What changed in this filing

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Item 1. Financial Statements

2021-04-28 compared with 2020-10-28 · 105 added, 205 removed, 359 unchanged (46% of the section changed)

15 unchanged sentences

Accounts payable

Current portion of convertible debt, net

Deferred revenue and returns liability

1 unchanged sentence

Total current liabilities

Convertible debt

Convertible debt, net

Other non-current liabilities

7 unchanged sentences

250,000 shares authorized;

43,827 and 43,496 shares issued and outstanding at October 3, 2020 and December 28, 2019, respectively

44,749 and 43,925 shares issued and outstanding at April 3, 2021 and January 2, 2021, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 28,

Cost of revenues

16 unchanged sentences

Three Months Ended

Nine Months Ended

September 28,

Other comprehensive income (loss), before tax

Other comprehensive loss, before tax:

Net changes to available-for-sale securities:

Unrealized gains (losses) arising during the period

Unrealized losses arising during the period

Reclassification for gains included in net income

1 unchanged sentence

Unrealized losses arising during the period

Reclassification for losses included in net income

Other comprehensive income (loss), before tax

Reclassification for (gains) losses included in net income

Other comprehensive loss, before tax

Provision (benefit) for income taxes

Other comprehensive income (loss)

Other comprehensive loss

Comprehensive income

6 unchanged sentences

Stockholders’

Three Months Ended October 3, 2020

Three Months Ended April 3, 2021

Income (Loss)

Balance as of July 4, 2020

Balance as of January 2, 2021

Other comprehensive loss

2 unchanged sentences

Convertible debt activity

Balance as of October 3, 2020

Accumulated Other

Comprehensive

Stockholders’

Three Months Ended September 28, 2019

Income (Loss)

Balance as of June 29, 2019

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Balance as of September 28, 2019

Balance as of April 3, 2021

Accumulated Other

1 unchanged sentence

Stockholders’

Nine Months Ended October 3, 2020

Three Months Ended April 4, 2020

Income (Loss)

1 unchanged sentence

Cumulative effect of adoption of accounting standard

Other comprehensive income

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Convertible debt activity

Balance as of October 3, 2020

Accumulated Other

Comprehensive

Stockholders’

Nine Months Ended September 28, 2019

Income (Loss)

Balance as of December 29, 2018

Other comprehensive income

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

1 unchanged sentence

Stock-based compensation

Balance as of September 28, 2019

Balance as of April 4, 2020

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

2 unchanged sentences

(In thousands)

Nine Months Ended

September 28,

Three Months Ended

Operating Activities

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

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

Depreciation of property and equipment

13 unchanged sentences

Investing Activities

Purchases of available-for-sale investments

Sales and maturities of available-for-sale investments

Purchases of marketable securities

Sales and maturities of marketable securities

Purchases of property and equipment

Purchases of other assets

Acquisition of business, net of cash acquired

Net cash used in investing activities

Net cash provided by investing activities

Financing Activities

Proceeds from issuance of debt

Proceeds from revolving line of credit

Payments on debt

1 unchanged sentence

Payment of taxes withheld for vested stock awards

Proceeds from the issuance of common stock

Net cash provided by (used in) financing activities

9 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 October 3, 2020 and December 28, 2019, the condensed consolidated results of its operations for the three and nine months ended October 3, 2020 and September 28, 2019, the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 3, 2020 and September 28, 2019, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended October 3, 2020 and September 28, 2019, and the Condensed Consolidated Statements of Cash Flows for the nine months ended October 3, 2020 and September 28, 2019.

and its subsidiaries (collectively, the “Company”) at April 3, 2021 and January 2, 2021, the condensed consolidated results of its operations for the three months ended April 3, 2021 and April 4, 2020, the Condensed Consolidated Statements of Comprehensive Income for the three months ended April 3, 2021 and April 4, 2020, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended April 3, 2021 and April 4, 2020, and the Condensed Consolidated Statements of Cash Flows for the three months ended April 3, 2021 and April 4, 2020.

All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated results of operations for the three and nine months ended October 3, 2020 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated results of operations for the three months ended April 3, 2021 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.

generally accepted accounting principles (GAAP).

Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 28, 2019, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on January 29, 2020.

Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended January 2, 2021, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 3, 2021.

The Company prepares financial statements on a 52 - or 53 -week fiscal year that ends on the Saturday closest to December 31.

Fiscal 2020 will have 53 weeks with the extra week occurring in the first quarter of the year.

Fiscal 2019 had 52 weeks.

Fiscal 2021 will have 52 weeks.

Fiscal 2020 had 53 weeks with the extra week occurring in the first quarter of the year.

In a 52-week year, each fiscal quarter consists of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Among the significant estimates affecting the financial statements are those related to inventories, goodwill, acquired intangible assets, other long-lived assets, revenue recognition, stock-based compensation and income taxes.

Actual results could differ from those estimates, and such differences could be material to the financial statements.

Adoption of New Accounting Standard

The Company adopted Accounting Standards Update (ASU) No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , on December 29, 2019, the first day of its fiscal year ending January 2, 2021.

The adoption did not have a material impact on its financial statements.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (IC) products.

2 unchanged sentences

The Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts.

8 unchanged sentences

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

4 unchanged sentences

Such convertible instruments will be accounted for as a single liability measured at amortized cost, as long as no other features require bifurcation and recognition as derivatives.

This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, using one of two retrospective methods.

This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, using one of two retrospective transition methods.

Early adoption is permitted for fiscal periods beginning after December 15, 2020.

The Company expects the primary impacts of this new standard will be to potentially increase the carrying value of its convertible debt and reduce its reported interest expense.

The Company expects the primary impacts of this new standard will be to increase the carrying value of its convertible debt by approximately $ 78.5 million, with an offsetting reduction in additional paid-in capital, and reduce its reported interest expense.

In addition, should the Company be required to use the if-converted method for calculating diluted earnings per share, the number of shares used in such calculation could potentially increase.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 28,

Shares used in computing basic earnings per share

3 unchanged sentences

Earnings per share:

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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 the three months ended October 3, 2020 and September 28, 2019 and the nine months ended October 3, 2020 and September 28, 2019, approximately 0.1 million, 0.6 million, 0.2 million and 0.3 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

For the three months ended April 3, 2021 and April 4, 2020, approximately 1.1 million and 0.3 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

See Note 6, Debt , to the Condensed Consolidated Financial Statements for additional information.

3 unchanged sentences

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

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.

3 unchanged sentences

Fair Value Measurements

at October 3, 2020 Using

at April 3, 2021 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

at December 28, 2019 Using

at January 2, 2021 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 of Financial Instruments (Continued)

Valuation methodology

5 unchanged sentences

The Company’s derivative instruments are valued using discounted cash flow models.

The assumptions used in preparing the valuation models include quoted interest swap rates, foreign exchange rates, forward and spot prices for currencies, and market observable data of similar instruments.

Available-for-sale investments

The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies and market observable data of similar instruments.

Contractual maturities of 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 in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at October 3, 2020 (in thousands):

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments and money market funds at April 3, 2021 (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)

Available-for-sale investments

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 October 3, 2020

As of April 3, 2021

Government debt securities

3 unchanged sentences

12 Months or Greater

As of December 28, 2019

As of January 2, 2021

Government debt securities

1 unchanged sentence

Auction rate securities

The gross unrealized losses as of October 3, 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 April 3, 2021 and January 2, 2021 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)

Fair Value of Financial Instruments (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 October 3, 2020, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At October 3, 2020 and December 28, 2019, there were no material unrealized gains associated with the Company’s available-for-sale investments.

As of April 3, 2021, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At April 3, 2021 and January 2, 2021, 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

October 3, 2020

April 3, 2021

Valuation Technique

Unobservable Input

Weighted Average

Discounted cash flow

2 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 and nine months ended October 3, 2020 (in thousands):

The following summarizes the activity in Level 3 financial instruments for the three months ended April 3, 2021 (in thousands):

Auction Rate Securities

Beginning balance

Loss included in other comprehensive income (loss)

Balance at October 3, 2020

Loss included in other comprehensive loss

Balance at April 3, 2021

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 October 3, 2020 and December 28, 2019, the fair value of the 1.375 % convertible senior notes was $ 174.5 million and $ 524.0 million, respectively.

The fair value of the 0.625 % convertible senior notes as of October 3, 2020 was $ 575.8 million.

As of April 3, 2021 and January 2, 2021, the fair value of the 0.625 % convertible senior notes due in 2025 was $ 691.2 million and $ 671.4 million, respectively.

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

The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates and interest rates.

The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates.

The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings.

5 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 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 (loss) 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 may be recognized in the Consolidated Statement of Income 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 October 3, 2020, all contracts have matured.

The fair value of the contracts, contract losses recognized in other comprehensive income (loss) 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 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 into earnings.

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.

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

As of April 3, 2021, the contracts had maturities of one to twelve months and an aggregate notional value of $ 22.0 million.

Gains expected to be reclassified into earnings in the next twelve months were not material.

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

Non-designated Hedges

4 unchanged sentences

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

As of October 3, 2020, the Company held three foreign currency forward contracts denominated in Singapore Dollars with a notional value of $ 17.5 million.

As of April 3, 2021, the Company held three foreign currency forward contracts denominated in Singapore Dollars with a notional value of $ 16.5 million.

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

5 unchanged sentences

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.

Revenues attributable to the Redpine Signals business from the date of acquisition to October 3, 2020 were $ 5.8 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 nine months ended October 3, 2020.

0.625 % Convertible Senior Notes

1 unchanged sentence

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.

12 unchanged sentences

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 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.

The conversion rate is subject to adjustment under certain circumstances.

Holders may convert the 2022 Notes under the following circumstances:

during any calendar quarter after the calendar quarter ended on June 30, 2017 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 $ 120.66 per share, representing 130 % of the conversion price of the 2022 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 2022 Notes are called for redemption;

or at any time after December 1, 2021.

The Company may redeem all or any portion of the 2022 Notes, at its option, on or after March 6, 2020, 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 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.

During the nine months ended October 3, 2020, the Company paid $ 299.1 million in cash to repurchase $ 254.4 million aggregate principal amount of the 2022 Notes.

The Company recognized a loss on debt extinguishment of $ 4.0 million during the nine months ended October 3, 2020, which was recorded in interest expense in the Condensed Consolidated Statements of Income.

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

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

On January 6, 2021, the Company issued a notice of redemption for the remaining $ 140.6 million principal amount of the 2022 Notes.

Prior to the redemption, the Company received conversion notices representing $ 130.4 million principal amount of the notes.

The Company paid $ 130.4 million in cash and issued 528,022 shares of common stock for the conversions.

Notes representing $ 10.2 million principal amount were redeemed at par, plus accrued interest.

All note conversions and redemptions were completed by March 22, 2021.

The Company recognized a loss on debt extinguishment of $ 3.4 million during the three months ended April 3, 2021, which was recorded in interest expense in the Condensed Consolidated Statements of Income.

Convertible Debt, Net

The principal balances of the 2025 Notes and 2022 Notes (together, 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.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

The carrying amount of the Notes consisted of the following (in thousands):

8 unchanged sentences

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

As of October 3, 2020, the remaining period over which the debt discount and debt issuance costs will be amortized was 4.7 years for the 2025 Notes and 1.4 years for the 2022 Notes.

As of April 3, 2021, the remaining period over which the debt discount and debt issuance costs will be amortized was 4.2 years for the 2025 Notes.

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

Three Months Ended

Nine Months Ended

September 28,

Contractual interest expense

5 unchanged sentences

The Company also has an option to increase the size of the borrowing capacity by up to the greater of an aggregate of $ 250 million and 100 % of EBITDA, plus an amount that would not cause a secured leverage ratio (funded debt secured by assets/EBITDA) to exceed 3.25 to 1.00, subject to certain conditions.

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

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.

2 unchanged sentences

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 October 3, 2020, the Company was in compliance with all covenants of the credit facility.

As of April 3, 2021, 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.

5 unchanged sentences

While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.

Stockholders’ Equity

The Company issued 0.5 million shares of common stock during the nine months ended October 3, 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.

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 nine months ended October 3, 2020 and September 28, 2019, respectively.

These shares were retired upon repurchase.

Reclassifications From Accumulated Other Comprehensive Income

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

Three Months Ended

Nine Months Ended

September 28,

Reclassification

Gains on available-for-sales securities to:

Interest income and other, net

Losses on cash flow hedges to:

Operating expenses

Income tax expense (benefit)

Total reclassifications

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

Nine Months Ended

September 28,

Internet of Things

Infrastructure and automotive

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

Prior periods were retrospectively adjusted.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

A portion of the Company's sales are made to distributors under agreements allowing certain rights of return and/or price protection related to the final selling price to the end customers.

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

During the three months ended October 3, 2020 and September 28, 2019 and the nine months ended October 3, 2020 and September 28, 2019, the Company recognized revenue of $ 18.4 million, $ 14.1 million, $ 16.1 million and $ 16.9 million, respectively, from performance obligations that were satisfied in previous reporting periods.

During the three months ended April 3, 2021 and April 4, 2020, the Company recognized revenue of $ 12.0 million and $ 11.1 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

Nine Months Ended

September 28,

Direct customers

2 unchanged sentences

In fiscal 2017, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan.

These amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company’s corporate governance and to implement other best practices.

The purpose of the amendments was to authorize additional shares of common stock for issuance, to comply with changes in applicable law, to improve the Company’s corporate governance and to implement other best practices.

Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans.

The fair values of stock awards (such as restricted stock units (RSUs), performance stock units (PSUs) and restricted stock awards (RSAs)) are estimated based on their intrinsic values.

The fair values of stock awards (such as restricted stock awards (RSUs), performance stock units (PSUs) and restricted stock awards (RSAs)) are estimated based on their intrinsic values.

The fair values of market stock awards (MSUs) are estimated using a Monte Carlo simulation.

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)

Stock-Based Compensation (Continued)

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

Three Months Ended

Nine Months Ended

September 28,

Cost of revenues

2 unchanged sentences

Income tax benefit

The Company had approximately $ 89.4 million of total unrecognized compensation costs related to equity grants from the 2009 Plan as of October 3, 2020 that are expected to be recognized over a weighted-average period of approximately 2.2 years.

The Company had approximately $ 66.0 million of total unrecognized compensation costs related to equity grants from the 2009 Plan as of April 3, 2021 that are expected to be recognized over a weighted-average period of approximately 2.0 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 $( 0.1 ) million and $ 1.7 million for the three months ended October 3, 2020 and September 28, 2019, resulting in effective tax rates of ( 3.3 )% and 7.7 %, respectively.

Income tax expense (benefit) was $( 0.3 ) million and $ 28.5 million for the nine months ended October 3, 2020 and September 28, 2019, resulting in effective tax rates of ( 9.3 )% and 74.9 %, respectively.

The decrease in the effective tax rate for the three months ended October 3, 2020 as compared to the prior period was primarily due to the impact of permanent tax differences relative to the decreased current period pre-tax book income.

The significant decrease in the effective tax rate for the nine months ended October 3, 2020 as compared to the prior period was primarily due to the impact in the prior period of a change in the Company’s position related to the treatment of stock-based compensation within its intercompany cost-sharing arrangement.

Income tax expense (benefit) was $ 0.2 million and $( 0.6 ) million for the three months ended April 3, 2021 and April 4, 2020, resulting in effective tax rates of 1.5 % and ( 35.4 )%, respectively.

The higher provision for income taxes for the three months ended April 3, 2021 was primarily due to higher profits, partially offset by the amount of income earned in foreign jurisdictions where the tax rate may be lower than the federal statutory rate, as well as permanent items including excess tax benefits from stock-based awards and the federal research and development credit.

The benefit from income taxes for the three months ended April 4, 2020 was primarily due to lower profits relative to the amount of income earned in foreign jurisdictions where the tax rate may be lower than the federal statutory rate, as well as the increased impact of permanent items including the federal research and development credit, the tax effects of non-deductible stock-based compensation, global intangible low-tax income (“GILTI”) and excess tax benefits from stock-based awards.

Uncertain Tax Positions

As of October 3, 2020, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 2.9 million, of which $ 2.0 million would affect the effective tax rate if recognized.

During the nine months ended October 3, 2020, the Company did not release any of its unrecognized tax benefits.

As of April 3, 2021, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 3.2 million, of which $ 2.5 million would affect the effective tax rate if recognized.

During the three months ended April 3, 2021, 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 (benefit) for income taxes.

5 unchanged sentences

The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Income Taxes (Continued)

The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination.

3 unchanged sentences

The Company does not expect material changes to its gross unrecognized tax benefits in the next 12 months.

Subsequent Event

On April 22, 2021, the Company entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions, Inc.

has agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising the Company’s infrastructure and automotive business for $ 2.75 billion in cash.

The Company cannot estimate the amount of the gain to be recorded upon the close of the sale at this time.

The Company has determined that the criteria for classification as held for sale for the infrastructure and automotive business were met beginning in the second quarter of fiscal 2021.

As a result, the assets and liabilities of the infrastructure and automotive business will be classified as held for sale and financial results of the business will be reported as income from discontinued operations beginning in the second quarter of fiscal 2021.

The transaction is subject to regulatory approval and other customary closing conditions and is expected to be closed in the third quarter of fiscal 2021.

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