0001104659-21-096693.txt : 20210728 0001104659-21-096693.hdr.sgml : 20210728 20210728091758 ACCESSION NUMBER: 0001104659-21-096693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20210703 FILED AS OF DATE: 20210728 DATE AS OF CHANGE: 20210728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILICON LABORATORIES INC. CENTRAL INDEX KEY: 0001038074 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 742793174 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29823 FILM NUMBER: 211119998 BUSINESS ADDRESS: STREET 1: 400 W CESAR CHAVEZ CITY: AUSTIN STATE: TX ZIP: 78701 BUSINESS PHONE: 5124168500 MAIL ADDRESS: STREET 1: 400 W CESAR CHAVEZ CITY: AUSTIN STATE: TX ZIP: 78701 FORMER COMPANY: FORMER CONFORMED NAME: SILICON LABORATORIES INC DATE OF NAME CHANGE: 20000105 10-Q 1 slab-20210630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission file number: 000-29823

SILICON LABORATORIES INC.

(Exact name of registrant as specified in its charter)

Delaware

    

74-2793174

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

400 West Cesar Chavez, Austin, Texas

    

78701

(Address of principal executive offices)

(Zip Code)

(512) 416-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange
on which registered

Common Stock, $0.0001 par value

SLAB

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

   Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

   Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ    Accelerated filer      Non-accelerated filer     Smaller reporting company     Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

As of July 20, 2021, 44,764,087 shares of common stock of Silicon Laboratories Inc. were outstanding.

Table of Contents

Part I. Financial Information

Page
Number

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets at July 3, 2021 and January 2, 2021

3

Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2021 and July 4, 2020

4

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2021 and July 4, 2020

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended July 3, 2021 and July 4, 2020

6

Condensed Consolidated Statements of Cash Flows for the six months ended July 3, 2021 and July 4, 2020

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

Part II. Other Information

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

44

Item 6.

Exhibits

45

Cautionary Statement

Except for the historical financial information contained herein, the matters discussed in this report on Form 10-Q (as well as documents incorporated herein by reference) may be considered “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include declarations regarding the intent, belief or current expectations of Silicon Laboratories Inc. and its management and may be signified by the words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan,” “project,” “will” or similar language. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those indicated by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed under “Risk Factors” and elsewhere in this report. Silicon Laboratories disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2

Part I. Financial Information

Item 1. Financial Statements

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

July 3,

January 2,

    

2021

    

2021

Assets

Current assets:

Cash and cash equivalents

$

303,084

$

202,720

Short-term investments

 

314,183

 

521,963

Accounts receivable, net

 

99,546

 

95,169

Inventories

 

52,269

 

47,861

Prepaid expenses and other current assets

 

94,378

 

87,103

Current assets held for sale

297,543

21,005

Total current assets

 

1,161,003

 

975,821

Property and equipment, net

 

139,362

 

135,803

Goodwill

 

376,389

 

376,389

Other intangible assets, net

 

140,581

 

163,483

Other assets, net

 

78,667

 

76,675

Non-current assets held for sale

265,316

Total assets

$

1,896,002

$

1,993,487

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

70,820

$

54,949

Current portion of convertible debt, net

134,480

Deferred revenue and returns liability

12,811

12,986

Other current liabilities

 

70,552

 

81,650

Current liabilities held for sale

699

433

Total current liabilities

 

154,882

 

284,498

Convertible debt, net

439,654

428,945

Other non-current liabilities

 

73,712

 

79,752

Non-current liabilities held for sale

451

Total liabilities

 

668,248

 

793,646

Commitments and contingencies

Stockholders’ equity:

Preferred stock – $0.0001 par value; 10,000 shares authorized; no shares issued

 

 

Common stock – $0.0001 par value; 250,000 shares authorized; 44,764 and 43,925 shares issued and outstanding at July 3, 2021 and January 2, 2021, respectively

 

4

 

4

Additional paid-in capital

 

200,716

 

204,359

Retained earnings

 

1,027,105

 

993,664

Accumulated other comprehensive income (loss)

 

(71)

 

1,814

Total stockholders' equity

 

1,227,754

 

1,199,841

Total liabilities and stockholders’ equity

$

1,896,002

$

1,993,487

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

3

Silicon Laboratories Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

    

July 3,

    

July 4,

    

July 3,

    

July 4,

2021

2020

2021

2020

Revenues

$

169,492

$

114,350

$

327,349

$

232,368

Cost of revenues

73,194

 

47,771

139,297

 

96,942

Gross profit

96,298

 

66,579

188,052

 

135,426

Operating expenses:

Research and development

64,832

 

57,992

128,847

 

115,702

Selling, general and administrative

42,953

 

40,350

85,407

 

84,802

Operating expenses

107,785

 

98,342

214,254

 

200,504

Operating loss

(11,487)

(31,763)

(26,202)

 

(65,078)

Other income (expense):

Interest income and other, net

647

3,267

3,522

 

6,518

Interest expense

(6,486)

(11,778)

(17,810)

 

(17,319)

Loss from continuing operations before income taxes

(17,326)

(40,274)

(40,490)

 

(75,879)

Provision (benefit) for income taxes

1,165

 

(4,229)

3,157

 

(8,443)

Loss from continuing operations

(18,491)

(36,045)

(43,647)

(67,436)

Income from discontinued operations, net of income taxes

38,423

34,222

77,088

67,857

Net income (loss)

$

19,932

$

(1,823)

$

33,441

$

421

Basic earnings (loss) per share:

Continuing operations

$

(0.41)

$

(0.82)

$

(0.98)

$

(1.54)

Net income

$

0.44

$

(0.04)

$

0.75

$

0.01

Diluted earnings (loss) per share:

Continuing operations

$

(0.41)

$

(0.82)

$

(0.98)

$

(1.54)

Net income

$

0.44

$

(0.04)

$

0.73

$

0.01

Weighted-average common shares outstanding:

Basic

44,803

43,761

44,481

43,699

Diluted

45,756

43,761

45,794

44,219

 

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

4

Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

July 3,

    

July 4,

    

July 3,

    

July 4,

    

2021

2020

2021

2020

Net income (loss)

$

19,932

$

(1,823)

$

33,441

$

421

Other comprehensive income (loss), before tax

Net changes to available-for-sale securities

Unrealized gains (losses) arising during the period

(564)

 

3,068

(1,400)

 

2,598

Reclassification for gains included in net income (loss)

(39)

(121)

(397)

(222)

Net changes to cash flow hedges

Unrealized gains (losses) arising during the period

388

496

(269)

(311)

Reclassification for (gains) losses included in net income (loss)

(160)

282

(320)

 

423

Other comprehensive income (loss), before tax

(375)

3,725

(2,386)

 

2,488

Provision (benefit) for income taxes

(78)

 

783

(501)

 

523

Other comprehensive income (loss)

(297)

 

2,942

(1,885)

 

1,965

Comprehensive income

$

19,635

$

1,119

$

31,556

$

2,386

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

5

Silicon Laboratories Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended July 3, 2021

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of April 3, 2021

44,749

$

4

$

199,576

$

1,007,173

$

226

$

1,206,979

Net income

 

 

 

19,932

19,932

Other comprehensive loss

 

 

 

 

(297)

 

(297)

Stock issuances, net of shares withheld for taxes

157

 

 

6,473

 

 

 

6,473

Repurchases of common stock

(142)

(18,982)

(18,982)

Stock-based compensation

 

 

13,649

 

 

 

13,649

Balance as of July 3, 2021

44,764

$

4

$

200,716

$

1,027,105

$

(71)

$

1,227,754

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended July 4, 2020

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of April 4, 2020

43,670

$

4

$

116,553

$

983,377

$

(331)

$

1,099,603

Net loss

 

 

 

(1,823)

 

 

(1,823)

Other comprehensive income

 

 

 

 

2,942

 

2,942

Stock issuances, net of shares withheld for taxes

126

 

 

7,295

 

 

 

7,295

Stock-based compensation

 

 

14,458

 

 

 

14,458

Convertible debt issuance

 

 

35,171

 

 

 

35,171

Balance as of July 4, 2020

43,796

$

4

$

173,477

$

981,554

$

2,611

$

1,157,646

    

    

    

Additional

    

    

Accumulated Other 

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Six Months Ended July 3, 2021

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of January 2, 2021

 

43,925

$

4

$

204,359

$

993,664

$

1,814

$

1,199,841

Net income

 

 

 

 

33,441

 

 

33,441

Other comprehensive loss

 

 

 

 

 

(1,885)

 

(1,885)

Stock issuances, net of shares withheld for taxes

 

453

 

 

(11,344)

 

 

 

(11,344)

Repurchases of common stock

(142)

(18,982)

(18,982)

Stock-based compensation

 

 

 

27,431

 

 

 

27,431

Convertible debt activity

528

(748)

(748)

Balance as of July 3, 2021

 

44,764

$

4

$

200,716

$

1,027,105

$

(71)

$

1,227,754

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Six Months Ended July 4, 2020

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of December 28, 2019

 

43,496

$

4

$

133,793

$

980,608

$

646

$

1,115,051

Cumulative effect of adoption of accounting standard

525

525

Net income

 

 

 

 

421

 

421

Other comprehensive income

 

 

 

 

 

1,965

 

1,965

Stock issuances, net of shares withheld for taxes

 

509

 

 

(8,999)

 

 

 

(8,999)

Repurchases of common stock

 

(209)

 

 

(16,287)

 

 

 

(16,287)

Stock-based compensation

29,799

29,799

Convertible debt issuance

 

 

 

35,171

 

 

 

35,171

Balance as of July 4, 2020

 

43,796

$

4

$

173,477

$

981,554

$

2,611

$

1,157,646

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

6

Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended

July 3,

July 4,

    

2021

    

2020

Operating Activities

Net income

$

33,441

$

421

Adjustments to reconcile net income to cash provided by operating activities of
continuing operations:

Income from discontinued operations, net of income taxes

(77,088)

(67,857)

Depreciation of property and equipment

8,184

 

7,711

Amortization of intangible assets and other assets

22,902

 

20,486

Amortization of debt discount and debt issuance costs

11,822

8,359

Loss on extinguishment of convertible debt

3,370

3,685

Stock-based compensation expense

22,620

 

24,461

Deferred income taxes

(5,644)

 

1,177

Changes in operating assets and liabilities:

Accounts receivable

(4,377)

 

7,070

Inventories

(4,447)

 

8,021

Prepaid expenses and other assets

(5,489)

 

22,976

Accounts payable

14,711

 

(769)

Other current liabilities and income taxes

(10,626)

 

(15,480)

Deferred revenue and returns liability

(175)

 

6,678

Other non-current liabilities

(3,464)

1,146

Net cash provided by operating activities of continuing operations

5,740

 

28,085

Investing Activities

Purchases of marketable securities

(80,426)

 

(199,347)

Sales and maturities of marketable securities

286,649

 

255,112

Purchases of property and equipment

(10,779)

 

(9,051)

Purchases of other assets

(578)

(820)

Acquisition of business, net of cash acquired

(316,809)

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

194,866

 

(270,915)

Financing Activities

Proceeds from issuance of debt

845,000

Payments on debt

(140,572)

(597,446)

Repurchases of common stock

(18,982)

(16,287)

Payment of taxes withheld for vested stock awards

(19,732)

(16,756)

Proceeds from the issuance of common stock

8,388

7,757

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

(170,898)

 

222,268

Discontinued Operations

Operating activities

72,674

72,418

Investing activities

(2,018)

(1,343)

Net cash provided by discontinued operations

70,656

71,075

Increase in cash and cash equivalents

100,364

 

50,513

Cash and cash equivalents at beginning of period

202,720

 

227,146

Cash and cash equivalents at end of period

$

303,084

$

277,659

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

7

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Condensed Consolidated Financial Statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly the condensed consolidated financial position of Silicon Laboratories Inc. and its subsidiaries (collectively, the “Company”) at July 3, 2021 and January 2, 2021, the condensed consolidated results of its operations for the three and six months ended July 3, 2021 and July 4, 2020, the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2021 and July 4, 2020, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended July 3, 2021 and July 4, 2020, and the Condensed Consolidated Statements of Cash Flows for the six months ended July 3, 2021 and July 4, 2020. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three and six months ended July 3, 2021 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited Condensed Consolidated Financial Statements do not include certain footnotes and financial presentations normally required under U.S. generally accepted accounting principles (GAAP). Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended January 2, 2021, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 3, 2021.

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2021 will have 52 weeks. Fiscal 2020 had 53 weeks with the extra week occurring in the first quarter of the year. In a 52-week year, each fiscal quarter consists of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those related to inventories, goodwill, acquired intangible assets, other long-lived assets, revenue recognition, stock-based compensation and income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (IC) products. This performance obligation is satisfied when control of the product is transferred to the customer, which typically occurs upon delivery. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.

The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts. Variable consideration primarily includes sales made to distributors under agreements allowing certain rights of return, referred to as stock rotation, and credits issued to the distributor due to price protection. The Company estimates variable consideration at the most likely amount to which it expects to be entitled. The estimate is based on information available to the Company, including recent sales activity and pricing data. The Company applies a constraint to its variable consideration estimate which considers both the likelihood of a return and the amount of a potential price concession. Variable consideration that does not meet revenue recognition criteria is deferred. The Company records a right of return asset in prepaid expenses and other current assets for the costs of distributor inventory not meeting revenue recognition criteria. A corresponding deferred revenue and returns liability amount is recorded for unrecognized revenue associated with such costs. The Company’s products carry a one-year replacement warranty. Payments are typically due within 30 days of invoicing and do not include a significant financing component.

8

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity and requires the use of the if-converted method for calculating diluted earnings per share. The ASU removes separation models for convertible debt with a cash conversion feature. Such convertible instruments will be accounted for as a single liability measured at amortized cost, as long as no other features require bifurcation and recognition as derivatives. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, using one of two retrospective transition methods. Early adoption is permitted for fiscal periods beginning after December 15, 2020. The Company expects the primary impacts of this new standard will be to increase the carrying value of its convertible debt by approximately $78.5 million, with an offsetting reduction in additional paid-in capital, and reduce its reported interest expense. In addition, should the Company be required to use the if-converted method for calculating diluted earnings per share, the number of shares used in such calculation could potentially increase. The Company will continue to evaluate the effect that the adoption of this ASU will have on its financial statements.

2. Discontinued Operations

On April 22, 2021, the Company entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions, Inc. agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising the Company’s infrastructure and automotive business for $2.75 billion in cash. The transaction closed on July 26, 2021. The financial results of the infrastructure and automotive business, which are readily distinguishable from other components of the Company, have been presented as discontinued operations in the Condensed Consolidated Financial Statements.

The following table presents the financial results of the infrastructure and automotive business (the “discontinued operations”) in the Company’s condensed consolidated statements of operations (in thousands):

    

Three Months Ended

    

Six Months Ended

July 3,

July 4,

July 3,

July 4,

2021

    

2020

    

2021

    

2020

Revenues

$

108,064

$

93,183

$

205,712

$

190,042

Costs of revenues and operating expenses

 

70,143

 

54,352

 

130,917

 

113,948

Income from discontinued operations before income taxes

 

37,921

 

38,831

 

74,795

 

76,094

Provision (benefit) for income taxes

 

(502)

 

4,609

 

(2,293)

 

8,237

Income from discontinued operations

$

38,423

$

34,222

$

77,088

$

67,857

Income from discontinued operations per share:

 

  

 

  

 

  

 

  

Basic

$

0.86

$

0.78

$

1.73

$

1.55

Diluted

$

0.84

$

0.78

$

1.68

$

1.53

9

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Discontinued Operations (Continued)

The following table summarizes the assets and liabilities of the infrastructure and automotive business held for sale (in thousands):

    

July 3,

    

January 2,

2021

2021

Assets

 

  

 

  

Inventories

$

30,176

$

18,801

Prepaid expenses and other current assets

1,876

 

2,204

Goodwill

255,543

 

255,543

Other assets

9,947

 

9,772

Total assets held for sale

$

297,543

$

286,321

Liabilities

 

  

Other current liabilities

$

699

$

433

Other non-current liabilities

 

451

Total liabilities held for sale

$

699

$

884

Continuing Involvement

In connection with the closing of the sale, the Company entered into certain ancillary agreements with Skyworks, including a Transition Services Agreement ("TSA"). Through the TSA, the Company will sublease certain premises to Skyworks and provide various temporary support services for three to eighteen months, depending on the service provided. Although the services provided under the TSA will generate continuing cash flows between the Company and Skyworks for the duration of the TSA, the amounts are not expected to be material to the ongoing operations of either entity. In addition, the Company has no contractual ability through the TSA or any other agreement to significantly influence the operating or financial policies of Skyworks.

3. Earnings (Loss) Per Share

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

Three Months Ended

Six Months Ended

    

July 3,

    

July 4,

    

July 3,

    

July 4,

2021

2020

2021

2020

Loss from continuing operations

$

(18,491)

$

(36,045)

$

(43,647)

$

(67,436)

Shares used in computing basic loss per share

44,803

 

43,761

44,481

 

43,699

Effect of dilutive securities:

Stock-based awards and convertible debt

 

 

Shares used in computing diluted loss per share

44,803

 

43,761

44,481

 

43,699

Loss per share:

Basic

$

(0.41)

$

(0.82)

$

(0.98)

$

(1.54)

Diluted

$

(0.41)

$

(0.82)

$

(0.98)

$

(1.54)

10

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Earnings (Loss) Per Share (Continued)

For the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020, approximately 0.0 million, 0.4 million, 0.0 million and 0.3 million shares, respectively, consisting primarily of restricted stock awards (RSUs) and market stock awards (MSUs) granted under our 2009 Stock Incentive Plan, were not included in the diluted loss per share calculation since the shares were anti-dilutive. Further, diluted shares for the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020 excluded 1.0 million, 0.3 million, 1.3 million and 0.5 million shares, respectively, due to the Company’s loss from continuing operations for the periods.

The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion. Accordingly, shares issuable upon conversion of the principal amount using the treasury stock method have been excluded from the calculation of diluted earnings per share. If the market value of the notes under certain prescribed conditions exceeds the conversion amount, the excess is included in the denominator for the computation of diluted earnings per share using the treasury stock method. For the three months ended July 3, 2021 and July 4, 2020 and the six months ended July 3, 2021 and July 4, 2020, approximately 0.5 million, 0.0 million, 0.8 million and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share. See Note 8, Debt, to the Condensed Consolidated Financial Statements for additional information.

4. Fair Value of Financial Instruments

The fair values of the Company’s financial instruments are recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 – Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data.

11

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

4. Fair Value of Financial Instruments (Continued)

The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value.

Fair Value Measurements

at July 3, 2021 Using

Quoted Prices in

Significant Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Description

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Assets:

    

    

    

    

Cash equivalents:

Money market funds

$

161,586

$

$

$

161,586

Corporate debt securities

Total cash equivalents

$

161,586

$

$

$

161,586