What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-29 compared with 2020-04-29 · 196 added, 119 removed, 360 unchanged (47% of the section changed)

15 unchanged sentences

Accounts payable

Revolving line of credit

Deferred revenue and returns liability

11 unchanged sentences

250,000 shares authorized;

43,670 and 43,496 shares issued and outstanding at April 4, 2020 and December 28, 2019, respectively

43,796 and 43,496 shares issued and outstanding at July 4, 2020 and December 28, 2019, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders’ equity

2 unchanged sentences

Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended

Six Months Ended

Cost of revenues

7 unchanged sentences

Interest expense

Income before income taxes

Income (loss) before income taxes

Provision (benefit) for income taxes

Earnings per share:

Net income (loss)

Earnings (loss) per share:

Weighted-average common shares outstanding:

1 unchanged sentence

Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

Three Months Ended

Other comprehensive income (loss), before tax:

Six Months Ended

Net income (loss)

Other comprehensive income, before tax

Net changes to available-for-sale securities

Unrealized gains (losses) arising during the period

Reclassification for (gains) losses included in net income

Unrealized gains arising during the period

Reclassification for gains included in net income (loss)

Net changes to cash flow hedges

Unrealized gains (losses) arising during the period

Reclassification for losses included in net income

Other comprehensive income (loss), before tax

Provision (benefit) for income taxes

Other comprehensive income (loss)

Comprehensive income

Reclassification for losses included in net income (loss)

Other comprehensive income, before tax

Provision for income taxes

Other comprehensive income

Comprehensive income (loss)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5 unchanged sentences

Stockholders’

Three Months Ended April 4, 2020

Three Months Ended July 4, 2020

Income (Loss)

Balance as of April 4, 2020

Net income (loss)

Other comprehensive income

Stock issuances, net of shares withheld for taxes

Stock-based compensation

Convertible debt issuance

Balance as of July 4, 2020

Accumulated Other

Comprehensive

Stockholders’

Three Months Ended June 29, 2019

Income (Loss)

Balance as of March 30, 2019

Net income (loss)

Other comprehensive income

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Balance as of June 29, 2019

Accumulated Other

Comprehensive

Stockholders’

Six Months Ended July 4, 2020

Income (Loss)

Balance as of December 28, 2019

Cumulative effect of adoption of accounting standard

Other comprehensive income (loss)

Net income (loss)

Other comprehensive income

Stock issuances, net of shares withheld for taxes

1 unchanged sentence

Stock-based compensation

Balance as of April 4, 2020

Convertible debt issuance

Balance as of July 4, 2020

Accumulated Other

1 unchanged sentence

Stockholders’

Three Months Ended March 30, 2019

Six Months Ended June 29, 2019

Income (Loss)

Balance as of December 29, 2018

Other comprehensive income (loss)

Net income (loss)

Other comprehensive income

Stock issuances, net of shares withheld for taxes

1 unchanged sentence

Stock-based compensation

Balance as of March 30, 2019

Balance as of June 29, 2019

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation of property and equipment

1 unchanged sentence

Amortization of debt discount and debt issuance costs

Loss on extinguishment of convertible debt

Stock-based compensation expense

13 unchanged sentences

Purchases of other assets

Net cash provided by investing activities

Acquisition of business, net of cash acquired

Net cash used in investing activities

Financing Activities

Proceeds from revolving line of credit

Proceeds from issuance of debt

Payments on debt

Repurchases of common stock

Payment of taxes withheld for vested stock awards

Proceeds from the issuance of common stock

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

7 unchanged sentences

however, they contain all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly the condensed consolidated financial position of Silicon Laboratories Inc.

and its subsidiaries (collectively, the “Company”) at April 4, 2020 and December 28, 2019, the condensed consolidated results of its operations for the three months ended April 4, 2020 and March 30, 2019, the Condensed Consolidated Statements of Comprehensive Income for the three months ended April 4, 2020 and March 30, 2019, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended April 4, 2020 and March 30, 2019, and the Condensed Consolidated Statements of Cash Flows for the three months ended April 4, 2020 and March 30, 2019.

and its subsidiaries (collectively, the “Company”) at July 4, 2020 and December 28, 2019, the condensed consolidated results of its operations for the three and six months ended July 4, 2020 and June 29, 2019, the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 4, 2020 and June 29, 2019, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended July 4, 2020 and June 29, 2019, and the Condensed Consolidated Statements of Cash Flows for the six months ended July 4, 2020 and June 29, 2019.

All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated results of operations for the three months ended April 4, 2020 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated results of operations for the three and six months ended July 4, 2020 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited Condensed Consolidated Financial Statements do not include certain footnotes and financial presentations normally required under U.S.

32 unchanged sentences

Payments are typically due within 30 days of invoicing and do not include a significant financing component.

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):

Three Months Ended

Shares used in computing basic earnings per share

Six Months Ended

Net income (loss)

Shares used in computing basic earnings (loss) per share

Effect of dilutive securities:

Stock-based awards and convertible debt

Shares used in computing diluted earnings per share

Earnings per share:

For the three months ended April 4, 2020 and March 30, 2019, approximately 0.2 million and 0.5 million shares, respectively, consisting of restricted stock awards (RSUs) and market stock awards (MSUs), were not included in the diluted earnings per share calculation since the shares were anti-dilutive.

Shares used in computing diluted earnings (loss) per share

Earnings (loss) per share:

For the three months ended July 4, 2020 and June 29, 2019 and the six months ended July 4, 2020 and June 29, 2019, approximately 0.4 million, 0.0 million, 0.3 million and 0.5 million shares, respectively, consisting of restricted stock awards (RSUs) and market stock awards (MSUs), were not included in the diluted earnings (loss) per share calculation since the shares were anti-dilutive.

Further, diluted shares used in calculating net loss per share for the three months ended July 4, 2020 and the three and six months ended June 29, 2019 excluded 0.3 million shares, 0.6 million shares and 0.6 million shares, respectively, due to the Company’s net loss for the periods.

The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion.

1 unchanged sentence

If the market value of the notes under certain prescribed conditions exceeds the conversion amount, the excess is included in the denominator for the computation of diluted earnings per share using the treasury stock method.

For three months ended April 4, 2020, approximately 0.3 million shares were included in the denominator for the calculation of diluted earnings per share.

For three months ended March 30, 2019, no such shares were included in the denominator for the calculation of diluted earnings per share.

For three and six months ended July 4, 2020, approximately 0.0 million shares and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

See Note 7, Debt , to the Condensed Consolidated Financial Statements for additional information.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments

3 unchanged sentences

Level 2 - Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Level 3 - Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data.

2 unchanged sentences

Fair Value Measurements

at April 4, 2020 Using

at July 4, 2020 Using

Quoted Prices in

5 unchanged sentences

Corporate debt securities

Government debt securities

Total cash equivalents

5 unchanged sentences

Auction rate securities

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value Measurements

14 unchanged sentences

Auction rate securities

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Valuation methodology

7 unchanged sentences

Available-for-sale investments

The Company's investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at April 4, 2020 (in thousands):

The Company's investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at July 4, 2020 (in thousands):

Due in one year or less

1 unchanged sentence

Due after ten years

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

1 unchanged sentence

12 Months or Greater

As of April 4, 2020

As of July 4, 2020

Government debt securities

7 unchanged sentences

Auction rate securities

The gross unrealized losses as of April 4, 2020 and December 28, 2019 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities.

The gross unrealized losses as of July 4, 2020 and December 28, 2019 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities.

The Company’s auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders exceeded buy orders.

1 unchanged sentence

The Company is unable to predict if these funds will become available before their maturity date.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors.

When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made.

As of April 4, 2020, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At April 4, 2020 and December 28, 2019, there were no material unrealized gains associated with the Company's available-for-sale investments.

As of July 4, 2020, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At July 4, 2020 and December 28, 2019, there were no material unrealized gains associated with the Company's available-for-sale investments.

Level 3 fair value measurements

2 unchanged sentences

Fair Value at

April 4, 2020

Valuation Technique

5 unchanged sentences

Estimated discount rate

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly lower or higher fair value measurement.

1 unchanged sentence

Generally, a change in the assumptions used for expected holding period is accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate.

The following summarizes the activity in Level 3 financial instruments for the three months ended April 4, 2020 (in thousands):

The following summarizes the activity in Level 3 financial instruments for the three and six months ended July 4, 2020 (in thousands):

Auction Rate Securities

Beginning balance

Loss included in other comprehensive income (loss)

Balance at April 4, 2020

Loss included in other comprehensive income

Balance at July 4, 2020

Fair values of other financial instruments

2 unchanged sentences

The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement.

As of April 4, 2020 and December 28, 2019, the fair value of the convertible senior notes was $ 423.2 million and $ 524.0 million, respectively.

As of July 4, 2020 and December 28, 2019, the fair value of the 1.375 % convertible senior notes was $ 196.5 million and $ 524.0 million, respectively.

The fair value of the 0.625 % convertible senior notes as of July 4, 2020 was $ 569.1 million.

The Company's other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Derivative Financial Instruments

7 unchanged sentences

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S.

Changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) in the Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized.

Changes in the fair value of the contracts are recorded in accumulated other comprehensive income in the Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized.

The reclassified amount is reported in the same financial statement line item as the hedged item.

If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive income (loss) may be recognized in the Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive income may be recognized in the Consolidated Statement of Operations based on an assessment of the contracts at the time of termination.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in the Norwegian Krone.

As of April 4, 2020, the contracts had maturities of one to three months and an aggregate notional value of $ 2.8 million.

As of July 4, 2020, the contracts had a maturity of less than one month and an aggregate notional value of $ 1.2 million.

Losses expected to be reclassified into earnings in the next 12 months were not material.

The fair value of the contracts, contract losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) into earnings were not material for any of the periods presented.

The fair value of the contracts, contract losses recognized in other comprehensive income and amounts reclassified from accumulated other comprehensive income into earnings were not material for any of the periods presented.

Interest Rate Swaps

The Company uses interest rate swap agreements to manage exposure to interest rate risks.

The effective portion of the gain or loss on the interest rate swap is recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity and is subsequently recognized as interest expense in the Consolidated Statement of Income when the hedged exposure affects earnings.

If the Credit Facility or the interest rate swap agreement is terminated prior to maturity, the fair value of the interest rate swap recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Income based on an assessment of the agreements at the time of termination.

The Company did not discontinue any cash flow hedges of interest rates in any of the periods presented.

The Company entered into an interest rate swap agreement with an original notional value of $ 310 million in connection with its Credit Facility on March 27, 2020.

The interest rate swap agreement effectively converted the Eurodollar portion of the variable-rate interest payments to fixed-rate interest payments through April 1, 2021.

Losses expected to be reclassified into earnings in the next 12 months were not material as of April 4, 2020.

Hedge ineffectiveness, the fair value of the swap agreement, contract losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) into earnings were not material for any of the periods presented.

If the credit facility or the interest rate swap agreement is terminated prior to maturity, the fair value of the interest rate swap recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Operations based on an assessment of the agreements at the time of termination.

The Company entered into an interest rate swap agreement with an original notional value of $ 310 million in connection with borrowing from its credit facility on March 27, 2020.

The Company terminated the swap agreement on June 1, 2020 in connection with the repayment in full of its credit facility.

The termination of the swap agreement resulted in the reclassification of $ 0.4 million of unrealized losses that were previously recorded in accumulated other comprehensive income (loss) into earnings.

Non-designated Hedges

2 unchanged sentences

dollar balance sheet exposures.

The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability.

The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Operations in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability.

The Company does not apply hedge accounting to these foreign currency forward contracts.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

As of April 4, 2020, the Company held one foreign currency forward contract denominated in Singapore Dollars with a notional value of $ 6.1 million.

As of July 4, 2020, the Company held three foreign currency forward contracts denominated in Singapore Dollars with a notional value of $ 17.8 million.

The fair value of foreign contracts and contract losses recognized in income were not material for any of the periods presented.

3 unchanged sentences

Finished goods

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Redpine Signals

On April 28, 2020, the Company acquired the Wi-Fi® and Bluetooth® business of Redpine Signals.

The acquisition will accelerate the Company’s roadmap for Wi-Fi and Bluetooth silicon and software solutions.

The purchase price was in excess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill.

A portion of the goodwill is deductible for tax purposes.

The purchase price was allocated as follows (in thousands):

Weighted-Average

Amortization Period

Intangible assets:

In-process research and development

Not amortized

Developed technology

Customer relationships

Accounts receivable

Other current assets

Other non-current assets

Current liabilities

Non-current liabilities

Total purchase price

In-process research and development (IPR&D) represents Wi-Fi and Bluetooth technology that had not achieved technological feasibility as of the acquisition date.

The fair value of IPR&D was determined using the income approach.

The discount rate applied to the projected cash flows was 13.8 %, which reflects the risks related to the projects.

The allocation of the purchase price is preliminary and subject to change, primarily for the valuation of consideration, intangible assets and the finalization of income tax matters.

Revenues attributable to the Redpine Signals business from the date of acquisition to July 4, 2020 were $ 2.4 million.

Pro forma information related to this acquisition has not been presented because it would not be materially different from amounts reported.

The Company recorded approximately $ 1.5 million of acquisition-related costs in selling, general and administrative expenses during the six months ended July 4, 2020.

0.625 % Convertible Senior Notes

On June 1, 2020, the Company completed a private offering of $ 535 million principal amount convertible senior notes (the “2025 Notes”).

The 2025 Notes bear interest semi-annually at a rate of 0.625 % per year and mature on June 15, 2025.

The Company used $ 310.0 million of the proceeds to repay in full the outstanding balance under its credit facility and the remainder of the proceeds, along with cash on hand, to repurchase approximately $ 236.8 million aggregate principal amount of its outstanding 1.375 % convertible senior notes.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The 2025 Notes are convertible at an initial conversion rate of 8.1498 shares of common stock per $1,000 principal amount of the 2025 Notes, or approximately 4.4 million shares of common stock, which is equivalent to a conversion price of approximately $ 122.70 per share.

The conversion rate is subject to adjustment under certain circumstances.

Holders may convert the 2025 Notes under the following circumstances:

during any calendar quarter after the calendar quarter ended on September 30, 2020 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to $ 159.51 per share, representing 130 % of the conversion price of the 2025 Notes;

during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the closing sale price of our common stock and the conversion rate on each such trading day;

if specified distributions or corporate events occur;

if the Notes are called for redemption;

or at any time after March 15, 2025.

The Company may redeem all or any portion of the 2025 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.

Upon conversion, the 2025 Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

The Company incurred debt issuance costs of approximately $ 10.4 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds.

The costs allocated to the liability component are being amortized as interest expense over the term of the 2025 Notes using the effective interest method.

1.375 % Convertible Senior Notes

On March 6, 2017, the Company completed a private offering of $ 400 million principal amount convertible senior notes (the “2022 Notes”).

The Notes bear interest semi-annually at a rate of 1.375 % per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date.

The Company used $ 72.5 million of the proceeds to pay off the then remaining balance under its credit agreement.

The Notes bear interest semi-annually at a rate of 1.375 % per year and mature on March 1, 2022.

The 2022 Notes are convertible at an initial conversion rate of 10.7744 shares of common stock per $1,000 principal amount of the 2022 Notes, or approximately 4.3 million shares of common stock, which is equivalent to a conversion price of approximately $ 92.81 per share.

8 unchanged sentences

Upon conversion, the 2022 Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

The principal balance of the Notes was separated into liability and equity components, and was recorded initially at fair value.

The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is amortized to interest expense over the term of the Notes using the effective interest method.

The carrying amount of the liability component was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance.

The Company incurred debt issuance costs of approximately $ 10.6 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds.

The costs allocated to the liability component are being amortized as interest expense over the term of the Notes using the effective interest method.

On June 1, 2020, the Company paid $ 276.9 million in cash to repurchase $ 236.8 million aggregate principal amount of the 2022 Notes.

The Company recognized a loss on debt extinguishment of $ 3.7 million during the three months ended July 4, 2020, which was recorded in interest expense in the Condensed Consolidated Statements of Operations.

The principal balances of the notes were separated into liability and equity components, and recorded initially at fair value.

The excess of the principal amounts of the liability components over their carrying amounts represent the debt discount, which are amortized to interest expense over the term of the notes using the effective interest method.

The carrying amounts of the liability components was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance.

Silicon Laboratories Inc.

7 unchanged sentences

Net carrying amount

The liability component of the Notes is recorded in convertible debt on the Consolidated Balance Sheet.

The equity component of the Notes is recorded in additional paid-in capital.

The effective interest rate for the liability component was 4.75 %.

As of April 4, 2020, the remaining period over which the debt discount and debt issuance costs will be amortized was 1.9 years.

The liability components of the notes are recorded in convertible debt on the Consolidated Balance Sheet.

The equity components of the notes are recorded in additional paid-in capital.

The effective interest rate for the liability component was 5.336 % for the 2025 Notes and 4.75 % for the 2022 Notes.

As of July 4, 2020, the remaining period over which the debt discount and debt issuance costs will be amortized was 5.0 years for the 2025 Notes and 1.7 years for the 2022 Notes.

Interest expense related to the notes was comprised of the following (in thousands):

Three Months Ended

Six Months Ended

Contractual interest expense

2 unchanged sentences

Credit Facility

On August 7, 2019, the Company and certain of its domestic subsidiaries (the “Guarantors”) amended its existing credit agreement.

The amended agreement (the “Credit Facility”) consists of a $ 400 million revolving credit facility with a maturity date of August 7, 2024.

The Company (and certain of its domestic subsidiaries (the “Guarantors”)) have a $ 400 million revolving credit facility with a maturity date of August 7, 2024.

The credit facility includes a $ 25 million letter of credit sublimit and a $ 10 million swingline loan sublimit.

1 unchanged sentence

On March 27, 2020, the Company borrowed $ 310 million under the credit facility.

The revolving credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50 % and the Eurodollar Base Rate plus 1.00 %) plus an applicable margin.

On June 1, 2020, the Company repaid in full the outstanding balance of the credit facility.

The credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50 % and the Eurodollar Base Rate plus 1.00 %) plus an applicable margin.

Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans.

The applicable margins for the Eurodollar rate loans range from 1.00 % to 1.75 % and for base rate loans range from 0.00 % to 0.75 %, depending in each case, on the leverage ratio as defined in the credit facility.

The Credit Facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a leverage ratio (funded debt/EBITDA) of no more than 4.25 to 1, a secured leverage ratio of no more than 3.50 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

As of April 4, 2020, the Company was in compliance with all covenants of the Credit Facility.

The credit facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a net leverage ratio (funded indebtedness/EBITDA) of no more than 4.25 to 1, a secured leverage ratio of no more than 3.50 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

As of July 4, 2020, the Company was in compliance with all covenants of the credit facility.

The Company’s obligations under the credit facility are guaranteed by the Guarantors and are secured by a security interest in substantially all assets of the Company and the Guarantors.

Interest Rate Swap Agreement

On March 27, 2020, the Company entered into an interest rate swap agreement and effectively converted the Eurodollar portion of the interest on the Credit Facilities to a fixed interest rate of 0.5 % through April 1, 2021.

Silicon Laboratories Inc.

5 unchanged sentences

Stockholders’ Equity

The Company issued 0.4 million shares of common stock during the three months ended April 4, 2020.

The Company issued 0.5 million shares of common stock during the six months ended July 4, 2020.

Share Repurchase Program

In April 2020, the Board of Directors terminated the Company's existing share repurchase program, effective immediately, which had an authorization amount of $ 200 million and a termination date of December 2020.

This program allowed for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions.

The Company repurchased 0.2 million shares and 0.2 million shares of its common stock for $ 16.3 million and $ 15.0 million during the three months ended April 4, 2020 and March 30, 2019, respectively.

The Company repurchased 0.2 million shares and 0.3 million shares of its common stock for $ 16.3 million and $ 26.7 million during the six months ended July 4, 2020 and June 29, 2019, respectively.

These shares were retired upon repurchase.

Reclassifications From Accumulated Other Comprehensive Income (Loss)

The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive loss (in thousands):

The following table summarizes the effect on net income (loss) from reclassifications out of accumulated other comprehensive income (loss) (in thousands):

Three Months Ended

Six Months Ended

Reclassification

Gains (losses) on available-for-sales securities to:

Gains on available-for-sales securities to:

Interest income and other, net

Gains (losses) on cash flow hedges to:

Losses on cash flow hedges to:

Operating expenses

1 unchanged sentence

Total reclassifications

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company groups its revenues into two categories, based on the markets and applications in which its products may be used.

1 unchanged sentence

Three Months Ended

Six Months Ended

Internet of Things

Infrastructure and automotive

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company has combined its previous product groups, Infrastructure, Broadcast and Access, into the Infrastructure and automotive product group.

2 unchanged sentences

These factors impact the timing and uncertainty of revenues and cash flows.

During the three months ended April 4, 2020 and March 30, 2019, the Company recognized revenue of $ 11.1 million and $ 11.0 million, respectively, from performance obligations that were satisfied in previous reporting periods.

During the three months ended July 4, 2020 and June 29, 2019 and the six months ended July 4, 2020 and June 29, 2019, the Company recognized revenue of $ 13.5 million, $ 13.5 million, $ 14.6 million and $ 15.4 million, respectively, from performance obligations that were satisfied in previous reporting periods.

The following disaggregates the Company's revenue by sales channel (in thousands):

Three Months Ended

Six Months Ended

Direct customers

7 unchanged sentences

The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands):

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Operations (in thousands):

Three Months Ended

Six Months Ended

Cost of revenues

1 unchanged sentence

Selling, general and administrative

Income tax benefit

The Company had approximately $ 98.4 million of total unrecognized compensation costs related to granted stock options and awards as of April 4, 2020 that are expected to be recognized over a weighted-average period of approximately 2.4 years.

Income tax (expense) benefit

The Company had approximately $ 100.1 million of total unrecognized compensation costs related to granted stock options and awards as of July 4, 2020 that are expected to be recognized over a weighted-average period of approximately 2.4 years.

There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences.

Income tax expense (benefit) was $( 0.6 ) million and $( 2.5 ) million for the three months ended April 4, 2020 and March 30, 2019, resulting in effective tax rates of ( 35.4 )% and ( 85.0 )%, respectively.

The effective tax rate for the three months ended April 4, 2020 increased from the prior period primarily due to a decrease in the Company’s excess tax benefits from stock-based compensation , offset by an increase in the Company's Federal research and development credit benefit year over year, further impacted by its relation to pre-tax book income.

Income tax expense (benefit) was $ 0.4 million and $ 29.3 million for the three months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of ( 26.4 )% and 221.0 %, respectively.

Income tax expense (benefit) was $( 0.2 ) million and $ 26.8 million for the six months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of ( 95.8 )% and 165.8 %, respectively.

The significant change in the effective tax rate for the three and six months ended July 4, 2020 as compared to the prior periods was primarily due to the impact in the prior periods of a change in the Company’s position related to the treatment of stock-based compensation within its intercompany cost-sharing arrangement as well as a change in the proportion of permanent tax impacts relative to a decrease in current year pre-tax book income.

On July 27, 2015, the U.S.

1 unchanged sentence

Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share costs related to stock-based compensation.

In February 2016, the U.S.

Internal Revenue Service (“IRS”) appealed the decision to the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”).

On June 7, 2019, the Ninth Circuit reversed the 2015 decision of the U.S.

On June 7, 2019, the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) reversed the 2015 decision of the U.S.

Tax Court, thus requiring related parties in an intercompany cost-sharing agreement to share stock-based compensation costs.

As a result of the Ninth Circuit decision, the Company no longer reflects a tax benefit related to the removal or exclusion of stock-based compensation from its intercompany cost-sharing arrangement within its financial statements.

On November 12, 2019, the Ninth Circuit denied a petition for rehearing the case en banc and on February 10, 2020, Altera filed a petition to the U.S.

Supreme Court for review of the Ninth Circuit’s decision.

As of April 10, 2020, the IRS has received extensions from the Supreme Court until May 14, 2020 to file their response to Altera's petition.The Company will continue to monitor ongoing developments in this matter and potential impacts to its financial statements.

On June 22, 2020, the U.S.

Supreme Court denied Altera’s petition for writ of certiorari, declining to review the Ninth Circuit’s decision.

Based on the Supreme Court’s denial to hear the Altera case, until and unless there is further litigation on this matter in the future, the Company considers the matter resolved.

Uncertain Tax Positions

As of April 4, 2020, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 3.0 million, of which $ 2.1 million would affect the effective tax rate if recognized.

During the three months ended April 4, 2020, the Company did not release any of its unrecognized tax benefits.

As of July 4, 2020, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 2.4 million, of which $ 2.0 million would affect the effective tax rate if recognized.

During the six months ended July 4, 2020, the Company did not release any of its unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

These amounts were not material for any of the periods presented.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction.

8 unchanged sentences

The Company does not believe gross unrecognized tax benefits will decrease in the next 12 months.

Subsequent Event

On April 28, 2020, the Company acquired the Wi-Fi® and Bluetooth® business of Redpine Signals.

The acquisition will accelerate the Company’s roadmap for Wi-Fi and Bluetooth silicon and software solutions.

Under the terms of the agreement, the Company paid approximately $ 314 million as part of the closing.

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-Q

Item 1. Financial Statements