What changed in this filing

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Item 1. Financial Statements

2022-04-27 compared with 2021-10-27 · 136 added, 194 removed, 350 unchanged (49% of the section changed)

8 unchanged sentences

Prepaid expenses and other current assets

Current assets of discontinued operations

Total current assets

2 unchanged sentences

Other assets, net

Non-current assets of discontinued operations

Liabilities and Stockholders’ Equity

4 unchanged sentences

Other current liabilities

Current liabilities of discontinued operations

Total current liabilities

1 unchanged sentence

Other non-current liabilities

Non-current liabilities of discontinued operations

Total liabilities

6 unchanged sentences

250,000 shares authorized;

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

Additional paid-in capital

37,204 and 38,481 shares issued and outstanding at April 2, 2022 and January 1, 2022, respectively

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenues

3 unchanged sentences

Operating expenses

Operating loss

Operating income (loss)

Other income (expense):

1 unchanged sentence

Interest expense

Loss from continuing operations before income taxes

Provision (benefit) for income taxes

Loss from continuing operations

Income (loss) from continuing operations before income taxes

Provision for income taxes

Equity-method earnings

Income (loss) from continuing operations

Income from discontinued operations, net of income taxes

9 unchanged sentences

Three Months Ended

Nine Months Ended

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) losses included in net income

1 unchanged sentence

Unrealized losses arising during the period

Reclassification for (gains) losses included in net income

Other comprehensive income (loss), before tax

Reclassification for gains 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 2, 2021

Three Months Ended April 2, 2022

Income (Loss)

Balance as of July 3, 2021

Balance as of January 1, 2022

Cumulative effect of adoption of accounting standard

Other comprehensive loss

2 unchanged sentences

Stock-based compensation

Balance as of October 2, 2021

Accumulated Other

Comprehensive

Stockholders’

Three Months Ended October 3, 2020

Income (Loss)

Balance as of July 4, 2020

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Stock-based compensation

Convertible debt activity

Balance as of October 3, 2020

Balance as of April 2, 2022

Accumulated Other

1 unchanged sentence

Stockholders’

Nine Months Ended October 2, 2021

Three Months Ended April 3, 2021

Income (Loss)

2 unchanged sentences

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Convertible debt activity

Balance as of October 2, 2021

Accumulated Other

Comprehensive

Stockholders’

Nine Months Ended October 3, 2020

Income (Loss)

Balance as of December 28, 2019

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

Balance as of April 3, 2021

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

2 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended

Operating Activities

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

continuing operations:

Adjustments to reconcile net income to cash provided by (used in) operating activities of continuing operations:

Income from discontinued operations, net of income taxes

( 2,183,884 )

Depreciation of property and equipment

Amortization of intangible assets and other assets

Amortization of other intangible assets

Amortization of debt discount and debt issuance costs

1 unchanged sentence

Stock-based compensation expense

Equity-method earnings

Deferred income taxes

6 unchanged sentences

Other non-current liabilities

Net cash provided by operating activities of continuing operations

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

Investing Activities

Purchases of marketable securities

( 1,212,572 )

Sales and maturities of marketable securities

Sales of marketable securities

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 of continuing operations

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

Financing Activities

Proceeds from issuance of debt

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 of continuing operations

Net cash used in financing activities of continuing operations

Discontinued Operations

1 unchanged sentence

Investing activities

Net cash provided by discontinued operations

Increase in cash and cash equivalents

Net cash provided by (used in) discontinued operations

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 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.

and its subsidiaries (collectively, the “Company”) at April 2, 2022 and January 1, 2022, the condensed consolidated results of its operations for the three months ended April 2, 2022 and April 3, 2021, the Condensed Consolidated Statements of Comprehensive Income for the three months ended April 2, 2022 and April 3, 2021, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended April 2, 2022 and April 3, 2021, and the Condensed Consolidated Statements of Cash Flows for the three months ended April 2, 2022 and April 3, 2021.

The Condensed Consolidated Balance Sheet as of January 1, 2022 was derived from the Company’s audited Consolidated Financial Statements.

All intercompany balances and transactions have been eliminated in consolidation.

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 condensed consolidated results of operations for the three months ended April 2, 2022 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.

2 unchanged sentences

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

Fiscal 2021 will have 52 weeks.

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

Fiscal 2022 will have 52 weeks and fiscal 2021 had 52 weeks.

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

1 unchanged sentence

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.

generally accepted accounting principles (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.

18 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) .

This ASU simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity and requires the use of the if-converted method for calculating diluted earnings per share.

The ASU removes separation models for convertible debt with a cash conversion feature.

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 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 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.

The Company will continue to evaluate the effect that the adoption of this ASU will have on its financial statements.

Adoption of New Accounting Standard

Convertible Instruments

The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40 , on January 2, 2022, the first day of its fiscal year ending December 31, 2022.

The Company elected the modified retrospective transition method of adoption at the beginning of the period of adoption through a cumulative-effect adjustment.

Prior periods have not been adjusted.

The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item

Current portion of convertible debt, net

Other non-current liabilities

Retained earnings

The primary impact of the Company’s adoption of ASU 2020-06 was to increase the carrying value of its convertible debt, representing the unamortized debt discount, and reduce deferred tax liabilities related to convertible debt.

The adoption reduced reported interest expense recorded in connection with convertible debt, which increased basic earnings per share and diluted earnings per share by $ 0.11 and $ 0.10 , respectively, for the three months ended April 2, 2022.

Discontinued Operations

On April 22, 2021, the Company entered into an Asset Purchase 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.

On April 22, 2021, the Company entered into an Asset Purchase Agreement to sell its infrastructure and automotive business to Skyworks Solutions, Inc.

for $ 2.75 billion in cash.

The transaction closed on July 26, 2021.

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 income (in thousands):

The following table presents the financial results of the infrastructure and automotive business (the “discontinued operations”) in the Company’s Condensed Consolidated Statements of Income (in thousands, except per share data):

Three Months Ended

Nine Months Ended

Costs of revenues and operating expenses

Gain on sale of discontinued operations

Costs of revenues

Operating expenses

Income from discontinued operations before income taxes

Provision for income taxes

Provision (benefit) for income taxes

Income from discontinued operations

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

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

Prepaid expenses and other current assets

Other current liabilities

Other non-current liabilities

Total liabilities

Continuing Involvement

In connection with the closing of the sale, the Company entered into certain ancillary agreements with Skyworks, including a Transition Services Agreement ("TSA").

Through the TSA, the Company will sublease certain premises to Skyworks and provide various temporary support services for three to eighteen months , depending on the service provided.

In connection with the closing of the sale, the Company entered into certain ancillary agreements with Skyworks, including a Transition Services Agreement (“TSA”).

Through the TSA, the Company has subleased certain premises to Skyworks and will provide or provides various temporary support services for three to eighteen months , depending on the service provided.

Although the services provided under the TSA will generate continuing cash flows between the Company and Skyworks for the duration of the TSA, the amounts are not expected to be material to the ongoing operations of either entity.

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.

Fees received by the Company under the TSA were approximately $ 1.9 million for the three months ended April 2, 2022.

Earnings (Loss) Per Share

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

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

Three Months Ended

Nine Months Ended

Loss from continuing operations

Shares used in computing basic loss per share

Income (loss) from continuing operations

Shares used in computing basic income (loss) per share

Effect of dilutive securities:

Stock-based awards and convertible debt

Shares used in computing diluted loss per share

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)

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.

Accordingly, shares issuable upon conversion of the principal amount using the treasury stock method have been excluded from the calculation of diluted earnings per share.

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 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.

Convertible debt and stock-based awards

Shares used in computing diluted income (loss) per share

Income (loss) per share:

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

For the three months ended April 2, 2022 and April 3, 2021, approximately 1.0 million and 1.1 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.

3 unchanged sentences

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

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.

Level 2 – Inputs other than Level 1 that are directly or indirectly observable, such as quoted prices for similar assets or liabilities and quoted prices in less active markets.

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.

4 unchanged sentences

Fair Value Measurements

at October 2, 2021 Using

at April 2, 2022 Using

Quoted Prices in

34 unchanged sentences

quoted market prices for similar instruments in active markets;

quoted prices in less active markets;

or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

1 unchanged sentence

The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities.

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

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

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 (loss) in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at October 2, 2021 (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 loss in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at April 2, 2022 (in thousands):

Due in one year or less

5 unchanged sentences

12 Months or Greater

As of October 2, 2021

As of April 2, 2022

Government debt securities

7 unchanged sentences

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 gross unrealized losses as of April 2, 2022 and January 1, 2022 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)

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.

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 2, 2022, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At April 2, 2022 and January 1, 2022, 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

April 2, 2022

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 nine months ended October 2, 2021 (in thousands):

The following summarizes the activity in Level 3 financial instruments for the three months ended April 2, 2022 (in thousands):

Auction Rate Securities

Beginning balance

Loss included in other comprehensive income (loss)

Balance at October 2, 2021

Loss included in other comprehensive loss

Balance at April 2, 2022

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 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.

As of April 2, 2022 and January 1, 2022, the fair value of the notes was $ 728.2 million and $ 944.3 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 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.

As of April 2, 2022, the contracts had maturities of one to nine months and an aggregate notional value of $ 47.6 million.

Gains and losses 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.

5 unchanged sentences

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

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.

As of April 2, 2022, the Company held two foreign currency forward contracts denominated in Indian Rupees with an aggregate notional value of $ 9.1 million and two foreign currency forward contracts denominated in Hungarian Forint with an aggregate notional value of $ 3.8 million.

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

Supplemental Information

5 unchanged sentences

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

On April 28, 2020, the Company acquired the Wi-Fi® and Bluetooth® business of Redpine Signals for $ 316.8 million in cash.

This strategic acquisition accelerated the Company’s roadmap for Wi-Fi and Bluetooth silicon and software solutions, while further scaling the Company’s engineering team.

Lease income from operating leases was $ 1.9 million and $ 0.8 million during the three months ended April 2, 2022 and April 3, 2021, respectively.

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”).

On June 1, 2020, the Company completed a private placement 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 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 $ 121.98 per share.

The 2025 Notes are convertible at a conversion rate of 8.1980 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 $ 121.98 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;

3 unchanged sentences

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 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.

As of January 1, 2022, upon conversion, the 2025 Notes could be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

On January 2, 2022, the Company irrevocably elected cash settlement for the principal amount of the 2025 Notes.

The Company intends to settle any excess value in shares in the event of a conversion.

The Sales Price Trigger condition was met on January 1, 2022, and as a result, holders had the option to convert their 2025 Notes at any time during the calendar quarter ended March 31, 2022.

The Sales Price Trigger condition was not met during the three months ended April 2, 2022.

Accordingly, the net carrying amount of the 2025 Notes was reclassified into non-current liabilities.

The principal balance of the 2025 Notes was separated into liability and equity components, and recorded initially at fair value.

The excess of the principal amount of the liability component over its carrying amount represented the debt discount, which was amortized to interest expense over the term of the 2025 Notes using the effective interest method.

With the Company’s adoption of ASU 2020-06 in fiscal 2022, the principal balance of the 2025 Notes is no longer separated between liability and equity components.

This resulted in an increase to the carrying value of its convertible debt, representing the unamortized debt discount as of January 2, 2022, with an offsetting reduction in stockholders’ equity.

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

Upon the adoption of ASU 2020-06, the equity component was reclassified to liabilities and remeasured to reflect cumulative amortization since the issuance of the 2025 Notes.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

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.

The carrying amount of the 2025 Notes consisted of the following (in thousands):

5 unchanged sentences

Net carrying amount

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 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.

The liability component of the 2025 Notes is recorded in convertible debt on the Consolidated Balance Sheet.

Prior to the Company’s adoption of ASU 2020-06, the equity component of the 2025 Notes was recorded in stockholders’ equity.

The effective interest rate for the liability component was 5.336 %.

As of April 2, 2022, the remaining period over which the debt issuance costs will be amortized was 3.2 years.

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

Three Months Ended

Nine Months Ended

Contractual interest expense

8 unchanged sentences

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.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (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 October 2, 2021, the Company was in compliance with all covenants of the credit facility.

As of April 2, 2022, 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.

As of April 2, 2022, no amounts were outstanding on the credit facility.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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.

The Company groups its products as Industrial & Commercial or Home & Life based on the target markets they address.

The following represents revenue by product category (in thousands):

Three Months Ended

Industrial & Commercial

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 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.

During the three months ended April 2, 2022 and April 3, 2021, the Company recognized revenue of $ 21.5 million and $ 6.8 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

Direct customers

Stock-Based Compensation

In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 Purchase Plan”).

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

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)

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

Cost of revenues

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Selling, general and administrative

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.

Income tax benefit

Share-based compensation – continuing operations

Share-based compensation – discontinued operations, net

The Company had approximately $ 87.3 million of total unrecognized compensation cost related to equity grants as of April 2, 2022 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 $ 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, 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)

Provision 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 was $ 11.7 million and $ 2.0 million for the three months ended April 2, 2022 and April 3, 2021, resulting in effective tax rates of 33.8 % and ( 8.6 )%, respectively.

The increase in the effective tax rate for the three months ended April 2, 2022 is primarily due to the application of ASU 2019-12, Simplifying the Accounting for Income Taxes, to the three months ended April 3, 2021 and the required adoption of new U.S.

tax rules regarding expensing of research and experimental costs in the period ended April 2, 2022.

Under ASU 2019-12, the income tax benefit of a loss from continuing operations should be recognized in discontinued operations if the Company would be unable to benefit from the loss without considering the income from discontinued operations.

As such, tax benefits associated with losses incurred for the period ended April 3, 2021 were recognized in discontinued operations.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

Under the Act, research and experimental expenditures incurred for tax years beginning after December 31, 2021 must be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted.

The Company has elected to treat global intangible low-taxed income (GILTI) as a period cost so the capitalization of research and experimental costs in GILTI increases the Company’s provision for income taxes.

Uncertain Tax Positions

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.

As of April 2, 2022, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 4.1 million, all of which would affect the effective tax rate if recognized.

During the three months ended April 2, 2022, the Company did not release any 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 - 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.

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

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

The Company believes it is reasonably possible that its gross unrecognized tax benefits will decrease by approximately $ 0.5 million, inclusive of interest, in the next 12 months due to the lapse of the statute of limitations.

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