What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-07-26 · 93 added, 77 removed, 348 unchanged (33% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

September 30,

Current assets:

24 unchanged sentences

250,000 shares authorized;

31,861 and 31,994 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively

31,779 and 31,994 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Retained earnings

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenues

17 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss), before tax

3 unchanged sentences

Net changes to cash flow hedges

Unrealized losses arising during the period

Reclassification for losses included in net income

Unrealized gains (losses) arising during the period

Reclassification for (gains) losses included in net income

Other comprehensive income (loss), before tax

9 unchanged sentences

Stockholders’

Three Months Ended July 1, 2023

Three Months Ended September 30, 2023

Income (Loss)

Balance as of April 1, 2023

Balance as of July 1, 2023

Other comprehensive income

2 unchanged sentences

Stock-based compensation

Convertible debt activity

Balance as of July 1, 2023

Balance as of September 30, 2023

Accumulated Other

1 unchanged sentence

Stockholders’

Three Months Ended July 2, 2022

Three Months Ended October 1, 2022

Income (Loss)

Balance as of April 2, 2022

Balance as of July 2, 2022

Other comprehensive loss

2 unchanged sentences

Stock-based compensation

Balance as of July 2, 2022

Balance as of October 1, 2022

Accumulated Other

1 unchanged sentence

Stockholders’

Six Months Ended July 1, 2023

Nine Months Ended September 30, 2023

Income (Loss)

5 unchanged sentences

Convertible debt activity

Balance as of July 1, 2023

Balance as of September 30, 2023

Accumulated Other

1 unchanged sentence

Stockholders’

Six Months Ended July 2, 2022

Nine Months Ended October 1, 2022

Income (Loss)

5 unchanged sentences

Stock-based compensation

Balance as of July 2, 2022

Balance as of October 1, 2022

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities

21 unchanged sentences

Purchases of other assets

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

Net cash provided by investing activities of continuing operations

Financing Activities

22 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated results of operations for the three and six months ended July 1, 2023 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2022, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 1, 2023.

29 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Shares used in computing basic earnings per share

3 unchanged sentences

Earnings per share:

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

In June 2023, the Company paid $ 535.0 million in cash and issued 0.9 million shares of common stock in connection with the conversions and redemptions of the 2025 convertible senior notes.

For the three and six months ended July 1, 2023 and July 2, 2022, approximately 0.9 million, 0.6 million, 1.1 million, and 0.8 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed convertible senior notes.) See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.

The Company irrevocably elected to settle the principal amount of its 0.625 % convertible senior notes due 2025 (the “2025 Notes”) in cash and intended to settle any excess value in shares in the event of a conversion.

In June 2023, the Company paid $ 535.0 million in cash and issued 0.9 million shares of common stock in connection with the conversions and redemptions of the 2025 Notes.

For the three and nine months ended September 30, 2023 and October 1, 2022, approximately 0.0 million, 0.7 million, 0.4 million, and 0.7 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed 2025 Notes.) See Note 6, Debt , to the Condensed Consolidated Financial Statements for additional information.Securities that were anti-dilutive were insignificant and were excluded from the computation of diluted earnings per share in all periods presented.

Fair Value of Financial Instruments

10 unchanged sentences

Fair Value Measurements

at July 1, 2023 Using

at September 30, 2023 Using

Quoted Prices in

23 unchanged sentences

Total short-term investments

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Valuation methodology

5 unchanged sentences

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.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Contractual maturities of investments

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 Condensed Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at July 1, 2023 (in thousands):

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at September 30, 2023 (in thousands):

Due in one year or less

4 unchanged sentences

12 Months or Greater

As of July 1, 2023

As of September 30, 2023

Corporate debt securities

5 unchanged sentences

Government debt securities

The gross unrealized losses as of July 1, 2023 and December 31, 2022 were due primarily to changes in market interest rates.

At July 1, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

The gross unrealized losses as of September 30, 2023 and December 31, 2022 were due primarily to changes in market interest rates.

At September 30, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors.

When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made.

As of September 30, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

Silicon Laboratories Inc.

1 unchanged sentence

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 July 1, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

Fair values of other financial instruments

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

The fair value of the Company’s convertible senior notes was determined using observable market prices.

Prior to its conversion or redemption in June 2023, the Company’s debt was recorded at cost, but measured at fair value for disclosure purposes.

The fair value of the Company’s 2025 Notes was determined using observable market prices.

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

As of December 31, 2022, the fair value of the 2025 Notes was $ 671.9 million.

No notes were outstanding as of July 1, 2023.

No notes were outstanding as of September 30, 2023.

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.

11 unchanged sentences

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

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

As of July 1, 2023, the contracts had maturities of two to six months and an aggregate notional value of $ 10.3 million.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in Norwegian Krone.

As of September 30, 2023, the contracts had maturities of one to three months and an aggregate notional value of $ 2.0 million.

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

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Derivative Financial Instruments (Continued)

Non-designated Hedges

4 unchanged sentences

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

As of July 1, 2023, the Company held foreign currency forward contracts denominated in Hungarian Forint and Singapore Dollars with an aggregate notional value of $ 8.1 million.

As of September 30, 2023, the Company held foreign currency forward contracts denominated in the Euro with an aggregate notional value of $ 7.4 million.

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Supplemental Information

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

September 30,

Work in progress

1 unchanged sentence

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

Lease income from operating leases was $ 1.4 million and $ 3.7 million during the six months ended July 1, 2023 and July 2, 2022, respectively.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Lease income from operating leases was $ 2.3 million and $ 5.4 million during the nine months ended September 30, 2023 and October 1, 2022, respectively.

0.625 % Convertible Senior Notes

3 unchanged sentences

Prior to the redemption, the Company received conversion notices representing $ 533.6 million principal amount of the notes.

The Company paid $ 533.6 million in cash and issued 0.9 million shares of common stock, as well as $ 47 thousand in lieu of fractional shares, for the conversions.

The Company paid $ 533.6 million in cash and issued 0.9 million shares of common stock, as well as $ 47 thousand in cash in lieu of fractional shares, for the conversions.

Notes representing $ 1.4 million principal amount were redeemed at par, plus accrued interest.

3 unchanged sentences

Net carrying amount

The 2025 Notes were recorded in convertible debt, net on the Condensed Consolidated Balance Sheet.

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

The remaining balance of the debt issuance costs was recognized in stockholders’ equity for 2025 Notes that were converted and as debt extinguishment loss for 2025 Notes that were redeemed in the second quarter of fiscal 2023.

Interest expense related to the 2025 Notes was comprised of the following (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Contractual interest expense

Amortization of debt issuance costs

The 2025 Notes were recorded in convertible debt, net on the Condensed Consolidated Balance Sheet.

The remaining balance of the debt issuance costs was recognized in stockholders’ equity for the 2025 Notes that were converted and as debt extinguishment loss for the 2025 Notes that were redeemed in the second quarter of fiscal 2023.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

Credit Facility

2 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 net leverage ratio (funded debt secured by assets/EBITDA) to exceed 3.50 to 1.00, subject to certain conditions.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

The credit facility, other than swingline loans, will bear interest at the Adjusted Term Secured Overnight Financing Rate (“SOFR”) 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 Adjusted Term SOFR 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 consolidated net leverage ratio (funded indebtedness less cash and cash equivalents up to $ 750 million and divided by EBITDA) of no more than 4.25 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

As of July 1, 2023, the Company was in compliance with all covenants of the credit facility.

As of September 30, 2023, 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 July 1, 2023, $ 80.0 million was outstanding on the credit facility.

As of September 30, 2023, $ 45.0 million was outstanding on the credit facility.

Commitments and Contingencies

1 unchanged sentence

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Industrial & Commercial

1 unchanged sentence

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

During the three and six months ended July 1, 2023, the Company did no t recognize any revenue related to performance obligations that were satisfied in previous reporting periods.

During the three and six months ended July 2, 2022, the Company recognized revenue of $ 36.5 million and $ 32.0 million, respectively, from performance obligations that were satisfied in previous reporting periods.

During the three and nine months ended September 30, 2023, the Company did no t recognize any revenue related to performance obligations that were satisfied in previous reporting periods.

During the three and nine months ended October 1, 2022, the Company recognized revenue of $ 4.5 million and $ 30.7 million, respectively, from performance obligations that were satisfied in previous reporting periods.

The following disaggregates the Company’s revenue by sales channel (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Direct customers

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Stock-Based Compensation

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenues

2 unchanged sentences

Income tax benefit

The Company had approximately $ 140.1 million of total unrecognized compensation cost related to equity grants as of July 1, 2023 that is expected to be recognized over a weighted-average period of approximately 2.2 years.

For the three months ended September 30, 2023, the Company recognized an expense reversal of $ 9.5 million to reflect a reduction in the estimated levels of achievement related to unvested performance stock units.

The Company had approximately $ 103.8 million of total unrecognized compensation cost related to equity grants as of September 30, 2023 that is expected to be recognized over a weighted-average period of approximately 2.2 years.

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

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income and Subpart F income inclusions and other permanent differences.

Income tax expense was $ 12.3 million and $ 11.0 million for the three months ended July 1, 2023 and July 2, 2022, resulting in effective tax rates of 53.0 % and 33.2 %, respectively.

Income tax expense was $ 20.1 million and $ 22.7 million for the six months ended July 1, 2023 and July 2, 2022, resulting in effective tax rates of 44.6 % and 33.5 %, respectively.

The increase in the effective tax rate for the three and six months ended July 1, 2023 was primarily due to a decrease to forecasted pre-tax book income, as the impact of permanent items is greater when pre-tax book income is lower, partially offset by a discrete state return-to-provision benefit recorded in the recent quarter.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Typically, the Company’s interim provision for income taxes is determined using an estimated annual effective tax rate, adjusted for discrete tax items.

Under certain circumstances where the Company is unable to make a reliable estimate of the annual effective tax rate, it uses the actual effective tax rate for the year-to-date period.

For the three and nine months ended September 30, 2023, the Company used this approach due to the variability of the rate as a result of fluctuations in forecasted pre-tax income.

Income tax expense was $ 3.4 million and $ 14.2 million for the three months ended September 30, 2023 and October 1, 2022, resulting in effective tax rates of 24.7 % and 40.3 %, respectively.

Income tax expense was $ 23.5 million and $ 36.9 million for the nine months ended September 30, 2023, and October 1, 2022, resulting in effective tax rates of 40.0 % and 35.8 %, respectively.

The decrease in the effective tax rate for the three months ended September 30, 2023 as compared to the prior period was primarily due to a decrease in nondeductible stock compensation and a delay in the application of unfavorable foreign tax credit Treasury regulations that was announced during the recent quarter, partially offset by the increased impact of global intangible low-taxed income relative to lower pre-tax book income.

The increase in the effective tax rate for the nine months ended September 30, 2023 as compared to the prior period was primarily due the increased impact of global intangible low-taxed income relative to lower pre-tax book income, partially offset by discrete U.S.

federal and state return-to-provision benefits recorded in the recent nine-month period.

Uncertain Tax Positions

As of July 1, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 5.1 million, all of which would affect the effective tax rate if recognized.

During the six months ended July 1, 2023, the Company did not release any unrecognized tax benefits.

As of September 30, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 5.2 million, all of which would affect the effective tax rate if recognized.

During the nine months ended September 30, 2023, the Company did not release any unrecognized tax benefits.

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

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

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Income Taxes (Continued)

Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013 - 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction.

2 unchanged sentences

The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained.

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

The Company plans to exhaust all available administrative remedies.

If unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

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

6 unchanged sentences

Subsequent Event

In July 2023, the U.S.

Treasury Department released IRS Notice 2023-55, which temporarily relieves taxpayers from the application of certain foreign tax credit Treasury regulations until January 1, 2024.

The Company estimates that it will recognize a net tax benefit of approximately $ 3.3 million as a result, most of which will be recognized in the third quarter of 2023.

The Company expects to incur approximately $ 6.5 million of restructuring related expense in the fourth quarter of fiscal year 2023, consisting primarily of reduction-in-force severance charges.

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

What changed 10-Q

Item 1. Financial Statements