What changed in this filing

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Item 1. Financial Statements

2021-10-27 compared with 2021-07-28 · 89 added, 90 removed, 455 unchanged (28% of the section changed)

8 unchanged sentences

Prepaid expenses and other current assets

Current assets held for sale

Current assets of discontinued operations

Total current assets

2 unchanged sentences

Other assets, net

Non-current assets held for sale

Non-current assets of discontinued operations

Liabilities and Stockholders’ Equity

4 unchanged sentences

Other current liabilities

Current liabilities held for sale

Current liabilities of discontinued operations

Total current liabilities

1 unchanged sentence

Other non-current liabilities

Non-current liabilities held for sale

Non-current liabilities of discontinued operations

Total liabilities

6 unchanged sentences

250,000 shares authorized;

44,764 and 43,925 shares issued and outstanding at July 3, 2021 and January 2, 2021, respectively

40,547 and 43,925 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively

Additional paid-in capital

5 unchanged sentences

Silicon Laboratories Inc.

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Income

(In thousands, except per share data)

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenues

11 unchanged sentences

Income from discontinued operations, net of income taxes

Net income (loss)

Basic earnings (loss) per share:

8 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

Nine Months Ended

Other comprehensive income (loss), before tax

1 unchanged sentence

Unrealized gains (losses) arising during the period

Reclassification for gains included in net income (loss)

Reclassification for (gains) losses included in net income

Net changes to cash flow hedges

Unrealized gains (losses) arising during the period

Reclassification for (gains) losses included in net income (loss)

Unrealized losses arising during the period

Reclassification for (gains) losses included in net income

Other comprehensive income (loss), before tax

9 unchanged sentences

Stockholders’

Three Months Ended July 3, 2021

Three Months Ended October 2, 2021

Income (Loss)

Balance as of April 3, 2021

Balance as of July 3, 2021

Other comprehensive loss

2 unchanged sentences

Stock-based compensation

Balance as of July 3, 2021

Balance as of October 2, 2021

Accumulated Other

1 unchanged sentence

Stockholders’

Three Months Ended July 4, 2020

Three Months Ended October 3, 2020

Income (Loss)

Balance as of April 4, 2020

Other comprehensive income

Balance as of July 4, 2020

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Stock-based compensation

Convertible debt issuance

Balance as of July 4, 2020

Convertible debt activity

Balance as of October 3, 2020

Accumulated Other

1 unchanged sentence

Stockholders’

Six Months Ended July 3, 2021

Nine Months Ended October 2, 2021

Income (Loss)

5 unchanged sentences

Convertible debt activity

Balance as of July 3, 2021

Balance as of October 2, 2021

Accumulated Other

1 unchanged sentence

Stockholders’

Six Months Ended July 4, 2020

Nine Months Ended October 3, 2020

Income (Loss)

5 unchanged sentences

Stock-based compensation

Convertible debt issuance

Balance as of July 4, 2020

Convertible debt activity

Balance as of October 3, 2020

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

Operating Activities

2 unchanged sentences

Income from discontinued operations, net of income taxes

( 2,183,884 )

Depreciation of property and equipment

14 unchanged sentences

Purchases of marketable securities

( 1,212,572 )

Sales and maturities of marketable securities

2 unchanged sentences

Acquisition of business, net of cash acquired

Net cash provided by (used in) investing activities of continuing operations

Net cash used in investing activities of continuing operations

Financing Activities

19 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 July 3, 2021 and January 2, 2021, the condensed consolidated results of its operations for the three and six months ended July 3, 2021 and July 4, 2020, the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2021 and July 4, 2020, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended July 3, 2021 and July 4, 2020, and the Condensed Consolidated Statements of Cash Flows for the six months ended July 3, 2021 and July 4, 2020.

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

All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated results of operations for the three and six months ended July 3, 2021 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated results of operations for the three and nine months ended October 2, 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.

28 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

14 unchanged sentences

The financial results of the infrastructure and automotive business, which are readily distinguishable from other components of the Company, have been presented as discontinued operations in the Condensed Consolidated Financial Statements.

The following table presents the financial results of the infrastructure and automotive business (the “discontinued operations”) in the Company’s condensed consolidated statements of operations (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Costs of revenues and operating expenses

Gain on sale of discontinued operations

Income from discontinued operations before income taxes

Provision (benefit) for income taxes

Provision for income taxes

Income from discontinued operations

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Discontinued Operations (Continued)

The following table summarizes the assets and liabilities of the infrastructure and automotive business held for sale (in thousands):

The following table summarizes the assets and liabilities of the infrastructure and automotive business (in thousands):

Prepaid expenses and other current assets

Total assets held for sale

Other current liabilities

Other non-current liabilities

Total liabilities held for sale

Total liabilities

Continuing Involvement

3 unchanged sentences

In addition, the Company has no contractual ability through the TSA or any other agreement to significantly influence the operating or financial policies of Skyworks.

The TSA fees were approximately $ 2.1 million for the nine months ended October 2, 2021.

Earnings (Loss) Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Loss from continuing operations

4 unchanged sentences

Loss per share:

Diluted shares for the three months ended October 2, 2021 and October 3, 2020 and the nine months ended October 2, 2021 and October 3, 2020 excluded 1.2 million, 0.5 million, 1.3 million and 0.5 million shares, respectively, due to the Company’s loss from continuing operations for the periods.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Earnings (Loss) Per Share (Continued)

For the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020, approximately 0.0 million, 0.4 million, 0.0 million and 0.3 million shares, respectively, consisting primarily of restricted stock awards (RSUs) and market stock awards (MSUs) granted under our 2009 Stock Incentive Plan, were not included in the diluted loss per share calculation since the shares were anti-dilutive.

Further, diluted shares for the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020 excluded 1.0 million, 0.3 million, 1.3 million and 0.5 million shares, respectively, due to the Company’s loss from continuing operations 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 the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020, approximately 0.5 million, 0.0 million, 0.8 million and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

For the three months ended October 2, 2021 and October 3, 2020 and the nine months ended October 2, 2021 and October 3, 2020, approximately 0.7 million, 0.1 million, 0.8 million and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share from net income and discontinued operations.

See Note 8, Debt , to the Condensed Consolidated Financial Statements for additional information.

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

The following summarizes the valuation of the Company’s financial instruments (in thousands).

1 unchanged sentence

Fair Value Measurements

at July 3, 2021 Using

at October 2, 2021 Using

Quoted Prices in

31 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Valuation methodology

8 unchanged sentences

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 and money market funds at July 3, 2021 (in thousands):

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at October 2, 2021 (in thousands):

Due in one year or less

5 unchanged sentences

12 Months or Greater

As of July 3, 2021

As of October 2, 2021

Government debt securities

7 unchanged sentences

Auction rate securities

The gross unrealized losses as of July 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 gross unrealized losses as of October 2, 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.

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

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

At July 3, 2021 and January 2, 2021, there were no material unrealized gains associated with the Company’s available-for-sale investments.

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 2, 2021, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At October 2, 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 2, 2021

Valuation Technique

8 unchanged sentences

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 six months ended July 3, 2021 (in thousands):

The following summarizes the activity in Level 3 financial instruments for the three and nine months ended October 2, 2021 (in thousands):

Auction Rate Securities

1 unchanged sentence

Loss included in other comprehensive income (loss)

Balance at July 3, 2021

Balance at October 2, 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 July 3, 2021 and January 2, 2021, the fair value of the 0.625 % convertible senior notes due in 2025 was $ 743.2 million and $ 671.4 million, respectively.

As of October 2, 2021 and January 2, 2021, the fair value of the 0.625 % convertible senior notes due in 2025 was $ 690.2 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.

14 unchanged sentences

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

As of July 3, 2021, the contracts had maturities of one to six months and an aggregate notional value of $ 23.1 million.

As of October 2, 2021, the contracts had maturities of one to three months and an aggregate notional value of $ 11.7 million.

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

6 unchanged sentences

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

As of July 3, 2021, the Company held two foreign currency forward contracts denominated in Singapore Dollars with a notional value of $ 8.9 million and one foreign currency forward contract denominated in Indian Rupees with a notional value of $ 5.3 million.

As of October 2, 2021, the Company held two foreign currency forward contracts denominated in Singapore Dollars with a notional value of $ 8.1 million and two foreign currency forward contracts denominated in Indian Rupees with a notional value of $ 7.9 million.

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

Balance Sheet Details

Supplemental Information

The following shows the details of selected Condensed Consolidated Balance Sheet items (in thousands):

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

The Company leases a portion of its headquarter facilities to other tenants.

Lease income from operating leases was $ 3.1 million and $ 2.4 million during the nine months ended October 2, 2021 and October 3, 2020, respectively.

Redpine Signals

24 unchanged sentences

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 Operations.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

Convertible Debt, Net

12 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 July 3, 2021, the remaining period over which the debt discount and debt issuance costs will be amortized was 4.0 years for the 2025 Notes.

As of October 2, 2021, the remaining period over which the debt discount and debt issuance costs will be amortized was 3.7 years for the 2025 Notes.

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

Three Months Ended

Six Months Ended

Nine Months Ended

Contractual interest expense

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

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 3, 2021, the Company was in compliance with all covenants of the credit facility.

As of October 2, 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.

As of October 2, 2021, no amounts were outstanding on the credit facility.

Commitments and Contingencies

2 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.

Share Repurchases

On August 2, 2021, the Company announced its intention to commence a “modified Dutch Auction” tender offer to purchase in cash up to $ 1.0 billion in value of shares of its common stock.

The tender offer commenced on August 3, 2021 and expired on August 30, 2021.

The Company repurchased 4.0 million shares through the tender offer at a price of $ 160.00 per share, for an aggregate cost of $ 640.7 million, excluding fees and expenses relating to the tender offer.

In addition, the Company repurchased 0.4 million shares of its common stock for $ 53.6 million through its existing share repurchase program during the nine months ended October 2, 2021.

Shares purchased through the tender offer and share repurchase program were retired upon repurchase.

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 July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020, the Company recognized revenue of $ 8.4 million, $ 8.5 million, $ 9.3 million and $ 9.5 million, respectively, from performance obligations that were satisfied in previous reporting periods.

During the three months ended October 2, 2021 and October 3, 2020 and the nine months ended October 2, 2021 and October 3, 2020, the Company recognized revenue of $ 10.0 million, $ 11.0 million, $ 10.9 million and $ 10.5 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

Nine Months Ended

Direct customers

3 unchanged sentences

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.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

2 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)

Stock-Based Compensation (Continued)

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenues

1 unchanged sentence

Selling, general and administrative

Income tax benefit

The Company had approximately $ 110.8 million of total unrecognized compensation costs related to equity grants under the 2009 Plan as of July 3, 2021 that are expected to be recognized over a weighted-average period of approximately 2.4 years.

Income tax (expense) benefit

The Company had approximately $ 90.1 million of total unrecognized compensation cost related to equity grants under the 2009 Plan as of October 2, 2021 that is expected to be recognized over a weighted-average period of approximately 2.3 years.

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

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 $ 1.2 million and $( 4.2 ) million for the three months ended July 3, 2021 and July 4, 2020, resulting in effective tax rates of ( 6.7 )% and 10.5 %, respectively.

Income tax expense (benefit) was $ 3.2 million and $( 8.4 ) million for the six months ended July 3, 2021 and July 4, 2020, resulting in effective tax rates of ( 7.8 )% and 11.1 %, respectively.

The higher provision for income taxes for the three and six months ended July 3, 2021 was primarily due to the adoption of ASU 2019-12 Simplifying the Accounting for Income Taxes, as of the beginning of the current fiscal year and its requirement to reallocate income tax benefit from continuing operations to discontinued operations.

Income tax expense (benefit) was $ 9.4 million and $( 3.5 ) million for the three months ended October 2, 2021 and October 3, 2020, resulting in effective tax rates of ( 90.7 )% and 11.5 %, respectively.

Income tax expense (benefit) was $ 12.5 million and $( 11.9 ) million for the nine months ended October 2, 2021 and October 3, 2020, resulting in effective tax rates of ( 24.7 )% and 11.2 %, respectively.

The higher provision for income taxes for the three and nine months ended October 2, 2021 was primarily due to the adoption of ASU 2019-12 Simplifying the Accounting for Income Taxes as of the beginning of the current fiscal year and its requirement to reallocate income tax benefit from continuing operations to discontinued operations.

Under ASU 2019-12, which is being applied prospectively from the date of adoption, the income tax benefit of a loss from continuing operations should be reallocated to discontinued operations if the Company would be unable to benefit from the loss without considering the income from discontinued operations.

As such, the income tax benefit of $ 9.6 million associated with continuing operations for the three and six months ended July 3, 2021 was reallocated to discontinued operations.

As such, an income tax benefit of $ 1.3 million and $ 10.9 million associated with continuing operations for the three and nine months ended October 2, 2021, respectively, was reallocated to discontinued operations.

Prior to ASU 2019-12, if the Company reported a loss from continuing operations and income from discontinued operations, income from discontinued operations would be considered in determining the income tax benefit allocated to continuing operations.

Additionally, for the three and nine months ended October 2, 2021, there was an increase in the beginning of year valuation allowance on state attribute carryforwards as a result of changes in state tax estimates, primarily due to the divestiture of the infrastructure and automotive business to Skyworks Solutions.

An estimated tax on the gain from the divestiture of the infrastructure and automotive business to Skyworks Solutions of $ 346.9 million was recorded in discontinued operations for the period, as well as additional tax benefit associated with discontinued operations of $( 13.7 ) million for the three-month period ended October 2, 2021.

As of October 2, 2021, the Company had recorded $ 328.0 million of income taxes payable in connection with the gain from the divestiture, of which $ 320.1 million was included in other current liabilities in the Condensed Consolidated Balance Sheets.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Uncertain Tax Positions

As of July 3, 2021, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 3.4 million, of which $ 2.7 million would affect the effective tax rate if recognized.

During the six months ended July 3, 2021, the Company did not release any of its unrecognized tax benefits.

As of October 2, 2021, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 3.7 million, all of which would affect the effective tax rate if recognized.

During the nine months ended October 2, 2021, the Company did not release any unrecognized tax benefits.

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

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Income Taxes (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 - 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.

7 unchanged sentences

The Company is not currently under audit in any major taxing jurisdiction.

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 (the “Agreement”) pursuant to which Skyworks Solutions, Inc.

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 sale was completed pursuant to the terms of the Agreement on July 26, 2021.

The Company expects to record a gain on sale, net of income tax, of approximately $ 2.1 billion in its third fiscal quarter of 2021 upon the close of the sale.

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

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