What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-23 compared with 2021-11-24 · 194 added, 201 removed, 731 unchanged (35% of the section changed)

2 unchanged sentences

(1) Report of Independent Registered Public Accounting Firm

(2) Consolidated Statements of Operations for the three years ended October 1, 2021

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

(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

(6) Consolidated Statements of Stockholders’ Equity for the three years ended October 1, 2021

(2) Consolidated Statements of Operations for the three years ended September 30, 2022

(3) Consolidated Statements of Comprehensive Income for the three years ended September 30, 2022

(4) Consolidated Balance Sheets at September 30, 2022, and October 1, 2021

(5) Consolidated Statements of Cash Flows for the three years ended September 30, 2022

(6) Consolidated Statements of Stockholders’ Equity for the three years ended September 30, 2022

(7) Notes to Consolidated Financial Statements

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

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 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.

and subsidiaries (the Company) as of September 30, 2022 and October 1, 2021, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ equity for each of the years in the three-year period ended September 30, 2022, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of September 30, 2022, 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 September 30, 2022 and October 1, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2022, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective 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.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in fiscal 2020 due to the adoption of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) Topic 842, Leases .

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

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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;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

and (3) provide reasonable

assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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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.

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.

Application of tax laws and regulations

As discussed in Note 2 and Note 9 to the consolidated financial statements, the Company recorded an income tax provision of $201.4 million for the year ended September 30, 2022, which is comprised of current and deferred taxes on domestic and foreign income.

The application of tax laws and regulations to calculate tax liabilities is subject to legal and factual interpretation, judgment, and uncertainty in a multitude of jurisdictions.

Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings.

We identified the evaluation of the application of tax laws and regulations in certain jurisdictions as a critical audit matter.

Challenging auditor judgment and the involvement of tax professionals with specialized skills and knowledge were required due to the Company’s application of the tax laws and regulations within the manually prepared income tax provision.

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 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 evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process, including controls relating to the application of the tax laws and regulations.

We involved tax professionals with specialized skills and knowledge, who assisted in evaluating the Company’s application of the tax laws and regulations in certain jurisdictions, including the resulting calculations, within the manually prepared income tax provision.

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

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Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Net revenue $ 5,485.5 $ 5,109.1 $ 3,355.7

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Interest expense ( 47.9 ) ( 13.4 ) —

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

Other expense, net ( 2.5 ) ( 0.6 ) ( 0.1 )

Income before income taxes 1,476.6 1,598.7 891.7

12 unchanged sentences

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Net income $ 1,275.2 $ 1,498.3 $ 814.8

Other comprehensive income, net of tax

Other comprehensive income (loss), net of tax:

Fair value of investments ( 0.2 ) ( 0.5 ) 0.1

5 unchanged sentences

(In millions, except per share amounts)

September 30,

2022 October 1,

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Receivables, net of allowances of $ 0.8 and $ 0.7 , respectively

1,094.0 756.2

Inventory 1,212.1 885.0

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Accrued compensation and benefits 114.3 135.3

Current portion of long-term debt 499.2 —

Other current liabilities 339.2 287.2

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525.0 shares authorized;

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

160.2 shares issued and outstanding at September 30, 2022, and 165.3 shares issued and outstanding at October 1, 2021

Additional paid-in capital 11.9 79.6

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Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Cash flows from operating activities:

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Amortization of debt discount and issuance costs 4.0 1.1 —

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

Other, net ( 1.5 ) 0.2 3.8

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Payments for acquisitions — ( 2,751.0 ) —

Receipts from the sales of property, plant, and equipment 7.7 — —

Net cash used in investing activities ( 378.9 ) ( 3,133.2 ) ( 581.4 )

17 unchanged sentences

Non-cash investing in capital expenditures, accrued but not paid $ 43.2 $ 29.3 $ 78.7

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

See accompanying Notes to Consolidated Financial Statements.

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Dividends declared — — — — — ( 307.0 ) — ( 307.0 )

Other comprehensive loss — — — — — — 0.8 0.8

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

Other comprehensive income — — — — — — 0.1 0.1

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

1 unchanged sentence

Share-based compensation expense — — — — 158.1 — — 158.1

Stock repurchase program ( 6.3 ) ( 1.6 ) 6.3 ( 647.5 ) 1.6 — — ( 647.5 )

Repurchase and retirement of common stock ( 1.4 ) ( 0.4 ) ( 67.1 ) 4,147.0 ( 3,549.9 ) ( 792.3 ) — ( 195.6 )

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

Other comprehensive income — — — — — — 0.1 0.1

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

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

Balance at October 1, 2021 165.3 $ 41.3 — $ ( 1.7 ) $ 79.6 $ 5,185.8 $ ( 7.9 ) $ 5,297.1

2 unchanged sentences

Share-based compensation expense — — — — 173.9 — — 173.9

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 ) — —

Repurchase and retirement of common stock ( 6.5 ) ( 1.6 ) ( 0.6 ) 90.2 ( 309.4 ) ( 666.0 ) — ( 886.8 )

Dividends declared — — — — — ( 373.1 ) — ( 373.1 )

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

Other comprehensive income — — — — — — 3.1 3.1

Balance at October 1, 2021 165.3 $ 41.3 — $ ( 1.7 ) $ 79.6 $ 5,185.8 $ ( 7.9 ) $ 5,297.1

Balance at September 30, 2022 160.2 $ 40.0 — $ — $ 11.9 $ 5,421.9 $ ( 4.8 ) $ 5,469.0

See accompanying Notes to Consolidated Financial Statements.

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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.

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

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

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 2022 and 2021 each consisted of 52 weeks and ended on September 30, 2022, and October 1, 2021, respectively.

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

Use of Estimates

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 during the reporting period.

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

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Maintenance and repairs are expensed as incurred.

Depreciation is calculated using the straight-line method over the estimated useful lives, which range from five to thirty years for buildings and improvements and three to ten years for machinery and equipment.

Depreciation is calculated using the straight-line method over the estimated useful lives, which range from five to forty years for buildings and improvements and three to ten years for machinery and equipment.

Leasehold improvements are depreciated over the lesser of the economic life or the life of the associated lease.

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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 on its sales to trade customers.

The Company records

net revenue excluding taxes on its sales to trade customers.

The Company recognizes shipping fees, if any, received from customers in revenue and includes the related shipping and handling costs in cost of revenue.

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

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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 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.

Contract exit costs include contract termination fees and are recognized in the period in which the Company terminates the contract.

Foreign Currencies

3 unchanged sentences

Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

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.

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.

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.

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Diluted earnings per share incorporate the potentially dilutive incremental shares issuable upon the assumed exercise of stock options, the assumed vesting of outstanding restricted stock units, and the assumed issuance of common stock under the stock purchase plan using the treasury share 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.

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.

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.

Stock Repurchase

The Company accounts for stock repurchases in the consolidated balance sheet by reducing common stock for the par value of the shares, reducing paid-in capital for the amount in excess of par to zero during the period in which the shares are repurchased, and recording the residual amount, if any, to retained earnings.

Recently Issued Accounting Guidance

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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.

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

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

BUSINESS COMBINATIONS

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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 to the assets and liabilities recognized in the Company’s acquisition of the I&A business was considered final at the time of filing the 2021 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):

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Current Noncurrent

Available-for-sale:

2021 October 2,

September 30,

2022 October 1,

2021 September 30,

2022 October 1,

2 unchanged sentences

Municipal bonds 7.0 12.6 — 1.1

Total $ 137.2 $ 408.1 $ 7.1 $ 5.2

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.

Total marketable securities $ 20.3 $ 137.2 $ 0.5 $ 7.1

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

Neither gross unrealized gains and losses nor realized gains and losses were material as of September 30, 2022, and October 1, 2021, respectively.

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

The Company measures certain assets and liabilities at fair value on a recurring basis such as its financial instruments.

There have been no transfers between Level 1, 2, or 3 assets or liabilities during the fiscal year ended October 1, 2021.

There have been no transfers between Level 1, 2, or 3 assets or liabilities during fiscal 2022 .

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

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

As of September 30, 2022 As of October 1, 2021

Fair Value Measurements Fair Value Measurements

3 unchanged sentences

Municipal bonds 7.0 — 7.0 — 13.7 — 13.7 —

Total $ 1,027.2 $ 885.5 $ 141.7 $ — $ 980.0 $ 604.4 $ 375.6 $ —

Total assets at fair value $ 586.8 $ 569.3 $ 17.5 $ — $ 1,027.2 $ 885.5 $ 141.7 $ —

(1) Cash equivalents included in Levels 1 and 2 consist of money market funds and corporate bonds and notes, commercial paper, and agency securities purchased with less than ninety days until maturity.

1 unchanged sentence

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 2021, there were no indicators of impairment identified.

During fiscal 2022, the Company recorded impairment charges of $ 20.7 million primarily related to the abandonment of two previously capitalized IPR&D projects.

During the fiscal years ended October 1, 2021, and October 2, 2020, the Company recorded impairment charges of $ 7.1 million and $ 11.8 million, respectively.

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.

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 carrying amount and estimated fair value of debt consists of the following (in millions):

September 30,

2022 October 1,

Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

0.90% Senior Notes due 2023 $ 499.2 $ 488.5 $ 497.9 $ 501.0

1.80% Senior Notes due 2026 496.8 431.2 496.0 507.5

3.00% Senior Notes due 2031 494.5 377.6 493.9 514.6

Total debt under Senior Notes $ 1,490.5 $ 1,297.3 $ 1,487.8 $ 1,523.1

Inventory consists of the following (in millions):

September 30,

2022 October 1,

6 unchanged sentences

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

September 30,

2022 October 1,

8 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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 Company’s goodwill balance was $ 2,176.7 million as of each of September 30, 2022, and October 1, 2021.

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.

There were no other indicators of impairment noted during the fiscal year ended October 1, 2021.

There were no indicators of impairment noted during the fiscal year ended September 30, 2022.

Intangible assets consist of the following (in millions):

period (years)

October 1, 2021 October 2, 2020

September 30, 2022 October 1, 2021

Customer relationships and backlog 2.3 $ 154.6 $ ( 122.3 ) $ 32.3 $ 174.3 $ ( 44.0 ) $ 130.3

Developed technology and other 4.3 1,280.9 ( 209.2 ) 1,071.7 1,036.9 ( 88.0 ) 948.9

Trademarks 3.0 1.0 ( 1.0 ) — 1.6 ( 1.5 ) 0.1

Technology licenses 2.7 105.1 ( 45.2 ) 59.9 48.4 ( 23.9 ) 24.5

IPR&D 594.9 — 594.9 $ 19.5 — 19.5

In-process research and development 280.8 — 280.8 594.9 — 594.9

Total intangible assets $ 1,821.4 $ ( 376.7 ) $ 1,444.7 $ 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.

During fiscal 2022, $ 293.5 million of IPR&D assets were transferred to definite-lived intangible assets, and are being amortized over their useful lives of 12 years.

Amortization expense related to definite-lived intangible assets was $ 288.4 million, $ 86.8 million, and $ 46.0 million for the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, 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):

2023 2024 2025 2026 2027 Thereafter

Amortization expense, cost of goods sold $ 156.1 $ 144.0 $ 129.5 $ 115.1 $ 100.8 $ 298.8

Amortization expense, operating expense $ 110.3 $ 40.3 $ 5.4 $ 2.3 $ 1.1 $ —

Total amortization expense $ 266.4 $ 184.3 $ 134.9 $ 117.4 $ 101.9 $ 298.8

Amortization expense $ 225.0 $ 177.6 $ 154.2 $ 126.4 $ 111.0 $ 369.7

Income before income taxes consists of the following components (in millions):

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

United States $ 663.0 $ 804.7 $ 435.9

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Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Current tax expense (benefit):

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Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Tax expense at United States statutory rate $ 310.1 $ 335.7 $ 187.3

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Provision for income taxes $ 201.4 $ 100.4 $ 76.9

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.

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 September 30, 2022, October 1, 2021, and October 2, 2020.

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

The Company had accrued $ 18.6 million and $ 139.7 million of the deemed repatriation tax in short-term and long-term liabilities within the consolidated balance sheet, respectively, as of September 30, 2022.

The Company had accrued $ 18.6 million and $ 158.4 million of the deemed repatriation tax in short-term and long-term liabilities within the consolidated balance sheet, respectively, as of October 1, 2021.

The remaining repatriation tax is payable over the next four years:

$ 18.6 million in 2023, $ 34.9 million in 2024, $ 46.6 million in 2025, and $ 58.2 million in 2026.

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

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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 $ 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.

The impact of the tax holiday decreased Singapore taxes owed by $ 96.6 million, $ 99.5 million, and $ 63.1 million for the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, respectively, which resulted in tax benefits of $ 0.59 , $ 0.60 , and $ 0.37 of diluted earnings per share, respectively.

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

1 unchanged sentence

Fiscal Years Ended

September 30,

2022 October 1,

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Property, plant, and equipment 31.4 35.8

Intangible assets 20.4 —

Other, net 8.7 15.0

10 unchanged sentences

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

September 30,

2022 October 1,

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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 $ 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.

As of September 30, 2022, the Company has a valuation allowance of $ 161.4 million.

This valuation allowance is comprised of $ 136.6 million related to United States tax credits, $ 4.8 million related to United States state net operating loss carry forwards, and $ 20.0 million related to foreign deferred tax assets.

The United States 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 United States 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 $ 161.4 million income tax benefit may be recognized.

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 will need to generate $ 130.6 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 September 30, 2022.

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.

6 unchanged sentences

Increases based on positions related to current year 9.3

Decreases relating to settlements with taxing authorities ( 13.6 )

Decreases relating to lapses of applicable statutes of limitations ( 25.5 )

Balance at October 1, 2021 $ 55.3

Of the total unrecognized tax benefits at October 1, 2021, $ 35.9 million would impact the effective tax rate, if recognized.

Balance at September 30, 2022 $ 62.5

Of the total unrecognized tax benefits at September 30, 2022, $ 40.1 million would impact the effective tax rate, if recognized.

The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions that were required to be capitalized.

1 unchanged sentence

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

During fiscal 2022 and fiscal 2020, the Company recognized $ 1.2 million and $ 4.6 million, respectively, of interest or penalties related to unrecognized tax benefits.

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.

Accrued interest and penalties of $ 5.7 million and $ 4.5 million related to uncertain tax positions have been included in long-term tax liabilities within the consolidated balance sheet as of September 30, 2022, and October 1, 2021, respectively.

The Company’s major tax jurisdictions as of September 30, 2022, are the United States, California, Canada, Mexico, Japan, and Singapore.

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

6 unchanged sentences

STOCKHOLDERS’ EQUITY

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.

At September 30, 2022, the Company is authorized to issue 525.0 million shares of common stock, par value $ 0.25 per share, of which 160.2 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.

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

Stock Repurchase

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 September 30, 2022, the Company had no shares of preferred stock issued or outstanding.

Stock Repurchase and Retirement

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

This authorized stock repurchase program replaced in its entirety the stock repurchase program adopted by the Board of Directors on January 30, 2019.

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 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 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).

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).

During the fiscal year ended September 30, 2022, the Company paid approximately $ 886.8 million (including commissions) in connection with the repurchase of 6.5 million shares of its common stock (paying an average price of $ 136.32 per share) under the January 26, 2021, stock repurchase program.

As of September 30, 2022, $ 1.1 billion remained available under the January 26, 2021, stock repurchase program.

During the fiscal years ended September 30, 2022, and October 1, 2021, the Board of Directors approved the retirement of 6.2 million and 68.5 million treasury shares at an aggregate historical cost of $ 893.4 million and $ 4,342.6 million, respectively.

Upon retirement, the shares assumed the status of authorized and unissued.

All future repurchases of shares will assume the status of authorized and unissued.

On November 3, 2022 , the Company announced that the Board of Directors had declared a cash dividend on the Company’s common stock of $ 0.62 per share.

3 unchanged sentences

Fiscal Years Ended

September 30,

2022 October 1,

6 unchanged sentences

Employee Stock Benefit Plans

As of October 1, 2021, the Company has the following equity compensation plans under which its equity securities were authorized for issuance to its employees and/or directors:

As of September 30, 2022, the Company has the following equity compensation plans under which its equity securities were authorized for issuance to its employees and/or directors:

◦ the 2002 Employee Stock Purchase Plan

4 unchanged sentences

Except for the Non-Qualified Employee Stock Purchase Plan, each of the foregoing equity compensation plans was approved by the Company’s stockholders.

As of October 1, 2021, a total of 81.8 million shares are authorized for grant under the Company’s share-based compensation plans, with 0.2 million options outstanding.

The number of common shares reserved for future awards to employees and directors under these plans was 16.3 million at October 1, 2021.

As of September 30, 2022, a total of 81.8 million shares are authorized for grant under the Company’s share-based compensation plans, with 0.1 million options outstanding.

The number of common shares reserved for future awards to employees and directors under these plans was 14.1 million at September 30, 2022.

The Company currently grants new equity awards to employees under the 2015 Long-Term Incentive Plan and to non-employee directors under the 2008 Director Long-Term Incentive Plan.

3 unchanged sentences

Under the plan, up to 24.5 million shares have been authorized for grant.

A total of 14.0 million shares are available for new grants as of October 1, 2021.

A total of 12.1 million shares were available for new grants as of September 30, 2022.

The maximum contractual term of options under the plan is seven years from the date of grant.

7 unchanged sentences

Under the plan a total of 1.5 million shares have been authorized for grant.

A total of 0.6 million shares are available for new grants as of October 1, 2021.

A total of 0.6 million shares were available for new grants as of September 30, 2022.

The maximum contractual term of options granted under the plan is ten years from the date of grant.

6 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 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 $ 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.

Shares of common stock purchased under these plans in the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, were 0.3 million, 0.2 million, and 0.3 million, respectively.

At September 30, 2022, there were 1.4 million shares available for purchase.

The Company recognized compensation expense of $ 9.2 million, $ 8.7 million, and $ 6.6 million for the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, respectively, related to the employee stock purchase plan.

The unrecognized compensation expense on the employee stock purchase plan at September 30, 2022, was $ 3.4 million.

The weighted average period over which the cost is expected to be recognized is approximately four months.

Stock Options

The following table represents a summary of the Company’s stock options:

(in millions)

Weighted average exercise price

Weighted average remaining

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

Balance outstanding at October 2, 2020

Granted — $ 143.87

Exercised ( 0.2 ) $ 66.35

Canceled/forfeited — $ 31.88

Balance outstanding at October 1, 2021

0.2 $ 74.68 1.8 $ 16.7

Exercisable at October 1, 2021

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 1, 2021, October 2, 2020, and September 27, 2019, was $ 39.63 , $ 24.49 , and $ 21.74 , respectively.

Restricted and Performance Awards and Units

7 unchanged sentences

Canceled/forfeited ( 0.3 ) $ 129.80

Non-vested awards outstanding at October 1, 2021 2.7 $ 118.90

Non-vested awards outstanding at September 30, 2022 2.4 $ 139.63

(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 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):

The weighted-average grant date fair value per share for awards granted during the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, was $ 151.20 , $ 148.96 , and $ 99.68 , respectively.

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

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Awards $ 249.6 $ 167.4 $ 100.9

Options $ 18.6 $ 44.2 $ 26.4

Valuation and Expense Information

1 unchanged sentence

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Cost of goods sold $ 26.9 $ 28.9 $ 23.2

4 unchanged sentences

Capitalized share-based compensation expense at period end $ 6.8 $ 9.8 $ 10.6

The following table summarizes total compensation costs related to unvested share-based awards not yet recognized and the weighted average period over which it is expected to be recognized at October 1, 2021:

The following table summarizes total compensation costs related to unvested share-based awards not yet recognized and the weighted-average period over which it is expected to be recognized at September 30, 2022:

Unrecognized compensation cost for unvested awards

1 unchanged sentence

Awards $ 208.2 2.6

Options $ 0.1 1.3

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.

2 unchanged sentences

Fiscal Year Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Volatility of common stock 44.04 % 43.20 % 32.22 %

3 unchanged sentences

Dividend yield 1.40 % 1.39 % 1.78 %

The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

Fiscal Years Ended

2021 October 2,

2020 September 27,

Expected volatility 39.65 % 34.26 % 34.47 %

Risk-free interest rate 0.13 % 1.65 % 2.76 %

Dividend yield 1.39 % 1.78 % 1.84 %

Expected option life (in years) 4.0 4.0 4.0

The Company used a historical volatility calculated by the mean reversion of the weekly-adjusted closing stock price over the expected life of the options.

The risk-free interest rate assumption is based upon observed treasury bill interest rates appropriate for the expected life of the Company’s employee stock options.

The dividend yield was calculated based on the annualized dividend and the stock price on the date of grant.

The expected life of employee stock options represents a calculation based upon the historical exercise, cancellation, and forfeiture experience for the Company across its demographic population.

The Company believes that this historical data is the best estimate of the expected life of a new option and that generally all groups of the Company’s employees exhibit similar behavior.

The Company’s lease arrangements consist primarily of corporate, manufacturing, and other facility agreements as well as various machinery and office equipment agreements.

The Company’s lease arrangements consist primarily of corporate, manufacturing, design, and other facility agreements as well as various machinery and office equipment agreements.

The leases expire at various dates through 2061, some of which include options to extend the lease term.

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 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.

The longest potential total lease term consists of a 40 -year land lease in Osaka, Japan.

During the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, the Company recorded $ 43.6 million, $ 33.9 million, and $ 28.1 million of operating lease expense, and $ 12.3 million, $ 3.2 million, and $ 7.6 million of variable lease expense, respectively.

Supplemental cash information and non-cash activities related to operating leases are as follows (in millions):

Fiscal Year Ended

September 30,

2022 October 1,

1 unchanged sentence

Operating lease assets obtained in exchange for new lease liabilities $ 84.6 $ 24.8

Operating leases are classified as follows (in millions):

Fiscal Year Ended

September 30,

2022 October 1,

Other current liabilities $ 18.5 $ 33.0

Long-term operating lease liabilities 206.9 144.5

Total lease liabilities $ 225.4 $ 177.5

Maturities of lease liabilities under operating leases by fiscal year are as follows (in millions):

September 30,

Thereafter 150.1

5 unchanged sentences

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

September 30,

2022 October 1,

5 unchanged sentences

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights.

From time to time, third parties have asserted and may in the future assert patent, copyright, trademark, and other intellectual property rights to technologies that are important to the Company’s business and have demanded and may in the future demand that the Company license their technology.

Third parties have asserted, and may in the future, assert patent, copyright, trademark, and other intellectual property rights to technologies that are important to the Company’s business and have demanded and may in the future demand that the Company license their technology.

The outcome of any such litigation cannot be predicted with certainty and some such lawsuits, claims, or proceedings may be disposed of unfavorably to the Company.

16 unchanged sentences

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Net income $ 1,275.2 $ 1,498.3 $ 814.8

6 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 1, 2021, October 2, 2020, and September 27, 2019, using the treasury stock method.

The calculation of diluted earnings per share includes the dilutive effect of equity-based awards that were outstanding during the fiscal years ended September 30, 2022, October 1, 2021, and October 2, 2020, using the treasury stock method.

7 unchanged sentences

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.

economic factors.

Individually insignificant OEMs are presented based on sales region.

1 unchanged sentence

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

United States $ 3,685.7 $ 3,228.1 $ 2,012.8

7 unchanged sentences

Fiscal Years Ended

2021 October 2,

September 30,

2022 October 1,

2021 October 2,

Distributors $ 4,488.1 $ 4,539.7 $ 2,599.8

4 unchanged sentences

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

September 30,

2022 October 1,

Japan $ 679.7 $ 598.9

Mexico 362.9 364.9

Singapore 363.3 340.0

Mexico 296.7 362.9

United States 246.0 183.5

6 unchanged sentences

In fiscal 2022, 2021, and 2020, Apple, through sales to multiple distributors, contract manufacturers, and direct sales for multiple applications including smartphones, tablets, desktop, and notebook computers, watches and other devices, in the aggregate accounted for 58 %, 59 %, and 56 % of the Company’s net revenue, respectively.

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

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

At September 30, 2022, the Company’s three largest accounts receivable balances comprised 79 % of aggregate gross accounts receivable.

This concentration was 70 % at October 1, 2021, and 70 % at October 2, 2020.

SUPPLEMENTAL FINANCIAL INFORMATION

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

September 30,

2022 October 1,

Prepaid expenses $ 242.3 $ 106.7

Other 95.2 97.4

Total other current assets $ 337.5 $ 204.1

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

September 30,

2022 October 1,

Accrued taxes $ 88.6 $ 31.2

Operating lease liability 33.0 28.2

Accrued customer liabilities $ 226.9 $ 119.7

Accrued taxes 48.8 88.6

Short-term operating lease liabilities 18.5 33.0

Other 45.0 45.9

Total other current liabilities $ 339.2 $ 287.2

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,

Debt consists of the following (in millions, except percentages):

Effective Interest Rate September 30,

2022 October 1,

5 unchanged sentences

Total debt 2,189.1 2,235.6

current portion of long-term debt 499.2 —

Total $ 1,689.9 $ 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”).

4 unchanged sentences

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.

As of September 30, 2022, the Company considered the likelihood of acceleration related to the 2026 and 2031 Notes and recorded the Notes as long-term debt.

The 2023 Note has been recorded as short-term debt.

Notes are recorded 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.

2 unchanged sentences

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.

During fiscal 2022 and 2021, the Company repaid $ 50.0 million and $ 250.0 million, respectively, of outstanding borrowings under the Term Loans.

As of September 30, 2022, there were $ 700.0 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.

Interest on the Term Loans is payable either monthly or quarterly elected at the Company’s discretion 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.

9 unchanged sentences

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 $ —

As of September 30, 2022, there were no borrowings outstanding under the Revolver.

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