances under the revolving line of credit will become due on such date, or earlier in the event of a default.

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We generate cash primarily from operating activities in the ordinary course of business.

In addition, in 2019 our cash generated from operating activities was favorably impacted by the settlement of our patent litigation with ON Semiconductor Corporation.

In 2022, our net income was $170.9 million, which included non-cash expenses of $34.9 million of depreciation, $22.4 million of stock-based compensation, $3.3 million for amortization of premium on marketable securities, $2.4 million of intangibles amortization and a $2.6 million decrease in deferred income taxes.

Sources of cash also included a $19.9 million decrease in accounts receivable and $7.3 million decrease in prepaid expenses and other assets.

These sources of cash were partially offset by a $36.2 million increase in inventories due to softening demand during the year and a $3.8 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $5.2 million decrease in taxes payable and accrued liabilities.

In 2021, our net income was $164.4 million, which included non-cash expenses of $37.6 million of stock-based compensation, $31.5 million of depreciation and $3.5 million of intangibles amortization.

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These sources of cash were partially offset by an $11.3 million increase in accounts receivable due to increased shipments and the timing of collections, a $12.5 million increase in inventories, reflecting impact of a market slowdown during the first half of the year and higher inventory levels to support anticipated future demand.

In 2019, our net income was $193.5 million, which included a $169.0 million gain, net of direct legal fees, from a favorable litigation settlement, $23.3 million of stock-based compensation, $19.2 million of depreciation and $5.2 million of intangibles amortization.

Sources of cash also included a $10.6 million increase in taxes payable and accrued liabilities due primarily to increased taxes payable as result of favorable litigation settlement.

These sources of cash were partially offset by a $13.3 million increase in accounts receivable due to increased shipments and the timing of collections, a $9.5 million increase in inventories in anticipation of future demand, and a $6.6 million decrease in accounts payable due to the timing of payments.

Cash from Investing Activities

Our investing activities in the year ended December 31, 2021 resulted in a $232.8 million net use of cash, consisting primarily of $185.6 million for purchases of marketable securities, net of sales and maturities, and $47.3 million for purchases of property and equipment, primarily machinery and equipment for use in the manufacture of our products, as well as construction of an office building in Switzerland.

Our investing activities in the year ended December 31, 2022 generated $78.3 million of cash, consisting primarily of $116.3 million from sales and maturities of marketable securities, net of purchases, and proceeds of $1.2 million from the sale of an office building, partially offset by $39.2 million for purchases of property and equipment, primarily production-related machinery and equipment.

for purchases of property and equipment, primarily machinery and equipment for use in the manufacture of our products, as well as construction of an office building in Switzerland.

Our investing activities in the year ended December 31, 2020 resulted in a $28.3 million net use of cash, consisting primarily of $41.7 million from purchases of marketable securities, net of sales and maturities, and $70.6 million for purchases of property and equipment, primarily machinery and equipment for use in the manufacture of our products and a building for our design center in Germany.

Our investing activities in the year ended December 31, 2019 resulted in a $162.0 million net use of cash, consisting primarily of $136.9 million from purchases of marketable securities, net of sales and maturities, and $24.1 million for purchases of property and equipment, primarily machinery and equipment for use in the manufacture of our products.

Cash from Financing Activities

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Financing activities consisted primarily of $311.1 million for the repurchase of our common stock and $41.5 million for the payment of dividends to stockholders, partially offset by proceeds of $6.2 million from the issuance of common stock, including the exercise of employee stock options and issuance of shares through our employee stock purchase plan.

Our financing activities in the year ended December 31, 2020, resulted in a net use of $17.2 million of cash.

Financing activities consisted primarily of $25.1 million for the payment of dividends to stockholders and $2.6 million for

the repurchase of our common stock, partially offset by proceeds of $10.5 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

Our financing activities in the year ended December 31, 2021, resulted in a $98.8 million net use of cash.

Financing activities consisted primarily of $73.9 million for the repurchase of our common stock and $32.6 million for the payment of dividends to stockholders, partially offset by proceeds of $7.7 million from the issuance of common stock, including the exercise of employee stock options and issuance of shares through our employee stock purchase plan.

Our financing activities in the year ended December 31, 2020, resulted in a net use of $17.2 million of cash.

Financing activities consisted primarily of $25.1 million for the payment of dividends to stockholders and $2.6 million for the repurchase of our common stock, partially offset by proceeds of $10.5 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

In January 2019, our board of directors declared four quarterly cash dividends of $0.085 per share to be paid to stockholders of record at the end of each quarter in 2019.

In October 2019, our board of directors raised the cash dividends per share with the declaration of five cash dividends, consisting of (a) a dividend of $0.01 per share to be paid to stockholders of record at the end of the fourth quarter in 2019, that was in addition to the dividend of $0.085 per share to be paid to stockholders of record at the end of the fourth quarter in 2019 previously declared by the board in January 2019, and (b) a dividend of $0.095 per share to be paid to stockholders of record at the end of each quarter in 2020.

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In July 2020, our board of directors raised the cash dividends further with the declaration of two cash dividends of $0.11 per share (in lieu of the $0.105 per share announced in April 2020) to be paid to stockholders of record at the end of each of the third and fourth quarter in 2020.

The dividends per share presented above reflect the 2-for-1 stock split implemented as a stock dividend in August 2020.

In January 2021, our board of directors raised the quarterly cash dividend by an additional $0.02 per share with the declaration of four cash dividends of $0.13 per share to be paid to stockholders of record at the end of each quarter in 2021.

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In January 2022, our board of directors raised the quarterly cash dividend an additional $0.03 per share with the declaration of four cash dividends of $0.18 per share (in lieu of the $0.15 per share announced in October 2021) to be paid to stockholders of record at the end of each quarter in 2022.

The declaration of any future cash dividend is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of our stockholders.

In February 2023, our board of directors raised the cash dividend with the declaration of four cash dividends of $0.19 per share to be paid to stockholders of record at the end of each quarter in 2023.

The declaration of any future cash dividend is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of our stockholders.

Stock Repurchases

Over the years our board of directors has authorized the use of funds to repurchase shares of our common stock, including $80.0 million in October 2018, $50.0 million in April 2021 and another $50.0 million in October 2021 with repurchases to be executed according to pre-defined price/volume guidelines.

In 2019, we repurchased 242,000 shares for approximately $7.3 million.

In 2020, we repurchased 63,000 shares for approximately $2.6 million.

In 2021, we repurchased 878,000 shares for approximately $73.9 million.

As of December 31, 2021, we had $67.3 million remaining under our repurchase program, all of which was utilized in January 2022.

In January 2022, our board of directors authorized the use of an additional $100.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

Authorization of future stock repurchase programs is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors.

Over the years our board of directors has authorized the use of funds to repurchase shares of our common stock, including $80.0 million in October 2018, $50.0 million in both April and October 2021, $100.0 million in January 2022, $50.0 million in February 2022, $75.0 million in April 2022 and $100.0 million in October 2022 with repurchases to be

executed according to pre-defined price/volume guidelines.

In 2020, we repurchased 63 thousand shares for approximately $2.6 million.

In 2021, we repurchased 0.9 million shares for approximately $73.9 million.

In 2022, we repurchased 3.8 million shares for $311.1 million, leaving $81.3 million in funds authorized as of December 31, 2022.

Authorization of future stock repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors.

Capital Expenditures

Cash paid for property and equipment in the year ended December 31, 2022 was $39.2 million.

As of December, 31, 2021, our non-cancelable commitments for property and equipment was $10.9 million.

We expect capital expenditures in fiscal 2022 to be primarily for machinery and equipment for use in the manufacture of our products to support our

continued growth.

As of December 31, 2022, we had non-cancelable commitments of $1.1 million for the purchase of property and equipment.

We expect capital expenditures in fiscal 2023 to be primarily for machinery and equipment for use in the manufacture of our products to support future growth.

We expect to fund these capital expenditures with cash on hand as well as cash provided by future operations.

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We believe that cash generated from operations, together with existing sources of liquidity, will satisfy our projected working capital and other cash requirements for at least the next 12 months.

Our uses of cash beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are uncertain but include funding our operations and additional capital expenditures.

Off-Balance-Sheet Arrangements

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In addition to operating lease and purchase obligations, we have a contractual obligation related to income tax as of December 31, 2022, which primarily comprises unrecognized tax benefits of approximately $23.4 million, and was classified as contra deferred tax assets or long-term income taxes payable in our consolidated balance sheet.

As of December 31, 2021 we also had approximately $4.0 million classified as long-term income taxes payable related to the estimated one-time transition tax from the enactment of the Tax Act which will be payable in four annual installments.

As of December 31, 2022 we also had approximately $3.0 million classified as long-term income taxes payable related to the estimated one-time transition tax from the enactment of the Tax Act which will be payable in three remaining annual installments.

We believe that cash generated from operations, together with existing sources of liquidity, will satisfy the cash requirements for these contractual obligations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis