What changed in this filing

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Item 1. Financial Statements

2022-02-04 compared with 2021-07-30 · 130 added, 247 removed, 342 unchanged (52% of the section changed)

3 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Net revenue $ 1,510.4 $ 1,510.0

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Interest expense ( 11.0 ) —

Other income (expense), net ( 1.0 ) ( 3.5 ) ( 0.1 ) 1.4

Other income, net 1.2 0.2

Income before income taxes 436.1 570.9

Provision (benefit) for income taxes ( 1.6 ) 14.3 110.5 57.7

Provision for income taxes 36.2 61.6

Net income $ 399.9 $ 509.3

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(Unaudited, in millions)

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Net income $ 399.9 $ 509.3

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525.0 shares authorized;

165.1 shares issued and 165.1 shares outstanding at July 2, 2021 , and 232.3 shares issued and 165.6 shares outstanding at October 2, 2020

166.7 shares issued and 164.5 shares outstanding at December 31, 2021, and 165.3 shares issued and 165.3 shares outstanding at October 1, 2021

Additional paid-in capital 155.8 79.6

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(Unaudited, in millions)

Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Cash flows from operating activities:

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Depreciation 94.2 78.4

Amortization of intangible assets 23.8 35.4

Amortization of intangible assets, including inventory step-up 87.3 8.0

Deferred income taxes 6.1 ( 0.7 )

Asset impairment charges — 11.8

Amortization of debt discount and issuance costs 1.0 —

Other, net 1.0 —

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Net proceeds from exercise of stock options 1.8 2.7

Proceeds from employee stock purchase plan 12.7 12.2

Proceeds from issuance of long-term debt, net 1,489.7 —

Debt financing costs ( 7.3 ) —

Net cash provided by (used in) financing activities 1,005.6 ( 606.5 )

Payments of debt ( 50.0 ) —

Net cash used in financing activities ( 490.2 ) ( 323.6 )

Net increase (decrease) in cash and cash equivalents ( 6.5 ) 50.5

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Income taxes paid $ 12.7 $ 8.1

Interest paid $ 16.7 $ —

Incentives paid in common stock

$ 32.2 $ 27.5

Non-cash investing in capital expenditures, accrued but not paid $ 73.2 $ 94.3

Operating lease assets obtained in exchange for new lease liabilities $ 26.6 $ 12.5

Retirement of treasury stock $ 4,342.6 $ —

See accompanying Notes to Consolidated Financial Statements.

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Other comprehensive income — — — — — — 3.2 3.2

Balance at January 1, 2021 164.9 $ 41.2 68.5 $ ( 4,336.9 ) $ 3,471.6 $ 5,246.7 $ ( 7.7 ) $ 4,414.9

Net income — $ — — $ — $ — 325.0 — 325.0

Exercise and settlement of share-based awards, net of shares withheld for taxes 0.2 0.1 — ( 3.6 ) 16.9 — — 13.4

Share-based compensation expense — — — — 41.7 — — 41.7

Dividends declared — — — — — ( 82.6 ) — ( 82.6 )

Other comprehensive loss — — — — — — ( 0.1 ) ( 0.1 )

Balance at April 2, 2021 165.1 $ 41.3 68.5 $ ( 4,340.5 ) $ 3,530.2 $ 5,489.1 $ ( 7.8 ) $ 4,712.3

Net income — — — — — 337.8 — 337.8

Exercise and settlement of share-based awards, net of shares withheld for taxes — — — ( 2.2 ) 0.7 — — ( 1.5 )

Share-based compensation expense — — — — 36.9 — — 36.9

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

Dividends declared — — — — — ( 82.5 ) — ( 82.5 )

Other comprehensive loss — — — — — — ( 0.2 ) ( 0.2 )

Balance at July 2, 2021 165.1 $ 41.3 — $ ( 0.1 ) $ 17.5 $ 4,952.1 $ ( 8.0 ) $ 5,002.8

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

Net income — — — — — 257.1 — 257.1

Exercise and settlement of share-based awards, net of shares withheld for taxes 1.1 0.3 0.3 ( 26.7 ) 34.6 — — 8.2

Share-based compensation expense — — — — 29.1 — — 29.1

Stock repurchase program ( 0.7 ) ( 0.2 ) 0.7 ( 74.2 ) 0.2 — — ( 74.2 )

Dividends declared — — — — — ( 75.1 ) — ( 75.1 )

Other comprehensive loss — — — — — — ( 0.1 ) ( 0.1 )

Balance at December 31, 2021 164.5 $ 41.1 2.2 $ ( 351.2 ) $ 155.8 $ 5,493.2 $ ( 4.7 ) $ 5,334.2

Net income — — — — — 181.1 — 181.1

Exercise and settlement of share-based awards, net of shares withheld for taxes 0.3 0.1 — ( 2.0 ) 20.4 — — 18.5

Share-based compensation expense — — — — 34.1 — — 34.1

Stock repurchase program ( 3.2 ) ( 0.8 ) 3.2 ( 283.8 ) 0.8 — — ( 283.8 )

Dividends declared — — — — — ( 74.9 ) — ( 74.9 )

Other comprehensive income — — — — — — 0.5 0.5

Balance at March 27, 2020 167.6 $ 41.9 64.3 $ ( 3,799.6 ) $ 3,307.2 $ 4,600.8 $ ( 7.5 ) $ 4,142.8

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 — — — — — 509.3 — 509.3

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Other comprehensive loss — — — — — — 0.1 0.1

Balance at June 26, 2020 167.1 $ 41.8 65.0 $ ( 3,860.3 ) $ 3,351.5 $ 4,657.0 $ ( 7.6 ) $ 4,182.4

Balance at January 1, 2021 164.9 $ 41.2 68.5 $ ( 4,336.9 ) $ 3,471.6 $ 5,246.7 $ ( 7.7 ) $ 4,414.9

See accompanying Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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

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1 to such Annual Report on Form 10-K, filed with the SEC on January 28, 2022 (“2021 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, expenses, comprehensive income, and accumulated other comprehensive loss that are reported in these unaudited consolidated financial statements and accompanying disclosures.

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

Fiscal 2021 consists of 52 weeks and ends on October 1, 2021.

Fiscal 2022 consists of 52 weeks and ends on September 30, 2022.

Fiscal 2021 consisted of 53 weeks and ended on October 1, 2021.

The three and nine months ended July 2, 2021 , and June 26, 2020, each consisted of 13 weeks and 39 weeks, respectively.

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.

The three months ended December 31, 2021, and January 1, 2021, each consisted of 13 weeks, respectively.

REVENUE RECOGNITION

The Company presents net revenue by geographic area based upon the location of the original equipment manufacturers’ (“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.

The Company presents net revenue by geographic area, based upon the location of the original equipment manufacturers’ (“OEMs”) headquarters, and by 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 upon the location of the Company's direct customer, which is typically a distributor.

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

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

United States $ 993.8 $ 1,101.6

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Total $ 1,510.4 $ 1,510.0

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

Three Months Ended

2021 January 1,

Distributors $ 1,290.5 $ 1,370.9

Direct customers 219.9 139.1

Total $ 1,510.4 $ 1,510.0

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

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2021 October 1,

2021 December 31,

2021 October 1,

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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 July 2, 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.

Neither gross unrealized gains and losses nor realized gains and losses were material as of December 31, 2021, and October 1, 2021, respectively.

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 July 2, 2021 As of October 2, 2020

As of December 31, 2021 As of October 1, 2021

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.

There were no indicators of impairment identified during the three and nine months ended July 2, 2021 .

There were no indicators of impairment identified during the three months ended December 31, 2021.

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 1,

0.90% Senior Notes due 2023 $ 499.6 $ 501.0

1.80% Senior Notes due 2026 495.3 507.5

3.00% Senior Notes due 2031 507.5 514.6

Total debt $ 1,502.4 $ 1,523.1

Inventory consists of the following (in millions):

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GOODWILL AND INTANGIBLE ASSETS

There were no changes to the carrying amount of goodwill during the three and nine months ended July 2, 2021 .

There were no changes to the carrying amount of goodwill during the three months ended December 31, 2021.

The Company tests its goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if certain events occur indicating the carrying value of goodwill may be impaired.

There were no indicators of impairment noted during the three and nine months ended July 2, 2021 .

There were no indicators of impairment noted during the three months ended December 31, 2021.

Intangible assets consist of the following (in millions):

Period (Years) July 2, 2021 October 2, 2020

Period (Years) December 31, 2021 October 1, 2021

Carrying Amount

Customer relationships 5.0 $ 18.2 $ ( 18.2 ) $ — $ 18.2 $ ( 15.8 ) $ 2.4

Customer relationships and backlog 2.3 154.6 ( 57.4 ) 97.2 174.3 ( 44.0 ) 130.3

Developed technology and other 9.8 987.4 ( 81.2 ) 906.2 1,036.9 ( 88.0 ) 948.9

Trademarks 3.0 — — — 1.6 ( 1.5 ) 0.1

Technology licenses 2.5 61.4 ( 28.1 ) 33.3 48.4 ( 23.9 ) 24.5

IPR&D 3.8 — 3.8 19.5 — 19.5

In-process research and development (“IPR&D”) 594.9 — 594.9 594.9 — 594.9

Total intangible assets $ 1,798.3 $ ( 166.7 ) $ 1,631.6 $ 1,854.5 $ ( 155.9 ) $ 1,698.6

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

Amortization expense related to definite-lived intangible assets was $ 80.0 million and $ 8.0 million for the three months ended December 31, 2021, and January 1, 2021, 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):

Remaining 2022 2023 2024 2025 2026 Thereafter

Amortization expense, cost of goods sold $ 1.3 $ 5.4 $ 5.4 $ 1.9 $ 0.1 $ 1.7

Amortization expense, operating expense $ 3.5 $ 6.2 $ 1.8 $ 1.4 $ 1.1 $ 1.1

Total amortization expense $ 4.8 $ 11.6 $ 7.2 $ 3.3 $ 1.2 $ 2.8

Amortization expense $ 191.9 $ 189.0 $ 137.6 $ 117.6 $ 101.9 $ 298.7

The provision for income taxes consists of the following components (in millions):

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

United States income taxes $ 18.4 $ 41.0

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Effective tax rate 8.3 % 10.8 %

The difference between the Company’s effective tax rate and the 21.0 % United States federal statutory rate for the three and nine months ended July 2, 2021 , and June 26, 2020, respectively, resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, a benefit related to a change in the reserve for uncertain tax positions, a benefit from foreign-derived intangible income deduction (“FDII”), windfall tax deductions, and research and experimentation and foreign tax credits earned, partially offset by a tax on global intangible low-taxed income (“GILTI”).

During fiscal 2021, the Company concluded an Internal Revenue Service (“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, which resulted in the recognition of an income tax benefit of $ 42.8 million and $ 34.8 million during the three and nine months ended July 2, 2021 , respectively.

The Company operates under a tax holiday in Singapore, which is effective through September 30, 2030 .

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

The difference between the Company’s effective tax rate and the 21.0 % United States federal statutory rate for the three months ended December 31, 2021, and January 1, 2021, respectively, resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, a benefit from foreign-derived intangible income deduction (“FDII”), windfall tax deductions, and research and experimentation and foreign tax credits earned, partially offset by a tax on global intangible low-taxed income (“GILTI”), and tax expense related to a change in the reserve for uncertain tax positions.

COMMITMENTS AND CONTINGENCIES

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STOCKHOLDERS’ EQUITY

Stock Repurchase Program

Stock Repurchase

On January 26, 2021, the Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to repurchase up to $ 2.0 billion of its common stock from time to time prior to January 26, 2023 , on the open market or in privately negotiated transactions, as permitted by securities laws and other legal requirements.

This authorized stock repurchase plan replaced in its entirety the January 30, 2019, stock repurchase program.

This authorized stock repurchase program replaced in its entirety the January 30, 2019, stock repurchase program.

The timing and amount of any shares of the Company’s common stock that are repurchased under the repurchase program are determined by the Company’s management based on its evaluation of market conditions and other factors.

During the three months ended July 2, 2021 , the Company did not repurchase any shares of its common stock.

During the nine months ended July 2, 2021 , the Company paid $ 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), all of which shares were repurchased pursuant to the January 30, 2019, stock repurchase program.

As of July 2, 2021 , $ 2.0 billion remained available under the January 26, 2021, stock repurchase program.

In connection with the Asset Purchase and the debt incurred to finance the Asset Purchase (as discussed in Notes 13 and 14 of the Notes to Consolidated Financial Statements), the Company has temporarily suspended repurchase activities under the January 26, 2021, stock repurchase program.

During the three and nine months ended July 2, 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 three months ended June 26, 2020, the Company paid $ 58.5 million (including commissions) in connection with the repurchase of 0.7 million shares of its common stock (paying an average price of $ 87.42 per share).

During the nine months ended June 26, 2020, the Company paid $ 416.5 million (including commissions) in connection with the repurchase of 4.6 million shares of its common stock (paying an average price of $ 89.56 per share).

On July 29, 2021 , the Company announced that the Board of Directors had declared a cash dividend on the Company’s common stock of $ 0.56 per share.

This dividend is payable on September 7, 2021 , to the Company’s stockholders of record as of the close of business on August 17, 2021 .

During the three months ended December 31, 2021, the Company paid $ 269.4 million (including commissions) in connection with the repurchase of 1.7 million shares of its common stock (paying an average price of $ 159.56 per share), all of which shares were repurchased pursuant to the January 26, 2021, stock repurchase program.

As of December 31, 2021, $ 1.7 billion remained available under the January 26, 2021, stock repurchase program.

During the three months ended January 1, 2021, the Company paid $ 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), all of which shares were repurchased pursuant to the January 30, 2019, stock repurchase program.

On February 3, 2022 , the Company announced that the Board of Directors had declared a cash dividend on the Company’s common stock of $ 0.56 per share.

This dividend is payable on March 15, 2022 , to the Company’s stockholders of record as of the close of business on February 22, 2022 .

Dividends charged to retained earnings were as follows (in millions, except per share data):

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First quarter $ 0.56 $ 92.5 $ 0.50 $ 83.0

Second quarter 0.50 82.6 0.44 74.9

Third quarter 0.50 82.5 0.44 73.5

Total $ 1.50 $ 248.1 $ 1.32 $ 223.5

Share-based Compensation

The following table summarizes the share-based compensation expense by line item in the Statements of Operations (in millions):

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Cost of goods sold $ 8.7 $ 6.4

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

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Net income $ 399.9 $ 509.3

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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 three and nine months ended July 2, 2021 , and June 26, 2020, 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.

The calculation of diluted earnings per share includes the dilutive effect of equity-based awards that were outstanding during the three months ended December 31, 2021, and January 1, 2021, using the treasury stock method.

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.

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Total other current liabilities $ 312.6 $ 287.2

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

Three Months Ended Nine Months Ended

2021 June 26,

Interest income $ 0.3 $ 1.2 $ 1.1 $ 8.8

Net gains (losses) on marketable securities 0.1 — 0.1 0.1

Other income 1.2 5.4 4.0 7.4

Other expense ( 2.6 ) ( 10.1 ) ( 5.3 ) ( 14.9 )

Total other income (expense), net $ ( 1.0 ) $ ( 3.5 ) $ ( 0.1 ) $ 1.4

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

Effective Interest Rate July 2,

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 —

Unamortized debt discount and issuance costs ( 12.9 ) —

Total debt $ 1,487.1 $ —

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.

The terms of the Indenture provided that, if (i) the consummation of the Asset Purchase (as defined in Note 14 of the Notes to Consolidated Financial Statements) had not occurred prior to 5:00 p.m., New York City time, on October 29, 2021, (ii) the Company had notified the trustee and the holders of the 2023 Notes that it would not pursue the consummation of the Asset Purchase or (iii) the Asset Purchase Agreement had been terminated without the consummation of the Asset Purchase, the 2023 Notes would be subject to a special mandatory redemption at 101 % of the principal amount of the Notes then outstanding plus accrued interest.

The 2026 Notes and the 2031 Notes were not subject to any special mandatory redemption if the Asset Purchase had not been completed.

As of July 2, 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”).

As of July 2, 2021 , there were no borrowings outstanding under the Term Credit Agreement.

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

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 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 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 July 2, 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 estimated fair value of debt consists of the following (in millions):

2021 October 2,

0.90% Senior Notes due 2023 $ 501.6 $ —

1.80% Senior Notes due 2026 507.0 —

3.00% Senior Notes due 2031 513.1 —

Total debt $ 1,521.7 $ —

SUBSEQUENT EVENTS

On July 26, 2021, the Company completed the acquisition of certain assets, rights, and properties, and the assumption of certain liabilities, comprising Silicon Laboratories Inc.

(“Silicon Labs”) Infrastructure and Automotive business (the “Business”) in an all-cash transaction valued at $ 2.75 billion (the “Asset Purchase”).

The Company expects to account for the Asset Purchase as a business combination and is currently evaluating the purchase price allocation.

It is not practicable to disclose the preliminary purchase price allocation or unaudited pro forma combined financial information for this transaction, given the short period of time between the acquisition date and the issuance of these consolidated financial statements.

In connection with the Asset Purchase, 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.

Interest on the Term Loans 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.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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Words such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “seek,” “should,” “will,” “would,” and similar expressions or variations or negatives of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this report.

Additionally, statements concerning future matters such as the possible impacts of the COVID-19 pandemic, the development of new products, enhancements of technologies, sales levels, expense levels, the benefits of the acquisition of Silicon Labs’ Infrastructure and Automotive business, and other statements regarding matters that are not historical are forward-looking statements.

Additionally, statements concerning future matters such as the possible impacts of the COVID-19 pandemic, the development of new products, enhancements of technologies, sales levels, expense levels, the benefits of acquisitions we have made or may make in the future and other statements regarding matters that are not historical are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management as of the date the statement is first made, such statements can only be based on facts and factors then known by us.

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The COVID-19 pandemic and the resulting economic downturn are affecting business conditions in our industry.

The duration, severity, and future impact of the pandemic, including as a result of more contagious variants of the virus that causes COVID-19, continue to be highly uncertain and could still result in significant disruptions to our business operations, including our supply chain, as well as negative impacts to our financial condition.

A renewed suspension of our operations in Mexicali, Mexico, similar to what we experienced in April 2020, or a continued reduction in our production capacity due to employee quarantines, employee absenteeism, and restrictions on certain of our employees’ ability to work, would negatively impact our future operating results.

The duration, severity, and future impact of the pandemic, including as a result of more contagious variants of the virus that causes COVID-19, continue to be highly uncertain and could still result in significant disruptions to our business operations, as well as negative impacts to our financial condition.

Like many companies in t he semiconductor industry, we are experiencing various supply constraints due to the pandemic.

While we are working with our global supply chain partners to mitigate this risk, the duration and extent of the supply chain disruptions remain uncertain.

RESULTS OF OPERATIONS

Three and Nine Months Ended July 2, 2021 , and June 26, 2020

Three Months Ended December 31, 2021, and January 1, 2021

The following table sets forth the results of our operations expressed as a percentage of net revenue:

Three Months Ended Nine Months Ended

2021 June 26,

Three Months Ended

2021 January 1,

Net revenue 100.0 % 100.0 %

9 unchanged sentences

Interest expense (0.7) —

Other income (expense), net (0.1) (0.5) — —

Other income, net 0.1 —

Income before income taxes 28.9 37.7

Provision (benefit) for income taxes (0.2) 1.9 2.8 2.4

Provision for income taxes 2.4 4.1

Net income 26.5 % 33.6 %

1 unchanged sentence

Our highly innovative analog semiconductors are connecting people, places, and things spanning a number of new and previously unimagined applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, entertainment and gaming, industrial, medical, military, smartphone, tablet, and wearable markets.

During the nine months ended July 2, 2021 , the following key factors contributed to our overall results of operations, financial position, and cash flows:

• Net revenue increased by 58.3% to $ 3,798.2 million for the nine months ended July 2, 2021 , as compared with the corresponding period in fiscal 2020.

This increase in revenue was driven primarily by an increase in overall demand for wireless connectivity products coupled with the onset of technology upgrade cycles, including for 5G and Wi-Fi 6 solutions.

Additionally, our average content per device for these next-generation solutions increased.

• Our ending cash, cash equivalents, and marketable securities balance increased 203.9% to $2,978.1 million as of July 2, 2021 , from $980.0 million as of October 2, 2020.

The increase in cash, cash equivalents and marketable securities during the nine months ended July 2, 2021 , was primarily due to the issuance of $500.0 million of Senior Notes due 2023 (the “2023 Notes”), $500.0 million of Senior Notes due 2026 (the “2026 Notes”), and $500.0 million of Senior Notes due 2031 (the “2031 Notes” and, together with the 2023 Notes and the 2026 Notes, the “Notes”) in order to fund the anticipated Asset Purchase.

The remaining increase was primarily the result of cash generated from operations of $1,373.7 million, partially offset by capital expenditures of $ 374.8 million, the repurchase of 1.4 million shares of common stock for $ 195.6 million, and dividend payments of $ 248.1 million.

Three Months Ended Nine Months Ended

2021 Change June 26,

During the three months ended December 31, 2021, the following key factors contributed to our overall results of operations, financial position, and cash flows:

• Net revenue slightly increased to $1,510.4 million for the three months ended December 31, 2021, as compared to $1,510.0 million for the corresponding period in fiscal 2021, driven primarily by our prior year fourth quarter acquisition to support high-growth market segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication and data center, automotive, and smart home.

• Our ending cash, cash equivalents, and marketable securities balance decreased slightly to $1,016.9 million as of December 31, 2021, from $1,027.2 million as of October 1, 2021.

The minimal decrease in cash, cash equivalents, and marketable securities during the three months ended December 31, 2021, was primarily due to the repurchase of 1.7 million shares of common stock for $ 269.4 million, capital expenditures of $ 95.8 million, dividend payments of $ 92.5 million, and repayments of Term Loans (as defined below) of $50.0 million, mostly offset by cash generated from operations of $581.7 million.

Three Months Ended

2021 Change January 1,

(dollars in millions)

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We generally experience seasonal peaks during our fourth and first fiscal quarters (which correspond to the second half of the calendar year), primarily as a result of increased worldwide production of consumer electronics in anticipation of increased holiday sales, whereas our second and third fiscal quarters are typically lower and in line with seasonal industry trends.

The increase in net revenue for the three and nine months ended July 2, 2021 , as compared with the corresponding period in fiscal 2020, was driven primarily by an increase in overall demand for wireless connectivity products coupled with the onset of technology upgrade cycles, including for 5G and Wi-Fi 6 solutions.

Additionally, our average content per device for these next-generation solutions increased.

Three Months Ended Nine Months Ended

2021 Change June 26,

The slight increase in net revenue for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was driven primarily by our prior year fourth quarter acquisition to support high-growth market segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication and data center, automotive, and smart home.

Three Months Ended

2021 Change January 1,

(dollars in millions)

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Gross profit represents net revenue less cost of goods sold.

Our cost of goods sold consists primarily of purchased materials, labor, and overhead (including depreciation and share-based compensation expense) associated with product manufacturing.

Erosion of average selling prices of established products is typical of the semiconductor industry.

As part of our normal course of business, we mitigate the gross margin impact of declining average selling prices with efforts to increase unit volumes, reduce material costs, improve manufacturing efficiencies, lower manufacturing costs of existing products, and by introducing new and higher value-added products.

The increase in gross profit for the three months ended July 2, 2021 , as compared with the corresponding period in fiscal 2020, was primarily the result of a favorable product mix and higher unit volumes with a gross profit impact of $197.9 million, partially offset by lower average selling prices.

In addition, there was a $23.4 million production utilization charge in the three months ended June 26, 2020, due to the temporary suspension of our operations in Mexicali in the government's effort to contain the COVID-19 pandemic.

Gross profit margin increased to 50.0% of net revenue for the three months ended July 2, 2021 , as compared with 45.3% in the corresponding period in fiscal 2020.

The increase in gross profit for the nine months ended July 2, 2021 , as compared with the corresponding period in fiscal 2020, was primarily the result of a favorable product mix and higher unit volumes with a gross profit impact of $766.0 million, partially offset by lower average selling prices.

In addition, there was a $23.4 million production utilization charge in the nine months ended June 26, 2020, due to the temporary suspension of our operations in Mexicali in the government's effort to contain the COVID-19 pandemic.

Gross profit margin increased to 50.0% of net revenue for the nine months ended July 2, 2021 , as compared with 48.1% in the corresponding period in fiscal 2020.

Our cost of goods sold consists primarily of purchased materials, labor, and overhead (including depreciation, share-based compensation, and amortization of acquisition intangibles, including inventory step-up expense) associated with product manufacturing.

As part of our normal course of business, we intend to improve gross profit with efforts to increase unit volumes, improve manufacturing efficiencies, lower manufacturing costs of existing products, and by introducing new and higher value-added products.

The decrease in gross profit for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily the result of an increase in amortization of acquisition intangibles, including inventory step-up, due to additional intangible assets acquired during fiscal 2021.

Research and Development

Three Months Ended Nine Months Ended

2021 Change June 26,

Three Months Ended

2021 Change January 1,

(dollars in millions)

2 unchanged sentences

Research and development expenses consist primarily of direct personnel costs including share-based compensation expense, costs for pre-production evaluation, and testing of new devices, masks, engineering prototypes, and design tool costs.

The increase in research and development expenses for the three and nine months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was primarily related to headcount-related expenses as a result of our increased investment in developing new technologies and products.

The increase in research and development expenses for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily related to headcount-related expenses, including share-based compensation, as a result of our increased investment in developing new technologies and products.

The increase in headcount was partially due to our acquisition in fiscal 2021.

Selling, General, and Administrative

Three Months Ended Nine Months Ended

2021 Change June 26,

Three Months Ended

2021 Change January 1,

(dollars in millions)

2 unchanged sentences

Selling, general, and administrative expenses include legal and related costs, accounting, treasury, human resources, information systems, customer service, bad debt expense, sales commissions, share-based compensation expense, advertising, marketing, costs associated with business combinations completed or contemplated during the period, and other costs.

The increase in selling, general, and administrative expenses for the three and nine months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was primarily related to increases in costs associated with business combinations contemplated during the period and increases in employee-related compensation expense, including share-based compensation expense.

The increase in selling, general, and administrative expenses for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily related to increases in headcount-related expenses, including share-based compensation.

The increase in headcount was primarily due to our acquisition in fiscal 2021.

Amortization of Intangibles

Three Months Ended Nine Months Ended

2021 Change June 26,

Three Months Ended

2021 Change January 1,

(dollars in millions)

1 unchanged sentence

% of net revenue 2.2 % 0.2 %

The decrease in amortization expense for the three and nine months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was primarily due to the end of the useful lives of certain intangible assets that were acquired in prior fiscal years.

The increase in amortization expense for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily due to additional intangible assets acquired during fiscal 2021.

Interest Expense

Three Months Ended Nine Months Ended

2021 Change June 26,

Three Months Ended

2021 Change January 1,

(dollars in millions)

1 unchanged sentence

% of net revenue (0.7) % — %

The increase in interest expense for the three and nine months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was due to the issuance of the Notes in May 2021.

The increase in interest expense for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was due to the issuance of the Notes (as defined below) in May 2021 and the borrowing of the Term Loans (as defined above) in July 2021.

Provision for Income Taxes

Three Months Ended Nine Months Ended

2021 Change June 26,

Three Months Ended

2021 Change January 1,

(dollars in millions)

Provision (benefit) for income taxes $ ( 1.6 ) (111.2) % $ 14.3 $ 110.5 91.4 % $ 57.7

Provision for income taxes $ 36.2 (41.2) % $ 61.6

% of net revenue 2.4 % 4.1 %

We recorded a benefit for income taxes of $ 1.6 million (which consisted of a benefit of $ 13.8 million and a provision of $ 12.2 million related to United States and foreign income taxes, respectively) and a provision of $ 110.5 million (which consisted

of $ 63.7 million and $ 46.8 million related to United States and foreign income taxes, respectively) for the three and nine months ended July 2, 2021 , respectively.

During fiscal 2021, we concluded an IRS examination of our federal income tax returns for fiscal 2015 and 2016.

With the conclusion of the audit, we decreased the reserve for uncertain tax positions, which resulted in the recognition of an income tax benefit of $42.8 million and $34.8 million during the three and nine months ended July 2, 2021 , respectively.

The decrease in income tax expense for the three months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was primarily due to a decrease in the reserve for uncertain tax positions, partially offset by increased income from operations, a reduction in the relative amount of benefits related to foreign income taxed at rates lower than the federal statutory rate, and a reduction in the relative amount of windfall tax deductions as compared to income from operations.

The increase in income tax expense for the nine months ended July 2, 2021 , as compared with the corresponding periods in fiscal 2020, was primarily due to increased income from operations, a reduction in the relative amount of benefits related to foreign income taxed at rates lower than the federal statutory rate, and a reduction in the relative amount of windfall tax deductions as compared to income from operations, partially offset by a decrease in the reserve for uncertain tax positions.

We recorded a provision for income taxes of $ 36.2 million (which consisted of $ 18.4 million and $ 17.8 million related to United States and foreign income taxes, respectively) for the three months ended December 31, 2021.

The decrease in income tax expense for the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily due to a decrease in income from operations and an increase in windfall tax deductions.

LIQUIDITY AND CAPITAL RESOURCES

Nine Months Ended

(in millions) July 2,

2021 June 26,

Three Months Ended

(in millions) December 31,

2021 January 1,

Cash and cash equivalents at beginning of period $ 882.9 $ 566.7

1 unchanged sentence

Net cash used in investing activities (98.0) (111.0)

Net cash provided by (used in) financing activities 1,005.6 (606.5)

Net cash used in financing activities (490.2) (323.6)

Cash and cash equivalents at end of period $ 876.4 $ 617.2

1 unchanged sentence

Cash provided by operating activities consists of net income for the period adjusted for certain non-cash items and changes in certain operating assets and liabilities.

The $436.2 million increase in cash provided by operating activities during the nine months ended July 2, 2021, as compared with the corresponding period in fiscal 2020, was primarily related to a $604.1 million increase in net income, partially offset by $178.5 million of unfavorable changes in working capital, due primarily to an increase in net cash outflows for accounts receivable which correlates with higher sales during the period.

The $96.6 million increase in cash provided by operating activities during the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily related to favorable changes in working capital of $96.2 million, due primarily to changes in accounts receivable.

Cash used in investing activities:

Cash used in investing activities consists primarily of capital expenditures and cash paid related to the purchase of marketable securities, offset by cash received related to the sale or maturity of marketable securities.

The $290.0 million decrease in cash used in investing activities during the nine months ended July 2, 2021, as compared with the corresponding period in fiscal 2020, was primarily related to a $421.1 million increase in the net sale of marketable securities, partially offset by a $131.3 million increase in cash used for capital expenditures.

Cash provided by financing activities:

Cash provided by financing activities consists primarily of proceeds and payments related to our long-term borrowings and cash transactions related to equity.

The $1,612.1 million net increase in cash provided by financing activities during the nine months ended July 2, 2021, as compared with the corresponding period in fiscal 2020, was primarily related to an increase of $1,489.7 million in long-term debt issued and a decrease of $220.9 million in stock repurchase activity, partially offset by an increase of $24.6 million in dividend payments, a decrease of $44.4 million in net proceeds from employee stock option exercises, and an increase of $22.7 million related to the minimum statutory payroll tax withholdings upon vesting of employee performance and restricted stock awards.

Cash, cash equivalents, and marketable securities totaled $2,978.1 million as of July 2, 2021, representing an increase of $1,998.1 million from October 2, 2020.

The increase resulted from $1,489.7 million in long-term debt issued, $1,373.7 million in cash generated from operations, partially offset by $374.8 million in capital expenditures, $195.6 million used to repurchase 1.4 million shares of stock, and $248.1 million in cash dividend payments.

We have outstanding $500 million of Notes Due 2023, $500 million of Notes Due 2026, and $500 million of Notes Due 2031.

The $13.0 million decrease in cash used in investing activities during the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily related to a $23.1 million decrease in cash used for capital expenditures, partially offset by an $8.6 million decrease in the net sales of marketable securities.

Cash used in financing activities:

Cash used in financing activities consists primarily of proceeds and payments related to our long-term borrowings and cash transactions related to equity.

The $166.6 million increase in cash used in financing activities during the three months ended December 31, 2021, as compared with the corresponding period in fiscal 2021, was primarily related to an increase of $73.8 million in stock repurchase activity, a $50.0 million repayment of Term Loans, an increase of $32.4 million related to the minimum statutory payroll tax withholdings upon vesting of employee performance and restricted stock awards, and an increase of $9.5 million in dividend payments.

Cash, cash equivalents, and marketable securities totaled $1,016.9 million as of December 31, 2021, representing a decrease of $10.3 million from October 1, 2021.

We have outstanding $500.0 million of Notes Due 2023, $500.0 million of Notes Due 2026, and $500.0 million of Notes Due 2031 (the "Notes").

We have 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 Infrastructure and Automotive business of Silicon Laboratories Inc.

and to pay fees and expenses incurred in connection therewith.

During the three months ended December 31, 2021, we repaid $50.0 million of outstanding borrowings under the Term Loans.

As of December 31, 2021, there were $700.0 million of borrowings outstanding under the Term Credit Agreement.

We have a Revolving Credit Agreement (the “Revolving Credit Agreement”) under which we may borrow up to $750.0 million for general corporate purposes and working capital needs of the Company and its subsidiaries.

As of July 2, 2021, there were no borrowings outstanding under the revolving credit facility (the “Revolver”).

As of December 31, 2021, there were no borrowings outstanding under the revolving credit facility (the “Revolver”).

The Revolving Credit Agreement expires July 26, 2026.

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

As of July 2, 2021, there were no borrowings outstanding under the Term Credit Agreement.

On July 26, 2021, we borrowed $1.0 billion in aggregate principal amount of 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.

Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, the cash we expect to generate from operations, proceeds from the Term Loan Facility, and funds from our Revolver will be sufficient to fund our research and development, capital expenditures, potential acquisitions, working capital, quarterly cash dividend payments (if such dividends are declared by the Board of Directors), outstanding commitments, and other liquidity requirements associated with existing operations for at least the next 12 months.

Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, the cash we expect to generate from operations, and funds from our Revolver, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from:

research and development, capital expenditures, potential acquisitions, working capital, quarterly cash dividend payments (if such dividends are declared by the Board of Directors), outstanding commitments, and other liquidity requirements associated with existing operations.

However, we cannot be certain that our cash on hand, cash generated from operations, and funds from our Revolver will be available in the future to fund all of our capital and operating requirements.

2 unchanged sentences

Our invested cash balances primarily consist of highly liquid marketable securities that are available to meet near-term cash requirements including:

term deposits, certificates of deposits, money market funds, U.S.

term deposits, certificates of deposit, money market funds, U.S.

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

We are exposed to interest rate risk via the terms of our Revolver and Term Loan Facility, which have variable interest rates.

See Note 13 of the Notes to Consolidated Financial Statements for further information.

A potential change in the associated interest rates would be immaterial to the results of our operations.

CONTRACTUAL OBLIGATIONS

Except for the issuance of our Notes, our contractual obligations disclosure in the 2020 10-K has not materially changed since we filed that report.

Refer to Note 13 of the Notes to Consolidated Financial Statements for further information.

Our contractual obligations disclosure in the 2021 10-K has not materially changed since we filed that report.

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