What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-27 compared with 2021-10-27 · 97 added, 103 removed, 200 unchanged (50% of the section changed)

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Our fiscal year-end financial reporting periods are 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.

Our third quarter of fiscal 2021 ended October 2, 2021.

Our third quarter of fiscal 2020 ended October 3, 2020.

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

Our first quarter of fiscal 2022 ended April 2, 2022.

Our first quarter of fiscal 2021 ended April 3, 2021.

Impact of COVID-19

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An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.

We are a leading provider of silicon, software and solutions for a smarter, more connected world.

Our award-winning technologies are shaping the future of the Internet of Things (IoT), industrial automation and consumer markets.

Our world-class engineering team creates products focused on performance, energy savings, connectivity and simplicity.

Our primary semiconductor products are mixed-signal integrated circuits (ICs), which are electronic components that convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can process.

We are a leader in secure, intelligent wireless technology for a more connected world.

Our integrated hardware and software platform, intuitive development tools, industry leading ecosystem and robust support enable customers in building advanced industrial, commercial, home and life applications.

We make it easy for developers to solve complex wireless challenges throughout the product lifecycle and get to market quickly with innovative solutions that transform industries, grow economies and improve lives.

We provide analog-intensive, mixed-signal solutions for use in a variety of electronic products in a broad range of applications for the Internet of Things (IoT) including connected home and security, industrial automation and control, smart metering, smart lighting, commercial building automation, consumer electronics, asset tracking and medical instrumentation.

We group our products as Industrial & Commercial or Home & Life based on the target markets they address.

As a fabless semiconductor company, we rely on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, to manufacture the silicon wafers that reflect our IC designs.

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Testing performed by such third parties facilitates faster delivery of products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower costs and increased flexibility of test capacity.

Our expertise in analog-intensive, high-performance, mixed-signal ICs and software enables us to develop highly differentiated solutions that address multiple markets.

Our Internet of Things products include wireless connectivity, microcontroller (MCU) and sensor products.

The sales cycle for our ICs can be as long as 12 months or more.

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Discontinued Operations

On April 22, 2021, we entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising our 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 results of operations of the sold component have been presented in the accompanying condensed consolidated financial statements as discontinued operations.

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

for $2.75 billion in cash.

The sale was completed on July 26, 2021.

The prior year comparable period results of operations of the sold component have been presented in the accompanying condensed consolidated financial statements as discontinued operations and, therefore, are excluded from the following discussion of the results of our continuing operations.

Current Period Highlights of Continuing Operations

Revenues increased $52.1 million in the recent quarter compared to the third quarter of fiscal 2020 primarily due to increased demand for our products.

Revenues increased $75.9 million in the recent quarter compared to the first quarter of fiscal 2021 due to increased revenues from our Industrial & Commercial products and our Home & Life products.

Gross profit increased $64.0 million during the same period due primarily to increased product sales.

Gross margin increased to 59.2% in the recent quarter compared to 56.9% in the third quarter of fiscal 2020 due primarily to variations in product mix.

Operating expenses increased by $19.7 million in the recent quarter compared to the third quarter of fiscal 2020 due primarily to increased personnel-related expenses and new product introduction costs.

Operating loss in the recent quarter was $9.3 million compared to $23.6 million in the third quarter of fiscal 2020.

We ended the third quarter with $2.7 billion in cash, cash equivalents and short-term investments.

Net cash provided by operating activities was $48.2 million during the recent nine-month period.

Accounts receivable were $72.6 million at October 2, 2021, representing 35 days sales outstanding (DSO).

Inventory was $59.1 million at October 2, 2021, representing 71 days of inventory (DOI).

In the third quarter, we completed a tender offer in which we repurchased 4.0 million shares of our common stock for an aggregate cost of $640.7 million.

Through acquisitions and internal development efforts, we have continued to diversify our portfolio and introduce new products and solutions with added functionality and integration.

In the first nine months of fiscal 2021, we introduced Custom Part Manufacturing Service (CPMS) to support IoT companies with the implementation of ‘Zero Trust’ security architectures to meet emerging cybersecurity standards;

the Unify Software Development Kit (SDK), which provides the common building blocks for connectivity across IoT ecosystems;

new sub-1-GHz SoCs delivering wireless solutions that combine long-range RF and energy efficiency with certified Arm® PSA Level 3 security;

a fully integrated, certified Wi-SUN® solution simplifying Low Power Wide Area Network (LPWAN) deployment for smart cities;

wireless solutions for development of Matter end products that support Thread, Wi-Fi, and Bluetooth protocols;

and a new 32-bit MCU on our award-winning xG22 platform for IoT edge applications.

Gross margin increased to 66.6% in the recent quarter compared to 58.1% in the first quarter of fiscal 2021 due to variations in product mix and increases in the price of our products.

Operating expenses increased by $15.7 million in the recent quarter compared to the first quarter of fiscal 2021 due primarily to increased personnel-related expenses.

Operating income (loss) in the recent quarter was $33.6 million compared to $(14.7) million in the first quarter of fiscal 2021.

We ended the first quarter with $1.9 billion in cash, cash equivalents and short-term investments.

Net cash provided by operating activities was $85.2 million during the recent three-month period.

Accounts receivable were $79.2 million at April 2, 2022, representing 30 days sales outstanding (DSO).

Inventory was $55.5 million at April 2, 2022, representing 64 days of inventory (DOI).

In the first quarter, we acquired 1.4 million shares of our common stock for $163.8 million.

Through acquisitions and internal development efforts, we have continued to diversify our product portfolio and introduce new products and solutions with added functionality and integration.

In the first three months of fiscal 2022, we introduced a family of 2.4 GHz wireless SoCs for Bluetooth® and multi-protocol operations with a built-in AI and Machine Learning (ML) accelerator, improving performance for AI and ML applications on battery-powered edge devices.

We plan to continue introducing products that increase the content we provide for existing applications, thereby enabling us to serve markets we do not currently address and expand our total available market opportunity.

During the nine months ended October 2, 2021, we had no customer that represented more than 10% of our revenues.

During the three months ended April 2, 2022, we had no customer that represented more than 10% of our revenues.

In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and contract manufacturers.

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Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer.

Three of our distributors who sell to our customers, Arrow Electronics, Edom Technology and Sekorm, each represented more than 10% of our revenues during the nine months ended October 2, 2021.

The percentage of our revenues derived from outside of the United States was 87% during the nine months ended October 2, 2021.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the three months ended April 2, 2022.

The percentage of our revenues derived from outside of the United States was 84% during the three months ended April 2, 2022.

All of our revenues to date have been denominated in U.S.

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Interest Income and Other, Net.

Interest income and other, net reflects interest earned on our cash, cash equivalents and investment balances, foreign currency remeasurement adjustments, income or loss on equity method investments, and other non-operating income and expenses.

Interest income and other, net reflects interest earned on our cash, cash equivalents and investment balances, foreign currency remeasurement adjustments, and other non-operating income and expenses.

Interest Expense.

Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes and credit facility.

Interest expense on our convertible senior notes includes contractual interest, amortization of the debt discount and amortization of debt issuance costs.

Provision (Benefit) for Income Taxes.

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.

Interest expense on our convertible senior notes includes contractual interest, amortization of debt issuance costs, and for periods prior to fiscal 2022, amortization of the debt discount.

Provision for Income Taxes.

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.

Equity-method Earnings.

Equity-method earnings represents income or loss on our equity-method investment.

Income from discontinued operations, net of income taxes.

Income from discontinued operations, net of income taxes includes the results of operations of our former infrastructure and automotive business.

The following table sets forth our Condensed Consolidated Statements of Income data as a percentage of revenues for the periods indicated:

Three Months Ended

Nine Months Ended

Cost of revenues

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Operating expenses

Operating loss

Operating income (loss)

Other income (expense):

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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

Three Months Ended

Nine Months Ended

(in millions)

The change in revenues in the recent three and nine month periods was due to increased demand for our IoT products.

Unit volumes of our products increased by 31.9% during the three months ended October 2, 2021 while average selling prices increased by 4.8% compared to the three months ended October 3, 2020.

Unit volumes of our products increased by 40.9% during the three months ended October 2, 2021 while average selling prices decreased by 0.2% compared to the nine months ended October 3, 2020.

Industrial & Commercial

The increase in revenues in the recent three month period was due to increased revenues of $48.0 million from our Industrial & Commercial products and $27.9 million from our Home & Life products.

Unit volumes of our products increased slightly during the three months ended April 2, 2022 while average selling prices increased substantially compared to the three months ended April 3, 2021.

The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, pricing decisions and other factors.

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Three Months Ended

Nine Months Ended

(in millions)

Gross profit increased during the recent three and nine month periods due primarily to increased product sales.

Gross margin increased during the recent three-month period primarily due to variations in product mix.

We may experience variation in the average selling prices of certain of our products.

Gross profit increased during the recent three-month period due primarily to increased product sales.

The change in gross profit in the recent period was due to increases in gross profit for our Industrial & Commercial products and our Home & Life products.

Gross margin increased primarily due to variations in product mix and increases in the price of our products.

Increased product demand and production capacity constraints have increased the selling price and costs of our products, and has resulted in period-to-period fluctuations in our gross margin.

We expect the prices we pay for inventory to increase in future periods and that this will reduce our gross margins.

We may experience variations in the average selling prices of certain of our products.

Increases in average selling prices may occur during periods of increased demand, but such demand may be short-lived and could be accompanied by higher product costs.

Declines in average selling prices create downward pressure on gross margin and may be offset to the extent we are able to introduce higher margin new products and gain market share with our products;

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Three Months Ended

Nine Months Ended

(in millions)

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Percent of revenue

The increase in research and development expense in the recent three-month period was primarily due to an increase of $7.8 million for personnel-related expenses and $4.7 million for new product development costs.

The increase in research and development expense in the recent nine-month period was primarily due to an increase of $13.3 million for personnel-related expenses, $8.9 million for new product development costs and $1.4 million for the amortization of intangible assets.

We expect that research and development expense will remain relatively stable in absolute dollars in the fourth quarter of fiscal 2021.

The increase in research and development expense in the recent three-month period was primarily due to an increase of $12.7 million for personnel-related expenses.

The decrease in research and development expense as a percent of revenues in the current period was due to our increased revenues.

We expect that research and development expense will increase in absolute dollars in the second quarter of fiscal 2022.

Selling, General and Administrative

Three Months Ended

Nine Months Ended

(in millions)

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The increase in selling, general and administrative expense in the recent three-month period was primarily due to an increase of $2.1 million for personnel-related expenses.

The increase in selling, general and administrative expense in the recent nine-month period was primarily due to an increase of $7.8 million for personnel-related expenses offset in part by a decrease of $1.5 million in acquisition-related costs.

We expect that selling, general and administrative expense will increase in absolute dollars in the fourth quarter of fiscal 2021.

The decrease in selling, general and administrative expense as a percent of revenues in the current period was due to our increased revenues.

We expect that selling, general and administrative expense will increase in absolute dollars in the second quarter of fiscal 2022.

Interest Income and Other, Net

Interest income and other, net for the three and nine months ended October 2, 2021 was $5.5 million and $9.0 million, respectively, compared to $2.0 million and $8.6 million for the three and nine months ended October 3, 2020, respectively.

The increase in interest income and other, net in the recent three month period was primarily due to increased income earned in connection with an equity investment.

Interest income and other, net for the three months ended April 2, 2022 was $1.5 million compared to $1.1 million for the three months ended April 3, 2021.

Interest Expense

Interest expense was generally consistent for the three and nine months ended October 2, 2021 and was $6.6 million and $24.4 million, respectively, compared to $8.6 million and $25.9 million for the three and nine months ended October 3, 2020, respectively.

Provision (Benefit) for Income Taxes

Interest expense for the three months ended April 2, 2022 was $1.7 million compared to $11.3 million for the three months ended April 3, 2021.

The decrease in interest expense in the recent three-month period was primarily due to a decrease of $5.9 million in amortization of debt discount as a result of our adoption of ASU 2020-06 in the current period and a loss of $3.4 million recorded on the early extinguishment of the remaining 2022 Notes in the prior period.

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

Provision for Income Taxes

Three Months Ended

Nine Months Ended

(in millions)

Provision (benefit) for income taxes

Provision for income taxes

Effective tax rate

The increase in the provision for income taxes for the three and nine months ended October 2, 2021 as compared to the prior periods was primarily due to the reallocation of income tax benefit from continuing operations to discontinued operations under ASU 2019-12 and 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.

Additionally, 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.

The increase in the effective tax rate for the three months ended April 2, 2022 is primarily due to the recognition of certain tax benefits for the three months ended April 3, 2021 in discontinued operations under ASU 2019-12 and the required adoption of new U.S.

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

Equity-method Earnings

Equity-method earnings for the three months ended April 2, 2022 were $1.2 million compared to $1.7 million for the three months ended April 3, 2021.

Income from discontinued operations, net of income taxes

Three Months Ended

Nine Months Ended

(in millions)

Income from discontinued operations, net of income taxes

The increase in income from discontinued operations, net of income taxes in the recent three and nine month periods was primarily due to a gain on sale of $2.1 billion, net of tax, in the current periods.

See Note 2, Discontinued Operations , to the Condensed Consolidated Financial Statements for additional information.

There was no income from prior year discontinued operations in the current period.

Income from discontinued operations in the prior period included revenue of $97.7 million, income before income taxes of $36.9 million and an income tax benefit of $1.8 million.

Business Outlook

The following represents our business outlook for the fourth quarter of fiscal 2021.

The following represents our business outlook for the second quarter of fiscal 2022.

Income Statement Item

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Effective tax rate

Diluted earnings (loss) per share

Diluted earnings per share

$0.37 to $0.47

Liquidity and Capital Resources

Our principal sources of liquidity as of October 2, 2021 consisted of $2.7 billion in cash, cash equivalents and short-term investments, of which approximately $1.3 billion was held by our U.S.

Our principal sources of liquidity as of April 2, 2022 consisted of $1.9 billion in cash, cash equivalents and short-term investments, of which approximately $1.2 billion was held by our U.S.

The remaining balance was held by our foreign subsidiaries.

Our cash equivalents and short-term investments consisted of government debt securities, which include agency bonds, municipal bonds, variable-rate demand notes, U.S.

Treasury bills and U.S.

Our cash equivalents and short-term investments consisted of government debt securities, which include agency bonds, agency discount notes, municipal bonds and U.S.

government securities;

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Operating Activities

Net cash provided by operating activities was $48.2 million during the nine months ended October 2, 2021, compared to net cash provided of $20.4 million during the nine months ended October 3, 2020.

Operating cash flows during the nine months ended October 2, 2021 reflect our net income of $2.1 billion, adjustments of $2.1 billion for income from discontinued operations, depreciation, amortization, stock-based compensation and deferred income taxes, and a net cash outflow of $10.3 million due to changes in our operating assets and liabilities.

Accounts receivable decreased to $72.6 million at October 2, 2021 from $95.2 million at January 2, 2021.

The decrease in accounts receivable resulted primarily from lower billings as a result of the divestiture of our infrastructure and automotive business as well as normal variations in the timing of collections and billings.

Our average DSO was 35 days at October 2, 2021 and January 2, 2021.

Inventory increased to $59.1 million at October 2, 2021 from $47.9 million at January 2, 2021.

The increase in inventory was primarily due to increased revenues in the recent three-month period.

Net cash provided by operating activities was $85.2 million during the three months ended April 2, 2022, compared to net cash used of $20.3 million during the three months ended April 3, 2021.

Operating cash flows during the three months ended April 2, 2022 reflect our net income of $22.9 million, adjustments of $23.5 million for depreciation, amortization, stock-based compensation, equity-method earnings and deferred income taxes, and a net cash inflow of $38.8 million due to changes in our operating assets and liabilities.

Accounts receivable decreased to $79.2 million at April 2, 2022 from $98.3 million at January 1, 2022.

The decrease in accounts receivable resulted primarily from normal variations in the timing of collections and billings.

Our DSO was 30 days at April 2, 2022 and 42 days at January 1, 2022.

Inventory increased to $55.5 million at April 2, 2022 from $49.3 million at January 1, 2022.

Our inventory levels will vary based on the availability of supply, and to a lesser extent, the impact of variations between forecasted demand used for purchasing inventory and actual demand.

Our DOI was 71 days at October 2, 2021 and 70 days at January 2, 2021.

Our DOI was 64 days at April 2, 2022 and 55 days at January 1, 2022.

Investing Activities

Net cash used in investing activities was $864.2 million during the nine months ended October 2, 2021, compared to net cash used of $322.3 million during the nine months ended October 3, 2020.

The increase in cash outflows was principally due to an increase in cash outflows of $853.2 million from net purchases and sales of marketable securities in the current period, offset by a cash payment of $316.8 million for the acquisition of the Wi-Fi and Bluetooth business of Redpine Signals in the prior period.

Net cash used in investing activities was $217.4 million during the three months ended April 2, 2022, compared to net cash provided of $146.9 million during the three months ended April 3, 2021.

The increase in cash outflows was principally due to an increase in cash outflows of $366.0 million from net purchases, sales and maturities of marketable securities in the current period.

Financing Activities

Net cash used in financing activities was $841.7 million during the nine months ended October 2, 2021, compared to net cash provided of $200.6 million during the nine months ended October 3, 2020.

The increase in cash outflows was principally due to $845.0 million in proceeds from the issuance of debt in the prior period and an increase of $672.1 million for repurchases of our common stock in the current period, offset by a decrease of $478.2 million in payments on debt in the current period.

During the nine months ended October 2, 2021, we completed a tender offer in which we repurchased 4.0 million shares for an aggregate cost of $640.7 million.

Net cash used in financing activities was $166.5 million during the three months ended April 2, 2022, compared to net cash used of $158.4 million during the three months ended April 3, 2021.

The increase in cash outflows was principally due to an increase of $157.8 million for repurchases of our common stock in the current period, offset by $140.6 million in payments on debt in the prior period.

Discontinued Operations

Net cash provided by discontinued operations was $2.8 billion during the nine months ended October 2, 2021, compared to net cash provided of $104.5 million during the nine months ended October 3, 2020.

The increase in cash inflows was principally due to $2.75 billion in proceeds from the sale of our infrastructure and automotive business.

As of October 2, 2021, our debt included $535 million principal amount of convertible senior notes (the “2025 Notes”).

Net cash used in discontinued operations was $10.0 million during the three months ended April 2, 2022, compared to net cash provided of $34.4 million during the three months ended April 3, 2021.

The decrease in cash inflows was principally due to a decrease of $38.7 million in income from discontinued operations, net of income taxes, and a payment of $10.0 million for income taxes on the gain on sale in the current period.

As of April 2, 2022, our debt included $535 million principal amount of convertible senior notes (the “2025 Notes”).

We also had an undrawn $400 million revolving credit facility.

We have an option to increase the size of the borrowing capacity of the revolving credit facility 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 to exceed 3.25 to 1.00, subject to certain conditions.

On January 6, 2021, we issued a notice of redemption for the remaining 2022 convertible senior notes (the “2022 Notes”).

During the three months ended April 3, 2021, we paid $140.6 million in cash and issued 528,022 shares of common stock in connection with the redemption of the remaining 2022 Notes.

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

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

Capital Requirements

Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities.

We believe our existing cash, cash equivalents, investments and credit under our Credit Facility are sufficient to meet our capital requirements through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time.

We believe our existing cash, cash equivalents, investments, credit under our credit facility, and cash generated from operations are sufficient to meet our short-term and long-term capital requirements, although we could be required, or could elect, to seek additional funding prior to that time.

We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing.

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In order to achieve this core principle, we apply a five-step process.

As part of this process, we analyze the performance obligations in a customer contract and estimate the consideration we expect to receive.

As part of this process, we analyze the performance obligations in a customer contract and estimate the variable consideration we expect to receive.

The evaluation of performance obligations requires that we identify the promised goods and services in the contract.

For contracts that contain more than one promised good and service, we then must determine whether the promises are capable of being distinct and if they are separately identifiable from other promises in the contract.

Additionally, for our sales to distributors, we must estimate the impact that price adjustments and rights of return will have on consideration.

Variable consideration primarily includes sales made to distributors under agreements allowing certain rights of return, referred to as stock rotation, and credits issued to the distributor due to price protection.

We estimate variable consideration at the most likely amount to which we expect to be entitled.

We make these estimates based on available information, including recent sales activity and pricing data.

We apply a constraint to our variable consideration estimate which considers both the likelihood of a return and the amount of a potential price concession.

If our evaluation of performance obligations is incorrect, we may recognize revenue sooner or later than is appropriate.

If our estimates of consideration are inaccurate, we may recognize too much or too little revenue in a period.

If our estimates of variable consideration are inaccurate, we may recognize too much or too little revenue in a period.

We may adjust assumptions used to estimate consideration periodically based on analysis of prior estimates.

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This process involves calculating the actual current tax liability together with assessing temporary differences in recognition of income (loss) for tax and accounting purposes.

These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet.

These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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We believe adequate provisions for income taxes have been made for all periods.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is provided in Note 1, Significant Accounting Policies , to the Condensed Consolidated Financial Statements.

Such information is incorporated by reference herein.

Quantitative and Qualitative Disclosures about Market Risk

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interest rates.

Our investment portfolio holdings as October 2, 2021 yielded less than 100 basis points.

A decline in yield to zero basis points on our investment portfolio holdings as of October 2, 2021 would decrease our future annual interest income by approximately $4.1 million.

Our investment portfolio holdings as April 2, 2022 yielded less than 100 basis points.

A decline in yield to zero basis points on our investment portfolio holdings as of April 2, 2022 would decrease our future annual interest income by approximately $10.4 million.

We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

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The interest rate on the credit facility consists of a variable-rate of interest and an applicable margin.

While we have drawn from the credit facility in the past, we have no borrowings as of October 2, 2021.

While we have drawn from the credit facility in the past, we have no borrowings as of April 2, 2022.

If we borrow from the credit facility in the future, we will again be exposed to interest rate fluctuations.

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Investments in Auction-rate Securities

As of October 2, 2021, we held $6.0 million par value auction-rate securities, all of which have experienced failed auctions because sell orders exceeded buy orders.

As of April 2, 2022, we held $6.0 million par value auction-rate securities, all of which have experienced failed auctions because sell orders exceeded buy orders.

We are unable to predict if these funds will become available before their maturity dates.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis