What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-24 compared with 2020-11-17 · 268 added, 176 removed, 664 unchanged (40% of the section changed)

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(3) Consolidated Statements of Comprehensive Income for the three years ended October 1, 2021

(4) Consolidated Balance Sheets at October 2, 2020, and September 27, 2019

(4) Consolidated Balance Sheets at October 1, 2021, and October 2, 2020

(5) Consolidated Statements of Cash Flows for the three years ended October 1, 2021

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We have audited the accompanying consolidated balance sheets of Skyworks Solutions, Inc.

and subsidiaries (the Company) as of October 2, 2020 and September 27, 2019, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ equity for each of the years in the three-year period ended October 2, 2020, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of October 1, 2021 and October 2, 2020, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ equity for each of the years in the three-year period ended October 1, 2021, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of October 1, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 2, 2020 and September 27, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended October 2, 2020, in conformity with U.S.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 1, 2021 and October 2, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended October 1, 2021, in conformity with U.S.

generally accepted accounting principles.

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The communication of a 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.

Assessment of the Gross Unrecognized Tax Benefits

As discussed in Notes 2 and 8 to the consolidated financial statements, the Company has recorded gross unrecognized tax benefits of $117.6 million in domestic and foreign jurisdictions as of October 2, 2020.

The Company records unrecognized tax benefits when there is more than a 50% likelihood that its tax positions will not be sustained upon examination by the taxing authorities.

This determination requires management of the Company to apply judgment in the interpretation of domestic and international tax laws and regulations.

We identified the assessment of the gross unrecognized tax benefits as a critical audit matter because of the high degree of auditor judgment involved in evaluating the Company’s interpretation of domestic and international tax laws and regulations, including the need to involve professionals with specialized skills and knowledge.

Evaluation of the acquisition-date fair value of developed technology and in-process research and development intangible assets

As discussed in Note 3 to the consolidated financial statements, on July 26, 2021, the Company acquired the Infrastructure and Automotive business of Silicon Laboratories, Inc.

(the “Asset Purchase”).

As a result of the Asset Purchase, the Company acquired tangible and intangible net assets, including developed technology and in-process research and development (IPR&D) with an estimated fair value of $960.1 million and $591.1 million, respectively.

We identified the evaluation of the acquisition-date fair value of developed technology and IPR&D acquired in the Asset Purchase as a critical audit matter.

Subjective auditor judgment was required to evaluate the forecasted revenue growth rates and discount rate used in the valuation model to calculate the acquisition-date fair value of the developed technology and IPR&D.

Limited observable market information was available, and the fair value of the developed technology and IPR&D was sensitive to changes to these assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s unrecognized tax benefit process, including controls over the interpretation of domestic and international tax laws and regulations.

We involved domestic and international tax professionals with specialized skills and knowledge, who assisted in:

– assessing the Company’s ongoing compliance with applicable domestic and international tax laws and regulations,

– reading the Company’s documentation that provided the basis for its tax positions,

– evaluating the impact of changes in the Company’s tax structure, changes in domestic and international tax laws and regulations, and similar settlements with applicable taxing authorities, and

– evaluating the Company’s interpretation of domestic and international tax laws and regulations based on our understanding and interpretation of the domestic and international tax laws and regulations.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date fair value process, including controls over the forecasted revenue growth rates and the discount rate.

We evaluated the forecasted revenue growth rates used to determine the fair value of acquired developed technology and IPR&D in relation to the past performance of the acquired business as well as current industry forecasts.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate, by comparing it against a discount rate that was developed using publicly available market data for comparable entities.

We have served as the Company’s auditor since 2002.

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

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Operating income 1,612.7 891.8 952.0

Interest expense ( 13.4 ) — —

Other income (expense), net ( 0.6 ) ( 0.1 ) 9.0

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Diluted 167.0 169.9 174.5

Cash dividends declared and paid per share $ 1.82 $ 1.58 $ 1.34

See accompanying Notes to Consolidated Financial Statements.

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

Net income $ 1,498.3 $ 814.8 $ 853.6

Other comprehensive income (loss), net of tax

Other comprehensive income, net of tax

Fair value of investments ( 0.5 ) 0.1 0.3

Pension adjustments 0.4 — 0.5

Foreign currency translation adjustment — — ( 0.2 )

Comprehensive income $ 1,498.2 $ 814.9 $ 854.4

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(In millions, except per share amounts)

2020 September 27,

2021 October 2,

Current assets:

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Marketable securities 137.2 408.1

Receivables, net of allowance of $0.6 and $0.8, respectively 393.6 465.3

Receivables, net of allowances of $ 0.7 and $ 0.6 , respectively

Inventory 885.0 806.0

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Total current liabilities 658.5 448.4

Long-term debt 2,235.6 —

Long-term tax liabilities 222.8 311.3

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525.0 shares authorized;

232.3 shares issued and 165.6 shares outstanding at October 2, 2020, and 230.2 shares issued and 170.1 shares outstanding at September 27, 2019

165.3 shares issued and 165.3 shares outstanding at October 1, 2021, and 232.3 shares issued and 165.6 shares outstanding at October 2, 2020

Additional paid-in capital 79.6 3,403.7

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

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Asset impairment charges 7.1 11.8 —

Amortization of debt discount and issuance costs 1.1 — —

Changes in fair value of contingent consideration — — ( 3.1 )

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Sales and maturities of marketable securities 770.7 607.6 447.0

Payments for acquisitions, net of cash — — ( 404.0 )

Payments for acquisitions ( 2,751.0 ) — —

Net cash used in investing activities ( 3,133.2 ) ( 581.4 ) ( 336.9 )

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Proceeds from employee stock purchase plan 24.8 22.8 19.7

Net cash used in financing activities ( 907.7 ) ( 912.5 ) ( 993.7 )

Proceeds from issuance of long-term debt, net 2,488.2 — —

Debt financing costs ( 5.8 ) — —

Payments of debt ( 250.0 ) — —

Net cash provided by (used in) financing activities 1,677.4 ( 907.7 ) ( 912.5 )

Net increase (decrease) in cash and cash equivalents 316.2 ( 284.6 ) 118.0

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Income taxes paid $ 184.0 $ 110.8 $ 124.4

Interest paid $ 2.2 $ — $ —

Incentives paid in common stock $ 27.5 $ — $ 0.7

Non-cash investing in capital expenditures, accrued but not paid $ 29.3 $ 78.7 $ 101.5

Retirement of treasury stock $ 4,342.6 $ — $ —

See accompanying Notes to Consolidated Financial Statements.

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Dividends declared — — — — — ( 273.9 ) — ( 273.9 )

Pre-combination service on replacement awards — — — — 0.2 — — 0.2

Other comprehensive loss — — — — — — 0.8 0.8

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Other comprehensive income — — — — — — 0.1 0.1

Balance at September 27, 2019 170.1 $ 42.5 60.1 $ ( 3,412.9 ) $ 3,188.0 $ 4,312.6 $ ( 7.9 ) $ 4,122.3

Balance at October 2, 2020 165.6 $ 41.4 66.7 $ ( 4,093.5 ) $ 3,403.7 $ 4,820.4 $ ( 7.8 ) $ 4,164.2

Net income — — — — — 1,498.3 — 1,498.3

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Stock repurchase program ( 1.4 ) ( 0.4 ) 1.4 ( 195.6 ) 0.4 — — ( 195.6 )

Retirement of treasury stock — — ( 68.5 ) 4,342.6 ( 3,550.3 ) ( 792.3 ) — —

Dividends declared — — — — — ( 340.6 ) — ( 340.6 )

Pre-combination service on replacement awards — — — — 4.1 — — 4.1

Other comprehensive income — — — — — — ( 0.1 ) ( 0.1 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

DESCRIPTION OF BUSINESS

Skyworks Solutions, Inc., together with its consolidated subsidiaries (“Skyworks” or the “Company”), is empowering the wireless networking revolution.

The Company’s analog semiconductors are connecting people, places, and things, spanning a number of new applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, entertainment and gaming, industrial, medical, military, smartphone, tablet, and wearable markets.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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The Company’s fiscal year ends on the Friday closest to September 30.

Fiscal 2021 and 2019 each consisted of 52 weeks and ended on October 1, 2021, and September 27, 2019, respectively.

Fiscal 2020 consisted of 53 weeks and ended on October 2, 2020.

Fiscal 2019 and 2018 each consisted of 52 weeks and ended on September 27, 2019 and September 28, 2018, respectively.

Use of Estimates

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The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment.

Judgment is required in determining the reserves for and fair value of items such as overall fair value assessments of assets and liabilities, particularly those classified as Level 2 or Level 3 in the fair value hierarchy, marketable securities, inventory, intangible assets associated with business combinations, share-based compensation, loss contingencies, and income taxes.

In addition, judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows for any necessary impairment testing.

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Cash and Cash Equivalents

The Company invests excess cash in time deposits, certificate of deposits, money market funds, U.S.

The Company invests excess cash in time deposits, certificates of deposit, money market funds, U.S.

Treasury securities, agency securities, other government securities, corporate debt securities, and commercial paper.

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however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Business Combinations

The Company uses the acquisition method of accounting for business combinations and recognizes assets acquired and liabilities assumed at their fair values on the date acquired.

Goodwill represents the excess of the purchase price over the fair value of the acquired identifiable net assets.

The fair values of the assets and liabilities acquired are determined based upon the Company’s valuation using a combination of market, income, or cost approaches.

The valuation involves making significant estimates and assumptions, which are based on detailed financial models including the projection of future cash flows, the weighted average cost of capital, and any cost savings that are expected to be derived in the future from the viewpoint of a market participant.

Revenue Recognition

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Variable consideration is estimated using the expected value method considering all reasonably available information, including the Company’s historical experience and its current expectations, and is reflected in the transaction price when sales are recorded.

The Company records net revenue excluding taxes collected on its sales to trade customers.

The Company records net revenue excluding taxes on its sales to trade customers.

Accounts receivable represents the Company’s unconditional right to receive consideration from its customer.

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The fair value of share-based payment awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award.

The Company uses a straight-line attribution method for all grants that include only a service condition.

The Company generally uses a straight-line attribution method for all grants that include only a service condition.

Awards with both performance and service conditions are expensed over the service period for each separately vesting tranche.

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Forfeitures are recorded as incurred.

The Company determines the fair value of share-based option awards based on the Company’s closing stock price on the date of grant using a Black-Scholes options pricing model.

Under the Black-Scholes model, a number of variables are used including, but not limited to:

the expected stock price volatility over the term of the award, the risk-free rate, the expected life of the award and dividend yield.

The determination of fair value of restricted and certain performance stock awards and units is based on the value of the Company’s stock on the date of grant with performance awards and units adjusted for the actual outcome of the underlying performance condition.

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A liability for post-employment benefits is recorded when payment is probable and the amount is reasonably estimable.

Contract exit costs include contract termination fees and future contractual commitments for lease payments.

Contract exit costs include contract termination fees and future contractual termination commitments for lease payments.

A liability for contract exit costs is recognized in the period in which the Company terminates the contract or on the cease-use date for leased facilities.

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This method also requires the recognition of future tax benefits such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable

income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The carrying value of the Company’s net deferred tax assets assumes the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions.

If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets

resulting in additional income tax expense in its Consolidated Statement of Operations.

If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets resulting in additional income tax expense in its Consolidated Statement of Operations.

Management evaluates the realizability of the deferred tax assets and assesses the adequacy of the valuation allowance quarterly.

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Shares issuable upon the vesting of performance stock awards are likewise included in the calculation of diluted earnings per share as of the date the condition(s) have been satisfied.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”).

This ASU requires lessees to reflect leases with a term greater than one year on their balance sheet as assets and obligations.

The Company adopted the standard in the first quarter of fiscal 2020, using the modified retrospective approach, whereby the Company was not required to adjust comparative period financial statements for the new standard.

Upon adoption, the Company recorded an ROU asset of $ 141.4 million and a lease liability of $ 143.1 million.

This standard did not have a material impact on the Consolidated Statement of Operations or Consolidated Statement of Cash Flows.

Upon adoption, the Company elected the package of three practical expedients that permits the Company to maintain its historical conclusions about lease identification, lease classification and initial direct costs for leases that exist at the date of adoption.

Further, the Company elected the practical expedient to not separate lease and non-lease components.

Treasury Stock

The Company accounts for treasury stock using the cost method.

The Company accounts for the retirement of treasury stock by charging any excess of cost over par value as a deduction from additional paid-in capital and the remaining excess as a deduction to retained earnings on the consolidated balance sheets.

Retired treasury shares revert to the status of authorized but unissued shares.

Recently Issued Accounting Guidance

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update that simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation and modified the methodology for calculating income taxes in an interim period.

The guidance also clarifies and simplifies other aspects of the accounting for income taxes.

The guidance is effective for the Company beginning in the first quarter of fiscal 2022.

The new standard is not expected to have a material effect on the Company’s consolidated financial statements.

BUSINESS COMBINATIONS

On July 26, 2021, the Company acquired the Infrastructure and Automotive (“I&A”) business of Silicon Laboratories Inc.

(the “Asset Purchase”).

The Asset Purchase accelerated the Company’s expansion into high-growth segments, including electric and

hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication, data center, automotive, smart home, and several other applications.

The Company acquired the business for total cash consideration of $ 2.75 billion.

Net revenue and net income from this acquisition have been included in the Consolidated Statements of Operations from the acquisition date through the end of the fiscal year on October 1, 2021, and the impact of the acquisition to the ongoing operations on the Company’s net revenue and net income was not material.

The Company incurred $ 40.7 million in transaction-related costs during the fiscal year ended October 1, 2021, which were included within the selling, administrative, and general expense.

The allocation of the purchase price to the assets and liabilities recognized in the Company’s acquisition of the I&A business was considered final at the time of filing this Annual Report on Form 10-K.

The allocation of the purchase price is based on the estimated fair values of the assets acquired and liabilities assumed by major class related to the Asset Purchase and are reflected, as of the acquisition date, in the accompanying financial statements as follows (in millions):

Purchase Price July 26,

Cash consideration $ 2,750.0

Fair value of partially vested equity awards 4.1

Total purchase consideration $ 2,754.1

Inventory, including step up $ 56.3

Property, plant, and equipment 4.4

Other long-term assets 0.7

Intangible assets 1,708.3

Goodwill 986.2

Liabilities assumed ( 1.8 )

Estimated fair value of net assets acquired $ 2,754.1

Goodwill is primarily attributable to the assembled workforce and planned growth in strategic markets.

This goodwill is expected to be deductible for tax purposes.

Intangible Assets July 26,

Developed technology $ 960.1

Backlog 154.6

Customer relationships and tradename 2.5

Total identified finite-lived intangible assets 1,117.2

In-process research and development (“IPR&D”)

Total identified intangible assets $ 1,708.3

Developed semiconductor technology relates to timing products including clocks and oscillators, power products including isolation and power-over-ethernet devices, and broadcast products including consumer and automotive radio devices.

Developed technology was valued using the multi-period excess earnings method under the income approach.

This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows.

The weighted-average amortization period of approximately four years was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

Customer relationships and backlog represent the fair value of future projected revenue that will be derived from sales of products to existing customers of the I&A business.

Backlog was valued using the multi-period excess earnings method under

the income approach, and customer relationships were valued using the replacement cost method under the cost approach.

The cost approach estimates the amount of money required to replace the investment or asset with another having equivalent utility.

The weighted-average amortization period of the customer relationships was determined based on historical customer acquisition rates under a distributor model and was fully amortized as of October 1, 2021.

The weighted-average amortization period of the backlog of approximately two years was determined based on the expected life of the backlog and the cash flows over the forecast period.

Tradename relates to the “Silicon Laboratories” trade name.

The fair value was determined by applying the relief-from-royalty method under the income approach.

This method is based on the application of a market royalty rate to forecasted revenue under the trade name.

The weighted-average amortization period was determined based on the expected life of the trade name and was fully amortized as of October 1, 2021.

The fair value of IPR&D was determined using the multi-period excess earnings method under the income approach.

This method reflects the present value of the projected net cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.

The unaudited pro forma financial results for the fiscal years ended October 1, 2021, and October 2, 2020, combine the historical results of Skyworks with the unaudited historical results of the I&A business for the fiscal years ended October 1, 2021, and October 2, 2020, respectively.

The results include the effects of unaudited pro forma adjustments as if the I&A business was acquired at the beginning of the prior fiscal year.

The unaudited pro forma results presented include amortization charges for acquired intangible assets, adjustments for increases in the fair value of acquired inventory, interest expense, other charges, and related tax effects.

The pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisition.

These unaudited results are presented for informational purposes only and are not necessarily indicative of future operations (in millions,):

Fiscal Years Ended

(unaudited) October 1,

2021 October 2,

Revenue $ 5,440.0 $ 3,735.4

Net income 1,514.3 637.8

MARKETABLE SECURITIES

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Available-for-sale:

2020 September 27,

2021 October 2,

2020 September 27,

2020 October 1,

2021 October 2,

Treasury and government $ 7.6 $ 129.4 $ 6.0 $ 5.0

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The contractual maturities of noncurrent available-for-sale marketable securities were due within two years or less.

There were no gross unrealized gains or losses as of October 1, 2021.

There were gross unrealized gains of $ 0.3 million on U.S.

Treasury securities and $ 0.2 million on corporate bonds and notes as of October 2, 2020, and $ 0.1 million in gross unrealized losses on municipal bonds as of September 27, 2019.

Treasury securities and $ 0.2 million on corporate bonds and notes as of October 2, 2020.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

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Assets and liabilities recorded at fair value on a recurring basis consisted of the following (in millions):

As of October 2, 2020 As of September 27, 2019

As of October 1, 2021 As of October 2, 2020

Fair Value Measurements Fair Value Measurements

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The Company’s non-financial assets and liabilities, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and are subsequently re-measured if there are indicators of impairment.

During fiscal 2020, the Company abandoned a previously capitalized IPR&D project and recorded an impairment charge of $ 9.8 million.

During fiscal 2021, there were no indicators of impairment identified.

Inventory consists of the following (in millions):

2020 September 27,

2021 October 2,

Raw materials $ 62.2 $ 37.8

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Property, plant, and equipment, net consists of the following (in millions):

2020 September 27,

2021 October 2,

Land and improvements $ 11.9 $ 11.8

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GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill balance was $ 1,189.8 million as of October 2, 2020, and September 27, 2019.

The Company performed an impairment test of its goodwill as of the first day of the fourth fiscal quarter in accordance with its regularly scheduled testing.

The Company’s goodwill balance was $ 2,176.7 million and $ 1,189.8 million as of October 1, 2021, and October 2, 2020, respectively.

Goodwill increased by $ 986.9 million in fiscal 2021 due to acquisitions completed during the period.

See Note 3 to Item 8 of this Annual Report on Form 10-K for a detailed discussion of goodwill acquired.

The Company performed an

impairment test of its goodwill as of the first day of the fourth fiscal quarter in accordance with its regularly scheduled testing.

The results of this test indicated that the Company’s goodwill was not impaired.

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period (years)

October 2, 2020 September 27, 2019

Customer relationships 5.0 $ 18.2 $ ( 15.8 ) $ 2.4 $ 25.6 $ ( 19.5 ) $ 6.1

October 1, 2021 October 2, 2020

Customer relationships and backlog 2.5 $ 174.3 $ ( 44.0 ) $ 130.3 $ 18.2 $ ( 15.8 ) $ 2.4

Developed technology and other 4.2 1,036.9 ( 88.0 ) 948.9 101.0 ( 81.6 ) 19.4

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Fully amortized intangible assets are eliminated from both the gross and accumulated amortization amounts in the first quarter of each fiscal year.

Accrued technology licenses payable of $ 11.5 million and $ 20.1 million have been included in other current liabilities within the consolidated balance sheets as of October 2, 2020, and September 27, 2019, respectively.

Annual amortization expense for the next five fiscal years related to definite-lived intangible assets, excluding IPR&D, is expected to be as follows (in millions):

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

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Federal ( 45.8 ) ( 6.8 ) ( 0.4 )

State ( 0.1 ) — —

Foreign ( 11.9 ) ( 10.2 ) ( 0.9 )

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Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

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Effect of stock compensation ( 13.5 ) ( 10.3 ) ( 1.6 )

Change of tax rate on deferred taxes — — 18.3

Research and development credits ( 27.0 ) ( 23.0 ) ( 25.7 )

Change in tax reserve ( 51.5 ) 9.6 18.4

Domestic production activities deduction — — ( 13.9 )

Global Intangible Low-Taxed Income 69.0 35.9 54.3

Foreign Derived Intangible Income ( 79.7 ) ( 41.2 ) ( 41.5 )

Settlements with Tax Authorities ( 0.5 ) 4.3 —

Other, net 22.6 5.0 9.0

Provision for income taxes $ 100.4 $ 76.9 $ 107.4

The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate of 21.0 % for the fiscal years ended October 2, 2020, and September 27, 2019.

The Company’s tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were $ 86.6 million and $ 115.3 million for the fiscal years ended October 2, 2020, and September 27, 2019, respectively.

The Tax Reform Act includes, among other things, a reduction of the United States corporate tax rate from 35.0% to 21.0%, a mandatory deemed repatriation tax on foreign earnings, repeal of the corporate alternative minimum tax and the domestic production activities deduction, and expensing of certain capital investments.

The law makes fundamental changes to the

taxation of multinational entities, including a shift from worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime, a minimum tax on low-taxed foreign earnings, and new measures to deter base erosion and promote export from the United States.

As a result of this legislation, during fiscal 2018 the Company recognized a one-time transition tax related to the deemed repatriation of foreign earnings of $ 224.6 million and a charge related to the revaluation of its deferred tax assets at the new corporate tax rate of $ 18.3 million.

During fiscal 2020 and fiscal 2019, the Company recorded discrete income tax expense adjustments of $ 0.2 million and $ 8.1 million, respectively, to the prior year provisional estimates.

The Company had accrued $ 18.6 million and $ 177.0 million of the deemed repatriation tax in short-term and long-term liabilities within the consolidated balance sheet, respectively, as of October 2, 2020.

The Company had accrued $ 18.8 million and $ 195.9 million of the deemed repatriation tax in short-term and long-term liabilities within the consolidated balance sheet, respectively, as of September 27, 2019.

In addition to the introduction of a modified territorial tax system, the Tax Reform Act includes new sets of provisions aimed at preventing or decreasing U.S.

tax base erosion:

the GILTI provisions, the base erosion and anti-abuse tax (“BEAT”) provisions, and the FDII provisions.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The Company has made an accounting policy election to account for taxes due on GILTI inclusions as a component of current-period tax expense.

The BEAT provisions eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax.

The FDII provisions allow a U.S.

corporation an immediate deduction for a portion of its FDII.

The amount of the deduction will depend in part on the Company’s U.S.

taxable income.

The GILTI and FDII provisions became effective for the Company in fiscal 2019 and resulted in a $ 54.3 million tax expense and a $ 41.5 million tax benefit, respectively.

In fiscal 2020, the GILTI and FDII provisions resulted in $ 35.9 million tax expense and $ 41.2 million tax benefit, respectively.

The Company has analyzed the BEAT provisions for fiscal 2020, 2019, and 2018, and has determined that it is not subject to the minimum tax imposed by the BEAT provisions.

The Company’s federal income tax returns for fiscal 2015, fiscal 2016, fiscal 2018, and fiscal 2019 are currently under IRS examination.

During the year ended September 27, 2019, the Company effectively settled a portion of this IRS examination.

As a result, the Company accrued a tax payable of $ 3.8 million, including interest.

The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate of 21.0 % for the fiscal years ended October 1, 2021, and October 2, 2020.

The Company’s tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were $ 155.2 million, $ 86.6 million, and $ 115.3 million for the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, respectively.

The Company’s federal income tax returns for fiscal 2018 and fiscal 2019 are currently under Internal Revenue Service (“IRS”) examination.

During fiscal 2021, the Company concluded an IRS examination of its federal income tax returns for fiscal 2015 and 2016.

With the conclusion of the audit, the Company decreased the reserve for uncertain tax positions, including accrued interest and penalties, which resulted in the recognition of an income tax benefit of $ 34.8 million.

On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore.

1 unchanged sentence

The current tax holiday is conditioned upon the Company’s compliance with certain employment and investment thresholds in Singapore.

The impact of the tax holiday decreased Singapore’s taxes by $ 63.1 million, $ 32.8 million, and $ 38.4 million for the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, respectively, which resulted in tax benefits of $ 0.37 , $ 0.19 , and $ 0.21 of diluted earnings per share, respectively.

The impact of the tax holiday decreased Singapore’s taxes by $ 99.5 million, $ 63.1 million, and $ 32.8 million for the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, respectively, which resulted in tax benefits of $ 0.60 , $ 0.37 , and $ 0.19 of diluted earnings per share, respectively.

These tax benefits were partially offset by an increase in tax expense on GILTI.

Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in millions):

Fiscal Years Ended

2020 September 27,

2021 October 2,

Deferred tax assets:

Inventory $ 15.8 $ 12.1

Bad debts 0.1 0.2

Accrued compensation and benefits 12.7 10.1

Product returns, allowances, and warranty 0.9 0.4

Restructuring — 0.6

Share-based and other deferred compensation 31.8 25.9

2 unchanged sentences

State tax credits 126.9 115.5

Leases 43.4 —

Operating leases 45.4 43.4

Prepayments 42.1 —

Property, plant, and equipment 35.8 24.3

4 unchanged sentences

Deferred tax liabilities:

Prepaid insurance ( 0.9 ) ( 0.5 )

Property, plant, and equipment ( 38.6 ) ( 26.4 )

Intangible assets ( 5.3 ) ( 7.6 )

Leases ( 41.5 ) —

Operating leases ( 40.4 ) ( 41.5 )

Other, net ( 15.6 ) ( 7.5 )

1 unchanged sentence

Total net deferred tax assets $ 100.6 $ 41.1

The deferred tax assets and liabilities based on tax jurisdictions are presented on our Consolidated Balance Sheets as follows:

2021 October 2,

Deferred tax assets $ 119.5 $ 55.3

Deferred tax liabilities ( 18.9 ) ( 14.2 )

Net deferred tax asset $ 100.6 $ 41.1

In accordance with GAAP, management has determined that it is more likely than not that a portion of the Company's historic and current year income tax benefits will not be realized.

As of October 1, 2021, the Company has a valuation allowance of $ 150.0 million.

This valuation allowance is comprised of $ 118.8 million related to United States state tax credits and $ 18.6 million related to foreign deferred tax assets.

This valuation allowance is comprised of $ 126.9 million related to United States state tax credits, $ 3.3 million related to United States state net operating loss carry forwards, and $ 19.8 million related to foreign deferred tax assets.

The state tax credits relate primarily to California research tax credits that can be carried forward indefinitely, for which the Company has provided a full valuation allowance.

The Company does not anticipate sufficient taxable income or tax liability to utilize these state and foreign credits.

If these benefits are recognized in a future period, the valuation allowance on deferred tax assets will be reversed and up to a $ 150.0 million income tax benefit may be recognized.

The Company will need to generate $ 124.1 million of future United States federal taxable income to utilize its United States deferred tax assets as of October 2, 2020.

The Company will need to generate $ 351.7 million of future United States federal taxable income to utilize its United States deferred tax assets, excluding state deferred tax assets with a full valuation allowance, as of October 1, 2021.

The Company believes that future reversals of taxable temporary differences, and its forecast of continued earnings in its domestic and foreign jurisdictions, support its decision to not record a valuation allowance on other deferred tax assets.

1 unchanged sentence

The net valuation allowance increased by $ 12.6 million and $ 8.3 million in fiscal 2021 and fiscal 2020, respectively, primarily related to increases for foreign and state net operating loss and tax credit carryovers.

As of October 2, 2020, the Company has United States federal net operating loss carry forwards of approximately $ 8.1 million.

The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions.

The United States federal net operating loss carry forwards expire at various dates through 2035.

The Company also has state income tax credit carry forwards of $ 115.4 million, net of federal benefits, for which the Company has provided a valuation allowance.

The state tax credits relate primarily to California research tax credits that can be carried forward indefinitely.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):

Unrecognized tax benefits

Balance at September 27, 2019 $ 103.3

Increases based on positions related to prior years 2.8

Balance at October 2, 2020 $ 117.6

Decreases based on positions related to prior years ( 28.6 )

7 unchanged sentences

Due to open examinations, an estimate of anticipated reversals within the next 12 months cannot be made.

During the fiscal years 2020, 2019, and 2018, the Company recognized $ 4.6 million, $ 6.0 million, and $ 4.1 million, respectively, of interest or penalties related to unrecognized tax benefits.

Accrued interest and penalties of $ 16.1 million and $ 12.7 million related to uncertain tax positions have been included in long-term tax liabilities within the consolidated balance sheet as of October 2, 2020, and September 27, 2019, respectively.

During fiscal 2021, the Company recognized an $ 11.6 million benefit for interest or penalties related to unrecognized tax benefits.

During fiscal 2020 and 2019, the Company recognized $ 4.6 million and $ 6.0 million, respectively, of interest or penalties related to unrecognized tax benefits.

Accrued interest and penalties of $ 4.5 million and $ 16.1 million related to uncertain tax positions have been included in long-term tax liabilities within the consolidated balance sheet as of October 1, 2021, and October 2, 2020, respectively.

The Company’s major tax jurisdictions as of October 1, 2021, are the United States, California, Canada, Mexico, Japan, and Singapore.

For the United States, the Company has open tax years dating back to fiscal 2001 due to the carry forward of tax attributes.

For the United States, the Company has open tax years dating back to fiscal 2018 .

For California, the Company has open tax years dating back to fiscal 1999 due to the carry forward of tax attributes.

5 unchanged sentences

STOCKHOLDERS’ EQUITY

At October 2, 2020, the Company is authorized to issue 525.0 million shares of common stock, par value $ 0.25 per share, of which 232.3 million shares are issued and 165.6 million shares are outstanding.

At October 1, 2021, the Company is authorized to issue 525.0 million shares of common stock, par value $ 0.25 per share, of which 165.3 million shares are issued and outstanding.

Holders of the Company’s common stock are entitled to dividends in the event declared by the Company’s Board of Directors out of funds legally available for such purpose.

6 unchanged sentences

The Company’s Certificate of Incorporation has authorized and permits the Company to issue up to 25.0 million shares of preferred stock without par value in one or more series and with rights and preferences that may be fixed or designated by the Company’s Board of Directors without any further action by the Company’s stockholders.

The designation, powers, preferences, rights and qualifications, limitations, and restrictions of the preferred stock of each series will be fixed by the certificate of designation relating to such series, which will specify the terms of the preferred stock.

The designation, powers,

preferences, rights and qualifications, limitations, and restrictions of the preferred stock of each series will be fixed by the certificate of designation relating to such series, which will specify the terms of the preferred stock.

At October 1, 2021, the Company had no shares of preferred stock issued or outstanding.

4 unchanged sentences

During the fiscal year ended October 1, 2021, the Company paid approximately $ 195.6 million (including commissions) in connection with the repurchase of 1.4 million shares of its common stock (paying an average price of $ 138.85 per share) under the January 30, 2019, stock repurchase plan.

As of October 2, 2020, $ 978.8 million remained available under the January 30, 2019, stock repurchase plan.

During the fiscal year ended September 27, 2019, the Company paid approximately $ 657.6 million (including commissions) in connection with the repurchase of 8.9 million shares of its common stock (paying an average price of $ 74.26 per share).

As of October 1, 2021, $ 2.0 billion remained available under the January 26, 2021, stock repurchase plan.

During the fiscal year ended October 1, 2021, the Board of Directors approved the retirement of 68.5 million shares of treasury stock at an aggregated historical cost of $ 4,342.6 million.

During the fiscal year ended October 2, 2020, the Company paid approximately $ 647.5 million (including commissions) in connection with the repurchase of 6.3 million shares of its common stock (paying an average price of $ 102.74 per share).

4 unchanged sentences

Fiscal Years Ended

2020 September 27,

2021 October 2,

Per Share Total Per Share Total

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2015 Long-Term Incentive Plan.

Under this plan, officers, employees, and certain consultants may be granted stock options, restricted stock awards and units, performance stock awards and units and other share-based awards.

Under this plan, officers, employees, and certain consultants may be granted stock options, restricted stock units, performance stock units, and other share-based awards.

The plan has been approved by the stockholders.

3 unchanged sentences

Options granted under the plan at the determination of the compensation committee generally vest ratably over four years.

Restricted stock awards and units granted under the plan at the determination of the compensation committee generally vest over three or more years.

With respect to restricted stock awards, dividends are accumulated from the grant date and paid when the underlying shares vest.

If the underlying shares are forfeited for any reason, the rights to the dividends with respect to such shares are forfeited.

Restricted stock units granted under the plan at the determination of the compensation committee generally vest over three or more years.

No dividends or dividend equivalents are accumulated or paid with respect to restricted stock unit awards or other awards until the shares underlying such awards vest and are issued to the award holder.

Performance stock awards and units are contingently granted depending on the achievement of certain predetermined performance goals and generally vest over two or more years.

Performance stock units are contingently granted depending on the achievement of certain predetermined performance goals and generally vest over one or more years.

2008 Director Long-Term Incentive Plan.

Under this plan, non-employee directors may be granted stock options, restricted stock awards, and other share-based awards.

Under this plan, non-employee directors may be granted stock options, restricted stock units, and other share-based awards.

The plan has been approved by the stockholders.

3 unchanged sentences

Options granted under the plan are generally exercisable over four years.

Restricted stock awards and units granted under the plan generally vest over one or more years.

With respect to restricted stock awards, dividends are accumulated from the grant date and paid when the underlying shares vest.

If the underlying shares are forfeited for any reason, the rights to the dividends with respect to such shares are forfeited.

Restricted stock units granted under the plan generally vest over one or more years.

Employee Stock Purchase Plans.

3 unchanged sentences

The plans provide for purchases by employees of up to an aggregate of 11.6 million shares.

Shares of common stock purchased under these plans in the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, were 0.3 million, 0.3 million, and 0.2 million, respectively.

Shares of common stock purchased under these plans in the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, were 0.2 million, 0.3 million, and 0.3 million, respectively.

At October 1, 2021, there are 1.6 million shares available for purchase.

The Company recognized compensation expense of $ 6.6 million, $ 5.8 million, and $ 5.2 million for the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, respectively, related to the employee stock purchase plan.

The Company recognized compensation expense of $ 8.7 million, $ 6.6 million, and $ 5.8 million for the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, respectively, related to the employee stock purchase plan.

The unrecognized compensation expense on the employee stock purchase plan at October 1, 2021, was $ 3.1 million.

6 unchanged sentences

contractual life (in years) Aggregate intrinsic value (in millions)

Balance outstanding at September 27, 2019

Balance outstanding at October 2, 2020

Granted — $ 143.87

5 unchanged sentences

0.2 $ 74.12 1.7 $ 16.2

The weighted-average grant date fair value per share of employee stock options granted during the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, was $ 24.49 , $ 21.74 , and $ 68.32 , respectively.

The weighted-average grant date fair value per share of employee stock options granted during the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, was $ 39.63 , $ 24.49 , and $ 21.74 , respectively.

Restricted and Performance Awards and Units

3 unchanged sentences

grant date fair value

Non-vested awards outstanding at September 27, 2019 2.9 $ 89.14

Non-vested awards outstanding at October 2, 2020 2.9 $ 94.77

Granted (1) 1.5 $ 148.96

3 unchanged sentences

(1) includes performance stock awards granted and earned assuming target performance under the underlying performance metrics

The weighted average grant date fair value per share for awards granted during the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, was $ 99.68 , $ 78.41 , and $ 108.86 , respectively.

The weighted-average grant date fair value per share for awards granted during the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, was $ 148.96 , $ 99.68 , and $ 78.41 , respectively.

The following table summarizes the total intrinsic value for stock options exercised and awards vested (in millions):

Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

4 unchanged sentences

Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

10 unchanged sentences

Options $ 0.1 1.3

The fair value of the restricted stock awards and units is equal to the closing market price of the Company’s common stock on the date of grant.

The fair value of the restricted stock units is equal to the closing market price of the Company’s common stock on the date of grant.

The Company issued performance stock unit awards during fiscal 2021, fiscal 2020, and fiscal 2019 that contained market-based conditions.

1 unchanged sentence

Fiscal Year Ended

2020 September 27,

2021 October 2,

2020 September 27,

6 unchanged sentences

Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

11 unchanged sentences

The options with the longest potential total lease term consist of options for extension of up to three five-year periods following expiration of the original lease term.

During the fiscal year ended October 2, 2020, the Company recorded $ 28.1 million of operating lease expense and $ 7.6 million of variable lease expense.

During the fiscal years ended September 27, 2019, and September 28, 2018, the Company recorded $ 18.7 million and $ 20.5 million of rent expense, respectively.

During the fiscal years ended October 1, 2021, and October 2, 2020, the Company recorded $ 33.9 million and $ 28.1 million of operating lease expense and $ 3.2 million and $ 7.6 million of variable lease expense, respectively.

During the fiscal year ended September 27, 2019, the Company recorded $ 18.7 million of rent expense.

The Company’s finance leases and short-term leases are immaterial.

1 unchanged sentence

Fiscal Year Ended

2021 October 2,

Operating cash outflows from operating leases $ 32.5 25.4

7 unchanged sentences

Total $ 144.5

Future minimum lease liabilities under non-cancelable operating leases are as follows (in millions):

September 27,

Thereafter 97.7

Total $ 219.9

Weighted-average remaining lease term and discount rate related to operating leases are as follows:

2021 October 2,

Weighted-average remaining lease term (years) 7.5 8.2

23 unchanged sentences

Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

7 unchanged sentences

Basic earnings per share are calculated by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period.

The calculation of diluted earnings per share includes the dilutive effect of equity-based awards that were outstanding during the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018, using the treasury stock method.

Shares issuable upon the vesting of performance stock awards are likewise included in the calculation of diluted earnings per share as of the date the condition(s) have been satisfied.

The calculation of diluted earnings per share includes the dilutive effect of equity-based awards that were outstanding during the fiscal years ended October 1, 2021, October 2, 2020, and September 27, 2019, using the treasury stock method.

Shares issuable upon the vesting of performance stock awards are likewise included in the calculation of diluted earnings per share as of the date the condition(s) have been satisfied, assuming the end of the reporting period was the end of the contingency period.

Certain of the Company’s outstanding share-based awards, noted in the table above, were excluded because they were anti-dilutive, but they could become dilutive in the future.

5 unchanged sentences

The Company assesses its determination of operating segments at least annually.

Geographic Information

The Company presents net revenue by geographic area based upon the location of the OEMs’ headquarters as it believes that doing so best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Disaggregation of Revenue and Geographic Information

The Company presents net revenue by geographic area based upon the location of the OEMs’ headquarters and sales channel as it believes that doing so best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Individually insignificant OEMs are presented based on sales region.

Net revenue by geographic area is as follows (in millions):

Fiscal Years Ended

2020 September 27,

2021 October 2,

2020 September 27,

1 unchanged sentence

China 994.2 700.7 718.7

South Korea 254.6 365.5 432.7

Taiwan 404.2 240.4 271.1

South Korea 264.5 254.6 365.5

Europe, Middle East, and Africa 180.1 122.9 134.9

1 unchanged sentence

Total $ 5,109.1 $ 3,355.7 $ 3,376.8

The Company’s revenue from external customers is generated principally from the sale of semiconductor products that facilitate various wireless communication applications.

Net revenue by sales channel is as follows (in millions):

Fiscal Years Ended

2021 October 2,

2020 September 27,

Distributors $ 4,539.7 $ 2,599.8 $ 2,330.9

Direct customers 569.4 755.9 1,045.9

Total $ 5,109.1 $ 3,355.7 $ 3,376.8

The Company’s revenue from external customers is generated principally from the sale of semiconductor products.

Accordingly, the Company considers its product offerings to be similar in nature and therefore not segregated for reporting purposes.

Accrued customer liabilities of $ 20.3 million and $ 38.5 million have been included in other current liabilities within the consolidated balance sheets as of October 2, 2020 and September 27, 2019, respectively.

Net property, plant, and equipment balances, based on the physical locations within the indicated geographic areas are as follows (in millions):

2020 September 27,

2021 October 2,

Japan $ 598.9 $ 507.0

10 unchanged sentences

At October 1, 2021, the Company’s three largest accounts receivable balances comprised 70 % of aggregate gross accounts receivable.

This concentration was 67 % and 66 % at September 27, 2019, and September 28, 2018, respectively.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes the quarterly and annual results (in millions, except per share data).

Amounts may not total for the fiscal year due to rounding:

First quarter

Second quarter

Third quarter

Fourth quarter

Net revenue $ 896.1 $ 766.1 $ 736.8 $ 956.8 $ 3,355.7

Gross profit 444.3 375.6 334.1 458.9 1,612.9

Net income 257.1 181.1 129.7 246.9 814.8

Per share data (1)

Net income, basic $ 1.51 $ 1.07 $ 0.78 $ 1.48 $ 4.84

Net income, diluted $ 1.50 $ 1.06 $ 0.77 $ 1.46 $ 4.80

Net revenue $ 972.0 $ 810.4 $ 767.0 $ 827.4 $ 3,376.8

Gross profit 485.1 400.2 312.5 406.0 1,603.8

Net income 284.9 214.0 144.1 210.6 853.6

Per share data (1)

Net income, basic $ 1.61 $ 1.23 $ 0.83 $ 1.23 $ 4.92

Net income, diluted $ 1.60 $ 1.23 $ 0.83 $ 1.22 $ 4.89

(1) Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding and included common stock equivalents in each period.

Therefore, the sums of the quarters do not necessarily equal the full year earnings per share.

This concentration was 70 % and 67 % at October 2, 2020, and September 27, 2019, respectively.

SUPPLEMENTAL FINANCIAL INFORMATION

Other current liabilities consist of the following (in millions):

2021 October 2,

Accrued taxes $ 88.6 $ 31.2

Operating lease liability 33.0 28.2

Accrued customer liabilities 119.7 20.3

Other 45.9 28.3

Total other current liabilities $ 287.2 $ 108.0

Other income (expense), net consists of the following (in millions):

Fiscal Years Ended

2021 October 2,

2020 September 27,

Interest income $ 1.2 $ 9.6 $ 18.8

Net gains (losses) on marketable securities 0.1 0.1 —

Other income 4.2 6.8 5.5

Other expense ( 6.1 ) ( 16.6 ) ( 15.3 )

Total other income (expense), net $ ( 0.6 ) $ ( 0.1 ) $ 9.0

Long-term debt consists of the following (in millions, except percentages):

Effective Interest Rate October 1,

2021 October 2,

0.90% Senior Notes due 2023 1.15 % $ 500.0 $ —

1.80% Senior Notes due 2026 1.97 % 500.0 —

3.00% Senior Notes due 2031 3.13 % 500.0 —

1.38% Term Loans due 2024 1.50 % 750.0 —

Unamortized debt discount and issuance costs ( 14.4 ) —

Total debt $ 2,235.6 $ —

On May 26, 2021, the Company issued $ 500.0 million of its 0.90 % Senior Notes due 2023 (the “2023 Notes”), $ 500.0 million of its 1.80 % Senior Notes due 2026 (the “2026 Notes”), and $ 500.0 million of its 3.00 % Senior Notes due 2031 (the “2031 Notes” and, together with the 2023 Notes and the 2026 Notes, the “Notes”).

The Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of its existing and future senior unsecured debt but effectively junior to any of the Company’s senior secured debt to the extent of the value of collateral securing such debt, and are structurally subordinated to all existing and future obligations of the Company’s subsidiaries.

The Notes will mature on each respective maturity date, unless earlier redeemed in accordance with their terms.

Interest on the Notes is payable on June 1 and December 1 of each year.

The Company may redeem all or a portion of the 2023 Notes at any time after June 1, 2022, and all or a portion of the 2026 Notes and the 2031 Notes at any time and from time to time prior to maturity, in whole or in part, for cash at the applicable redemption prices set forth in the respective supplemental indenture.

If the Company undergoes a change of control repurchase event, as defined in the indenture governing the Notes (as supplemented, the “Indenture”), holders may require the Company to repurchase the Notes in whole or in part for cash at a price equal to 101 % of the principal amount of the Notes to be purchased, plus any accrued and unpaid interest.

As of October 1, 2021, the Company considered the likelihood of acceleration and recorded the Notes as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective terms of these borrowings.

The Indenture contains customary events of default, including failure to make required payments of principal and interest, certain events of bankruptcy and insolvency, and default in the performance or breach of any covenant or warranty contained in the Indenture or the Notes.

Term Credit Agreement

On May 21, 2021, the Company entered into a term credit agreement (the “Term Credit Agreement”) providing for a $ 1.0 billion term loan facility (the “Term Loan Facility”).

On July 26, 2021, the Company borrowed $ 1.0 billion in aggregate principal amount of term loans (the “Term Loans”) under the Term Loan Facility to finance a portion of the purchase price for the Asset Purchase and to pay fees and expenses incurred in connection therewith.

During fiscal 2021, the Company repaid $ 250.0 million of outstanding borrowings under the Term Loans.

As of October 1, 2021, there were $ 750.0 million of borrowings outstanding under the Term Loan Facility.

Borrowings under the Term Loan Facility are not currently guaranteed by any of the Company’s subsidiaries.

Interest on the Term Loans is payable monthly and is based on the applicable floating interest rate, plus an applicable margin based on the Company’s public debt credit ratings.

The Term Loans mature on July 26, 2024, and all amounts then-outstanding under the Term Loans, together with accrued and unpaid interest thereon, are repayable at maturity.

There is no premium or penalty for prepayment.

The Term Credit Agreement contains customary representations and warranties and covenants, including restrictions on the incurrence of indebtedness by non-guarantor subsidiaries and the creation of liens, and a financial covenant consisting of a limitation on leverage, defined as consolidated total indebtedness divided by consolidated earnings before interest, taxes, depreciation, and amortization for the period of four consecutive quarters not to exceed a ratio of 3.0 to 1.0.

The Term Credit Agreement also contains customary events of default, which include failure to make required payments of principal and interest, breaches of representations and warranties, changes of control or failures to pay money judgments and certain defaults in respect of specified material indebtedness, upon the occurrence of which, among other remedies, the lenders may accelerate the maturity of the indebtedness and other obligations under the Term Credit Agreement.

Revolving Credit Agreement

On May 21, 2021, the Company entered into a revolving credit agreement (the “Revolving Credit Agreement”) providing for a $ 750.0 million revolving credit facility (the “Revolver”).

The proceeds of the Revolver will be used for general corporate purposes and working capital needs of the Company and its subsidiaries.

The Revolver provides for revolving credit borrowings and letters of credit, with sublimits for letters of credit.

The Revolver may be increased in specified circumstances by up to $ 250.0 million at the discretion of the lenders.

The Revolver matures on July 26, 2026, and all unpaid borrowings, together with accrued and unpaid interest thereon, are repayable at maturity.

The Revolving Credit Agreement contains customary representations and warranties and covenants, including restrictions on the incurrence of indebtedness by non-guarantor subsidiaries and the creation of liens, and a financial covenant consisting of a limitation on leverage, defined as consolidated total indebtedness divided by consolidated earnings before interest, taxes, depreciation, and amortization for the period of four consecutive quarters not to exceed a ratio of 3.0 to 1.0.

As of October 1, 2021, there were no borrowings outstanding under the Revolver.

Fair Value of Debt

The Company’s debt is carried at amortized cost and is measured at fair value quarterly for disclosure purposes.

The estimated fair values are based on Level 2 inputs as the fair value is based on quoted prices for the Company’s debt and comparable instruments in inactive markets.

The carrying value of the Term Loan approximates its fair value as the Term Loan is carried at a market observable interest rate that resets periodically.

The estimated fair value of debt consists of the following (in millions):

2021 October 2,

0.90% Senior Notes due 2023 $ 501.0 $ —

1.80% Senior Notes due 2026 507.5 —

3.00% Senior Notes due 2031 514.6 —

Total debt under Senior Notes $ 1,523.1 $ —

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data