What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-01 compared with 2022-02-02 · 316 added, 436 removed, 789 unchanged (49% of the section changed)

2 unchanged sentences

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act).

Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of January 1, 2022 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2022 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Such disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls during the fiscal quarter ended January 1, 2022 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

There was no change in our internal controls during the fiscal quarter ended December 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control over Financial Reporting

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Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of January 1, 2022.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 framework).

Based on our assessment we concluded that, as of January 1, 2022, our internal control over financial reporting is effective based on those criteria.

Based on our assessment we concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm, Ernst & Young LLP, issued an attestation report on our internal control over financial reporting.

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Other Information

On January 26, 2023, the Compensation Committee of the Board of Directors of the Company approved a form of Performance Stock Units Grant Notice and Global PSU Award Agreement (the “PSU Award Agreement”) under its 2009 Stock Incentive Plan, as amended and restated, attached hereto as Exhibit 10.20.

The PSU Awards will be earned based upon the level of achievement of the following three performance criteria (each as defined in the PSU Award Agreement):

● 3-Year Revenue CAGR (weighted 50%)

● Year 2 Non-GAAP Operating Income Margin (weighted 25%)

● Year 3 Non-GAAP Operating Income Margin (weighted 25%)

The PSU Awards are all subject to the terms and conditions of the 2009 Stock Incentive Plan, as amended and restated, and the form of PSU Award Agreement, a copy of which is attached as Exhibit 10.20 to this Form 10-K and incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Report of independent registered public accounting firm

Consolidated Balance Sheets at January 1, 2022 and January 2, 2021

Consolidated Statements of Income for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019

Consolidated Statements of Comprehensive Income for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019

Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019

Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019

Consolidated Balance Sheets at December 31 , 2022 and January 1, 2022

Consolidated Statements of Income for the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021

Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021

Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021

Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021

Notes to Consolidated Financial Statements

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Form of 0.625% Convertible Senior Note due 2025 (filed as Exhibit 4.2 to the Form 8-K filed on June 1, 2020).

First Supplemental Indenture between Silicon Laboratories Inc.

and Wilmington Trust, National Association, as trustee, dated January 2, 2022 (filed as Exhibit 4.1 to the Form 8-K filed on January 3, 2022).

Description of Registrant’s Securities Registered under Section 12 of the Exchange Act.

Form of Indemnification Agreement between Silicon Laboratories Inc.

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Form of Stock Option Grant Notice and Global Stock Option Award Agreement under Registrant’s 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.9 to the Form 10-K filed on February 1, 2017).

Form of Performance Stock Units Grant Notice and Global PSU Award Agreement under Registrant’s 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.10 to the Form 10-K filed on February 1, 2017).

Purchase Agreement between Silicon Laboratories Inc.

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Silicon Laboratories Inc.

2021 Bonus Plan (filed as Exhibit 10.1 to the Form 8-K filed on February 3, 3021).

Silicon Laboratories Inc.

Form of CEO Severance Agreement (filed as Exhibit 10.1 to the Form 8-K filed on May 17, 2021).

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dated July 27, 2021 (filed as Exhibit 10.1 to the Form 8-K filed on July 28, 2021).

ASR Agreement dated October 27, 2021 between Silicon Laboratories Inc.

and Goldman Sachs & Co.

LLC (filed as Exhibit 10.1 to the Form 8-K filed on October 28, 2021).

Silicon Laboratories Inc.

Form of Performance Stock Units Grant Notice and Global PSU Award Agreement under Registrant’s 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.1 to the Form 8-K filed on December 23, 2021).

Silicon Laboratories Inc.

2022 Bonus Plan (filed as Exhibit 10.1 to the Form 8-K filed on January 28, 2022).

Silicon Laboratories Inc.

Form of Performance Stock Units Grant Notice and Global PSU Award Agreement under Registrant’s 2009 Stock Incentive Plan, as amended and restated.

Subsidiaries of the Registrant.

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February 1, 2023

/s/ Robert Conrad

February 1, 2023

Robert Conrad

/s/ Gregg Lowe

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We have audited the accompanying consolidated balance sheets of Silicon Laboratories Inc.

(the Company) as of January 1, 2022 and January 2, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022, in conformity with U.S.

(the Company) as of December 31, 2022 and January 1, 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 2, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recognition of Variable Consideration

Description of the matter

At January 1, 2022 the Company’s revenue returns liability, which is included in the deferred revenues and returns liability in the consolidated balance sheet, was $13.8 million.

As discussed in Note 2 of the consolidated financial statements, when recording revenue for its contracts with customers the Company estimates variable consideration at the most likely amount to which it expects to be entitled.

As described in Note 2 of the consolidated financial statements, the transaction price for sales reflects the Company’s expectations about the consideration it will be entitled to receive and may include fixed or variable amounts.

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.

The Company uses significant estimates to determine the expected variable consideration.

Variable consideration that does not meet revenue recognition criteria is deferred and a revenue returns liability is recorded.

The variable consideration estimate considers both the likelihood of a return and the amount of potential price concession.

Auditing management’s estimate of the revenue returns liability was judgmental because the calculation involves subjective management assumptions about the estimates of expected future price concessions and/or product returns.

Auditing management’s variable consideration estimates relating to the pricing concessions and returns liability was judgmental because the calculations involve subjective management assumptions about the estimates of expected future price concessions and product returns.

For example, the estimated variable consideration included in the transaction price reflects management’s evaluation of contractual terms, historical experience, assumptions about future economic conditions and the quantity of products distributors are expected to sell.

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How we addressed the matter in our audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the measurement and valuation of the variable consideration recognized as revenue and the revenue returns liability.

For example, we tested controls over management’s review of the variable consideration methodology, the significant assumptions and the historical data utilized in the estimate for assumed product returns and expected price concessions.

To test the variable consideration recognized as revenue and the revenue returns liability, we performed audit procedures that included, among others, an evaluation of the Company’s methodology and significant assumptions and estimates, and tested the completeness and accuracy of the historical data utilized in the estimates.

In our assessment of the methodology, we considered changes in the business, changes to specific distributor contracts, and evaluated significant assumptions used by management by comparison to current trends and recent transactions.

We also evaluated the accuracy of management’s assumed product returns and expected price concessions from prior periods by comparing to subsequent actual activity.

Accounting for Discontinued Operations

Description of the Matter

As discussed in Note 3 of the consolidated financial statements, on July 26, 2021, the Company completed the sale of its Infrastructure and Automotive (“I&A”) business to Skyworks Solutions, Inc.

for $2.75 billion in cash.

In connection with the sale, the Company recognized a pre-tax gain of $2.4 billion in discontinued operations.

As a result of the discontinued operations classification, the comparative period consolidated financial statements for fiscal years 2020 and 2019 have been recast to reclassify balance sheet, income statement and cash flow amounts related to the infrastructure and automotive business as discontinued operations.

Auditing the Company’s discontinued operations was complex due to judgments made by management to calculate the gain on sale, including allocating goodwill between the I&A and Internet of Things (IoT) business lines as well as the non-routine process used by management to compile historical financial data for the I&A business, which involved certain judgments in allocating expenses to the discontinued operations.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for the discontinued operations.

For example, we tested controls over management’s treatment of the sale and calculation of the gain on sale, which included management’s review of the methodologies and assumptions used in the gain on sale calculation as well as controls over the disclosure of discontinued operations, including recasting prior period comparative financial statements.

Our audit procedures included, among others, testing the accuracy of the gain on sale calculation and evaluating the adequacy of the company’s disclosures related to discontinued operations.

For example, we evaluated the appropriateness of the company’s application of the criteria for reporting of discontinued operations by inspecting management’s supporting documentation, reading of board of director meeting minutes and other entity information, and evaluating for contrary evidence based on our understanding of the business.

To test the gain recognized in discontinued operations, we performed audit procedures that included testing the existence and valuation of cash proceeds;

inspecting the related sale agreement to obtain an understanding of the assets and liabilities included in the scope of the sales transaction and testing the completeness and accuracy of the assets and liabilities included in the gain calculation on a sample basis by comparing amounts to the Company’s accounting records and testing the tax effects of the sale.

To test the allocation of goodwill between the I&A and IoT business lines, we involved our valuation specialists to evaluate the reasonableness of the Company’s valuation methodology and significant assumptions used to allocate goodwill.

For example, we compared the significant assumptions used by the Company to current market and economic trends, to the assumptions used to value similar assets in other relevant divestitures, and to the historical results of the Company.

We performed procedures to audit the presentation of discontinued operations in the financial statements, including testing the recast prior period financial statements and assessing the reasonableness of key judgments applied by management in allocating expenses to the discontinued operations.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the measurement and valuation of the variable consideration recognized.

To test the variable consideration recognized as revenue we performed audit procedures that included, among others, an evaluation of the Company’s methodology and significant assumptions and estimates and tested the completeness and accuracy of the historical data utilized in the estimates.

In our assessment of the methodology, we considered changes in the business, changes in pricing assumptions, and evaluated significant assumptions used by management by comparison to current trends and recent transactions.

We also evaluated the accuracy of management’s assumed price concessions and product returns from prior periods by comparing to subsequent actual activity.

/s/ Ernst & Young LLP

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Opinion on Internal Control Over Financial Reporting

We have audited Silicon Laboratories Inc.’s internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Silicon Laboratories Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Silicon Laboratories Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on the COSO criteria.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Silicon Laboratories Inc.

as of January 1, 2022 and January 2, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and our report dated February 2, 2022 expressed an unqualified opinion thereon.

as of December 31, 2022 and January 1, 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Prepaid expenses and other current assets

Current assets of discontinued operations

Total current assets

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Other assets, net

Non-current assets of discontinued operations

Liabilities and Stockholders’ Equity

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Other current liabilities

Current liabilities of discontinued operations

Total current liabilities

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Other non-current liabilities

Non-current liabilities of discontinued operations

Total liabilities

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250,000 shares authorized;

38,481 and 43,925 shares issued and outstanding at January 1, 2022 and January 2, 2021, respectively

Additional paid-in capital

31,994 and 38,481 shares issued and outstanding at December 31, 2022 and January 1, 2022, respectively

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total stockholders’ equity

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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

Income (loss) from continuing operations before income taxes

Provision (benefit) for income taxes

Equity-method earnings

Loss from continuing operations

Income (loss) from continuing operations

Income from discontinued operations, net of income taxes

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Unrealized gains (losses) arising during the period

Reclassification for gains included in net income

Reclassification for (gains) losses included in net income

Net changes to cash flow hedges:

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Balance as of December 28, 2019

Other comprehensive income

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Balance as of December 28, 2019

Cumulative effect of adoption of accounting standard

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Balance as of January 1, 2022

Cumulative effect of adoption of accounting standard

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Balance as of December 31, 2022

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

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Operating Activities

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

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

Income from discontinued operations, net of income taxes

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( 1,541,971 )

Sales and maturities of marketable securities

Sales of marketable securities

Maturities of marketable securities

Purchases of property and equipment

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Acquisitions of businesses, 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

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Investing activities

Net cash provided by discontinued operations

Net cash provided by (used in) discontinued operations

Increase (decrease) in cash and cash equivalents

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Notes to Consolidated Financial Statements

January 1, 2022

December 31, 2022

Description of Business

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(the “Company”), a Delaware corporation, is 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.

Our integrated hardware and software platform, intuitive development tools, industry-leading ecosystem, and robust support help customers build advanced industrial, commercial, home, and life applications.

The Company provides 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.

Within the semiconductor industry, the Company is known as a “fabless” company meaning that the integrated circuits (ICs) incorporated in its products are manufactured by third-party foundry semiconductor companies.

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.

The transaction closed on July 26, 2021.

The financial results of the infrastructure and automotive business have been presented as discontinued operations in the Consolidated Financial Statements because the sale represented a strategic shift for the Company.

Prior period financial statements have been reclassified to reflect these changes for all periods presented.

On July 26, 2021, the Company sold its infrastructure and automotive business to Skyworks Solutions, Inc for $ 2.75 billion in cash.

The financial results of the infrastructure and automotive business have been presented as discontinued operations in the Consolidated Financial Statements.

See Note 3, Discontinued Operations , for additional information.

Unless indicated otherwise, the information in the Notes to the Consolidated Financial Statements relates to the Company’s continuing operations and does not include the results of discontinued operations.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Significant Accounting Policies

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

Fiscal 2021 had 52 weeks.

Fiscal 2022 and 2021 had 52 weeks.

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

Fiscal 2019 had 52 weeks.

Fiscal 2021, 2020 and 2019 ended on January 1, 2022, January 2, 2021 and December 28, 2019, respectively.

Fiscal 2022, 2021 and 2020 ended on December 31, 2022, January 1, 2022 and January 2, 2021, respectively.

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

All intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency Transactions

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

The Company periodically reviews the assumptions used in its financial statement estimates.

Fair Value of Financial Instruments

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Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Significant Accounting Policies (Continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits, certificates of deposit, money market funds and investments in debt securities with original maturities of ninety days or less when purchased.

The Company’s investments typically have original maturities greater than ninety days as of the date of purchase and are classified as either available-for-sale or trading securities.

Investments in available-for-sale securities 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.

Investments in trading securities are reported at fair value, with both realized and unrealized gains and losses recorded in interest income and other, net in the Consolidated Statement of Income.

Cash and cash equivalents consist of cash deposits, money market funds and investments in debt securities with original maturities of ninety days or less when purchased.

The Company’s investments typically have original maturities greater than ninety days as of the date of purchase and are classified as available-for-sale securities.

Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations (including those with contractual maturities greater than one year from the date of purchase) are classified as short-term.

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If either of these two conditions is met, the Company recognizes a charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value.

If the Company does not intend to sell a security and it is not more likely than not that it will be required to sell the security before recovery, the unrealized loss is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recorded in accumulated other comprehensive income (loss).

In addition, the Company has made equity investments in non-publicly traded companies.

Equity investments in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

The Company’s proportionate share of income or loss is recorded in equity-method earning in the Consolidated Statements of Income.

The Company has elected to use the measurement alternative under ASU 2019-04 to value non-marketable equity investments that do not have readily determinable fair values.

The Company’s proportionate share of income or loss is recorded in equity-method earnings in the Consolidated Statements of Income.

The Company has elected to use the measurement alternative under Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to value non-marketable equity investments that do not have readily determinable fair values.

Under the alternative, these non-marketable equity investments are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes of the same or similar securities in observable transactions.

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Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Significant Accounting Policies (Continued)

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Long-Lived Assets

Purchased intangible assets are stated at cost, net of accumulated amortization, and are amortized using the straight-line method over their estimated useful lives, ranging from two to twelve years .

Purchased intangible assets are stated at cost, net of accumulated amortization, and are amortized using the straight-line method over their estimated useful lives, ranging from five to twelve years .

Fair values are determined primarily using the income approach, in which the Company projects future expected cash flows and applies an appropriate discount rate.

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Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Significant Accounting Policies (Continued)

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The Company accounts for those plans using a fair-value method and recognizes the expense in its Consolidated Statement of Income.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Significant Accounting Policies (Continued)

Research and Development

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Assets purchased to support the Company’s ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or have an alternative future use, and are amortized over their estimated useful lives.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Significant Accounting Policies (Continued)

Advertising costs are expensed as incurred.

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See Note 18, Income Taxes , for additional information.

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.

The Company will elect the modified retrospective transition method to account for the impact of the adoption with a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption.

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 stockholders’ equity, 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.

On January 2, 2022, the Company irrevocably elected cash settlement for the principal amount of its convertible senior notes.

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

Adoption of New Accounting Standard

Convertible Instruments

The Company adopted FASB 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 ended 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 $ 0.47 and $ 0.46 , respectively, for the year ended December 31, 2022.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 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.

The Company believes the sale accelerates its IoT market leadership and growth, making it a pure-play leader of intelligent, wireless connectivity for the IoT.

The transaction closed on July 26, 2021.

On July 26, 2021, the Company sold its infrastructure and automotive business to Skyworks Solutions, Inc.

for $ 2.75 billion in cash.

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 Consolidated Financial Statements because the sale represented a strategic shift for the Company.

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Income from discontinued operations per share:

The following table summarizes the assets and liabilities of the discontinued operations (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 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 $ 4.2 million for fiscal 2021.

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 after the close of the transaction, 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 have not been nor are expected to be material to the ongoing operations of either entity.

Fees received by the Company under the TSA were $ 5.2 million for fiscal 2022.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Earnings Per Share

December 31, 2022

Earnings (Loss) Per Share

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

Loss from continuing operations

Shares used in computing basic loss per share

Income (loss) from continuing operations

Shares used in computing basic earnings (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 fiscal 2021, 2020 and 2019 excluded 1.5 million, 0.6 million and 0.9 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.

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 fiscal 2021, 2020 and 2019 approximately 1.0 million shares, 0.2 million shares and 0.4 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share from net income.

Shares used in computing diluted earnings (loss) per share

Earnings (loss) per share:

Diluted shares for fiscal 2021 and 2020 excluded 1.5 million and 0.6 million shares, respectively, due to the Company’s loss from continuing operations for the periods.

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 fiscal 2022, 2021 and 2020 approximately 0.6 million shares, 1.0 million shares and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

See Note 11, Debt , to the Consolidated Financial Statements for additional information.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Fair Value of Financial Instruments

2 unchanged sentences

Fair Value Measurements

at January 1, 2022 Using

at December 31, 2022 Using

Quoted Prices in

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Corporate debt securities

Government debt securities

Total cash equivalents

Short-term investments:

Government debt securities

Corporate debt securities

Government debt securities

Total short-term investments

Other assets, net:

Auction rate securities

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Fair Value of Financial Instruments (Continued)

Fair Value Measurements

10 unchanged sentences

Short-term investments:

Government debt securities

Corporate debt securities

Government debt securities

Total short-term investments

1 unchanged sentence

Auction rate securities

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Fair Value of Financial Instruments (Continued)

Valuation methodology

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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 January 1, 2022 (in thousands):

The Company’s available-for-sale 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 December 31, 2022 (in thousands):

Due in one year or less

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Due after ten years

Available-for-sale investments

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Fair Value of Financial Instruments (Continued)

Unrealized Gains and Losses

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

1 unchanged sentence

12 Months or Greater

As of January 1, 2022

Government debt securities

As of December 31, 2022

Corporate debt securities

Auction rate securities

Government debt securities

Less Than 12 Months

1 unchanged sentence

As of January 1, 2022

Government debt securities

Corporate debt securities

Government debt securities

Auction rate securities

The gross unrealized losses as of January 1, 2022 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.

These securities have a contractual maturity date of 2046.

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

The gross unrealized losses as of December 31, 2022 were due primarily to changes in market interest rates.

The gross unrealized losses as of January 1, 2022 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities.

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 December 31, 2022, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At December 31, 2022 and January 1, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

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.

As of January 1, 2022, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At January 1, 2022 and January 2, 2021, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Level 3 fair value measurements

The following summarizes quantitative information about Level 3 fair value measurements.

Auction rate securities

Fair Value at

January 1, 2022

Valuation Technique

Unobservable Input

Weighted Average

Discounted cash flow

Estimated yield

Expected holding period

Estimated discount rate

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

An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding period or estimated discount rate would result in a lower fair value measurement.

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 years ended January 1, 2022 and January 2, 2021 (in thousands):

The following summarizes the activity in Level 3 financial instruments for the years ended December 31, 2022 and January 1, 2022 (in thousands):

Auction Rate Securities

Beginning balance

Losses included in other comprehensive income (loss)

Loss recognized in earnings

Gain (loss) included in other comprehensive income (loss)

Ending balance

(1) On May 31, 2022, the Company sold its prior remaining holding of auction-rate securities for $ 5.7 million.

Fair values of other financial instruments

The Company’s debt is recorded at cost, but is measured at fair value for disclosure purposes.

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

As of January 1, 2022 and January 2, 2021, the fair value of the 0.625 % convertible senior notes due in 2025 was $ 944.3 million and $ 671.4 million, respectively.

As of December 31, 2022 and January 1, 2022, the fair value of the notes was $ 671.9 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.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Derivative Financial Instruments

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

Cash Flow Hedges

Foreign Currency Forward Contracts

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

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

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

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

As of December 31, 2022, the Company held no such foreign currency forward contracts.

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

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Derivative Financial Instruments (Continued)

Non-designated Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S.

The Company may use foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S.

dollar balance sheet exposures.

1 unchanged sentence

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

As of January 1, 2022, the Company held one foreign currency forward contract denominated in Singapore Dollars with a notional value of $ 3.7 million, and two foreign currency forward contracts denominated in Indian Rupees with an aggregate notional value of $ 7.4 million and one foreign currency forward contract denominated in the Hungarian Forint with a notional value of $ 2.1 million.

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

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

As of December 31, 2022, the Company held no such foreign currency forward contracts.

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

2 unchanged sentences

Finished goods

Prepaid Expenses and Other Current Assets

Distributor advances

Property and Equipment

8 unchanged sentences

* The Company holds an 8 % equity interest in China Walden Venture Investments III, a limited partnership.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Supplemental Information (Continued)

Other Current Liabilities

1 unchanged sentence

Income taxes payable

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Risks and Uncertainties

Financial Instruments

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, investments, accounts receivable, notes receivable and derivatives.

The Company places its cash equivalents and investments primarily in municipal bonds, money market funds, corporate bonds, certificates of deposit, U.S.

Treasury bills, U.S.

government securities, agency securities, asset-back securities, commercial paper and auction-rate securities.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, investments, accounts receivable and derivatives.

The Company places its cash equivalents and investments primarily in municipal bonds, money market funds, corporate bonds, U.S.

government securities, agency bonds, asset-back securities, variable rate demand notes, Yankee bonds and commercial paper.

Concentrations of credit risk with respect to accounts receivable are primarily due to customers with large outstanding balances.

2 unchanged sentences

Edom Technology

* Less than 10% of accounts receivable

The Company performs periodic credit evaluations of its customers’ financial condition and generally requires no collateral from its customers.

14 unchanged sentences

The agreements governing these advances can be cancelled by the Company at any time.

A significant portion of the Company’s products are fabricated by Taiwan Semiconductor Manufacturing Co.

(TSMC) or Semiconductor Manufacturing International Corporation (SMIC).

The inability of TSMC or SMIC to deliver wafers to the Company on a timely basis could impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Risks and Uncertainties (Continued)

A significant portion of the Company’s products are fabricated by Taiwan Semiconductor Manufacturing Co.

(TSMC) or Semiconductor Manufacturing International Corporation (SMIC).

The Company sells directly to end customers, distributors and contract manufacturers.

4 unchanged sentences

Edom Technology

* Less than 10% of revenue

Redpine Signals

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

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

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

A portion of the goodwill is deductible for tax purposes.

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

Weighted-Average

Amortization Period

Intangible assets:

In-process research and development

Not amortized

Developed technology

Customer relationships

Accounts receivable

Other current assets

Other non-current assets

Current liabilities

Non-current liabilities

Total purchase price

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

The Company recorded approximately $ 1.5 million of acquisition-related costs in selling, general and administrative expenses during fiscal 2020.

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

The Company believes the acquisition accelerated its roadmap for Wi-Fi and Bluetooth silicon and software solutions.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Goodwill and Other Intangible Assets

The following summarizes the activity in goodwill for the years ended January 1, 2022 and January 2, 2021 (in thousands):

Beginning balance

Additions due to business combinations

Ending balance

Other Intangible Assets

The gross carrying amount and accumulated amortization of other intangible assets are as follows (in thousands):

December 31, 2022

Other Intangible Assets, Net

The gross carrying amount and accumulated amortization of other intangible assets, net are as follows (in thousands):

Weighted-Average

January 1, 2022

December 31, 2022

January 1, 2022

Subject to amortization:

Developed technology

Customer relationships

Not subject to amortization:

In-process research and development

Not amortized

Total intangible assets

6 unchanged sentences

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

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 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, such as the repurchases of common stock under a “modified Dutch Auction” tender offer completed during fiscal 2021.

The conversion rate is subject to adjustment under certain circumstances.

Holders may convert the 2025 Notes under the following circumstances:

5 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 Sales Price Trigger condition was met on January 1, 2022, and as a result, holders may convert their 2025 Notes at any time during the quarter ending March 31, 2022.

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

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 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 fiscal 2021, which was recorded in interest expense in the Consolidated Statements of Income.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Debt (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 2025 Notes were classified as current liabilities at January 1, 2022 due to the Sales Price Trigger condition being met on January 1, 2022.

The Sales Price Trigger condition was not met during fiscal 2022, therefore the net carrying amount of the 2025 Notes is now classified as a non-current liability.

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

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 stockholders’ equity.

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

As of January 1, 2022, the remaining period over which the debt discount and debt issuance costs will be amortized was 3.5 years for the 2025 Notes.

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

This will result in an increase to the carrying value of its convertible debt by $ 78.5 million, representing the unamortized debt discount, with an offsetting reduction in stockholders’ equity.

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

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 December 31, 2022, the remaining period over which the debt issuance costs will be amortized was 2.5 years.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Debt (Continued)

Interest expense related to the Company’s convertible debt was comprised of the following (in thousands):

Contractual interest expense

5 unchanged sentences

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

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Debt (Continued)

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

2 unchanged sentences

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

As of January 1, 2022, the Company was in compliance with all covenants of the credit facility.

As of December 31, 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 January 1, 2022, no amounts were outstanding on the credit facility.

As of December 31, 2022, no amounts were outstanding on the credit facility.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

The Company leases certain facilities under operating lease agreements that expire at various dates through 2030.

2 unchanged sentences

Supplemental Lease Information

Consolidated Balance

Balance Sheet Information (in thousands)

Sheet Classification

Operating lease right-of-use assets

Other assets, net

Operating lease liabilities

Other current liabilities

Operating lease liabilities

Other non-current liabilities

Cash Flow Information (in thousands)

4 unchanged sentences

Weighted-average discount rate

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Leases (Continued)

The maturities of operating lease liabilities as of January 1, 2022 were as follows (in thousands):

The maturities of operating lease liabilities as of December 31, 2022 were as follows (in thousands):

Total lease payments

3 unchanged sentences

Lease income from operating leases was $ 6.2 million, $ 4.9 million and $ 3.2 million during fiscal 2022, 2021 and 2020, respectively.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Commitments and Contingencies

Legal Proceedings

The Company is involved in various legal proceedings that have arisen in the normal course of business.

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.

The patent infringement actions initiated by Bell Semiconductor, LLC were resolved in December 2022.

Share Repurchases

The Company repurchased 6.5 million shares, 0.2 million shares and 0.3 million shares of its common stock for $ 1.15 billion, $ 16.3 million and $ 26.7 million during fiscal 2021, 2020 and 2019, respectively.

Shares repurchased in fiscal 2021 included purchases of 4.0 million shares through a “modified Dutch Auction” tender offer, 1.7 million shares through an accelerated share repurchase (“ASR”) agreement and 0.8 million shares through the Company’s existing share repurchase program.

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

Shares repurchased through the tender offer were priced at $ 160.00 per share, for an aggregate cost of $ 640.7 million, excluding fees and expenses relating to the tender offer.

Under the ASR Agreement, the Company will repurchase an aggregate of $ 400 million of its common stock.

In fiscal 2021, the Company received an aggregate initial share delivery of approximately 1.7 million shares, with the remaining shares, if any, expected to be delivered in the first fiscal quarter of 2022.

Shares purchased through the tender offer, ASR agreement and share repurchase program were effectively retired upon repurchase.

Revenues were generated predominately by sales of the Company’s mixed-signal products.

Revenue is recognized when control of the promised goods or services is transferred to the customer, which typically occurs upon delivery.

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

Variable consideration that does not meet revenue recognition criteria is deferred.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Revenues (Continued)

The Company repurchased 6.9 million shares, 6.5 million shares and 0.2 million shares of its common stock for $ 887.6 million, $ 1.15 billion and $ 16.3 million during fiscal 2022, 2021 and 2020, respectively.

Shares repurchased in fiscal 2021 included purchases of 4.0 million shares through a tender offer, 1.7 million shares through an accelerated share repurchase agreement and 0.8 million shares through the Company’s existing share repurchase program.

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):

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.

3 unchanged sentences

Direct customers

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Stock-Based Compensation

Information in this footnote is inclusive of both continuing and discontinued operations, except as noted.

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 and fiscal 2021, 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.

2009 Stock Incentive Plan

Under the 2009 Plan, the following may be granted:

stock options, stock appreciation rights, performance shares, performance stock units, restricted stock units (RSUs), restricted stock awards (RSAs), performance-based awards and other awards (collectively, all such grants are referred to as “awards”).

The fiscal 2017 amendments to the 2009 Plan created a single share pool.

All awards now deduct one share from the 2009 Plan shares available for issuance for each share granted.

Awards granted under the 2009 Plan generally contain vesting provisions ranging from three to four years .

The exercise price of stock options offered under the 2009 Plan may not be less than 100 % of the fair market value of a share of our common stock on the date of grant.

The Company has two active stock plans, the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 ESPP”) that have been amended and approved by shareholders from time to time.

● The 2009 Plan allows for grants of stock options, stock appreciation rights, performance shares, performance stock units, restricted stock units (RSUs), restricted stock awards (RSAs), performance-based stock units (PSUs) and other awards (collectively, “awards”).

All awards deduct one share from the 2009 Plan shares available for issuance for each share granted.

Awards granted under the 2009 Plan contain vesting provisions mostly ranging from three to four years .

To the extent awards granted under the 2009 Plan terminate, expire, or lapse for any reason, or are settled in cash, shares subject to such awards will again be available for grant.

Stock Grants and Modifications

The Company granted to its employees 0.6 million, 0.7 million and 0.7 million shares of full value awards and no stock options from the 2009 Plan during fiscal 2021, 2020 and 2019, respectively.

The Company recorded $ 7.8 million in selling, general and administrative expense during fiscal 2021 in connection with the modification of certain equity awards.

The modifications were pursuant to employee terminations.

There were no other significant modifications made to any stock grants during fiscal 2021, 2020 or 2019.

Included in the full value awards granted under the 2009 Plan in fiscal 2021 were 116,809 performance-based stock awards (PSUs).

PSUs provide for the rights to acquire a number of shares of common stock for no cash consideration based upon the achievement of specified revenue objectives during the year.

The requisite service period for these PSUs is approximately three years from the date of grant.

There were no performance stock units (PSUs) granted during fiscal 2020 or 2019.

● The 2009 ESPP allows eligible employees to purchase a limited number of shares of the Company’s common stock at no less than 85 % of the fair market value of a share of common stock at prescribed purchase intervals during an offering period.

Each offering period is comprised of a series of one or more successive and/or overlapping purchase intervals and has a maximum term of 27 months .

The Company granted to its employees 0.5 million, 0.6 million and 0.7 million shares of full value awards from the 2009 Plan during fiscal 2022, 2021 and 2020, respectively.

Full value awards include RSUs, MSUs awards and PSUs.

MSUs provide the rights to acquire a number of shares of common stock for no cash consideration based upon achievement of specified levels of market conditions.

The requisite measurement period for these MSUs is also the vesting period, which is generally three years .

MSUs granted in 2020 measured the relative performance of the total stockholders’ return of the Company against that of a selected benchmarked group of companies.

The Company granted no MSUs in fiscal 2022 and 2021 and 82,000 MSUs in fiscal 2020.

PSUs provide for the rights to acquire a number of shares of common stock for no cash consideration based upon the achievement of specified revenue or profitability objectives during the year.

The requisite performance period of these PSUs is approximately three years from the date of grant.

The Company granted 52,078 and 116,809 PSUs in fiscal 2022 and 2021, respectively, and no PSUs in fiscal 2020.

The rights to purchase common stock granted under the 2009 ESPP are intended to be treated as either (i) purchase rights granted under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Internal Revenue Code (the “423(b) Plan”), or (ii) purchase rights granted under an employee stock purchase plan that is not subject to the terms and conditions of Section 423(b) of the Internal Revenue Code (the “Non-423(b) Plan”).

The Company will retain the discretion to grant purchase rights under either the 423(b) Plan or the Non-423(b) Plan.

During fiscal 2022, 2021 and 2020, the Company issued 109,000 , 146,000 and 177,000 shares, respectively, under the 2009 ESPP to its employees.

The weighted-average fair value for purchase rights granted in fiscal 2022 under the 2009 ESPP was $ 37.70 per share.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Stock-Based Compensation (Continued)

Included in the full value awards granted under the 2009 Plan in fiscal 2020 and 2019 were a total of 82,000 and 93,000 market-based stock awards, respectively.

The awards, also known as market stock units (MSUs), provide the rights to acquire a number of shares of common stock for no cash consideration based upon achievement of specified levels of market conditions.

The requisite service period for these MSUs is also the vesting period, which is generally three years .

MSUs granted in 2020 and 2019 measure the relative performance of the total stockholders’ return of the Company against that of a selected benchmarked group of companies.

There were no MSUs granted in fiscal 2021.

2009 Employee Stock Purchase Plan

The rights to purchase common stock granted under the 2009 Purchase Plan are intended to be treated as either (i) purchase rights granted under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Internal Revenue Code (the “423(b) Plan”), or (ii) purchase rights granted under an employee stock purchase plan that is not subject to the terms and conditions of Section 423(b) of the Internal Revenue Code (the “Non-423(b) Plan”).

The Company will retain the discretion to grant purchase rights under either the 423(b) Plan or the Non-423(b) Plan.

Eligible employees may purchase a limited number of shares of the Company’s common stock at no less than 85 % of the fair market value of a share of common stock at prescribed purchase intervals during an offering period.

Each offering period will be comprised of a series of one or more successive and/or overlapping purchase intervals and has a maximum term of 24 months .

During fiscal 2021, 2020 and 2019, the Company issued 146,000 , 177,000 and 208,000 shares, respectively, under the 2009 Purchase Plan to its employees.

The weighted-average fair value for purchase rights granted in fiscal 2021 under the 2009 Purchase Plan was $ 41.59 per share.

Accounting for Stock-Based Compensation

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.

Stock-based compensation costs are based on the fair values on the date of grant for awards under the 2009 Plan, and on the date of enrollment for grants under the 2009 ESPP.

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

The fair values of MSUs are estimated using a Monte Carlo simulation.

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

The Black-Scholes valuation calculation requires the Company to estimate key assumptions such as future stock price volatility, expected terms, risk-free rates and dividend yield.

Expected stock price volatility is based upon a combination of both historical volatility and implied volatility derived from traded options on the Company’s stock in the marketplace.

Expected term is derived from an analysis of historical exercises and remaining contractual life of options.

The risk-free rate is based on the U.S.

Treasury yield curve in effect at the time of grant.

The Company has never paid cash dividends and does not currently intend to pay cash dividends, thus it has assumed a 0 % dividend yield.

The Monte Carlo simulation used to calculate the fair value of the MSUs simulates the present value of the potential outcomes of future stock prices of the Company and the Philadelphia Semiconductor Sector Total Return Index over the requisite service period.

The projection of stock prices are based on the risk-free rate of return, the volatilities of the stock price of the Company and the Index, and the correlation of the stock price of the Company with the Index.

The fair values of stock options and grants under the 2009 ESPP are estimated using the Black-Scholes option-pricing model.

The fair values of all such stock-based grants are generally amortized on a straight-line basis over the vesting period of the grants.

The Company estimates potential forfeitures of stock grants and adjusts compensation cost recorded accordingly.

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Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods.

The fair values of stock options and RSUs are amortized as compensation expense on a straight-line basis over the vesting period of the grants.

The fair values of RSAs are fully expensed in the period of grant when shares are immediately issued with no vesting restrictions.

The fair values of MSUs are amortized as compensation expense on a straight-line basis over the performance and service periods of the grants.

The fair values of PSUs are amortized as compensation expense on a straight-line basis over the performance period when the performance is probable of achievement, and over the remaining service periods thereafter.

Compensation expense recognized is shown in the operating activities section of the Consolidated Statements of Cash Flows.

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

Cost of revenues

Research and development

Selling, general and administrative

Income tax benefit

Share-based compensation – continuing operations

Share-based compensation – discontinued operations, net

The Company recorded $ 7.8 million in selling, general and administrative expense during fiscal 2021 in connection with the modification of certain equity awards.

The modifications were pursuant to employee terminations.

There were no other significant modifications made to any stock grants during fiscal 2022, 2021 or 2020.

The Company had approximately $ 121.5 million of total unrecognized compensation cost related to equity grants as of December 31, 2022 that is expected to be recognized over a weighted-average period of approximately 2.1 years.

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

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Stock-Based Compensation (Continued)

Fair value assumptions and stock awards activity

The fair values estimated from the Black-Scholes option-pricing model for ESPP shares granted were calculated using the following assumptions:

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Outstanding at January 1, 2022

Vested at January 1, 2022 and expected to vest

Exercisable at January 1, 2022

Outstanding at December 31, 2022

Vested at December 31, 2022 and expected to vest

Exercisable at December 31, 2022

Weighted-Average

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Cancelled or forfeited

Outstanding at January 1, 2022

Outstanding at January 1, 2022 and expected to vest

Outstanding at December 31, 2022

Outstanding at December 31, 2022 and expected to vest

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Stock-Based Compensation (Continued)

Weighted-Average

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Outstanding at January 1, 2022

Earned or issued

Vested or issued

Cancelled or forfeited

Outstanding at January 1, 2022

Outstanding at January 1, 2022 and expected to vest

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Stock-Based Compensation (Continued)

Outstanding at December 31, 2022

Outstanding at December 31, 2022 and expected to vest

The following summarizes the Company’s weighted average fair value at the date of grant:

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Grant date fair value of PSUs and MSUs that vested

The Company received $ 14.2 million cash for the issuance of common stock, and paid $ 22.2 million for shares withheld for taxes, during fiscal 2021.

The Company issues shares from the shares reserved under its stock plans upon the exercise of stock options, vesting of RSUs, PSUs and MSUs, and purchases through employee stock purchase plans.

The Company does not currently expect to repurchase shares from any source to satisfy such obligation.

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

Cost of revenues

Research and development

Selling, general and administrative

Income tax benefit

Share-based compensation – continuing operations

Share-based compensation – discontinued operations, net

The Company had approximately $ 74.2 million of total unrecognized compensation cost related to equity grants under the 2009 Plan as of January 1, 2022 that is expected to be recognized over a weighted-average period of approximately 2.4 years.

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

As of January 1, 2022, the Company had reserved shares of common stock for future issuance as follows (in thousands):

2009 Stock Incentive Plan

2009 Employee Stock Purchase Plan

As of December 31, 2022, the Company had reserved shares of common stock for future issuance as follows (in thousands):

Total shares reserved

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

Employee Benefit Plan

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The Company contributed $ 3.2 million, $ 3.5 million and $ 4.2 million to the 401(k) Plan during fiscal 2022, 2021 and 2020, respectively.

Loss from continuing operations before income taxes includes the following components (in thousands):

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2022

Income (loss) from continuing operations, inclusive of equity-method earnings and before income taxes, includes the following components (in thousands):

The provision (benefit) for income taxes consists of the following (in thousands):

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Research and development tax credits

GILTI and Subpart F Income

(Nondeductible) nontaxable foreign items

Nondeductible officer compensation

Change in cost-sharing treatment of stock-based compensation

Return to provision adjustments

Excess tax benefit of stock-based compensation

Other tax effects of equity compensation

Change in prior period valuation allowance

(Nondeductible) nontaxable domestic items

Net operating loss not benefited

Nondeductible (nontaxable) domestic items

State tax expense

Nondeductible officer compensation

Nondeductible (nontaxable) foreign items

GILTI and Subpart F income

Effective tax rate

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Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Income Taxes (Continued)

The effective tax rate for fiscal 2021 decreased from fiscal 2020 primarily due to the adoption of FASB ASU 2019-12, Simplifying the Accounting for Income Taxes, in 2021 and an increase in the beginning of year valuation allowance on deferred tax assets for state attribute carryforwards.

The effective tax rate for fiscal 2020 increased from fiscal 2019 primarily due to a fiscal 2019 change in the Company’s position related to the treatment of stock-based compensation within its intercompany cost-sharing arrangement offset by the increased impact of fiscal 2020 permanent tax differences.

The higher provision for income taxes for fiscal 2021 was primarily due to the adoption of ASU 2019-12 as of the beginning of fiscal 2021.

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 from net operating losses associated with continuing operations for fiscal 2021 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.

The increase in the effective tax rate for fiscal 2022 was primarily due to the recognition of certain tax benefits for fiscal 2021 in discontinued operations under FASB ASU 2019-12, Simplifying the Accounting for Income Taxes, and the required adoption of new U.S.

tax rules regarding the capitalization of research and experimental costs in fiscal 2022.

The effective tax rate for fiscal 2021 decreased from fiscal 2020 primarily due to the adoption of ASU 2019-12 in 2021 and an increase in the beginning of year valuation allowance on deferred tax assets for state attribute carryforwards.

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 fiscal 2021 were recognized in discontinued operations.

Additionally, for fiscal 2021 there was an increase in the beginning of year valuation allowance on deferred tax assets for state attribute carryforwards as a result of changes in state tax estimates, primarily due to the divestiture of the infrastructure and automotive business.

Tax on the gain from the divestiture of the infrastructure and automotive business of $ 346.9 million was recorded in discontinued operations for the current period, as well as additional tax benefits associated with discontinued operations of $ 7.2 million for fiscal 2021.

As of January 1, 2022, income taxes payable of $ 74.9 million recorded in connection with the gain from the divestiture was included in other current liabilities in the Consolidated Balance Sheet.

In fiscal 2021, tax on the gain from the divestiture of the infrastructure and automotive business of $ 346.9 million was recorded in discontinued operations, as well as additional tax benefits associated with discontinued operations of $ 7.2 million.

In fiscal 2022, the Company revised its estimate of tax on the gain from the divestiture and recorded an associated net tax benefit of $ 2.2 million, which comprises the majority of the return to provision adjustment in the effective tax rate.

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.

Additionally, the Act required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S.

income tax under U.S.

The Company elected to pay the transition tax over the eight-year period provided in the Act.

As of December 31, 2022, the unpaid balance of its transition tax obligation was $ 19.0 million, which is payable between April 2023 and April 2025.

This was recorded as components of other current liabilities and other non-current liabilities in the Consolidated Balance Sheet in the amounts of $ 4.8 million and $ 14.2 million, respectively.

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Income Taxes (Continued)

The Tax Cuts and Jobs Act was enacted in the U.S.

on December 22, 2017 and required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S income tax under U.S.

The Company elected to pay the transition tax over the eight-year period provided in the Act.

As of January 1, 2022, the unpaid balance of its transition tax obligation was $ 21.4 million, which is payable between April 2022 and April 2025.

This was recorded as components of other current liabilities and other non-current liabilities in the Consolidated Balance Sheet in the amounts of $ 2.4 million and $ 19.0 million, respectively.

The Company has made an accounting policy election to treat global intangible low-taxed income (GILTI) as a period expense when incurred.

Deferred Income Taxes

Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities.

Significant components of the Company’s deferred taxes as of January 1, 2022 and January 2, 2021 were as follows (in thousands):

Significant components of the Company’s deferred taxes as of December 31, 2022 and January 1, 2022 were as follows (in thousands):

Deferred tax assets:

Net operating loss carryforwards

Capitalized research and development

Tax credit carryforwards

Intangible assets

Deferred income on shipments to distributors

Accrued liabilities

Deferred income on shipments to distributors

Net operating loss carryforwards

Valuation allowance

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Intangible assets

Unrealized gain on equity method investment

Prepaid expenses and other

Unrealized gain on equity-method investment

Net deferred tax assets (liabilities)

As of January 1, 2022, the Company had federal net operating loss and research and development tax credit carryforwards of approximately $ 18.4 million and $ 1.8 million, respectively.

As of December 31, 2022, the Company had federal net operating loss and research and development tax credit carryforwards of approximately $ 14.6 million and $ 1.6 million, respectively.

These carryforwards expire in fiscal years 2023 through 2031.

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Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Income Taxes (Continued)

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End of Period

Year ended December 31, 2022

Year ended January 1, 2022

Year ended January 2, 2021

Year ended December 28, 2019

At the end of fiscal 2022, undistributed earnings of certain of the Company’s foreign subsidiaries of approximately $ 136.8 million are intended to be permanently reinvested outside the U.S.

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Reductions based on tax positions related to prior years

Reductions for tax positions as a result of a lapse of the applicable statute of limitations

Ending balance

As of January 1, 2022, January 2, 2021 and December 28, 2019, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 3.9 million, $ 3.0 million and $ 2.4 million, respectively, of which $ 3.9 million, $ 2.1 million and $ 1.9 million, respectively, would affect the effective tax rate if recognized.

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

As of December 31, 2022, January 1, 2022 and January 2, 2021, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 4.4 million, $ 3.9 million and $ 3.0 million, respectively, of which $ 4.4 million, $ 3.9 million and $ 2.1 million, respectively, would affect the effective tax rate if recognized.

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.

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Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.

Tax years 2015 through 2021 remain open to examination by the major taxing jurisdictions in which the Company operates.

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

Silicon Laboratories Inc.

Notes to Consolidated Financial Statements (Continued)

January 1, 2022

December 31, 2022

Income Taxes (Continued)

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.

Tax years 2015 through 2022 remain open to examination by the major taxing jurisdictions in which the Company operates.

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.

Segment Information

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The chief operating decision maker allocates resources and assesses performance of the business and other activities at the operating segment level.

The Company groups its products into two categories, based on the target markets they address.

See Note 15, Revenues , for a summary of the Company’s revenue by product category.

Revenue is attributed to a geographic area based on the shipped-to location .

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Rest of world

Supplementary Financial Information (Unaudited)

Quarterly financial information for fiscal 2021 and 2020 is as follows.

The financial data for fiscal 2020 and the first quarter of fiscal 2021 has been recast to reflect the sale of the Company’s infrastructure and automotive business as discontinued operations.

The sale of this business closed on July 26, 2021.

See Note 3, Discontinued Operations , to the Consolidated Financial Statements for additional information.

The first quarter of fiscal 2020 had 14 weeks.

All other quarterly periods reported here had 13 weeks (in thousands, except per share amounts):

Income (loss) from continuing operations

Net income (loss)

Basic earnings (loss) per share:

Continuing operations

Diluted earnings (loss) per share:

Continuing operations

Loss from continuing operations

Net income (loss)

Basic earnings (loss) per share:

Continuing operations

Diluted earnings (loss) per share:

Continuing operations

(1) Includes a gain on sale of our infrastructure and automotive business of $2.1 billion, net of tax.

(2) Includes an adjustment of $6.9 million to increase revenue resulting from a change in the assumptions used to estimate variable consideration.

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-K

Item 9A. Controls and Procedures