10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 30, 2019

or

o     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. x Yes  o 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). x Yes  o 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 x	Non-accelerated filer o
Accelerated filer o	Smaller reporting company o
	Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of April 16, 2019, 43,340,581 shares of common stock of Silicon Laboratories Inc. were outstanding.

Table of Contents

		Page Number
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets at March 30, 2019 and December 29, 2018	3
	Condensed Consolidated Statements of Income for the three months ended March 30, 2019 and March 31, 2018	4
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2019 and March 31, 2018	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 30, 2019 and March 31, 2018	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 2019 and March 31, 2018	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	30
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	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46

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)

	March 30, 2019			December 29, 2018
Assets
Current assets:
Cash and cash equivalents	$	231,144		$	197,043
Short-term investments	382,710			416,779
Accounts receivable, net	69,871			73,194
Inventories	70,489			74,972
Prepaid expenses and other current assets	60,274			64,650
Total current assets	814,488			826,638
Property and equipment, net	138,819			139,049
Goodwill	397,344			397,344
Other intangible assets, net	160,512			170,832
Other assets, net	110,764			90,491
Total assets	$	1,621,927		$	1,624,354
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	41,544		$	41,171
Deferred revenue and returns liability	23,971			22,494
Other current liabilities	69,240			81,180
Total current liabilities	134,755			144,845
Convertible debt	358,093			354,771
Other non-current liabilities	71,597			57,448
Total liabilities	564,445			557,064
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; 43,341 and 43,088 shares issued and outstanding at March 30, 2019 and December 29, 2018, respectively	4			4
Additional paid-in capital	90,988			107,517
Retained earnings	966,741			961,343
Accumulated other comprehensive loss	(251		)	(1,574		)
Total stockholders’ equity	1,057,482			1,067,290
Total liabilities and stockholders’ equity	$	1,621,927		$	1,624,354

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

3

Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 30, 2019			March 31, 2018
Revenues	$	188,113		$	205,384
Cost of revenues	72,239			81,147
Gross profit	115,874			124,237
Operating expenses:
Research and development	61,566			54,828
Selling, general and administrative	49,216			45,694
Operating expenses	110,782			100,522
Operating income	5,092			23,715
Other income (expense):
Interest income and other, net	2,823			3,202
Interest expense	(4,997		)	(4,883		)
Income before income taxes	2,918			22,034
Provision (benefit) for income taxes	(2,480		)	(4,371		)
Net income	$	5,398		$	26,405
Earnings per share:
Basic	$	0.12		$	0.61
Diluted	$	0.12		$	0.60
Weighted-average common shares outstanding:
Basic	43,189			42,963
Diluted	43,716			43,918

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
	March 30, 2019		March 31, 2018
Net income	$	5,398	$	26,405
Other comprehensive income (loss), before tax:
Net changes to available-for-sale securities:
Unrealized gain (losses) arising during the period	1,426		(757		)
Reclassification for losses included in net income	—		49
Net changes to cash flow hedges:
Unrealized gains (losses) arising during the period	12		(24		)
Reclassification for losses included in net income	237		—
Other comprehensive income (loss), before tax	1,675		(732		)
Provision (benefit) for income taxes	352		(154		)
Other comprehensive income (loss)	1,323		(578		)
Comprehensive income	$	6,721	$	25,827

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)

Three Months Ended March 30, 2019	Shares		Common Stock		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of December 29, 2018	43,088		$	4	$	107,517		$	961,343	$	(1,574	)	$	1,067,290
Net income	—		—		—			5,398		—			5,398
Other comprehensive income (loss)	—		—		—			—		1,323			1,323
Stock issuances, net of shares withheld for taxes	430		—		(14,113		)	—		—			(14,113		)
Repurchases of common stock	(177	)	—		(15,004		)	—		—			(15,004		)
Stock-based compensation	—		—		12,588			—		—			12,588
Balance as of March 30, 2019	43,341		$	4	$	90,988		$	966,741	$	(251	)	$	1,057,482

Three Months Ended March 31, 2018	Shares	Common Stock		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of December 30, 2017	42,707	$	4	$	102,862		$	851,307	$	(1,157	)	$	953,016
Cumulative effect of adoption of accounting standard	—	—		—			26,448		(250		)	26,198
Net income	—	—		—			26,405		—			26,405
Other comprehensive income (loss)	—	—		—			—		(578		)	(578		)
Stock issuances, net of shares withheld for taxes	520	—		(16,663		)	—		—			(16,663		)
Stock-based compensation	—	—		12,197			—		—			12,197
Balance as of March 31, 2018	43,227	$	4	$	98,396		$	904,160	$	(1,985	)	$	1,000,575

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)

	Three Months Ended
	March 30, 2019			March 31, 2018
Operating Activities
Net income	$	5,398		$	26,405
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment	4,137			3,704
Amortization of other intangible assets and other assets	10,320			6,427
Amortization of debt discount and debt issuance costs	3,321			3,169
Stock-based compensation expense	12,584			12,192
Deferred income taxes	(3,530		)	(4,780		)
Changes in operating assets and liabilities:
Accounts receivable	3,323			(3,307		)
Inventories	4,488			(3,368		)
Prepaid expenses and other assets	6,410			(17,169		)
Accounts payable	714			13,030
Other current liabilities and income taxes	(15,996		)	(9,643		)
Deferred income, deferred revenue and returns liability	1,477			(2,599		)
Other non-current liabilities	(631		)	(1,849		)
Net cash provided by operating activities	32,015			22,212
Investing Activities
Purchases of available-for-sale investments	(63,577		)	(52,821		)
Sales and maturities of available-for-sale investments	99,068			128,975
Purchases of property and equipment	(3,874		)	(4,102		)
Purchases of other assets	(414		)	(4,698		)
Net cash provided by investing activities	31,203			67,354
Financing Activities
Repurchases of common stock	(15,004		)	—
Payment of taxes withheld for vested stock awards	(14,113		)	(17,871		)
Proceeds from the issuance of common stock	—			1,211
Net cash used in financing activities	(29,117		)	(16,660		)
Increase in cash and cash equivalents	34,101			72,906
Cash and cash equivalents at beginning of period	197,043			269,366
Cash and cash equivalents at end of period	$	231,144		$	342,272

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

7

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 March 30, 2019 and December 29, 2018, the condensed consolidated results of its operations for the three months ended March 30, 2019 and March 31, 2018, the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2019 and March 31, 2018, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 30, 2019 and March 31, 2018, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 2019 and March 31, 2018. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three months ended March 30, 2019 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 December 29, 2018, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on January 30, 2019.

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2019 will have 52 weeks and fiscal 2018 had 52 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Adoption of New Lease Accounting Standard

The Company adopted Accounting Standards Codification (ASC) Topic 842, Leases, on December 30, 2018, the first day of its fiscal year ending December 28, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess historical lease classifications, initial direct costs of existing leases or whether any expired or existing contracts were or contained leases.

The Company elected the retrospective method of adoption at the beginning of the period of adoption through a cumulative-effect adjustment. Prior periods have not been adjusted. The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item	Increase (Decrease)
Prepaid expenses and other current assets	$	(481	)
Other assets, net	$	18,166
Other current liabilities	$	3,516
Other non-current liabilities	$	14,169

8

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The primary impact of the Company’s adoption of ASC 842 resulted from the recognition of right-of-use assets and operating lease liabilities. The adoption had no significant impact to the Condensed Consolidated Statements of Income or to cash provided by or used in net operating, investing or financing activities in the Condensed Consolidated Statements of Cash Flows.

Leases

At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded in other current liabilities and other non-current liabilities. ROU assets are recorded in other assets, net.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term. Lease agreements that contain both lease and non-lease components are generally accounted for separately.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers, 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 and with an original expected duration of one year or less. As allowed under ASC 606, 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 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.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test, which previously measured an impairment loss by comparing the implied fair value of goodwill with its carrying amount. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have a material impact on its financial statements.

9

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required to record allowances for available-for-sale debt securities rather than reduce the carrying amount. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company expects that the adoption will not have a material impact on its financial statements.

2. Earnings Per Share

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Net income	$	5,398	$	26,405
Shares used in computing basic earnings per share	43,189		42,963
Effect of dilutive securities:
Stock options and other stock-based awards	527		955
Shares used in computing diluted earnings per share	43,716		43,918
Earnings per share:
Basic	$	0.12	$	0.61
Diluted	$	0.12	$	0.60

For the three months ended March 30, 2019 and March 31, 2018, approximately 0.5 million and 0.0 million shares, respectively, consisting of restricted stock awards (RSUs) and market stock awards (MSUs), were not included in the diluted earnings per share calculation since the shares were anti-dilutive.

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 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 three months ended March 30, 2019, no such shares were included in the denominator for the calculation of diluted earnings per share. For three months ended March 31, 2018, approximately 0.1 million shares were included in the denominator for the calculation of diluted earnings per share. See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.

10

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. 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.

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 March 30, 2019 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	84,151	$	—	$	—	$	84,151
Corporate debt securities	—		14,665		—		14,665
Government debt securities	21,878		19,463		—		41,341
Total cash equivalents	$	106,029	$	34,128	$	—	$	140,157
Short-term investments:
Government debt securities	$	55,571	$	70,349	$	—	$	125,920
Corporate debt securities	—		256,790		—		256,790
Total short-term investments	$	55,571	$	327,139	$	—	$	382,710
Other assets, net:
Auction rate securities	$	—	$	—	$	5,761	$	5,761
Total	$	—	$	—	$	5,761	$	5,761
Total	$	161,600	$	361,267	$	5,761	$	528,628

11

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

	Fair Value Measurements at December 29, 2018 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	74,990	$	—	$	—	$	74,990
Corporate debt securities	—		18,820		—		18,820
Government debt securities	9,338		—		—		9,338
Total cash equivalents	$	84,328	$	18,820	$	—	$	103,148
Short-term investments:
Government debt securities	$	48,141	$	99,211	$	—	$	147,352
Corporate debt securities	—		269,427		—		269,427
Total short-term investments	$	48,141	$	368,638	$	—	$	416,779
Other assets, net:
Auction rate securities	$	—	$	—	$	5,759	$	5,759
Total	$	—	$	—	$	5,759	$	5,759
Total	$	132,469	$	387,458	$	5,759	$	525,686

Valuation methodology

The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities. The Company’s derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies, and market observable data of similar instruments.

Available-for-sale investments

The Company’s investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at March 30, 2019 (in thousands):

	Cost		Fair Value
Due in one year or less	$	363,143	$	362,990
Due after one year through ten years	159,416		159,877
Due after ten years	6,000		5,761
	$	528,559	$	528,628

12

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
As of March 30, 2019	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	11,437	$	(3	)	$	72,515	$	(325	)	$	83,952	$	(328	)
Corporate debt securities	31,053		(33		)	43,724		(179		)	74,777		(212		)
Auction rate securities	—		—			5,761		(239		)	5,761		(239		)
	$	42,490	$	(36	)	$	122,000	$	(743	)	$	164,490	$	(779	)

	Less Than 12 Months					12 Months or Greater					Total
As of December 29, 2018	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	13,278	$	(10	)	$	88,696	$	(583	)	$	101,974	$	(593	)
Corporate debt securities	112,699		(273		)	76,310		(448		)	189,009		(721		)
Auction rate securities	—		—			5,759		(241		)	5,759		(241		)
	$	125,977	$	(283	)	$	170,765	$	(1,272	)	$	296,742	$	(1,555	)

The gross unrealized losses as of March 30, 2019 and December 29, 2018 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities. The Company’s auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders exceeded buy orders. These securities have a contractual maturity date of 2046. The Company is unable to predict if these funds will become available before their maturity date.

The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the severity and duration of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. As of March 30, 2019, the Company has determined that no other-than-temporary impairment losses existed.

At March 30, 2019 and December 29, 2018, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Level 3 fair value measurements

The following summarizes quantitative information about Level 3 fair value measurements.

Auction rate securities

Fair Value at March 30, 2019 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	5,761	Discounted cash flow	Estimated yield	3.42%
			Expected holding period	10 years
			Estimated discount rate	3.43%

13

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves the analysis of valuation techniques and evaluation of unobservable inputs commonly used by market participants to price similar instruments, and which have been demonstrated to provide reasonable estimates of prices obtained in actual market transactions. Outputs from the valuation process are assessed against various market sources when they are available, including marketplace quotes, recent trades of similar illiquid securities, benchmark indices and independent pricing services. The technique and unobservable input parameters may be recalibrated periodically to achieve an appropriate estimation of the fair value of the securities.

Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly lower or higher fair value measurement. An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding period or estimated discount rate would result in a lower fair value measurement. Generally, a change in the assumptions used for expected holding period is accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate.

The following summarizes the activity in Level 3 financial instruments for the three months ended March 30, 2019 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	5,759
Gain included in other comprehensive income (loss)	2
Balance at March 30, 2019	$	5,761

Fair values of other financial instruments

The Company’s debt is recorded at cost, but is measured at fair value for disclosure purposes. The fair value of the Company’s convertible senior notes is determined using observable market prices. The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement. As of March 30, 2019 and December 29, 2018, the fair value of the convertible senior notes was $433.8 million and $419.0 million, respectively.

The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

4. Derivative Financial Instruments

The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates. The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. The Company does not use derivative contracts for speculative or trading purposes. The Company recognizes derivatives, on a gross basis, in the Consolidated Balance Sheet at fair value. Cash flows from derivatives are classified according to the nature of the cash receipt or payment in the Consolidated Statement of Cash Flows.

14

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Cash Flow Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S. dollar. Changes in the fair value of the contracts are recorded in accumulated other comprehensive loss in the Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized. The reclassified amount is reported in the same financial statement line item as the hedged item. If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in the Norwegian Krone. As of March 30, 2019, the contracts had maturities of one to twelve months and an aggregate notional value of $8.9 million. Losses expected to be reclassified into earnings in the next 12 months were not material. The fair value of the contracts, contract losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive loss into earnings were not material for any of the periods presented.

Non-designated Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to these foreign currency forward contracts.

As of March 30, 2019, the Company held one foreign currency forward contract denominated in Singapore Dollars with a notional value of $6.6 million. The fair value of the contract and contract losses recognized in income were not material for any of the periods presented.

5. Balance Sheet Details

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

Inventories

	March 30, 2019		December 29, 2018
Work in progress	$	46,996	$	50,983
Finished goods	23,493		23,989
	$	70,489	$	74,972

15

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6.  Debt

1.375% Convertible Senior Notes

On March 6, 2017, the Company completed a private offering of $400 million principal amount convertible senior notes (the “Notes”). The Notes bear interest semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date. The Company used $72.5 million of the proceeds to pay off the then remaining balance under its credit agreement.

The Notes are convertible at an initial conversion rate of 10.7744 shares of common stock per $1,000 principal amount of the Notes, or approximately 4.3 million shares of common stock, which is equivalent to a conversion price of approximately $92.81 per share. The conversion rate is subject to adjustment under certain circumstances. Holders may convert the Notes under the following circumstances: during any calendar quarter after the calendar quarter ended on June 30, 2017 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes; during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of our common stock and the conversion rate on each such trading day; if specified distributions or corporate events occur; if the Notes are called for redemption; or at any time after December 1, 2021. The Company may redeem all or any portion of the Notes, at its option, on or after March 6, 2020, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Upon conversion, the Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

The principal balance of the Notes was separated into liability and equity components, and was recorded initially at fair value. The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is amortized to interest expense over the term of the Notes using the effective interest method. The carrying amount of the liability component was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance.

The Company incurred debt issuance costs of approximately $10.6 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds. The costs allocated to the liability component are being amortized as interest expense over the term of the Notes using the effective interest method.

The carrying amount of the Notes consisted of the following (in thousands):

	March 30, 2019			December 29, 2018
Liability component
Principal	$	400,000		$	400,000
Unamortized debt discount	(36,412		)	(39,298		)
Unamortized debt issuance costs	(5,495		)	(5,931		)
Net carrying amount	$	358,093		$	354,771
Equity component
Net carrying amount	$	57,735		$	57,735

The liability component of the Notes is recorded in convertible debt on the Consolidated Balance Sheet. The equity component of the Notes is recorded in additional paid-in capital. The effective interest rate for the liability component was 4.75%. As of March 30, 2019, the remaining period over which the debt discount and debt issuance costs will be amortized was 2.9 years.

16

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Contractual interest expense	$	1,390	$	1,390
Amortization of debt discount	2,886		2,753
Amortization of debt issuance costs	435		416
	$	4,711	$	4,559

Credit Facility

In connection with the Company’s offering of the Notes, it and certain of its domestic subsidiaries (the “Guarantors”) amended its existing credit agreement and paid off the then remaining balance of $72.5 million. The amended agreement (the “Credit Facility”) consists of a $300 million revolving credit facility with a maturity date of July 24, 2020. The Credit Facility includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to an aggregate of $200 million in additional commitments, subject to certain conditions.

The revolving credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Eurodollar rate loans range from 1.25% to 2.00% and for base rate loans range from 0.25% to 1.00%, depending in each case, on the leverage ratio as defined in the Credit Facility.

The Credit Facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a leverage ratio (funded debt/EBITDA) of no more than 3.00 to 1 and a minimum fixed charge coverage ratio (EBITDA/interest payments, income taxes and capital expenditures) of no less than 1.25 to 1. As of March 30, 2019, the Company was in compliance with all covenants of the Credit Facility. The Company’s obligations under the Credit Facility are guaranteed by the Guarantors and are secured by a security interest in substantially all assets of the Company and the Guarantors.

7. Leases

The Company leases certain facilities under operating lease agreements that expire at various dates through 2027. Some of these arrangements contain renewal options and require the Company to pay taxes, insurance and maintenance costs. Lease costs under operating leases were $1.5 million during the three months ended March 30, 2019.

Supplemental Lease Information

Balance Sheet Information (in thousands)	March 30, 2019
Operating lease right-of-use assets	$	19,374
Operating lease liabilities	$	21,096

17

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

	Three Months Ended
Cash Flow Information (in thousands)	March 30, 2019
Cash paid for operating lease liabilities	$	1,671
Right-of-use assets obtained in exchange for operating lease obligations	$	2,488

Operating Lease Information	March 30, 2019
Weighted-average remaining lease term	5.0 years
Weighted-average discount rate	5.22%

The maturities of operating lease liabilities as of March 30, 2019 were as follows (in thousands):

Fiscal Year
2019	$	4,406
2020	5,531
2021	4,401
2022	3,656
2023	3,022
Thereafter	3,609
Total lease payments	24,625
Less imputed interest	(3,529		)
Total lease liabilities	$	21,096

8.  Commitments and Contingencies

Legal Proceedings

The Company is involved in various legal proceedings that have arisen in the normal course of business. While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.

9. Stockholders’ Equity

Common Stock

The Company issued 0.4 million shares of common stock during the three months ended March 30, 2019.

Share Repurchase Program

In October 2018, the Board of Directors increased the authorization amount of the existing share repurchase program from $100 million to $200 million and extended the termination date to December 2019. This program allows for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions. The Company repurchased 0.2 million shares of its common stock for $15.0 million during the three months ended March 30, 2019. These shares were retired upon repurchase. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2018.

18

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Reclassifications From Accumulated Other Comprehensive Loss

The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive loss (in thousands):

	Three Months Ended
Reclassification	March 30, 2019			March 31, 2018
Losses on available-for-sales securities to:
Interest income and other, net	$	—		$	(49	)
Losses on cash flow hedges to:
Operating expenses	(237		)	—
	(237		)	(49		)
Income tax expense	50			10
Total reclassifications	$	(187	)	$	(39	)

10. Revenues

The Company groups its revenues into four categories, based on the markets and applications in which its products may be used. The following disaggregates the Company’s revenue by product category (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Internet of Things	$	106,421	$	103,091
Infrastructure	45,823		49,420
Broadcast	26,265		36,065
Access	9,604		16,808
Revenues	$	188,113	$	205,384

A portion of the Company’s sales are made to distributors under agreements allowing certain rights of return and/or price protection related to the final selling price to the end customers. These factors impact the timing and uncertainty of revenues and cash flows. The Company recognized revenue of $11.0 million and $12.7 million during the three months ended March 30, 2019 and March 31, 2018, respectively, from performance obligations that were satisfied in previous reporting periods. The following disaggregates the Company’s revenue by sales channel (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Distributors	$	134,129	$	150,271
Direct customers	53,984		55,113
Revenues	$	188,113	$	205,384

19

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Stock-Based Compensation

In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 Purchase Plan”). In fiscal 2017, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan. These amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company’s corporate governance and to implement other best practices.

Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans. The fair values of stock awards (such as restricted stock units (RSUs), performance stock units (PSUs) and restricted stock awards (RSAs)) are estimated based on their intrinsic values. The fair values of market stock awards (MSUs) are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model.

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Cost of revenues	$	318	$	296
Research and development	6,097		5,769
Selling, general and administrative	6,169		6,127
	12,584		12,192
Income tax benefit	3,320		5,219
	$	9,264	$	6,973

The Company had approximately $98.8 million of total unrecognized compensation costs related to granted stock options and awards as of March 30, 2019 that are expected to be recognized over a weighted-average period of approximately 2.3 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

12. Income Taxes

Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Income tax expense (benefit) was $(2.5) million and $(4.4) million for the three months ended March 30, 2019 and March 31, 2018, resulting in effective tax rates of (85.0)% and (19.8)%, respectively. The effective tax rate for the three months ended March 30, 2019 decreased from the prior period primarily due to a change in the proportion of excess tax benefits from stock-based compensation relative to pre-tax book income. The tax benefit in both periods is the result of the windfall benefit on share-based instruments and the Federal research and development tax credit exceeding the Company’s tax provision.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share costs related to stock-based compensation. In February 2016, the U.S. Internal Revenue Service appealed the decision to the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”).  The Ninth Circuit reversed the 2015 decision of the U.S. Tax Court on July 24, 2018 but on August 7, 2018, withdrew its decision to allow time for a reconstituted panel to confer on the appeal. On October 16, 2018, a rehearing was held; however the Ninth Circuit has not yet issued its final decision. Although the U.S. Treasury has not withdrawn the requirement to include stock-based compensation from its regulations, based on the facts and circumstances of the Tax Court Case, the Company continues to reflect a tax benefit in its financial statements based on the expectation that the Tax Court decision will be upheld on appeal. The Company will continue to monitor ongoing developments and potential impacts to its financial statements.

20

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Uncertain Tax Positions

As of March 30, 2019, the Company had gross unrecognized tax benefits, inclusive of interest, of $2.1 million which $2.1 million would affect the effective tax rate if recognized. During the three months ended March 30, 2019, the Company released $0.3 million of unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented.

The Norwegian Tax Administration (“NTA”) has completed its examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016. The Company received a final assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. The revised adjustment to the pricing of the intercompany transaction results in approximately $16.4 million additional Norwegian income tax.  The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.

Tax years 2015 through 2019 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently under audit in any major taxing jurisdiction.

The Company does not believe gross unrecognized tax benefits will decrease in the next 12 months.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the “Cautionary Statement” above and “Risk Factors” below for discussions of the uncertainties, risks and assumptions associated with these statements. Our fiscal year-end financial reporting periods are a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2019 will have 52 weeks and fiscal 2018 had 52 weeks. Our first quarter of fiscal 2019 ended March 30, 2019. Our first quarter of fiscal 2018 ended March 31, 2018.

Overview

We are a leading provider of silicon, software and solutions for a smarter, more connected world. Our award-winning technologies are shaping the future of the Internet of Things (IoT), Internet infrastructure, industrial automation, consumer and automotive markets. Our world-class engineering team creates products focused on performance, energy savings, connectivity and simplicity. Our primary semiconductor products are mixed-signal integrated circuits (ICs), which are electronic components that convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can process.

As a fabless semiconductor company, we rely on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, to manufacture the silicon wafers that reflect our IC designs. Each wafer contains numerous die, which are cut from the wafer to create a chip for an IC. We rely on third parties in Asia to assemble, package, and, in most cases, test these devices and ship these units to our customers. Testing performed by such third parties facilitates faster delivery of products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower costs and increased flexibility of test capacity.

21

Our expertise in analog-intensive, high-performance, mixed-signal ICs and software enables us to develop highly differentiated solutions that address multiple markets. We group our products into the following categories:

·Internet of Things products, which include our microcontroller (MCU), wireless and sensor products;

·Broadcast products, which include our broadcast consumer and automotive products;

·Infrastructure products, which include our timing products (clocks and oscillators), and isolation devices; and

·Access products, which include our Voice over IP (VoIP) products, embedded modems and Power over Ethernet (PoE) devices.

The sales cycle for our ICs can be as long as 12 months or more. An additional three to six months or more are usually required before a customer ships a significant volume of devices that incorporate our ICs. Due to this lengthy sales cycle, we typically experience a significant delay between incurring research and development and selling, general and administrative expenses, and the corresponding sales. Consequently, if sales in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our operating results for that quarter and, potentially, future quarters would be adversely affected. Moreover, the amount of time between initial research and development and commercialization of a product, if ever, can be substantially longer than the sales cycle for the product. Accordingly, if we incur substantial research and development costs without developing a commercially successful product, our operating results, as well as our growth prospects, could be adversely affected.

Because many of our ICs are designed for use in consumer products such as televisions, set-top boxes, radios and wearables, we expect that the demand for our products will be typically subject to some degree of seasonal demand. However, rapid changes in our markets and across our product areas make it difficult for us to accurately estimate the impact of seasonal factors on our business.

Current Period Highlights

Revenues decreased $17.3 million in the recent quarter compared to the first quarter of fiscal 2018, primarily due to decreased revenues from our Broadcast, Access and Infrastructure products offset by increased revenues from our IoT products. Gross profit decreased $8.3 million during the same period due primarily to decreased product sales. Gross margin increased to 61.6% in the recent quarter compared to 60.5% in the first quarter of fiscal 2018 primarily due to variations in product mix. Operating expenses increased by $10.3 million in the recent quarter compared to the first quarter of fiscal 2018 due primarily to increased personnel-related expenses, amortization of intangible assets and product marketing costs. Operating income in the recent quarter was $5.1 million compared to $23.7 million in the first quarter of fiscal 2018.

We ended the first quarter with $613.9 million in cash, cash equivalents and short-term investments. Net cash provided by operating activities was $32.0 million during the recent three-month period. Accounts receivable was $69.9 million at March 30, 2019, representing 33 days sales outstanding (DSO). Inventory was $70.5 million at March 30, 2019, representing 88 days of inventory (DOI). In the first three months of 2019, we repurchased 0.2 million shares of our common stock for $15.0 million. We adopted ASC 842, Leases, on the first day of fiscal 2019. In connection with the adoption, we have recorded $19.4 million of right-of-use assets and $21.1 million of operating lease liabilities as of March 30, 2019.

Through acquisitions and internal development efforts, we have continued to diversify our product portfolio and introduce new products and solutions with added functionality and further integration. In the first three months of fiscal 2019, we introduced isolation products designed to provide precise current and voltage measurement with very low temperature drift; new Bluetooth® software for our Wireless Gecko portfolio that increases location services accuracy; and Wi-Fi® modules and transceivers that cut power consumption for IoT applications. We plan to continue to introduce products that increase the content we provide for existing applications, thereby enabling us to serve markets we do not currently address and expand our total available market opportunity.

22

During the three months ended March 30, 2019, we had no customer that represented more than 10% of our revenues. In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and contract manufacturers. An end customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer to the end customer. Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer. Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the three months ended March 30, 2019. There were no contract manufacturers that accounted for more than 10% of our revenues during the three months ended March 30, 2019.

The percentage of our revenues derived from outside of the United States was 83% during the three months ended March 30, 2019.  All of our revenues to date have been denominated in U.S. dollars. We believe that a majority of our revenues will continue to be derived from customers outside of the United States.

Results of Operations

The following describes the line items set forth in our Condensed Consolidated Statements of Income:

Revenues.  Revenues are generated predominately by sales of our products. Our revenues are subject to variation from period to period due to the volume of shipments made within a period, the mix of products we sell and the prices we charge for our products.

Cost of Revenues.  Cost of revenues includes the cost of purchasing finished silicon wafers processed by independent foundries; costs associated with assembly, test and shipping of those products; costs of personnel and equipment associated with manufacturing support, logistics and quality assurance; costs of software royalties, other intellectual property license costs and certain acquired intangible assets; and an allocated portion of our occupancy costs. Our gross margin fluctuates depending on product mix, manufacturing yields, inventory valuation adjustments, average selling prices and other factors.

Research and Development.  Research and development expense consists primarily of personnel-related expenses, including stock-based compensation, as well as new product masks, external consulting and services costs, equipment tooling, equipment depreciation, amortization of intangible assets, and an allocated portion of our occupancy costs. Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

Selling, General and Administrative.  Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation, as well as an allocated portion of our occupancy costs, sales commissions to independent sales representatives, applications engineering support, professional fees, legal fees and promotional and marketing expenses.

Interest Income and Other, Net.  Interest income and other, net reflects interest earned on our cash, cash equivalents and investment balances, foreign currency remeasurement adjustments and other non-operating income and expenses.

Interest Expense.  Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes and credit facility. Interest expense on our convertible senior notes includes contractual interest, amortization of the debt discount and amortization of debt issuance costs.

Provision (Benefit) for Income Taxes.  Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences.

23

The following table sets forth our Condensed Consolidated Statements of Income data as a percentage of revenues for the periods indicated:

	Three Months Ended
	March 30, 2019		March 31, 2018
Revenues	100.0	%	100.0	%
Cost of revenues	38.4		39.5
Gross margin	61.6		60.5
Operating expenses:
Research and development	32.7		26.7
Selling, general and administrative	26.2		22.3
Operating expenses	58.9		49.0
Operating income	2.7		11.5
Other income (expense):
Interest income and other, net	1.5		1.6
Interest expense	(2.6	)	(2.4	)
Income before income taxes	1.6		10.7
Provision (benefit) for income taxes	(1.3	)	(2.1	)
Net income	2.9	%	12.8	%

Revenues

	Three Months Ended
(in millions)	March 30, 2019		March 31, 2018		Change			% Change
Internet of Things	$	106.4	$	103.1	$	3.3		3.2	%
Infrastructure	45.8		49.4		(3.6		)	(7.3	)%
Broadcast	26.3		36.1		(9.8		)	(27.2	)%
Access	9.6		16.8		(7.2		)	(42.9	)%
Revenues	$	188.1	$	205.4	$	(17.3	)	(8.4	)%

The change in revenues in the recent three month period was due primarily to:

·Increased revenues of $3.3 million for our IoT products, due primarily to the addition of revenues from an acquisition offset by decreased demand for our MCU products.

·Decreased revenues of $3.6 million for our Infrastructure products, due primarily to decreased demand for our isolation and timing products.

·Decreased revenues of $9.8 million for Broadcast products, due primarily to decreases in the demand and the market for our consumer products and decreased demand for our automotive products.

·Decreased revenues of $7.2 million for our Access products, due primarily to decreased demand for our products and decreases in the market for such products.

Unit volumes of our products decreased by 16.7% and average selling prices increased by 9.6% compared to the three months ended March 31, 2018. The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix and other factors. In general, as our products become more mature, we expect to experience decreases in average selling prices. We anticipate that newly announced, higher priced, next generation products and product derivatives will offset some of these decreases.

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Gross Profit

	Three Months Ended
(in millions)	March 30, 2019			March 31, 2018			Change
Gross profit	$	115.9		$	124.2		$	(8.3	)
Gross margin	61.6		%	60.5		%	1.1		%

Gross profit decreased during the recent period due primarily to decreased product sales. The change in gross profit in the recent three month period was due to decreases in gross profit of $5.4 million for our Broadcast products, $4.8 million for our Infrastructure products and $3.6 million for our Access products, offset by an increase in gross profit of $5.5 million for our Internet of Things products. Gross margin increased primarily due to variations in product mix.

We may experience declines in the average selling prices of certain of our products. This creates downward pressure on gross margin and may be offset to the extent we are able to introduce higher margin new products and gain market share with our products; reduce costs of existing products through improved design; achieve lower production costs from our wafer suppliers and third-party assembly and test subcontractors; achieve lower production costs per unit as a result of improved yields throughout the manufacturing process; or reduce logistics costs.

Research and Development

	Three Months Ended
(in millions)	March 30, 2019			March 31, 2018			Change		% Change
Research and development	$	61.6		$	54.8		$	6.8	12.3	%
Percent of revenue	32.7		%	26.7		%

The increase in research and development expense in the recent three month period was primarily due to increases of $2.9 million for the amortization of intangible assets, $2.1 million for personnel-related expenses, including costs associated with increased headcount and an acquisition, and $0.7 million for occupancy costs. We expect that research and development expense will increase in absolute dollars in the second quarter of fiscal 2019.

Selling, General and Administrative

	Three Months Ended
(in millions)	March 30, 2019			March 31, 2018			Change		% Change
Selling, general and administrative	$	49.2		$	45.7		$	3.5	7.7	%
Percent of revenue	26.2		%	22.3		%

The increase in selling, general and administrative expense in the recent three month period was primarily due to an increase of $1.9 million for personnel-related expenses, including costs associated with increased headcount and an acquisition, $1.0 million for the amortization of intangible assets and $0.7 million for product marketing costs. We expect that selling, general and administrative expense will remain relatively stable in absolute dollars in the second quarter of fiscal 2019.

Interest Income and Other, Net

Interest income and other, net for the three months ended March 30, 2019 was $2.8 million compared to $3.2 million for the three months ended March 31, 2018.

Interest Expense

Interest expense for the three months ended March 30, 2019 was relatively flat at $5.0 million compared to $4.9 million for the three months ended March 31, 2018.

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Provision (Benefit) for Income Taxes

	Three Months Ended
(in millions)	March 30, 2019			March 31, 2018			Change
Provision (benefit) for income taxes	$	(2.5	)	$	(4.4	)	$	1.9
Effective tax rate	(85.0		)%	(19.8		)%

The effective tax rate for the three months ended March 30, 2019 decreased from the prior period primarily due to a change in the proportion of excess tax benefits from stock-based compensation relative to pre-tax book income. The tax benefit in both periods is the result of the windfall benefit on share-based instruments and the Federal research and development tax credit exceeding our tax provision.

The effective tax rates for each of the periods presented differ from the U.S. federal statutory tax rates of 21% due to the amount of income earned in foreign jurisdictions where the tax rate may be higher or lower than the federal statutory tax rate, as well as other permanent items including research and development tax credits, and the tax effects of stock-based compensation.

Business Outlook

The following represents our business outlook for the second quarter of fiscal 2019.

Income Statement Item	Estimate
Revenues	$202 million to $212 million
Gross margin	60.0%
Operating expenses	$112.5 million
Effective tax rate	5.0%
Diluted earnings per share	$0.16 to $0.26

Liquidity and Capital Resources

Our principal sources of liquidity as of March 30, 2019 consisted of $613.9 million in cash, cash equivalents and short-term investments, of which approximately $489.5 million was held by our U.S. entities. The remaining balance was held by our foreign subsidiaries. Our cash equivalents and short-term investments consisted of government debt securities, which include agency bonds, municipal bonds, U.S. government securities and variable-rate demand notes; corporate debt securities, which include asset-backed securities, corporate bonds and commercial paper; and money market funds. Our long-term investments consisted of auction-rate securities.

Operating Activities

Net cash provided by operating activities was $32.0 million during the three months ended March 30, 2019, compared to net cash provided of $22.2 million during the three months ended March 31, 2018. Operating cash flows during the three months ended March 30, 2019 reflect our net income of $5.4 million, adjustments of $26.8 million for depreciation, amortization, stock-based compensation and deferred income taxes, and a net cash outflow of $0.2 million due to changes in our operating assets and liabilities.

Accounts receivable decreased to $69.9 million at March 30, 2019 from $73.2 million at December 29, 2018. The decrease in accounts receivable resulted primarily from normal variations in the timing of collections and billings. Our average DSO was 33 days at March 30, 2019 and 31 days at December 29, 2018.

Inventory decreased to $70.5 million at March 30, 2019 from $75.0 million at December 29, 2018. Our inventory level is primarily impacted by our need to make purchase commitments to support forecasted demand and variations between forecasted and actual demand. Our DOI was 88 days at March 30, 2019 and 79 days at December 29, 2018.

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Investing Activities

Net cash provided by investing activities was $31.2 million during the three months ended March 30, 2019, compared to net cash provided of $67.4 million during the three months ended March 31, 2018. The decrease in cash inflows was principally due to a decrease of $40.7 million in net sales and maturities of marketable securities.

We anticipate capital expenditures of approximately $18 to $20 million for fiscal 2019. Additionally, as part of our growth strategy, we expect to evaluate opportunities to invest in or acquire other businesses, intellectual property or technologies that would complement or expand our current offerings, expand the breadth of our markets or enhance our technical capabilities.

Financing Activities

Net cash used in financing activities was $29.1 million during the three months ended March 30, 2019, compared to net cash used of $16.7 million during the three months ended March 31, 2018. The increase in cash outflows was principally due to an increase of $15.0 million for repurchases of our common stock. In October 2018, the Board of Directors increased the authorization amount of the existing share repurchase program from $100 million to $200 million and extended the termination date to December 2019.

Our debt facilities include $400 million principal amount convertible senior notes (the “Notes”) and a $300 million revolving credit facility. On March 6, 2017, we completed a private offering of the Notes. The Notes bear interest semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date. In connection with our offering of the Notes, we entered into an amendment to our credit agreement and paid off the then remaining balance of $72.5 million. We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to an aggregate of $200 million in additional commitments, subject to certain conditions. See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.

Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our existing cash, cash equivalents, investments and credit under our Credit Facility are sufficient to meet our capital requirements through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time. We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing.

Critical Accounting Policies and Estimates

The preparation of financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires that we make estimates and assumptions that affect the amounts reported. Changes in facts and circumstances could have a significant impact on the resulting estimated amounts included in the financial statements. We believe the following critical accounting policies affect our more complex judgments and estimates.

Inventory valuation — We assess the recoverability of inventories through the application of a set of methods, assumptions and estimates. In determining net realizable value, we write down inventory that may be slow moving or have some form of obsolescence, including inventory that has aged more than 12 months. We also adjust the valuation of inventory when its manufacturing cost exceeds the estimated selling price less costs of completion, disposal and transportation. We assess the potential for any unusual customer returns based on known quality or business issues and write-off inventory losses for scrap or non-saleable material. Inventory not otherwise identified to be written down is compared to an assessment of our 12-month forecasted demand. The result of this methodology is compared against the product life cycle and competitive situations in the marketplace to determine the appropriateness of the resulting inventory levels. Demand for our products may fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than those that we project. In the event that actual demand is lower or market conditions are worse than originally projected, additional inventory write-downs may be required.

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Impairment of goodwill and other long-lived assets — We review long-lived assets which are held and used, including fixed assets and purchased intangible assets, for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its expected useful life and are significantly impacted by estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast. If the asset is considered to be impaired, we record an impairment charge equal to the amount by which the carrying value of the asset exceeds its fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

We test our goodwill for impairment annually as of the first day of our fourth fiscal quarter and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares our fair value to our net book value. In determining fair value, the accounting guidance allows for the use of several valuation methodologies, although it states quoted market prices are the best evidence of fair value. If the fair value is less than the net book value, the second step of the analysis compares the implied fair value of our goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, we recognize an impairment loss equal to that excess amount.

Acquired intangible assets — When we acquire a business, a portion of the purchase price is typically allocated to identifiable intangible assets, such as acquired technology and customer relationships. Fair value of these assets is determined primarily using the income approach, which requires us to project future cash flows and apply an appropriate discount rate. We amortize intangible assets with finite lives over their expected useful lives. Our estimates are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. Incorrect estimates could result in future impairment charges, and those charges could be material to our results of operations.

Revenue recognition — We recognize revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. In order to achieve this core principle, we apply a five-step process. As part of this process, we analyze the performance obligations in a customer contract and estimate the consideration we expect to receive. The evaluation of performance obligations requires that we identify the promised goods and services in the contract. For contracts that contain more than one promised good and service, we then must determine whether the promises are capable of being distinct and if they are separately identifiable from other promises in the contract. Additionally, for our sales to distributors, we must estimate the impact that price adjustments and rights of return will have on consideration. We make these estimates based on available information, including recent sales activity and pricing data. If our evaluation of performance obligations is incorrect, we may recognize revenue sooner or later than is appropriate. If our estimates of consideration are inaccurate, we may recognize too much or too little revenue in a period.

Stock-based compensation — We recognize the fair-value of stock-based compensation transactions in the Consolidated Statements of Income. The fair value of our full-value stock awards (with the exception of market-based performance awards) equals the fair market value of our stock on the date of grant. The fair value of our market-based performance awards is estimated at the date of grant using a Monte-Carlo simulation. The fair value of our stock option and employee stock purchase plan grants is estimated at the date of grant using the Black-Scholes option pricing model. In addition, we are required to estimate the expected forfeiture rate of our stock grants and only recognize the expense for those shares expected to vest. If our actual experience differs significantly from the assumptions used to compute our stock-based compensation cost, or if different assumptions had been used, we may have recorded too much or too little stock-based compensation cost. See Note 11, Stock-Based Compensation, to the Condensed Consolidated Financial Statements for additional information.

Income taxes — We are required to calculate income taxes in each of the jurisdictions in which we operate. This process involves calculating the actual current tax liability together with assessing temporary differences in recognition of income (loss) for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, we are required to estimate the amount of expected future taxable income. Judgment is inherent in this process and differences between the estimated and actual taxable income could result in a material impact on our Consolidated Financial Statements.

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We recognize liabilities for uncertain tax positions based on a two-step process. The first step requires us to determine whether the weight of available evidence indicates that the tax position has met the threshold for recognition. Therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This measurement step is inherently complex and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We re-evaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, they could have a material effect on our income tax provision and net income in the period or periods for which that determination is made. We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been made for all periods.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is provided in Note 1, Significant Accounting Policies, to the Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

Quantitative and Qualitative Disclosures about Market Risk

Interest Income

Our investment portfolio includes cash, cash equivalents, short-term investments and long-term investments. Our main investment objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio. Our interest income is sensitive to changes in the general level of U.S. interest rates. A 100 basis point decline in yield on our investment portfolio holdings as of March 30, 2019 would decrease our future annual interest income by approximately $5.6 million. We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

Interest Expense

We are exposed to interest rate fluctuations in the normal course of our business, including through our Credit Facility. The interest rate on the Credit Facility consists of a variable-rate of interest and an applicable margin. While we have drawn from the Credit Facility in the past, we have no borrowings as of March 30, 2019. If we borrow from the Credit Facility in the future, we will again be exposed to interest rate fluctuations.

Foreign currency exchange rate risk

We are exposed to foreign currency exchange rate risk primarily through assets, liabilities and operating expenses of our subsidiaries denominated in currencies other than the U.S. dollar. Our foreign subsidiaries are considered to be extensions of the U.S. parent. The functional currency of the foreign subsidiaries is the U.S. dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are recorded in the Consolidated Statements of Income. We use foreign currency forward contracts to manage exposure to foreign exchange risk. Gains and losses on foreign currency forward contracts are recognized in earnings in the same period during which the hedged transaction is recognized.

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Investments in Auction-rate Securities

As of March 30, 2019, we held $6.0 million par value auction-rate securities, all of which have experienced failed auctions because sell orders exceeded buy orders. We are unable to predict if these funds will become available before their maturity dates. Additionally, if we determine that an other-than-temporary decline in the fair value of any of our available-for-sale auction-rate securities has occurred, we may be required to adjust the carrying value of the investments through an impairment charge.

Available Information

Our website address is www.silabs.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Our website and the information contained therein or connected thereto are not intended to be incorporated into this Quarterly Report on Form 10-Q.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Information related to quantitative and qualitative disclosures regarding market risk is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 2 above.  Such information is incorporated by reference herein.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of March 30, 2019 because of the material weakness in our internal control over financial reporting described below.

Following the Public Company Accounting Oversight Board’s inspection of Ernst & Young LLP’s audit of our December 29, 2018 financial statements and internal controls over financial reporting in April 2019, management identified the following material weakness that existed as of December 29, 2018:

We did not maintain sufficient design and operating effectiveness of controls over the accounting for business combinations, primarily the maintenance of sufficient contemporaneous documentation of management review controls over certain assumptions used in the valuation of acquired intangible assets and related recording of goodwill.

A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. This material weakness did not result in a misstatement to the consolidated financial statements for the year ended December 29, 2018.

Notwithstanding the material weakness discussed below, our management, including our CEO and CFO, has concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

We have immediately commenced developing a plan to enhance the design and operating effectiveness of our internal controls over financial reporting, including maintaining sufficient contemporaneous documentation of management review controls over assumptions used in the valuation of acquired intangible assets and related recording of goodwill, which we believe will address the material weakness described above. Our remediation plan will include the implementation of procedures that will require enhanced documentation on the use of assumptions in business combinations and additional training. We expect our remediation will be complete prior to the end of the fourth quarter of fiscal 2019.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 30, 2019, we implemented certain internal controls over financial reporting in connection with our adoption of ASC Topic 842, Leases. There were no other changes in our internal controls during the fiscal quarter ended March 30, 2019 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II.  Other Information

Item 1.  Legal Proceedings

Information regarding legal proceedings is provided in Note 8, Commitments and Contingencies, to the Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

Item 1A. Risk Factors

Risks Related to our Business

We may not be able to maintain our historical growth and may experience significant period-to-period fluctuations in our revenues and operating results, which may result in volatility in our stock price

Although we have generally experienced revenue growth in our history, we may not be able to sustain this growth. We may also experience significant period-to-period fluctuations in our revenues and operating results in the future due to a number of factors, and any such variations may cause our stock price to fluctuate. In some future period our revenues or operating results may be below the expectations of public market analysts or investors. If this occurs, our stock price may drop, perhaps significantly.

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A number of factors, in addition to those cited in other risk factors applicable to our business, may contribute to fluctuations in our revenues and operating results, including:

·The timing and volume of orders received from our customers;

·The timeliness of our new product introductions and the rate at which our new products may cannibalize our older products;

·The rate of acceptance of our products by our customers, including the acceptance of new products we may develop for integration in the products manufactured by such customers, which we refer to as “design wins”;

·The time lag and realization rate between “design wins” and production orders;

·The demand for, and life cycles of, the products incorporating our mixed-signal solutions;

·The rate of adoption of mixed-signal products in the markets we target;

·Deferrals or reductions of customer orders in anticipation of new products or product enhancements from us or our competitors or other providers of mixed-signal ICs;

·Changes in product mix;

·The average selling prices for our products could drop suddenly due to competitive offerings or competitive predatory pricing;

·The average selling prices for our products generally decline over time;

·Changes in market standards;

·Impairment charges related to inventory, equipment or other long-lived assets;

·The software used in our products, including software provided by third parties, may not meet the needs of our customers;

·Our customers may not be able to obtain other components such as capacitors (which are currently in short supply) that they need to incorporate in conjunction with our products, leading to potential downturn in the demand for our products;

·Significant legal costs to defend our intellectual property rights or respond to claims against us; and

·The rate at which new markets emerge for products we are currently developing or for which our design expertise can be utilized to develop products for these new markets.

The markets for consumer electronics, for example, are characterized by rapid fluctuations in demand and seasonality that result in corresponding fluctuations in the demand for our products that are incorporated in such devices. Additionally, the rate of technology acceptance by our customers results in fluctuating demand for our products as customers are reluctant to incorporate a new IC into their products until the new IC has achieved market acceptance. Once a new IC achieves market acceptance, demand for the new IC can quickly accelerate to a point and then level off such that rapid historical growth in sales of a product should not be viewed as indicative of continued future growth. In addition, demand can quickly decline for a product when a new IC product is introduced and receives market acceptance. Due to the various factors mentioned above, the results of any prior quarterly or annual periods should not be relied upon as an indication of our future operating performance.

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If we are unable to develop or acquire new and enhanced products that achieve market acceptance in a timely manner, our operating results and competitive position could be harmed

Our future success will depend on our ability to develop or acquire new products and product enhancements that achieve market acceptance in a timely and cost-effective manner. The development of mixed-signal ICs is highly complex, and we have at times experienced delays in completing the development and introduction of new products and product enhancements. Successful product development and market acceptance of our products depend on a number of factors, including:

·Requirements of customers;

·Accurate prediction of market and technical requirements;

·Timely completion and introduction of new designs;

·Timely qualification and certification of our products for use in our customers’ products;

·Commercial acceptance and volume production of the products into which our ICs will be incorporated;

·Availability of foundry, assembly and test capacity;

·Achievement of high manufacturing yields;

·Quality, price, performance, power use and size of our products;

·Availability, quality, price and performance of competing products and technologies;

·Our customer service, application support capabilities and responsiveness;

·Successful development of our relationships with existing and potential customers;

·Technology, industry standards or end-user preferences; and

·Cooperation of third-party software providers and our semiconductor vendors to support our chips within a system.

We cannot provide any assurance that products which we recently have developed or may develop in the future will achieve market acceptance. We have introduced to market or are in development of many products. If our products fail to achieve market acceptance, or if we fail to develop new products on a timely basis that achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected. The growth of the IoT market is dependent on the adoption of industry standards to permit devices to connect and communicate with each other. If the industry cannot agree on a common set of standards, then the growth of the IoT market may be slower than expected.

Our research and development efforts are focused on a limited number of new technologies and products, and any delay in the development, or abandonment, of these technologies or products by industry participants, or their failure to achieve market acceptance, could compromise our competitive position

Our products serve as components and solutions in electronic devices in various markets. As a result, we have devoted and expect to continue to devote a large amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future. Research and development expense during the three months ended March 30, 2019 was $61.6 million, or 32.7% of revenues. A number of companies are actively involved in the development of these new technologies and standards. Should any of these companies delay or abandon their efforts to develop commercially available products based on new technologies and standards, our research and development efforts with respect to these technologies and standards likely would have no appreciable value. In addition, if we do not correctly anticipate new technologies and standards, or if the products that we develop based on these new technologies and standards fail to achieve market acceptance, our competitors may be better able to address market demand than we would.

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Furthermore, if markets for these new technologies and standards develop later than we anticipate, or do not develop at all, demand for our products that are currently in development would suffer, resulting in lower sales of these products than we currently anticipate.

Significant litigation over intellectual property in our industry may cause us to become involved in costly and lengthy litigation which could adversely affect our business

The semiconductor and software industries have experienced significant litigation involving patents and other intellectual property rights. From time to time, third parties, including non-practicing entities, allege intellectual property infringement by our products, our customers’ products, or products using technologies or communications standards used in our industry. We also receive communications from customers or suppliers requesting indemnification for allegations brought against them by third parties. Some of these allegations have resulted, and may result in the future, in our involvement in litigation. We have certain contractual obligations to defend and indemnify our customers from certain infringement claims. We also have been involved in litigation to protect our intellectual property rights in the past and may become involved in such litigation again in the future.

Given the unpredictable nature of litigation and the complexity of the technology, we may not prevail in any such litigation. Legal proceedings could subject us to significant liability, invalidate our proprietary rights, or harm our businesses and our ability to compete. Legal proceedings initiated by us to protect our intellectual property rights could also result in counterclaims or countersuits against us. Any litigation, regardless of its outcome or merit, could be time-consuming and expensive to resolve and could divert our management’s time and attention. Intellectual property litigation also could force us to take specific actions, including:

·Cease using, selling or manufacturing certain products, services or processes;

·Attempt to obtain a license, which license may require the payment of substantial royalties or may not be available on reasonable terms or at all;

·Incur significant costs, time delays and lost business opportunities to develop alternative technologies or redesign products; or

·Pursue legal remedies with third parties to enforce our indemnification rights, which may not adequately protect our interests.

Any acquisitions we make could disrupt our business and harm our financial condition

As part of our growth and product diversification strategy, we continue to evaluate opportunities to acquire other businesses, intellectual property or technologies that would complement our current offerings, expand the breadth of our markets or enhance our technical capabilities. The acquisitions that we have made and may make in the future entail a number of risks that could materially and adversely affect our business and operating results, including:

·Problems integrating the acquired operations, technologies or products with our existing business and products;

·Diversion of management’s time and attention from our core business;

·Need for financial resources above our planned investment levels;

·Difficulties in retaining business relationships with suppliers and customers of the acquired company;

·Risks associated with entering markets in which we lack prior experience;

·Risks associated with the transfer of licenses of intellectual property;

·Increased operating costs due to acquired overhead;

·Tax issues associated with acquisitions;

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·Acquisition-related disputes, including disputes over earn-outs and escrows;

·Potential loss of key employees of the acquired company; and

·Potential impairment of related goodwill and intangible assets.

Future acquisitions also could cause us to incur debt or contingent liabilities or cause us to issue equity securities that could negatively impact the ownership percentages of existing shareholders.

We may be unable to protect our intellectual property, which would negatively affect our ability to compete

Our products rely on our proprietary technology, and we expect that future technological advances made by us will be critical to sustain market acceptance of our products. Therefore, we believe that the protection of our intellectual property rights is and will continue to be important to the success of our business. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, consultants, intellectual property providers and business partners, and control access to and distribution of our documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. Monitoring unauthorized use of our technology is difficult, and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot be certain that patents will be issued as a result of our pending applications nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid or unenforceable. We also cannot be certain that others will not develop effective competing technologies on their own.

Failure to manage our distribution channel relationships could impede our future growth

The future growth of our business will depend in large part on our ability to manage our relationships with current and future distributors and sales representatives, develop additional channels for the distribution and sale of our products and manage these relationships. During the three months ended March 30, 2019, 71% of our revenue was derived from distributors. As we execute our indirect sales strategy, we must manage the potential conflicts that may arise with our direct sales efforts. For example, conflicts with a distributor may arise when a customer begins purchasing directly from us rather than through the distributor. The inability to successfully execute or manage a multi-channel sales strategy could impede our future growth. In addition, relationships with our distributors often involve the use of price protection and inventory return rights. This often requires a significant amount of sales management’s time and system resources to manage properly. Because we consolidated our distribution relationships to a single global distributor, Arrow Electronics, in fiscal 2018, termination of the relationship with Arrow Electronics, either by us or by Arrow Electronics, could result in a temporary or permanent loss of revenue. If Arrow Electronics fails to effectively market and sell our products in full compliance with applicable laws, or if we are unable to maintain our existing relationship with Arrow Electronics, we may not be able to find a distributor with the scale and resources of Arrow Electronics, maintain existing levels of international revenue or realize expected long-term international revenue growth. We may not be successful in finding suitable alternative global distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers.

We depend on a limited number of customers for a significant portion of our revenues, and the loss of, or a significant reduction in orders from, any key customer could significantly reduce our revenues

The loss of any of our key customers, or a significant reduction in sales to any one of them, would significantly reduce our revenues and adversely affect our business. During the three months ended March 30, 2019, our ten largest customers accounted for 23% of our revenues. Some of the markets for our products are dominated by a small number of potential customers. Therefore, our operating results in the foreseeable future will continue to depend on our ability to sell to these dominant customers, as well as the ability of these customers to sell products that incorporate our IC products. In the future, these customers may decide not to purchase our products at all, purchase fewer products than they did in the past or alter their purchasing patterns, particularly because:

·We do not have material long-term purchase contracts with our customers;

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·Substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or delay product purchase commitments with little or no notice to us and without penalty;

·Some of our customers may have efforts underway to actively diversify their vendor base which could reduce purchases of our products; and

·Some of our customers have developed or acquired products that compete directly with products these customers purchase from us, which could affect our customers’ purchasing decisions in the future.

Our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and protects their ability to secure these components. We believe that any expansion of our customers’ supplier bases could have an adverse effect on the prices we are able to charge and volume of product that we are able to sell to our customers, which would negatively affect our revenues and operating results.

We are subject to increased inventory risks and costs because we build our products based on forecasts provided by customers before receiving purchase orders for the products

In order to ensure availability of our products for some of our largest customers, we start the manufacturing of our products in advance of receiving purchase orders based on forecasts provided by these customers. However, these forecasts do not represent binding purchase commitments and we do not recognize sales for these products until they are shipped to the customer. As a result, we incur inventory and manufacturing costs in advance of anticipated sales. Because demand for our products may not materialize, manufacturing based on forecasts subjects us to increased risks of high inventory carrying costs, increased obsolescence and increased operating costs. These inventory risks are exacerbated when our customers purchase indirectly through contract manufacturers or hold component inventory levels greater than their consumption rate because this causes us to have less visibility regarding the accumulated levels of inventory for such customers. A resulting write-off of unusable or excess inventories would adversely affect our operating results.

Our products are complex and may contain errors which could lead to liability, an increase in our costs and/or a reduction in our revenues

Our products are complex and may contain errors, particularly when first introduced and/or when new versions are released. Our products are increasingly designed in more complex processes, including higher levels of software and hardware integration in modules and system-level solutions and/or include elements provided by third parties which further increase the risk of errors. We rely primarily on our in-house testing personnel to design test operations and procedures to detect any errors or vulnerabilities prior to delivery of our products to our customers.

Should problems occur in the operation or performance of our products, we may experience delays in meeting key introduction dates or scheduled delivery dates to our customers. These errors could also cause significant re-engineering costs, the diversion of our engineering personnel’s attention from our product development efforts and cause significant customer relations and business reputation problems. Any defects could result in refunds, product replacement, product recall or other liability. Any of the foregoing could impose substantial costs and harm our business.

Product liability, data breach or cyber liability claims may be asserted with respect to our products. Many of our products focus on wireless connectivity and the IoT market and such connectivity may make these products particularly susceptible to cyber-attacks. Our products are typically sold at prices that are significantly lower than the cost of the end-products into which they are incorporated. A defect, failure or vulnerability in our product could cause failure in our customer’s end-product, so we could face claims for damages that are disproportionately higher than the revenues and profits we receive from the products involved. Furthermore, product liability risks are particularly significant with respect to medical and automotive applications because of the risk of serious harm to users of these end-products. There can be no assurance that any insurance we maintain will sufficiently protect us from such claims.

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We rely on third parties to manufacture, assemble and test our products and the failure to successfully manage our relationships with our manufacturers and subcontractors would negatively impact our ability to sell our products

We do not have our own wafer fab manufacturing facilities. Therefore, we rely on third-party vendors to manufacture the products we design. We also currently rely on Asian third-party assembly subcontractors to assemble and package the silicon chips provided by the wafers for use in final products. Additionally, we rely on these offshore subcontractors for a substantial portion of the testing requirements of our products prior to shipping. We expect utilization of third-party subcontractors to continue in the future.

The cyclical nature of the semiconductor industry drives wide fluctuations in available capacity at third-party vendors. On occasion, we have been unable to adequately respond to unexpected increases in customer demand due to capacity constraints and, therefore, were unable to benefit from this incremental demand. We may be unable to obtain adequate foundry, assembly or test capacity from our third-party subcontractors to meet our customers’ delivery requirements even if we adequately forecast customer demand.

There are significant risks associated with relying on these third-party foundries and subcontractors, including:

·Failure by us, our customers or their end customers to qualify a selected supplier;

·Potential insolvency of the third-party subcontractors;

·Reduced control over delivery schedules and quality;

·Limited warranties on wafers or products supplied to us;

·Potential increases in prices or payments in advance for capacity;

·Increased need for international-based supply, logistics and financial management;

·Their inability to supply or support new or changing packaging technologies; and

·Low test yields.

We typically do not have long-term supply contracts with our third-party vendors which obligate the vendor to perform services and supply products to us for a specific period, in specific quantities, and at specific prices. Our third-party foundry, assembly and test subcontractors typically do not guarantee that adequate capacity will be available to us within the time required to meet demand for our products. In the event that these vendors fail to meet our demand for whatever reason, we expect that it would take up to 12 months to transition performance of these services to new providers. Such a transition may also require qualification of the new providers by our customers or their end customers.

Most of the silicon wafers for the products that we have sold were manufactured either by Taiwan Semiconductor Manufacturing Co. (TSMC) or Semiconductor Manufacturing International Corporation (SMIC). Our customers typically complete their own qualification process. If we fail to properly balance customer demand across the existing semiconductor fabrication facilities that we utilize or are required by our foundry partners to increase, or otherwise change the number of fab lines that we utilize for our production, we might not be able to fulfill demand for our products and may need to divert our engineering resources away from new product development initiatives to support the fab line transition, which would adversely affect our operating results.

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Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales

Prior to purchasing our products, our customers require that our products undergo an extensive qualification process, which involves testing of the products in the customer’s system as well as rigorous reliability testing. This qualification process may continue for six months or longer. However, qualification of a product by a customer does not ensure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision to the product or software, changes in the IC’s manufacturing process or the selection of a new supplier by us may require a new qualification process, which may result in delays and in us holding excess or obsolete inventory. After our products are qualified, it can take an additional six months or more before the customer commences volume production of components or devices that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, toward qualifying our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, such failure or delay would preclude or delay sales of such product to the customer, which may impede our growth and cause our business to suffer.

We are a global company, which subjects us to additional business risks including logistical and financial complexity, political instability and currency fluctuations

We have established international subsidiaries and have opened offices in international markets to support our activities in Asia, the Americas and Europe. This has included the establishment of a headquarters in Singapore for non-U.S. operations. The percentage of our revenues derived from outside of the United States was 83% during the three months ended March 30, 2019. We may not be able to maintain or increase global market demand for our products. Our international operations are subject to a number of risks, including:

·Complexity and costs of managing international operations and related tax obligations, including our headquarters for non-U.S. operations in Singapore;

·Protectionist laws and business practices, including trade restrictions, tariffs, quotas and other trade barriers, particularly with respect to China-U.S. trade policies;

·Difficulties related to the protection of our intellectual property rights in some countries;

·Multiple, conflicting and changing tax and other laws and regulations that may impact both our international and domestic tax and other liabilities and result in increased complexity and costs, including the impact of the Tax Cuts and Jobs Act;

·Longer sales cycles;

·Greater difficulty in accounts receivable collection and longer collection periods;

·High levels of distributor inventory subject to price protection and rights of return to us;

·Political and economic instability;

·Greater difficulty in hiring and retaining qualified personnel; and

·The need to have business and operations systems that can meet the needs of our international business and operating structure.

To date, substantially all of our sales to international customers and purchases of components from international suppliers have been denominated in U.S. dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive for our international customers to purchase, thus rendering our products less competitive. Similarly, a decrease in the value of the U.S. dollar could reduce our buying power with respect to international suppliers.

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Our inability to manage growth could materially and adversely affect our business

Our past growth has placed, and any future growth of our operations will continue to place, a significant strain on our management personnel, systems and resources. We anticipate that we will need to implement a variety of new and upgraded sales, operational and financial enterprise-wide systems, information technology infrastructure, procedures and controls, including the improvement of our accounting and other internal management systems to manage this growth and maintain compliance with regulatory guidelines, including Sarbanes-Oxley Act requirements. To the extent our business grows, our internal management systems and processes will need to improve to ensure that we remain in compliance. We also expect that we will need to continue to expand, train, manage and motivate our workforce. All of these endeavors will require substantial management effort, and we anticipate that we will require additional management personnel and internal processes to manage these efforts and to plan for the succession from time to time of certain persons who have been key management and technical personnel. If we are unable to effectively manage our expanding global operations, including our international headquarters in Singapore, our business could be materially and adversely affected.

We have a material weakness in our internal control over financial reporting and if we are unable to implement and maintain effective internal control over financial reporting, or our independent registered public accounting firm is unable to provide an unqualified report thereon, we could be materially adversely effected

We have identified a material weakness that existed as of the end of our fiscal 2018 regarding our internal controls over business combinations, primarily the maintenance of sufficient contemporaneous documentation of management review controls over assumptions used in the valuation of acquired intangible assets and related recording of goodwill. As a result of this material weakness, management concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 29, 2018.

Unless and until this material weakness has been remediated, or should new material weaknesses arise or be discovered in the future, material misstatements could occur and go undetected in our interim or annual consolidated financial statements and we may be required to restate our financial statements. In addition, we may experience delays in satisfying our reporting obligations or to comply with Securities and Exchange Commission rules and regulations, which could result in investigations and sanctions by regulatory authorities. Any of these results could adversely affect our business and the value of our common stock.

Our products incorporate technology licensed from third parties

We incorporate technology (including software) licensed from third parties in our products. We could be subjected to claims of infringement regardless of our lack of involvement in the development of the licensed technology. Although a third-party licensor is typically obligated to indemnify us if the licensed technology infringes on another party’s intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent. See Significant litigation over intellectual property in our industry may cause us to become involved in costly and lengthy litigation which could seriously harm our business. Furthermore, any failure of third-party technology to perform properly would adversely affect sales of our products incorporating such technology.

We are subject to risks relating to product concentration

We derive a substantial portion of our revenues from a limited number of products, and we expect these products to continue to account for a large percentage of our revenues in the near term. Continued market acceptance of these products, is therefore, critical to our future success. In addition, substantially all of our products that we have sold include technology related to one or more of our issued U.S. patents. If these patents are found to be invalid or unenforceable, our competitors could introduce competitive products that could reduce both the volume and price per unit of our products. Our business, operating results, financial condition and cash flows could therefore be adversely affected by:

·A decline in demand for any of our more significant products;

·Failure of our products to achieve continued market acceptance;

·Competitive products;

·New technological standards or changes to existing standards that we are unable to address with our products;

·A failure to release new products or enhanced versions of our existing products on a timely basis; and

·The failure of our new products to achieve market acceptance.

We are subject to credit risks related to our accounts receivable

We do not generally obtain letters of credit or other security for payment from customers, distributors or contract manufacturers. Accordingly, we are not protected against accounts receivable default or bankruptcy by these entities. Our ten largest customers or distributors represent a substantial majority of our accounts receivable. If any such customer or distributor, or a material portion of our smaller customers or distributors, were to become insolvent or otherwise not satisfy their obligations to us, we could be materially harmed.

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We depend on our key personnel to manage our business effectively in a rapidly changing market, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed

We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, engineering, sales and marketing personnel. We believe that our future success will be dependent on retaining the services of our key personnel, developing their successors and certain internal processes to reduce our reliance on specific individuals, and on properly managing the transition of key roles when they occur. There is currently a shortage of qualified personnel with significant experience in the design, development, manufacturing, marketing and sales of analog and mixed-signal products. In particular, there is a shortage of engineers who are familiar with the intricacies of the design and manufacturability of analog elements, and competition for such personnel is intense. Our key technical personnel represent a significant asset and serve as the primary source for our technological and product innovations. We may not be successful in attracting and retaining sufficient numbers of technical personnel to support our anticipated growth. The loss of any of our key employees or the inability to attract or retain qualified personnel both in the United States and internationally, including engineers, sales, applications and marketing personnel, could delay the development and introduction of, and negatively impact our ability to sell, our products.

Any dispositions could harm our financial condition

Any disposition of a product line would entail a number of risks that could materially and adversely affect our business and operating results, including:

·Diversion of management’s time and attention from our core business;

·Difficulties separating the divested business;

·Risks to relations with customers who previously purchased products from our disposed product line;

·Reduced leverage with suppliers due to reduced aggregate volume;

·Risks related to employee relations;

·Risks associated with the transfer and licensing of intellectual property;

·Security risks and other liabilities related to the transition services provided in connection with the disposition;

·Tax issues associated with dispositions; and

·Disposition-related disputes, including disputes over earn-outs and escrows.

Our stock price may be volatile

The market price of our common stock has been volatile in the past and may be volatile in the future. The market price of our common stock may be significantly affected by the following factors:

·Actual or anticipated fluctuations in our operating results;

·Changes in financial estimates by securities analysts or our failure to perform in line with such estimates;

·Changes in market valuations of other technology companies, particularly semiconductor companies;

·Announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

·Introduction of technologies or product enhancements that reduce the need for our products;

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·The loss of, or decrease in sales to, one or more key customers;

·A large sale of stock by a significant shareholder;

·Dilution from the issuance of our stock in connection with acquisitions;

·The addition or removal of our stock to or from a stock index fund;

·Departures of key personnel;

·The required expensing of stock awards; and

·The required changes in our reported revenue and revenue recognition accounting policy under ASC Topic 606, Revenue from Contracts with Customers.

The stock market has experienced extreme volatility that often has been unrelated to the performance of particular companies. These market fluctuations may cause our stock price to fall regardless of our performance.

Most of our current manufacturers, assemblers, test service providers, distributors and customers are concentrated in the same geographic region, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could disrupt our operations or sales

Most of our foundries and several of our assembly and test subcontractors’ sites are located in Taiwan and most of our other foundry, assembly and test subcontractors are located in the Pacific Rim region. In addition, many of our customers are located in the Pacific Rim region. The risk of earthquakes in Taiwan and the Pacific Rim region is significant due to the proximity of major earthquake fault lines in the area. Earthquakes, tsunamis, fire, flooding, lack of water or other natural disasters, an epidemic, political unrest, war, labor strikes or work stoppages in countries where our semiconductor manufacturers, assemblers and test subcontractors are located, likely would result in the disruption of our foundry, assembly or test capacity. There can be no assurance that alternate capacity could be obtained on favorable terms, if at all.

A natural disaster, epidemic, labor strike, war or political unrest where our customers’ facilities are located would likely reduce our sales to such customers. North Korea’s recent geopolitical maneuverings, including nuclear weapons and long-range missile testing, have created unrest. Such unrest could create economic uncertainty or instability, could escalate to war or otherwise adversely affect South Korea and our South Korean customers and reduce our sales to such customers, which would materially and adversely affect our operating results. In addition, a significant portion of the assembly and testing of our products occurs in South Korea. Any disruption resulting from these events could also cause significant delays in shipments of our products until we are able to shift our manufacturing, assembling or testing from the affected subcontractor to another third-party vendor.

The semiconductor manufacturing process is highly complex and, from time to time, manufacturing yields may fall below our expectations, which could result in our inability to satisfy demand for our products in a timely manner and may decrease our gross profit due to higher unit costs

The manufacturing of our products is a highly complex and technologically demanding process. Although we work closely with our foundries and assemblers to minimize the likelihood of reduced manufacturing yields, we have from time to time experienced lower than anticipated manufacturing yields. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials could result in lower than anticipated manufacturing yields or unacceptable performance deficiencies, which could lower our gross profit. If our foundries fail to deliver fabricated silicon wafers of satisfactory quality in a timely manner, we will be unable to meet our customers’ demand for our products in a timely manner, which would adversely affect our operating results and damage our customer relationships.

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We depend on our customers to support our products, and some of our customers offer competing products

We rely on our customers to provide hardware, software, intellectual property indemnification and other technical support for the products supplied by our customers. If our customers do not provide the required functionality or if our customers do not provide satisfactory support for their products, the demand for these devices that incorporate our products may diminish or we may otherwise be materially adversely affected. Any reduction in the demand for these devices would significantly reduce our revenues.

In certain products, some of our customers offer their own competitive products. These customers may find it advantageous to support their own offerings in the marketplace in lieu of promoting our products.

Our convertible senior notes could adversely affect our operating results and financial condition

Upon conversion, our convertible senior notes may be settled in cash, shares of our common stock or a combination of cash and shares, at our election. We intend to settle the principal amount of the notes in cash. If we do not have adequate cash available, we may not be able to settle the principal amount in cash. In such case, we will be required to settle the principal amount in stock, which would result in immediate, and likely material, dilution to the ownership interests of our existing stockholders. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

Following any conclusion that we no longer have the ability to settle the convertible senior notes in cash, we will be required on a going forward basis to change our accounting policy for earnings per share from the treasury stock method to the if-converted method. Earnings per share may be lower under the if-converted method as compared to the treasury stock method.

The principal balance of the convertible senior notes was separated into liability and equity components, which were recorded initially at fair value. The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is accreted to interest expense over the term of the notes using the effective interest method. Accordingly, we will report higher interest expense because of the recognition of both the debt discount amortization and the notes’ coupon interest.

Our debt could adversely affect our operations and financial condition

We believe we have the ability to service our debt, but our ability to make the required payments thereunder when due depends upon our future performance, which will be subject to general economic conditions, industry cycles and other factors affecting our operations, including risk factors described herein, many of which are beyond our control. Our credit facility also contains covenants, including financial covenants. If we breach any of the covenants under our credit facility and do not obtain appropriate waivers, then, subject to any applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable.

We could seek to raise additional debt or equity capital in the future, but additional capital may not be available on terms acceptable to us, or at all

We believe that our existing cash, cash equivalents, investments and credit under our credit facility will be sufficient to meet our working capital needs, capital expenditures, investment requirements and commitments for at least the next 12 months. However, our ability to borrow further under the credit facility is dependent upon our ability to satisfy various conditions, covenants and representations. It is possible that we may need to raise additional funds to finance our activities or to facilitate acquisitions of other businesses, products, intellectual property or technologies. We believe we could raise these funds, if needed, by selling equity or debt securities to the public or to selected investors. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. However, we may not be able to obtain additional funds on favorable terms, or at all. If we decide to raise additional funds by issuing equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced.

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We have limited resources compared to some of our current and potential competitors and we may not be able to compete effectively and increase market share

Some of our current and potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base of customers than we have. As a result, these competitors may have greater credibility with our existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products than we can to ours. In addition, some of our current and potential competitors have already established supplier or joint development relationships with the decision makers at our current or potential customers. These competitors may be able to leverage their existing relationships to discourage their customers from purchasing products from us or persuade them to replace our products with their products. Our competitors may also offer bundled solutions offering a more complete product despite the technical merits or advantages of our products. These competitors may elect not to support our products which could complicate our sales efforts. These and other competitive pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business. Competition could decrease our prices, reduce our sales, lower our gross profit and/or decrease our market share.

Provisions in our charter documents and Delaware law could prevent, delay or impede a change in control of us and may reduce the market price of our common stock

Provisions of our certificate of incorporation and bylaws could have the effect of discouraging, delaying or preventing a merger or acquisition that a stockholder may consider favorable. For example, our certificate of incorporation and bylaws provide for:

·The division of our Board of Directors into three classes to be elected on a staggered basis, one class each year;

·The ability of our Board of Directors to issue shares of our preferred stock in one or more series without further authorization of our stockholders;

·A prohibition on stockholder action by written consent;

·Elimination of the right of stockholders to call a special meeting of stockholders;

·A requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders; and

·A requirement that a supermajority vote be obtained to amend or repeal certain provisions of our certificate of incorporation.

We also are subject to the anti-takeover laws of Delaware which may discourage, delay or prevent someone from acquiring or merging with us, which may adversely affect the market price of our common stock.

Risks related to our industry

We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often connected with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions. Deteriorating general worldwide economic conditions, including reduced economic activity, concerns about credit and inflation, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased spending and similar adverse business conditions, would make it very difficult for our customers, our vendors, and us to accurately forecast and plan future business activities and could cause U.S. and foreign businesses to slow spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown or economic recovery.

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If the economy or markets in which we operate deteriorate, our business, financial condition, and results of operations would likely be materially and adversely affected.

Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. We believe the semiconductor industry is currently suffering a downturn due in large part to adverse macroeconomic conditions,  characterized by a slowdown in overall GDP performance and factory activity in certain regions, particularly in China , higher levels of customer inventory, the impact of tariffs on trade relations, and greater overall uncertainty regarding the economy. This downturn has had, and may continue to have, a material adverse effect on our business and operating results.

Upturns have been characterized by increased product demand and production capacity constraints created by increased competition for access to third-party foundry, assembly and test capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party foundry, assembly or test subcontractors have provided assurances that adequate capacity will be available to us.

The average selling prices of our products could decrease rapidly which may negatively impact our revenues and gross profit

We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices. We have reduced the average unit price of our products in anticipation of or in response to competitive pricing pressures, new product introductions by us or our competitors and other factors. If we are unable to offset any such reductions in our average selling prices by increasing our sales volumes, increasing our sales content per application or reducing production costs, our gross profit and revenues will suffer. To maintain our gross profit, we will need to develop and introduce new products and product enhancements on a timely basis and continually reduce our costs. Our failure to do so could cause our revenues and gross profit to decline.

Competition within the numerous markets we target may reduce sales of our products and reduce our market share

The markets for semiconductors in general, and for mixed-signal products in particular, are intensely competitive. We expect that the market for our products will continually evolve and will be subject to rapid technological change. In addition, as we target and supply products to numerous markets and applications, we face competition from a relatively large number of competitors. We compete with Analog Devices, Broadcom, Cypress, Infineon, Maxim Integrated Products, MaxLinear, Microchip, Nordic Semiconductor, NXP Semiconductors, Qualcomm, Renesas, STMicroelectronics, Synaptics, Texas Instruments and others. We expect to face competition in the future from our current competitors, other manufacturers and designers of semiconductors, and start-up semiconductor design companies. As the markets for communications products grow, we also may face competition from traditional communications device companies. These companies may enter the mixed-signal semiconductor market by introducing their own products or by entering into strategic relationships with or acquiring other existing providers of semiconductor products. In addition, large companies may restructure their operations to create separate companies or may acquire new businesses that are focused on providing the types of products we produce or acquire our customers.

We may be the victim of business disruptions and security breaches, including cyber-attacks, which could lead to liability or could damage our reputation and financial results

Information technology system and/or network disruptions, regardless of the cause, but including acts of sabotage, error, or other actions, could harm the company’s operations. Failure to effectively prevent, detect, and recover from security breaches, including cyber-attacks, could result in the misuse of company assets, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales and other costs to the company. We routinely face attacks that attempt to breach our security protocols, gain access to or disrupt our computerized systems or steal proprietary company, customer, partner or employee information. These attacks are sometimes successful. These attacks may be due to security breaches, employee error, theft, malfeasance, phishing schemes, ransomware, faulty password or data security management, or other irregularities. The theft, loss, destruction, unavailability or misuse of personal or business data collected, used, stored or transferred by us to run our business could result in increased security costs or costs related to defending legal claims.

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Industrial espionage, theft or loss of our intellectual property data could lead to counterfeit products or harm the competitive position of our products and services. Costs to implement, test and maintain measures to promote compliance with applicable privacy and data security laws as well as to protect the overall security of our system could be significant. Attempted or successful attacks against our products and services could damage our reputation with customers or users and reduce demand for our products and services.

Changes in the Privacy and Data Security/Protection Laws Could Have an Adverse Effect on our Operations

Federal, state and international privacy-related or data protection laws and regulations could have an adverse effect on our operations. Complying with these laws and the possibility of proceedings against us by governmental entities or others in relation to these laws could increase operational costs. In May 2018, the European Union’s General Data Protection Regulation (“GDPR”) went into effect, replacing the EU’s 1995 Data Protection Directive. The costs of compliance with the GDPR and the potential for fines and penalties in the event of a breach of the GDPR may have an adverse effect on our operations.

We may be subject to information technology failures that could damage our reputation, business operations and financial condition

We rely on information technology for the effective operation of our business. Our systems are subject to damage or interruption from a number of potential sources, including natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, theft, physical or electronic break-ins, cyber-attacks, sabotage, vandalism, or similar events or disruptions. Our security measures may not detect or prevent such security breaches. Any such compromise of our information security could result in the theft or unauthorized publication or use of our confidential business or proprietary information, result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation or damage our reputation. In addition, our inability to use or access information systems at critical points in time could unfavorably impact the timely and efficient operation of our business, which could negatively affect our business and operating results.

Third parties with which we conduct business, such as foundries, assembly and test contractors, distributors and customers, have access to certain portions of our sensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our reputation, business operations and financial results.

Our products must conform to industry standards and technology in order to be accepted by end users in our markets

Generally, our products comprise only a part of a device. All components of such devices must uniformly comply with industry standards in order to operate efficiently together. We depend on companies that provide other components of the devices to support prevailing industry standards. Many of these companies are significantly larger and more influential in affecting industry standards than we are. Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companies do not support the same industry standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected which would harm our business.

Products for certain applications are based on industry standards that are continually evolving. Our ability to compete in the future will depend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by other suppliers. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, we could miss opportunities to achieve crucial design wins.

Our pursuit of necessary technological advances may require substantial time and expense. We may not be successful in developing or using new technologies or in developing new products or product enhancements that achieve market acceptance. If our products fail to achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected.

44

Customer demands and new regulations related to conflict-free minerals may adversely affect us

The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes new disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in products, whether or not these products are manufactured by third parties. These new requirements could affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our products). There will be additional costs associated with complying with the disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. Our supply chain is complex and we may be unable to verify the origins for all metals used in our products. We may also encounter challenges with our customers and stockholders if we are unable to certify that our products are conflict free.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Our registration statement (Registration No. 333-94853) under the Securities Act of 1933, as amended, relating to our initial public offering of our common stock became effective on March 23, 2000.

The following table summarizes repurchases of our common stock during the three months ended March 30, 2019 (in thousands, except per share amounts):

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
December 30, 2018 — January 26, 2019	—	$	—	—	$	160,733
January 27, 2019 — February 23, 2019	177	$	84.73	177	$	145,733
February 24, 2019 — March 30, 2019	—	$	—	—	$	145,733
Total	177	$	84.73	177

In October 2018, the Board of Directors increased the authorization amount of the existing share repurchase program from $100 million to $200 million and extended the termination date to December 2019. The program allows for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions.

Item 3.  Defaults Upon Senior Securities

Not applicable

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

Not applicable

45

Item 6.  Exhibits

The following exhibits are filed as part of this report:

Exhibit Number
2.1*	Agreement and Plan of Merger, dated December 7, 2017, by and among Silicon Laboratories Inc., Seguin Merger Subsidiary, Inc. and Sigma Designs, Inc. (filed as Exhibit 2.1 to the Form 8-K filed on December 8, 2017).
3.1*	Form of Fourth Amended and Restated Certificate of Incorporation of Silicon Laboratories Inc. (filed as Exhibit 3.1 to the Registration Statement on Form S-1 (Securities and Exchange Commission File No. 333-94853) (the “IPO Registration Statement”)).
3.2*	Fourth Amended and Restated Bylaws of Silicon Laboratories Inc. (filed as Exhibit 3.2 to the Form 8-K filed on January 27, 2017).
4.1*	Specimen certificate for shares of common stock (filed as Exhibit 4.1 to the IPO Registration Statement).
4.2*	Indenture between Silicon Laboratories Inc. and Wilmington Trust, National Association, as trustee, dated March 6, 2017 (filed as Exhibit 4.1 to the Form 8-K filed on March 6, 2017).
4.3*	Form of 1.375% Convertible Senior Note due 2022 (filed as Exhibit 4.2 to the Form 8-K filed on March 6, 2017).
10.1+	Form of Market Stock Units Grant Notice and Global Market Stock Units Award Agreement under Registrant’s 2009 Stock Incentive Plan, as amended and restated.
31.1	Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

* Incorporated herein by reference to the indicated filing.

+ Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SILICON LABORATORIES INC.
May 3, 2019	/s/ G. Tyson Tuttle
Date	G. Tyson Tuttle
	President and
	Chief Executive Officer
	(Principal Executive Officer)
May 3, 2019	/s/ John C. Hollister
Date	John C. Hollister
	Senior Vice President and
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

SILICON LABORATORIES INC.

2009 STOCK INCENTIVE PLAN

MARKET STOCK UNITS GRANT NOTICE AND
GLOBAL MARKET STOCK UNITS AWARD AGREEMENT

Silicon Laboratories Inc., a Delaware corporation (the “Company”), pursuant to its 2009 Stock Incentive Plan, as amended and restated (the “Plan”), hereby grants to the holder listed below (the “Participant”), an award (the “Award”) of Market Stock Units (the “Units”), each of which is a bookkeeping entry representing the equivalent in value of one (1) Share, on the terms and conditions set forth herein and in the Global Market Stock Units Award Agreement attached hereto (the “Award Agreement”), including any country-specific terms and conditions set forth in an addendum to such agreement (the “Addendum”) the Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Award Agreement.

Participant:
Grant Date:
Target Number of Units:
Maximum Number of Units:	200% of the Target Number of Units, subject to adjustment as provided by the Award Agreement.
Start Date:	[Insert First Date of First Fiscal Year of Performance Period]
End Date:	[Insert Last Date of Third Fiscal Year of Performance Period]
Performance Period:	The three fiscal years of the Company beginning on the Start Date and ending on the End Date, subject to Section 9.1 of the Award Agreement.
Performance Criteria:	The Relative TSR Percentile, determined in accordance with Section 2 of the Award Agreement.
Relative Return Factor:	For each Performance Period, a percentage equal to (i) 0% if the Relative TSR Percentile is less than 25%, (ii) 50% if the Relative TSR Percentile is equal to 25% or (iii) if the Relative TSR Percentile is greater than 25%, then the sum of 50% plus the product of (a) 2 multiplied by (b) the difference of (x) the Relative TSR Percentile minus (y) 25%, as illustrated by Appendix A.
Earned Units:	The number of Earned Units, if any (not to exceed the Maximum Number of Units), shall equal the product of (i) the Target Number of Units and (ii) the Relative Return Factor determined for the Performance Period, as illustrated by Appendix A.

Vesting Date:	[INSERT DATE — January 31 following the End Date], except as otherwise provided by the Award Agreement.
Vested Units:	Provided that the Participant’s Service (as defined in Section 5.1 of the Award Agreement) has not terminated prior to the Vesting Date (except as otherwise provided by the Award Agreement), the Earned Units, if any, shall become Vested Units on the Vesting Date.
Settlement Date:	For each Vested Unit, except as otherwise provided by the Award Agreement, a date occurring no later than ten (10) days following the Vesting Date.

By his or her signature below or by electronic acceptance or authentication in a form authorized by the Company, the Participant agrees to be bound by the terms and conditions of the Plan, the Award Agreement, including the Addendum, and this Grant Notice.  The Participant has reviewed the Award Agreement, the Addendum, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Award Agreement, the Addendum and the Plan.  The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or relating to the Units.

SILICON LABORATORIES INC.	PARTICIPANT
By:	By:
Print Name:	Print Name:
Title:
Address:	Address:

APPENDIX A

ILLUSTRATION OF RELATIVE RETURN FACTOR AND RESULTING NUMBER OF EARNED UNITS

Relative TSR Percentile	Relative Return Factor		Earned Units (Per 1,000 Target Units)
100%	200.0	%	2,000
90%	180.0	%	1,800
80%	160.0	%	1,600
70%	140.0	%	1,400
60%	120.0	%	1,200
50%	100.0	%	1,000
40%	80.0	%	800
30%	60.0	%	600
25%	50.0	%	500
Less than 25%	0.0	%	0

APPENDIX A CONTINUED

ILLUSTRATIONS OF CALCULATION OF TSR FOR THE COMPANY OR A GIVEN BENCHMARK COMPANY

Assumptions:
Average Per Share Closing Price (beginning)		$	36.87
Average Per Share Closing Price (ending)		$	46.02
Computations:
TSR	((46.02 / 36.87) - 1) x 100	24.82		%

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APPENDIX B

ILLUSTRATION OF ADJUSTMENT TO AVERAGE PER SHARE CLOSING PRICE
TO REFLECT ASSUMED REINVESTMENT OF CASH DIVIDENDS AND DISTRIBUTIONS

1.Assumptions:

·For the purposes of this illustration only, the averaging periods for determination of the Average Per Share Closing Price and the Average Closing Index Value are assumed to be the 30-day periods ending on the first day of the Performance Period and the last day of the Performance Period.

·The company declares and pays a quarterly cash dividend of $0.20 per share throughout all periods relevant to this illustration, with ex-dividend dates occurring each year on or about March 28, June 28, September 28 and December 28.

·On the ex-dividend date, the dividend paid is reinvested to purchase an additional fractional share.

·The Performance Period begins on January 1, 2XX1 and ends on December 31, 2XX3

2.Calculate Average Per Share Closing Price at the beginning of the Performance Period.

On the ex-dividend date occurring on December 28, 2XX0, assume that the dividend of $0.20 paid on one share is reinvested.  Compute an adjusted Average Per Share Closing Price.  Assume only for simplicity of illustration that there are only five trading days during the 30-day period ending 01/01/2XX1.

Trading Day	Closing Price		Dividend Paid		Shares Purchased	Accumulated Shares	Total Accumulated Value
12/24/2XX0	$	37.26				1.000	$	37.26
12/26/2XX0	$	37.32				1.000	$	37.32
12/27/2XX0	$	37.44				1.000	$	37.44
12/28/2XX0	$	37.67	$	0.20	.0053	1.0053	$	37.87
12/31/2XX0	$	37.43				1.0053	$	37.63
		Average Per Share Closing Price with Dividends Reinvested					$	37.50

3.Calculate Accumulated Shares During the Performance Period.

On each ex-dividend date during the Performance Period, assume that the dividend of $0.20 paid on one share is reinvested, and the fractional share is added to the 1.0053 accumulated shares determined during the initial averaging period.

Ex-Dividend Date	Closing Price		Dividend Paid		Shares Purchased	Accumulated Shares
03/28/2XX1	$	31.13	$	0.20	.0064	1.0117
06/28/2XX1	$	36.46	$	0.20	.0055	1.0172
09/28/2XX1	$	31.08	$	0.20	.0064	1.0236
12/28/2XX1	$	23.67	$	0.20	.0084	1.0320
03/28/2XX2	$	26.96	$	0.20	.0074	1.0394
06/28/2XX2	$	38.75	$	0.20	.0052	1.0446
09/28/2XX2	$	46.49	$	0.20	.0043	1.0489
12/28/2XX2	$	47.97	$	0.20	.0042	1.0531
03/28/2XX3	$	47.72	$	0.20	.0042	1.0573
06/28/2XX3	$	43.50	$	0.20	.0046	1.0619
09/28/2XX3	$	37.55	$	0.20	.0053	1.0672
12/28/2XX3	$	46.13	$	0.20	.0043	1.0715

4.Calculate Average Per Share Closing Price at the end of the Performance Period.

On the ex-dividend date occurring on December 28, 2XX3, assume that the dividend of $0.20 paid on one share is reinvested, and the fractional share is added to the 1.0672 accumulated shares determined through the last ex-dividend date prior to the final averaging period.  Compute an adjusted Average Per Share Closing Price.  Assume only for simplicity of illustration that there are only seven trading days during the 30-day period ending 12/31/2XX3.

Trading Day	Closing Price		Dividend Paid		Shares Purchased	Accumulated Shares	Total Accumulated Value
12/22/2XX3	$	46.93				1.0672	$	50.08
12/23/2XX3	$	46.45				1.0672	$	49.57
12/27/2XX3	$	46.55				1.0672	$	49.68
12/28/2XX3	$	46.13	$	0.20	.0043	1.0715	$	49.43
12/29/2XX3	$	46.11				1.0715	$	49.41
12/30/2XX3	$	46.28				1.0715	$	49.59
12/31/2XX3	$	46.02				1.0715	$	49.31
	Average Per Share Closing Price with Dividends Reinvested						$	49.58

2

SILICON LABORATORIES INC.

2009 STOCK INCENTIVE PLAN

GLOBAL MARKET STOCK UNITS AWARD AGREEMENT

Silicon Laboratories Inc. (the “Company”) has granted to the Participant named in the Market Stock Units Grant Notice (the “Grant Notice”) to which this Market Stock Units Award Agreement (this “Award Agreement”) is attached an Award consisting of Market Stock Units (the “Units”) subject to the terms and conditions set forth in the Grant Notice and this Award Agreement, including any country-specific terms and conditions set forth in an addendum to such agreement (the “Addendum”).  The Award has been granted pursuant to the Silicon Laboratories Inc. 2009 Stock Incentive Plan, as amended and restated (the “Plan”), as amended to the Grant Date, the provisions of which are incorporated herein by reference.

Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings assigned under the Plan.

1.             THE AWARD.

The Company hereby awards to the Participant the Target Number of Units set forth in the Grant Notice, which, depending on the extent to which a Performance Goal (as described by Plan) is attained during the Performance Period, may result in the Participant earning as little as zero (0) Units or as many as the Maximum Number of Units.  Subject to the terms of this Award Agreement and the Plan, each Unit, to the extent it is earned and becomes a Vested Unit, represents a right to receive one (1) share of Common Stock (a “Share”) on the Settlement Date.  Unless and until a Unit has been determined to be an Earned Unit and has vested and become a Vested Unit as set forth in the Grant Notice, the Participant will have no right to settlement of such Units.  Prior to settlement of any Units, such Units will represent an unfunded and unsecured obligation of the Company.

2.             MEASUREMENT OF PERFORMANCE CRITERIA.

The components of Performance Criteria shall be determined for the Performance Period in accordance with the following:

2.1          “Benchmark Companies” mean, other than the Company, (x) the companies included in the Philadelphia Semiconductor Sector Total Return Index (NASDAQ OMX: XSOX) (the “Index”) as of the Start Date and (y) any additional companies not included in the Index that are designated as peer companies by the Committee in connection with setting the compensation of the Company’s executives for the first fiscal year of the Performance Period.  Benchmark Companies shall exclude any companies that are not publicly-traded (whether due to completed acquisition, dissolution or other event) for the entire Performance Period.  In the event of a completed merger between two Benchmark Companies during the Performance Period, the Benchmark Company with the higher reported revenue for the four fiscal quarters preceding the closing of such acquisition shall be included as a Benchmark Company and the other company shall not be a Benchmark Company.  The Committee shall retain the discretion to make adjustments to the Benchmark Companies, including without limitation, to address any fundamental change that takes place with respect to a Benchmark Company.

2.2          “Relative TSR Percentile” means the percentile (rounded to the nearest whole percentile) reflecting the Company’s rank by comparing the Company’s TSR relative to the TSR of the Benchmark Companies as set forth below:

Relative TSR Percentile = 1 – [(R-1)/(N-1)]

where

“R” represents the Company’s ranking when the TSR of the Company and the Benchmark Companies are ranked from highest to lowest TSR.

“N” represents the number of Benchmark Companies, plus the Company.

For example, if there are 24 Benchmark Companies, and the Company ranked 7th highest, the Relative TSR Percentile would be 75%.  The calculation would be 0.75=1-[(7-1)/(25-1)].

2.3          “TSR” with respect to any company means the percentage point increase or decrease in (a) the Average Per Share Closing Price for such company for the 30-day period ending on the last day of the Performance Period over (b) the Average Per Share Closing Price for such company for the 30-day period ending on the first day of the Performance Period.

2.4          “Average Per Share Closing Price” with respect to any company means the average of the daily closing prices per share as reported on the company’s primary stock market for all trading days falling within an applicable 30-day period described in Section 2.1.  The Average Per Share Closing Price shall be adjusted in each case to reflect an assumed reinvestment, as of the applicable ex-dividend date, of all cash dividends and other cash distributions (excluding cash distributions resulting from share repurchases or redemptions by the company) paid to stockholders, as applicable, during the 30-day period ending on the first day of the Performance Period and during the Performance Period.  The method of adjustment of the Average Per Share Closing Price to reflect the assumed reinvestment of cash dividends and other cash distributions to stockholders is illustrated in Appendix B to the Grant Notice.  In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution of assets to stockholders, or any other change affecting the shares or the price of the shares, the Committee shall make such adjustments to the Average Per Share Closing Price, if any, as the Committee in its discretion may deem appropriate to reflect such change.

3.             COMMITTEE CERTIFICATION OF EARNED UNITS.

3.1          Level of Performance Criteria Attained.  On or before the Vesting Date following completion of the Performance Period, the Committee shall determine and certify in writing for the Performance Period (i) the level of attainment of the Performance Criteria during such Performance Period, (ii) the resulting Relative Return Factor for such Performance Period and (iii) the number of Units which have become Earned Units for such Performance Period, and (b) the total number of Units which have become Earned Units for the entire Performance Period.  Except as set forth herein, the Committee may not increase the number of Units that may be eligible to become Earned Units to a number that is greater than the number of Earned Units determined in accordance with the foregoing sentence.  The Committee retains the sole discretion to reduce the number of Units that would otherwise be eligible to become Earned Units based on the attainment level of the Performance Criteria.

3.2          Adjustment for Leave of Absence or Part-Time Work.  Unless otherwise required by law or Company policy, if the Participant takes a leave of absence or commences working on a part-time basis during the Performance Period, the Committee may, in its discretion, reduce on a pro rata basis (reflecting the portion of the Performance Period worked by the Participant on a full-time equivalent basis) the number of Units which would otherwise become Earned Units, or provide that the number of Units which would otherwise become Earned Units shall be reduced as provided by the terms of an agreement between the Participant and the Company pertaining to the Participant’s leave of absence or part-time schedule.

2

4.             VESTING OF EARNED UNITS.

4.1          Normal Vesting.  Except as otherwise provided by this Award Agreement, Earned Units shall vest and become Vested Units as provided in the Grant Notice.

4.2          Vesting Upon a Change in Control.

(a)           In the event of a Change in Control before the end of the Performance Period as set forth in the Grant Notice, the vesting of Earned Units shall be determined in accordance with Section 9.1.

(b)           In the event of a Change in Control after the end of the Performance Period as set forth in the Grant Notice but before the Vesting Date as set forth in the Grant Notice, the vesting of Earned Units shall be determined in accordance with Section 9.2.

4.3          Vesting Upon Involuntary Termination Following a Change in Control.  In the event that upon or within eighteen (18) months following the effective date of a Change in Control, the Participant’s Service (as defined in Section 5.1 below) terminates due to Involuntary Termination, the vesting of Earned Units shall be determined in accordance with Section 9.3.

5.             TERMINATION OF SERVICE.

5.1          General Rule.  In the event that prior to the Vesting Date the Participant ceases to provide services to the Company (or any Subsidiary or Affiliate) in the capacity of an Employee, Director or Consultant (collectively referred to herein as “Service”) for any reason, with or without cause, other than by reason of the Participant’s termination of Service described in Section 4.3, the Participant shall forfeit all Units which are not, as of the time of such termination, Vested Units, and the Participant shall not be entitled to any payment therefor.

5.2          Determination of Termination Date.  For purposes of this Award Agreement, the date of termination of the Participant’s Service shall be the date upon which the Participant ceases active performance of services for the Company, a Subsidiary or Affiliate, as determined by the Company following the provision of such notification of termination or resignation from Service and shall be determined solely by this Award Agreement and without reference to any other agreement, written or oral, including the Participant’s contract of employment (if any).  Thus, in the event of termination of the Participant’s Service (regardless of the reason for such termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment contract, if any), and unless otherwise expressly provided in this Agreement or determined by the Company, the Participant’s right to vest in the Units under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment contract, if any).  The Committee shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of this Award Agreement (including whether the Participant may still be considered to be providing services while on a leave of absence).

3

6.             SETTLEMENT OF THE AWARD.

6.1          Issuance of Shares of Common Stock.  Subject to the provisions of Section 6.3, Section 7 and Section 9.2 below, the Company shall issue to the Participant on the Settlement Date with respect to each Vested Unit to be settled on such date one (1) Share.  Shares issued in settlement of Vested Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 6.3.

6.2          Beneficial Ownership of Shares; Certificate Registration.  The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with a Company-designated brokerage firm or, at the Company’s discretion, any other broker with which the Participant has an account relationship of which the Company has notice any or all Shares acquired by the Participant pursuant to the settlement of the Award.  Except as provided by the preceding sentence, a certificate for the Shares as to which the Award is settled shall be registered in the name of the Participant.

6.3          Restrictions on Grant of the Award and Issuance of Shares.  The grant of the Award and issuance of shares of Common Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of U.S. federal, state or foreign law with respect to such securities.  No Shares may be issued hereunder if the issuance of such Shares would constitute a violation of any applicable U.S. federal, state or foreign securities laws or other laws or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any Shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained.  As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.  Further, regardless of whether the transfer or issuance of the Shares to be issued pursuant to the Units has been registered under the Securities Act or has been registered or qualified under the securities laws of any State, the Company may impose additional restrictions upon the sale, pledge, or other transfer of the Shares (including the placement of appropriate legends on stock certificates and the issuance of stop-transfer instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary in order to achieve compliance with the provisions of the Securities Act, the securities laws of any State, or any other law.

6.4          Fractional Shares.  The Company shall not be required to issue fractional Shares upon the settlement of the Award.

7.             TAX WITHHOLDING AND ADVICE.

7.1          In General.  The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant or deemed by the Company or the Employer in its discretion to be an appropriate charge to the Participant even if legally applicable to the Company or the Employer (“Tax-Related Items”), is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer.  The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Units, including, but not limited to, the grant, vesting or settlement of the Units, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Units to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

4

7.2          Withholding of Taxes.  Prior to any relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items (including hypothetical withholding tax amounts if the Participant is covered under a Company tax equalization policy).  In this regard, the Participant authorizes the Company or its agent to satisfy the obligations with regard to all Tax-Related Items by withholding in Shares to be issued upon settlement of the Units.  In the event that such withholding in Shares is problematic under applicable tax or securities law or has materially adverse accounting consequences, by the Participant’s acceptance of the Units, the Participant authorizes and directs the Company and any brokerage firm determined acceptable to the Company to sell on the Participant’s behalf a whole number of Shares from those Shares issued to the Participant as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the obligation for Tax-Related Items.

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent.  If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the vested Units, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items .

If the Participant is covered by a Company tax equalization policy, the Participant agrees to pay to the Company any additional hypothetical tax obligation calculated and paid under the terms and conditions of such tax equalization policy.  Finally, the Participant agrees to pay to the Company or the Employer, including through direct payment from the Participant and/or withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described.  The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.

7.3          Tax Advice.  The Participant represents, warrants and acknowledges that the Company has made no warranties or representations to the Participant with respect to the income tax, social contributions or other tax consequences of the transactions contemplated by this Award Agreement, and the Participant is in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences.  THE PARTICIPANT UNDERSTANDS THAT THE TAX AND SOCIAL SECURITY LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.  THE PARTICIPANT IS HEREBY ADVISED TO CONSULT WITH HIS OR HER OWN PERSONAL TAX, LEGAL AND FINANCIAL ADVISORS REGARDING THE PARTICIPANT’S PARTICIPATION IN THE PLAN BEFORE TAKING ANY ACTION RELATED TO THE PLAN. NOTHING STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.

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8.             AUTHORIZATION TO RELEASE NECESSARY PERSONAL INFORMATION.

The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Award Agreement, the Appendix and any other Award grant materials (“Data”) by and among, as applicable, the Employer, the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.

The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Units or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan.

The Company’s equity compensation plan recordkeeper is Fidelity Stock Plan Services, LLC (the “Recordkeeper”).  The Participant understands that Data will be transferred to the Recordkeeper or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan.  The Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country.  The Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting the Company’s stock administration department.  The Participant authorizes the Company, the Recordkeeper and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan.  The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan.  The Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s stock administration department.  Further, the Participant understands that he or she is providing the consents herein on a purely voluntary basis.  If the Participant  does not consent, or if the Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant the Participant Units or other equity awards or administer or maintain such awards.  Therefore, the Participant understands that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan.  For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that he or she may contact the Company’s stock administration department.

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9.             CHANGE IN CONTROL.

9.1          Effect on Award of Change in Control Before End of Performance Period.  In the event of a Change in Control before the end of the Performance Period as set forth in the Grant Notice, the Performance Period shall end on the day immediately preceding the Change in Control (the “Adjusted Performance Period”).  The number of Earned Units and the vesting of those Units shall be determined for the Adjusted Performance Period in accordance with the following:

(a)           Earned Units.  In the Committee’s determination of the number of Earned Units for the Adjusted Performance Period, the following modifications shall be made to the components of the Relative Return Factor:

(i)            The Company’s TSR shall be determined as provided by Section 2.1, except that the Company’s Average Per Share Closing Price for the 30-day period ending on the last day of the Adjusted Performance Period shall be replaced with the price per Share to be paid to the holder thereof in accordance with the definitive agreement governing the transaction constituting the Change in Control (or, in the absence of such agreement, the closing price per Share as reported on the NASDAQ Stock Market for the last trading day of the Adjusted Performance Period), adjusted to reflect an assumed reinvestment, as of the applicable ex-dividend date, of all cash dividends and other cash distributions (excluding cash distributions resulting from share repurchases or redemptions by the Company) paid to stockholders during the Adjusted Performance Period, as illustrated in Appendix B to the Grant Notice.

(ii)           The TSR for each Benchmark Company shall be determined as provided by Section 2.3, except that for the purposes of clause (a) thereof, the Average Closing Index Value shall be determined for the 30-day period ending on the last day of the Adjusted Performance Period.

(b)           Vested Units if Award Assumed.  In the event of a Change in Control before the end of the Performance Period in connection with which the Award will be assumed or replaced with a substitute Award, as described in Section 11 of the Plan, then, as of the last day of the Adjusted Performance Period and provided that the Participant’s Service has not terminated prior to such date, a portion of the Earned Units determined in accordance with Section 9.1(a) shall become Vested Units (the “Accelerated Units”), with such portion determined by multiplying the total number of Earned Units by a fraction, the numerator of which equals the number of days contained in the Adjusted Performance Period and the denominator of which equals the number of days contained in the original Performance Period determined without regard to this Section.  The Accelerated Units shall be settled in accordance Section 6 immediately prior to the consummation of the Change in Control.  Except as otherwise provided by Section 9.3, that portion of the Earned Units determined in accordance with Section 9.1(a) in excess of the number of Accelerated Units shall become Vested Units on the Vesting Date of the original Performance Period determined without regard to this Section, provided that the Participant’s Service has not terminated prior to such Vesting Date.  Such Vested Units shall be settled on the Settlement Date in accordance with Section 6, provided that payment for each Vested Unit shall be made in the amount and in the form of the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a Share on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares).

(c)           Vested Units if Award Not Assumed.  In the event of a Change in Control before the end of the Performance Period in connection with which the Award will not be assumed or replaced with a substitute Award, as described in Section 11 of the Plan, then, as of the last day of the Adjusted Performance Period and provided that the Participant’s Service has not terminated prior to such date, all of the Earned Units determined in accordance with Section 9.1(a) shall become Vested Units and shall be settled in accordance Section 6 immediately prior to the consummation of the Change in Control.

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9.2          Effect on Award of Change in Control After End of Performance Period But Before Vesting Date.  In the event of a Change in Control upon or after the end of the Performance Period but before the Vesting Date, each as set forth in the Grant Notice, the number of Earned Units determined in accordance with the Grant Notice shall become Vested Units and shall be settled in accordance Section 6 immediately prior to the consummation of the Change in Control, provided that the Participant’s Service has not previously terminated.

9.3          Involuntary Termination Following Change in Control.  In the event that upon or within eighteen (18) months following the effective date of the Change in Control, the Participant’s Service terminates due to Involuntary Termination, then all Earned Units that have not previously become Vested Units, if any, shall be deemed Vested Units effective as of the effective date of the Participant’s Involuntary Termination (as determined in accordance with Section 9.4) and shall be settled in accordance with Section 6, treating the date of the Participant’s termination of Service as the Vesting Date, and provided that payment for each Vested Unit shall be made in the amount and in the form of the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a Share on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares).  Vested Units vested as a result of the Participant’s Involuntary Termination shall be settled in accordance with Section 6 on the 60th day following the date of the Participant’s termination of employment or service provided that the Participant has signed a full general release in a form prepared by or otherwise acceptable to Company, releasing all claims, known or unknown, that the Participant may have against Company and its officers, directors, employees and affiliated companies, arising out of or in any way related to the Participant’s employment or service or termination of employment or service with Company and the period for revocation, if any, of such release has lapsed on or before such 60th day without the release having been revoked.  In the event that such release does not become effective in accordance with its terms on or before the 60th day following the date of the Participant’s termination of employment or service, the Participant shall forfeit, without compensation therefor, any Earned Units that were deemed vested as a result of the Participant’s Involuntary Termination.

9.4          “Involuntary Termination” shall mean the termination of the employment or service of any Participant which occurs by reason of:

(a)           such Participant’s involuntary dismissal or discharge by the Company or a Subsidiary or Affiliate for reasons other than Misconduct, or

(b)           such Participant’s voluntary resignation following the initial existence of any of the following conditions: (A) a material diminution in the Participant’s authority, duties or responsibilities, (B) a material diminution in the Participant’s (i) base salary (including, without limitation, a reduction of base salary by more than 10%) or (ii) total cash compensation (including base salary and target bonus potential (including, without limitation, a reduction of total target cash compensation by more than 10%), (C) a material change in the geographic location at which the Participant must perform the services (including, without limitation, a change in the Participant’s assigned workplace that increases the Participant’s one-way commute by more than 35 miles), provided and only if such diminution or change is effected by the Company without the Participant’s written consent.  No voluntary resignation by the Participant shall be treated as an Involuntary Termination pursuant to this Section 9.3(b) unless the Participant gives written notice to the Committee advising the Company of such intended resignation (along with the facts and circumstances constituting the condition asserted as the reason for such resignation) within 30 days after the time the Participant becomes aware of the existence of such condition and provides the Company a cure period of 30 days following such date that notice is delivered. If the Committee determines that the asserted condition exists and the Company does not cure such condition within the 30-day cure period, the Participant’s termination of employment or service shall be effective on such 30th day of the cure period.

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10.          ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

The number of Units awarded pursuant to this Award Agreement (both the Target Number of Units and Maximum Number of Units) is subject to adjustment as provided in Article 11 of the Plan.  Upon the occurrence of an event described in Article 11 of the Plan, any and all new, substituted or additional securities or other property to which a holder of a Share issuable in settlement of the Award would be entitled shall be immediately subject to the Award Agreement and included within the meaning of the term “Shares” for all purposes of the Award.  The Participant shall be notified of such adjustments and such adjustments shall be binding upon the Company and the Participant.

11.          NO ENTITLEMENT OR CLAIMS FOR COMPENSATION.

11.1        Nature of the Grant.  In accepting the Award, the Participant acknowledges, understands and agrees that:

(a)           the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)           the grant of the Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Units, or benefits in lieu of Units, even if Units have been granted in the past;

(c)           all decisions with respect to future Units or other grants, if any, will be at the sole discretion of the Company;

(d)           the Units grant and the Participant’s participation in the Plan shall not create a right to employment or be interpreted as forming an employment or services contract with the Company, the Employer or any Subsidiary or Affiliate and shall not interfere with the ability of the Company, the Employer or any Subsidiary or Affiliate, as applicable, to terminate the Participant’s employment or service relationship (if any);

(e)           the Participant is voluntarily participating in the Plan;

(f)            the Units and the Shares subject to the Units are not intended to replace any pension rights or compensation;

(g)           the Units and the Shares subject to the Units, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

(h)           the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

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(i)            no claim or entitlement to compensation or damages shall arise from forfeiture of the Units resulting from the termination of the Participant’s employment or other service relationship (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment contract, if any), and in consideration of the grant of the Units to which the Participant is otherwise not entitled, the Participant irrevocably agrees never to institute any claim against the Company, any of its Subsidiaries or Affiliates or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, its Subsidiaries and Affiliates and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;

(j)            unless otherwise provided in the Plan or determined by the Company in its discretion, the Units and the benefits evidenced by this Award Agreement do not create any entitlement to have the Units or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company; and

(k)           the following provisions apply only if the Participant is providing services outside the United States:

(i)    the Units and the Shares subject to the Units are not part of normal or expected compensation or salary for any purpose; and

(ii)   the Participant acknowledges and agrees that neither the Company, the Employer nor any Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Units or of any amounts due to the Participant pursuant to the settlement of the Units or the subsequent sale of any Shares acquired upon settlement.

12.          RIGHTS AS A STOCKHOLDER.

The Participant shall have no rights as a stockholder with respect to any Shares which may be issued in settlement of this Award until the date of the issuance of a certificate for such Shares or the deposit of such Shares in a brokerage account (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the Shares are issued, except as provided in Section 10.

13.          MISCELLANEOUS PROVISIONS.

13.1        Amendment.  The Committee may amend this Award Agreement at any time; provided, however, that no such amendment may adversely affect the Participant’s rights under this Award Agreement without the consent of the Participant, except to the extent such amendment is desirable or necessary to comply with applicable law, including, but not limited to, Code Section 409A as further provided in the Plan.  No amendment or addition to this Award Agreement shall be effective unless in writing.

13.2        Nontransferability of the Award.  Prior to the issuance of Shares on the applicable Settlement Date, no right or interest of the Participant in the Award nor any Shares issuable on settlement of the Award shall be in any manner pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary or Affiliate or shall become subject to any lien, obligation, or liability of such Participant to any other party other than the Company, or a Subsidiary or Affiliate. Except as otherwise provided by the Committee, no Award shall be assigned, transferred or otherwise disposed of other than by will or the laws of descent and distribution.  All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.

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13.3        Further Instruments and Imposition of Other Requirements.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Award Agreement.  The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Units and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan.  Furthermore, the Participant acknowledges that the laws of the country in which the Participant is working at the time of grant, vesting and settlement of the Units or the sale of Shares received pursuant to this Award Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject the Participant to additional procedural or regulatory requirements that the Participant is and will be solely responsible for and must fulfill.

13.4        Binding Effect.  This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.

13.5        Notices.  Any notice required to be given or delivered to the Company under the terms of this Award Agreement shall be in writing and addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address maintained for the Participant in the Company’s records or at the address of the local office of the Company or of a Subsidiary or Affiliate at which the Participant works.

13.6        Construction of Award Agreement.  The Grant Notice, this Award Agreement, and the Units evidenced hereby (i) are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan, and (ii) constitute the entire agreement between the Participant and the Company on the subject matter hereof and supersede all proposals, written or oral, and all other communications between the parties related to the subject matter.  Notwithstanding the foregoing, the terms of any Change in Control Agreement (or similar written, fully-executed agreement) between the Company and Participant shall continue to be effective until the termination thereof (and may, for example, provide for alternative treatment than is set forth in Section 9 of this Award Agreement).  All decisions of the Committee with respect to any question or issue arising under the Grant Notice, this Award Agreement or the Plan shall be conclusive and binding on all persons having an interest in the Units.

13.7        Governing Law and Venue.  The interpretation, performance and enforcement of this Award Agreement shall be governed by the laws of the State of Texas, U.S.A. without regard to the conflict-of-laws rules thereof or of any other jurisdiction.  For purposes of litigating any dispute that arises under this grant or this Award Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Texas, agree that such litigation shall be conducted in the courts of Travis County, Texas, or the federal courts for the United States for the Western District of Texas, where this grant is made and/or to be performed.

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13.8        Section 409A.

(a)           Compliance with Code Section 409A.  Notwithstanding any other provision of the Plan, this Award Agreement or the Grant Notice, the Plan, this Award Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Code Section 409A (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof).  The vesting and settlement of Units awarded pursuant to this Award Agreement are intended to qualify for the “short-term deferral” exemption from Section 409A of the Code and the terms of this Award Agreement shall be interpreted in compliance with this intention.  The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify the Plan and/or this Award Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, including amendments or actions that would result in a reduction in benefits payable under the Award, as the Committee determines are necessary or appropriate to ensure that the Units qualify for exemption from or comply with Code Section 409A or mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Section 409A of the Code; provided, however, that the Company makes no representations that the Units will be exempt from Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to the Units.

(b)           Separation from Service; Required Delay in Payment to Specified Employee.  Notwithstanding anything set forth herein to the contrary, if the Participant is a U.S. taxpayer, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of Code Section 409A shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of Code Section 409A.  Furthermore, to the extent that the Participant is a “specified employee” within the meaning of Code Section 409A as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall paid to the Participant before the date (the “Delayed Payment Date”) which is the first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service.  All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

13.9        Administration.  The Committee shall have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all other interested persons.  No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Award Agreement or the Units.

13.10      Counterparts.  The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13.11      Severability.  If any provision of this Award Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible.  In any event, all other provisions of this Award Agreement shall be deemed valid and enforceable to the full extent possible.

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13.12      Language.  If the Participant has received this Award Agreement or any other document related to the Plan in a language other than English and the meaning of the translated version is different from the English version, the English version will control.

13.13      Electronic Delivery and Acceptance.  The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means.  The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

13.14      Waiver.  The Participant acknowledges that a waiver by the Company of breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by the Participant or any other award recipient.

13.15      Addendum.  Notwithstanding any provisions in this Award Agreement, the grant of Units shall be subject to any special terms and conditions set forth in any Addendum to this Award Agreement for the Participant’s country of residence.  Moreover, if the Participant relocates to one of the countries included in the Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons and, in such event, the Company reserves the right to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.  The Addendum is hereby incorporated by reference as part of this Award Agreement.

13.16      Clawback/Recovery.  The Units and any Shares, cash or other property issued in settlement of the Units will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.  In addition, the Committee may impose such other clawback, recovery or recoupment provisions on an Award as the Committee determines necessary or appropriate, including, but not limited to, a reacquisition right in respect of previously acquired Shares or other cash or property upon the occurrence of cause (as determined by the Committee).

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SILICON LABORATORIES INC.

2009 STOCK INCENTIVE PLAN

ADDENDUM TO

GLOBAL MARKET STOCK UNITS AWARD AGREEMENT

Terms and Conditions

This Addendum includes additional terms and conditions that govern the award of market stock units (“Units”) to the Participant by Silicon Laboratories Inc. (the “Company”) under the Silicon Laboratories Inc. 2009 Stock Incentive Plan, as amended and restated (the “Plan”) if the Participant resides in one of the countries listed below.  Capitalized terms not explicitly defined in this Addendum but defined in the Plan or the Global Market Stock Units Award Agreement (the “Award Agreement”) shall have the same definitions as in the Plan, the Grant Notice and/or the Award Agreement, as applicable.

Notifications

This Addendum also includes information regarding exchange control and other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan.  The information is based on the exchange control, securities and other laws in effect in the respective countries as of October 2013.  Such laws are often complex and change frequently.  As a result, the Company strongly recommends that the Participant not rely on the information herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time that the Units vest or the shares of the common stock (“Shares”) are sold.

In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation and the Company is not in a position to assure the Participant of a particular result.  Accordingly, the Participant is advised to seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s situation.

Finally, the Participant understands that if he or she is a citizen or resident of a country other than the one in which the Participant is currently working, transfers employment after the Grant Date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Participant, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.

UNITED STATES

Terms and Conditions

Death of the Participant.  Notwithstanding Sections 5.1 and 5.2 of the Award Agreement, if the Participant ceases Service prior to the Vesting Date by reason of his or her death prior to the Vesting Date, the Participant shall not forfeit the Award.  In such case, the number of Earned Units shall be determined as of the end of the Performance Period in accordance with Section 3, and all such Earned Units shall be deemed Vested Units upon the Committee’s certification in accordance with Section 3.1 and settled in accordance with Section 6 as if the Participant’s Service had continued through the Vesting Date.  The Shares due in settlement of such Vested Units shall be issued to the personal representative of the Participant’s estate, the person or persons to whom the Award is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution (collectively referred to herein as the “Participant’s Heirs”). If the Participant dies prior to the end of an Adjusted Performance Period (as described in Section 9.1), which becomes applicable as a result of a Change in Control occurring before the end of the Performance Period as set forth in the Grant Notice, then the number of Earned Units will be determined as of the end of the Adjusted Performance Period in accordance with Section 9.1(a), and all such Earned Units shall be deemed Vested Units upon the Committee’s certification in accordance with Section 3.1 and settled in accordance with Section 6 immediately prior to the consummation of the Change in Control.

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Issuance of Shares of Common Stock.  The following sentence replaces the first sentence in Section 6.1 of the Award Agreement.

Subject to the provisions of Section 6.3, Section 7 and Section 9.2 below, the Company shall issue to the Participant (or, if applicable, the Participant’s Heirs), on the Settlement Date with respect to each Vested Unit to be settled on such date one (1) Share.

Beneficial Ownership of Shares; Certificate Registration.  The following sentence replaces the last sentence in Section 6.2 of the Award Agreement.

Except as provided by the preceding sentence, a certificate for the Shares as to which the Award is settled shall be registered in the name of the Participant, or, if applicable, in the names of the Participant’s Heirs.

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EX-31.1

Exhibit 31.1

Certification to the Securities and Exchange Commission

by Registrant’s Chief Executive Officer, as required by Section 302

of the Sarbanes-Oxley Act of 2002

I, G. Tyson Tuttle, certify that:

1.I have reviewed this report on Form 10-Q of Silicon Laboratories Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2019

/s/ G. Tyson Tuttle

G. Tyson Tuttle

President and

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification to the Securities and Exchange Commission

by Registrant’s Chief Financial Officer, as required by Section 302

of the Sarbanes-Oxley Act of 2002

I, John C. Hollister, certify that:

1.I have reviewed this report on Form 10-Q of Silicon Laboratories Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2019

/s/ John C. Hollister

John C. Hollister

Senior Vice President and

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Silicon Laboratories Inc. (the “Company”) hereby certify that:

(i)   the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 30, 2019 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities Exchange Commission or its staff upon request.

Date: May 3, 2019

/s/ G. Tyson Tuttle

G. Tyson Tuttle

President and

Chief Executive Officer

/s/ John C. Hollister

John C. Hollister

Senior Vice President and

Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 30, 2019	Apr. 16, 2019
Document and Entity Information
Entity Registrant Name	SILICON LABORATORIES INC
Entity Central Index Key	0001038074
Document Type	10-Q
Document Period End Date	Mar. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-28
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		43,340,581
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 30, 2019	Dec. 29, 2018
Current assets:
Cash and cash equivalents	$ 231,144	$ 197,043
Short-term investments	382,710	416,779
Accounts receivable, net	69,871	73,194
Inventories	70,489	74,972
Prepaid expenses and other current assets	60,274	64,650
Total current assets	814,488	826,638
Property and equipment, net	138,819	139,049
Goodwill	397,344	397,344
Other intangible assets, net	160,512	170,832
Other assets, net	110,764	90,491
Total assets	1,621,927	1,624,354
Current liabilities:
Accounts payable	41,544	41,171
Deferred revenue and returns liability	23,971	22,494
Other current liabilities	69,240	81,180
Total current liabilities	134,755	144,845
Convertible debt	358,093	354,771
Other non-current liabilities	71,597	57,448
Total liabilities	564,445	557,064
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; 43,341 and 43,088 shares issued and outstanding at March 30, 2019 and December 29, 2018, respectively	4	4
Additional paid-in capital	90,988	107,517
Retained earnings	966,741	961,343
Accumulated other comprehensive loss	(251)	(1,574)
Total stockholders' equity	1,057,482	1,067,290
Total liabilities and stockholders' equity	$ 1,621,927	$ 1,624,354

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 30, 2019	Dec. 29, 2018
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	43,341	43,088
Common stock, shares outstanding	43,341	43,088

XML

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Condensed Consolidated Statements of Income
Revenues	$ 188,113	$ 205,384
Costs of revenues	72,239	81,147
Gross profit	115,874	124,237
Operating expenses:
Research and development	61,566	54,828
Selling, general and administrative	49,216	45,694
Operating expenses	110,782	100,522
Operating income	5,092	23,715
Other income (expense):
Interest income and other, net	2,823	3,202
Interest expense	(4,997)	(4,883)
Income before income taxes	2,918	22,034
Provision (benefit) for income taxes	(2,480)	(4,371)
Net income	$ 5,398	$ 26,405
Earnings per share:
Basic (in dollars per share)	$ 0.12	$ 0.61
Diluted (in dollars per share)	$ 0.12	$ 0.60
Weighted-average common shares outstanding:
Basic (in shares)	43,189	42,963
Diluted (in shares)	43,716	43,918

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 5,398	$ 26,405
Net changes to available-for-sale securities:
Unrealized gain (losses) arising during the period	1,426	(757)
Reclassification for losses included in net income		49
Net changes to cash flow hedges:
Unrealized gains (losses) arising during the period	12	(24)
Reclassification for losses included in net income	237
Other comprehensive income (loss), before tax	1,675	(732)
Provision (benefit) for income taxes	352	(154)
Other comprehensive income (loss)	1,323	(578)
Comprehensive income	$ 6,721	$ 25,827

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Balance at Dec. 30, 2017	$ 4	$ 102,862	$ 851,307	$ (1,157)	$ 953,016
Balance (in shares) at Dec. 30, 2017	42,707
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of accounting standard			26,448	(250)	26,198
Net income			26,405		26,405
Other comprehensive income (loss)				(578)	(578)
Stock issuances, net of shares withheld for taxes		(16,663)			(16,663)
Stock issuances, net of shares withheld for taxes (in shares)	520
Stock-based compensation		12,197			12,197
Balance at Mar. 31, 2018	$ 4	98,396	904,160	(1,985)	1,000,575
Balance (in shares) at Mar. 31, 2018	43,227
Balance at Dec. 29, 2018	$ 4	107,517	961,343	(1,574)	$ 1,067,290
Balance (in shares) at Dec. 29, 2018	43,088				43,088,000
Increase (Decrease) in Stockholders' Equity
Net income			5,398		$ 5,398
Other comprehensive income (loss)				1,323	1,323
Stock issuances, net of shares withheld for taxes		(14,113)			(14,113)
Stock issuances, net of shares withheld for taxes (in shares)	430
Repurchases of common stock		(15,004)			(15,004)
Repurchases of common stock (in shares)	(177)
Stock-based compensation		12,588			12,588
Balance at Mar. 30, 2019	$ 4	$ 90,988	$ 966,741	$ (251)	$ 1,057,482
Balance (in shares) at Mar. 30, 2019	43,341				43,341,000

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Operating Activities
Net income	$ 5,398	$ 26,405
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment	4,137	3,704
Amortization of other intangible assets and other assets	10,320	6,427
Amortization of debt discount and debt issuance costs	3,321	3,169
Stock-based compensation expense	12,584	12,192
Deferred income taxes	(3,530)	(4,780)
Changes in operating assets and liabilities:
Accounts receivable	3,323	(3,307)
Inventories	4,488	(3,368)
Prepaid expenses and other assets	6,410	(17,169)
Accounts payable	714	13,030
Other current liabilities and income taxes	(15,996)	(9,643)
Deferred income, deferred revenue and returns liability	1,477	(2,599)
Other non-current liabilities	(631)	(1,849)
Net cash provided by operating activities	32,015	22,212
Investing Activities
Purchases of available-for-sale investments	(63,577)	(52,821)
Sales and maturities of available-for-sale investments	99,068	128,975
Purchases of property and equipment	(3,874)	(4,102)
Purchases of other assets	(414)	(4,698)
Net cash provided by investing activities	31,203	67,354
Financing Activities
Repurchases of common stock	(15,004)
Payment of taxes withheld for vested stock awards	(14,113)	(17,871)
Proceeds from the issuance of common stock		1,211
Net cash used in financing activities	(29,117)	(16,660)
Increase in cash and cash equivalents	34,101	72,906
Cash and cash equivalents at beginning of period	197,043	269,366
Cash and cash equivalents at end of period	$ 231,144	$ 342,272

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Significant Accounting Policies

3 Months Ended

Mar. 30, 2019

Significant Accounting Policies

Significant Accounting Policies

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 March 30, 2019 and December 29, 2018, the condensed consolidated results of its operations for the three months ended March 30, 2019 and March 31, 2018, the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2019 and March 31, 2018, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 30, 2019 and March 31, 2018, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 2019 and March 31, 2018. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three months ended March 30, 2019 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 December 29, 2018, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on January 30, 2019.

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2019 will have 52 weeks and fiscal 2018 had 52 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Adoption of New Lease Accounting Standard

The Company adopted Accounting Standards Codification (ASC) Topic 842, Leases, on December 30, 2018, the first day of its fiscal year ending December 28, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess historical lease classifications, initial direct costs of existing leases or whether any expired or existing contracts were or contained leases.

The Company elected the retrospective method of adoption at the beginning of the period of adoption through a cumulative-effect adjustment. Prior periods have not been adjusted. The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item	Increase (Decrease)
Prepaid expenses and other current assets	$	(481	)
Other assets, net	$	18,166
Other current liabilities	$	3,516
Other non-current liabilities	$	14,169

The primary impact of the Company’s adoption of ASC 842 resulted from the recognition of right-of-use assets and operating lease liabilities. The adoption had no significant impact to the Condensed Consolidated Statements of Income or to cash provided by or used in net operating, investing or financing activities in the Condensed Consolidated Statements of Cash Flows.

Leases

At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded in other current liabilities and other non-current liabilities. ROU assets are recorded in other assets, net.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term. Lease agreements that contain both lease and non-lease components are generally accounted for separately.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers, 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 and with an original expected duration of one year or less. As allowed under ASC 606, 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 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.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test, which previously measured an impairment loss by comparing the implied fair value of goodwill with its carrying amount. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have a material impact on its financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required to record allowances for available-for-sale debt securities rather than reduce the carrying amount. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company expects that the adoption will not have a material impact on its financial statements.

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Earnings Per Share

3 Months Ended

Mar. 30, 2019

Earnings Per Share

Earnings Per Share

2. Earnings Per Share

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Net income	$	5,398	$	26,405
Shares used in computing basic earnings per share	43,189		42,963
Effect of dilutive securities:
Stock options and other stock-based awards	527		955
Shares used in computing diluted earnings per share	43,716		43,918
Earnings per share:
Basic	$	0.12	$	0.61
Diluted	$	0.12	$	0.60

For the three months ended March 30, 2019 and March 31, 2018, approximately 0.5 million and 0.0 million shares, respectively, consisting of restricted stock awards (RSUs) and market stock awards (MSUs), were not included in the diluted earnings per share calculation since the shares were anti-dilutive.

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 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 three months ended March 30, 2019, no such shares were included in the denominator for the calculation of diluted earnings per share. For three months ended March 31, 2018, approximately 0.1 million shares were included in the denominator for the calculation of diluted earnings per share. See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 30, 2019

Fair Value of Financial Instruments

Fair Value of Financial Instruments

3. 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.

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 March 30, 2019 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	84,151	$	—	$	—	$	84,151
Corporate debt securities	—		14,665		—		14,665
Government debt securities	21,878		19,463		—		41,341
Total cash equivalents	$	106,029	$	34,128	$	—	$	140,157
Short-term investments:
Government debt securities	$	55,571	$	70,349	$	—	$	125,920
Corporate debt securities	—		256,790		—		256,790
Total short-term investments	$	55,571	$	327,139	$	—	$	382,710
Other assets, net:
Auction rate securities	$	—	$	—	$	5,761	$	5,761
Total	$	—	$	—	$	5,761	$	5,761
Total	$	161,600	$	361,267	$	5,761	$	528,628

	Fair Value Measurements at December 29, 2018 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	74,990	$	—	$	—	$	74,990
Corporate debt securities	—		18,820		—		18,820
Government debt securities	9,338		—		—		9,338
Total cash equivalents	$	84,328	$	18,820	$	—	$	103,148
Short-term investments:
Government debt securities	$	48,141	$	99,211	$	—	$	147,352
Corporate debt securities	—		269,427		—		269,427
Total short-term investments	$	48,141	$	368,638	$	—	$	416,779
Other assets, net:
Auction rate securities	$	—	$	—	$	5,759	$	5,759
Total	$	—	$	—	$	5,759	$	5,759
Total	$	132,469	$	387,458	$	5,759	$	525,686

Valuation methodology

The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities. The Company’s derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies, and market observable data of similar instruments.

Available-for-sale investments

The Company’s investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at March 30, 2019 (in thousands):

	Cost		Fair Value
Due in one year or less	$	363,143	$	362,990
Due after one year through ten years	159,416		159,877
Due after ten years	6,000		5,761
	$	528,559	$	528,628

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
As of March 30, 2019	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	11,437	$	(3	)	$	72,515	$	(325	)	$	83,952	$	(328	)
Corporate debt securities	31,053		(33		)	43,724		(179		)	74,777		(212		)
Auction rate securities	—		—			5,761		(239		)	5,761		(239		)
	$	42,490	$	(36	)	$	122,000	$	(743	)	$	164,490	$	(779	)

	Less Than 12 Months					12 Months or Greater					Total
As of December 29, 2018	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	13,278	$	(10	)	$	88,696	$	(583	)	$	101,974	$	(593	)
Corporate debt securities	112,699		(273		)	76,310		(448		)	189,009		(721		)
Auction rate securities	—		—			5,759		(241		)	5,759		(241		)
	$	125,977	$	(283	)	$	170,765	$	(1,272	)	$	296,742	$	(1,555	)

The gross unrealized losses as of March 30, 2019 and December 29, 2018 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities. The Company’s auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders exceeded buy orders. These securities have a contractual maturity date of 2046. The Company is unable to predict if these funds will become available before their maturity date.

The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the severity and duration of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. As of March 30, 2019, the Company has determined that no other-than-temporary impairment losses existed.

At March 30, 2019 and December 29, 2018, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Level 3 fair value measurements

The following summarizes quantitative information about Level 3 fair value measurements.

Auction rate securities

Fair Value at March 30, 2019 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	5,761	Discounted cash flow	Estimated yield	3.42%
			Expected holding period	10 years
			Estimated discount rate	3.43%

The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves the analysis of valuation techniques and evaluation of unobservable inputs commonly used by market participants to price similar instruments, and which have been demonstrated to provide reasonable estimates of prices obtained in actual market transactions. Outputs from the valuation process are assessed against various market sources when they are available, including marketplace quotes, recent trades of similar illiquid securities, benchmark indices and independent pricing services. The technique and unobservable input parameters may be recalibrated periodically to achieve an appropriate estimation of the fair value of the securities.

Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly lower or higher fair value measurement. An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding period or estimated discount rate would result in a lower fair value measurement. Generally, a change in the assumptions used for expected holding period is accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate.

The following summarizes the activity in Level 3 financial instruments for the three months ended March 30, 2019 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	5,759
Gain included in other comprehensive income (loss)	2
Balance at March 30, 2019	$	5,761

Fair values of other financial instruments

The Company’s debt is recorded at cost, but is measured at fair value for disclosure purposes. The fair value of the Company’s convertible senior notes is determined using observable market prices. The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement. As of March 30, 2019 and December 29, 2018, the fair value of the convertible senior notes was $433.8 million and $419.0 million, respectively.

The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

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Derivative Financial Instruments

3 Months Ended

Mar. 30, 2019

Derivative Financial Instruments

Derivative Financial Instruments

4. Derivative Financial Instruments

The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates. The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. The Company does not use derivative contracts for speculative or trading purposes. The Company recognizes derivatives, on a gross basis, in the Consolidated Balance Sheet at fair value. Cash flows from derivatives are classified according to the nature of the cash receipt or payment in the Consolidated Statement of Cash Flows.

Cash Flow Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S. dollar. Changes in the fair value of the contracts are recorded in accumulated other comprehensive loss in the Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized. The reclassified amount is reported in the same financial statement line item as the hedged item. If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in the Norwegian Krone. As of March 30, 2019, the contracts had maturities of one to twelve months and an aggregate notional value of $8.9 million. Losses expected to be reclassified into earnings in the next 12 months were not material. The fair value of the contracts, contract losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive loss into earnings were not material for any of the periods presented.

Non-designated Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to these foreign currency forward contracts.

As of March 30, 2019, the Company held one foreign currency forward contract denominated in Singapore Dollars with a notional value of $6.6 million. The fair value of the contract and contract losses recognized in income were not material for any of the periods presented.

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Balance Sheet Details

3 Months Ended

Mar. 30, 2019

Balance Sheet Details

Balance Sheet Details

5. Balance Sheet Details

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

Inventories

	March 30, 2019		December 29, 2018
Work in progress	$	46,996	$	50,983
Finished goods	23,493		23,989
	$	70,489	$	74,972

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Debt

3 Months Ended

Mar. 30, 2019

Debt

Debt

6.  Debt

1.375% Convertible Senior Notes

On March 6, 2017, the Company completed a private offering of $400 million principal amount convertible senior notes (the “Notes”). The Notes bear interest semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date. The Company used $72.5 million of the proceeds to pay off the then remaining balance under its credit agreement.

The Notes are convertible at an initial conversion rate of 10.7744 shares of common stock per $1,000 principal amount of the Notes, or approximately 4.3 million shares of common stock, which is equivalent to a conversion price of approximately $92.81 per share. The conversion rate is subject to adjustment under certain circumstances. Holders may convert the Notes under the following circumstances: during any calendar quarter after the calendar quarter ended on June 30, 2017 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes; during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of our common stock and the conversion rate on each such trading day; if specified distributions or corporate events occur; if the Notes are called for redemption; or at any time after December 1, 2021. The Company may redeem all or any portion of the Notes, at its option, on or after March 6, 2020, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Upon conversion, the Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

The principal balance of the Notes was separated into liability and equity components, and was recorded initially at fair value. The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is amortized to interest expense over the term of the Notes using the effective interest method. The carrying amount of the liability component was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance.

The Company incurred debt issuance costs of approximately $10.6 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds. The costs allocated to the liability component are being amortized as interest expense over the term of the Notes using the effective interest method.

The carrying amount of the Notes consisted of the following (in thousands):

	March 30, 2019			December 29, 2018
Liability component
Principal	$	400,000		$	400,000
Unamortized debt discount	(36,412		)	(39,298		)
Unamortized debt issuance costs	(5,495		)	(5,931		)
Net carrying amount	$	358,093		$	354,771
Equity component
Net carrying amount	$	57,735		$	57,735

The liability component of the Notes is recorded in convertible debt on the Consolidated Balance Sheet. The equity component of the Notes is recorded in additional paid-in capital. The effective interest rate for the liability component was 4.75%. As of March 30, 2019, the remaining period over which the debt discount and debt issuance costs will be amortized was 2.9 years.

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Contractual interest expense	$	1,390	$	1,390
Amortization of debt discount	2,886		2,753
Amortization of debt issuance costs	435		416
	$	4,711	$	4,559

Credit Facility

In connection with the Company’s offering of the Notes, it and certain of its domestic subsidiaries (the “Guarantors”) amended its existing credit agreement and paid off the then remaining balance of $72.5 million. The amended agreement (the “Credit Facility”) consists of a $300 million revolving credit facility with a maturity date of July 24, 2020. The Credit Facility includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to an aggregate of $200 million in additional commitments, subject to certain conditions.

The revolving credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Eurodollar rate loans range from 1.25% to 2.00% and for base rate loans range from 0.25% to 1.00%, depending in each case, on the leverage ratio as defined in the Credit Facility.

The Credit Facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a leverage ratio (funded debt/EBITDA) of no more than 3.00 to 1 and a minimum fixed charge coverage ratio (EBITDA/interest payments, income taxes and capital expenditures) of no less than 1.25 to 1. As of March 30, 2019, the Company was in compliance with all covenants of the Credit Facility. The Company’s obligations under the Credit Facility are guaranteed by the Guarantors and are secured by a security interest in substantially all assets of the Company and the Guarantors.

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Leases

3 Months Ended

Mar. 30, 2019

Leases

Leases

7. Leases

The Company leases certain facilities under operating lease agreements that expire at various dates through 2027. Some of these arrangements contain renewal options and require the Company to pay taxes, insurance and maintenance costs. Lease costs under operating leases were $1.5 million during the three months ended March 30, 2019.

Supplemental Lease Information

Balance Sheet Information (in thousands)	March 30, 2019
Operating lease right-of-use assets	$	19,374
Operating lease liabilities	$	21,096

	Three Months Ended
Cash Flow Information (in thousands)	March 30, 2019
Cash paid for operating lease liabilities	$	1,671
Right-of-use assets obtained in exchange for operating lease obligations	$	2,488

Operating Lease Information	March 30, 2019
Weighted-average remaining lease term	5.0 years
Weighted-average discount rate	5.22%

The maturities of operating lease liabilities as of March 30, 2019 were as follows (in thousands):

Fiscal Year
2019	$	4,406
2020	5,531
2021	4,401
2022	3,656
2023	3,022
Thereafter	3,609
Total lease payments	24,625
Less imputed interest	(3,529		)
Total lease liabilities	$	21,096

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Commitments and Contingencies

3 Months Ended

Mar. 30, 2019

Commitments and Contingencies

Commitments and Contingencies

8.  Commitments and Contingencies

Legal Proceedings

The Company is involved in various legal proceedings that have arisen in the normal course of business. While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.

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Stockholders' Equity

3 Months Ended

Mar. 30, 2019

Stockholders' Equity

Stockholders' Equity

9. Stockholders’ Equity

Common Stock

The Company issued 0.4 million shares of common stock during the three months ended March 30, 2019.

Share Repurchase Program

In October 2018, the Board of Directors increased the authorization amount of the existing share repurchase program from $100 million to $200 million and extended the termination date to December 2019. This program allows for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions. The Company repurchased 0.2 million shares of its common stock for $15.0 million during the three months ended March 30, 2019. These shares were retired upon repurchase. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2018.

Reclassifications From Accumulated Other Comprehensive Loss

The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive loss (in thousands):

	Three Months Ended
Reclassification	March 30, 2019			March 31, 2018
Losses on available-for-sales securities to:
Interest income and other, net	$	—		$	(49	)
Losses on cash flow hedges to:
Operating expenses	(237		)	—
	(237		)	(49		)
Income tax expense	50			10
Total reclassifications	$	(187	)	$	(39	)

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Revenues

3 Months Ended

Mar. 30, 2019

Revenues

Revenues

10. Revenues

The Company groups its revenues into four categories, based on the markets and applications in which its products may be used. The following disaggregates the Company’s revenue by product category (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Internet of Things	$	106,421	$	103,091
Infrastructure	45,823		49,420
Broadcast	26,265		36,065
Access	9,604		16,808
Revenues	$	188,113	$	205,384

A portion of the Company’s sales are made to distributors under agreements allowing certain rights of return and/or price protection related to the final selling price to the end customers. These factors impact the timing and uncertainty of revenues and cash flows. The Company recognized revenue of $11.0 million and $12.7 million during the three months ended March 30, 2019 and March 31, 2018, respectively, from performance obligations that were satisfied in previous reporting periods. The following disaggregates the Company’s revenue by sales channel (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Distributors	$	134,129	$	150,271
Direct customers	53,984		55,113
Revenues	$	188,113	$	205,384

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Stock-Based Compensation

3 Months Ended

Mar. 30, 2019

Stock-Based Compensation

Stock-Based Compensation

11. Stock-Based Compensation

In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 Purchase Plan”). In fiscal 2017, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan. These amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company’s corporate governance and to implement other best practices.

Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans. The fair values of stock awards (such as restricted stock units (RSUs), performance stock units (PSUs) and restricted stock awards (RSAs)) are estimated based on their intrinsic values. The fair values of market stock awards (MSUs) are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model.

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Cost of revenues	$	318	$	296
Research and development	6,097		5,769
Selling, general and administrative	6,169		6,127
	12,584		12,192
Income tax benefit	3,320		5,219
	$	9,264	$	6,973

The Company had approximately $98.8 million of total unrecognized compensation costs related to granted stock options and awards as of March 30, 2019 that are expected to be recognized over a weighted-average period of approximately 2.3 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

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Income Taxes

3 Months Ended

Mar. 30, 2019

Income Taxes

Income Taxes

12. Income Taxes

Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Income tax expense (benefit) was $(2.5) million and $(4.4) million for the three months ended March 30, 2019 and March 31, 2018, resulting in effective tax rates of (85.0)% and (19.8)%, respectively. The effective tax rate for the three months ended March 30, 2019 decreased from the prior period primarily due to a change in the proportion of excess tax benefits from stock-based compensation relative to pre-tax book income. The tax benefit in both periods is the result of the windfall benefit on share-based instruments and the Federal research and development tax credit exceeding the Company’s tax provision.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share costs related to stock-based compensation. In February 2016, the U.S. Internal Revenue Service appealed the decision to the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”).  The Ninth Circuit reversed the 2015 decision of the U.S. Tax Court on July 24, 2018 but on August 7, 2018, withdrew its decision to allow time for a reconstituted panel to confer on the appeal. On October 16, 2018, a rehearing was held; however the Ninth Circuit has not yet issued its final decision. Although the U.S. Treasury has not withdrawn the requirement to include stock-based compensation from its regulations, based on the facts and circumstances of the Tax Court Case, the Company continues to reflect a tax benefit in its financial statements based on the expectation that the Tax Court decision will be upheld on appeal. The Company will continue to monitor ongoing developments and potential impacts to its financial statements.

Uncertain Tax Positions

As of March 30, 2019, the Company had gross unrecognized tax benefits, inclusive of interest, of $2.1 million which $2.1 million would affect the effective tax rate if recognized. During the three months ended March 30, 2019, the Company released $0.3 million of unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented.

The Norwegian Tax Administration (“NTA”) has completed its examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016. The Company received a final assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. The revised adjustment to the pricing of the intercompany transaction results in approximately $16.4 million additional Norwegian income tax.  The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.

Tax years 2015 through 2019 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently under audit in any major taxing jurisdiction.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 30, 2019

Significant Accounting Policies

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Adoption of New Lease Accounting Standard

Adoption of New Lease Accounting Standard

The Company adopted Accounting Standards Codification (ASC) Topic 842, Leases, on December 30, 2018, the first day of its fiscal year ending December 28, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess historical lease classifications, initial direct costs of existing leases or whether any expired or existing contracts were or contained leases.

The Company elected the retrospective method of adoption at the beginning of the period of adoption through a cumulative-effect adjustment. Prior periods have not been adjusted. The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item	Increase (Decrease)
Prepaid expenses and other current assets	$	(481	)
Other assets, net	$	18,166
Other current liabilities	$	3,516
Other non-current liabilities	$	14,169

The primary impact of the Company’s adoption of ASC 842 resulted from the recognition of right-of-use assets and operating lease liabilities. The adoption had no significant impact to the Condensed Consolidated Statements of Income or to cash provided by or used in net operating, investing or financing activities in the Condensed Consolidated Statements of Cash Flows.

Leases

Leases

At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded in other current liabilities and other non-current liabilities. ROU assets are recorded in other assets, net.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term. Lease agreements that contain both lease and non-lease components are generally accounted for separately.

Revenue Recognition

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers, 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 and with an original expected duration of one year or less. As allowed under ASC 606, 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 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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test, which previously measured an impairment loss by comparing the implied fair value of goodwill with its carrying amount. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have a material impact on its financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required to record allowances for available-for-sale debt securities rather than reduce the carrying amount. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company expects that the adoption will not have a material impact on its financial statements.

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Significant Accounting Policies (Tables)

3 Months Ended

Mar. 30, 2019

Significant Accounting Policies

Schedule of changes recorded in connection with the cumulative-effect adjustment

The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item	Increase (Decrease)
Prepaid expenses and other current assets	$	(481	)
Other assets, net	$	18,166
Other current liabilities	$	3,516
Other non-current liabilities	$	14,169

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Earnings Per Share (Tables)

3 Months Ended

Mar. 30, 2019

Earnings Per Share

Schedule of computation of basic and diluted earnings per share

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Net income	$	5,398	$	26,405
Shares used in computing basic earnings per share	43,189		42,963
Effect of dilutive securities:
Stock options and other stock-based awards	527		955
Shares used in computing diluted earnings per share	43,716		43,918
Earnings per share:
Basic	$	0.12	$	0.61
Diluted	$	0.12	$	0.60

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 30, 2019

Fair Value of Financial Instruments

Summary of valuation of the financial instruments

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 March 30, 2019 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	84,151	$	—	$	—	$	84,151
Corporate debt securities	—		14,665		—		14,665
Government debt securities	21,878		19,463		—		41,341
Total cash equivalents	$	106,029	$	34,128	$	—	$	140,157
Short-term investments:
Government debt securities	$	55,571	$	70,349	$	—	$	125,920
Corporate debt securities	—		256,790		—		256,790
Total short-term investments	$	55,571	$	327,139	$	—	$	382,710
Other assets, net:
Auction rate securities	$	—	$	—	$	5,761	$	5,761
Total	$	—	$	—	$	5,761	$	5,761
Total	$	161,600	$	361,267	$	5,761	$	528,628

	Fair Value Measurements at December 29, 2018 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	74,990	$	—	$	—	$	74,990
Corporate debt securities	—		18,820		—		18,820
Government debt securities	9,338		—		—		9,338
Total cash equivalents	$	84,328	$	18,820	$	—	$	103,148
Short-term investments:
Government debt securities	$	48,141	$	99,211	$	—	$	147,352
Corporate debt securities	—		269,427		—		269,427
Total short-term investments	$	48,141	$	368,638	$	—	$	416,779
Other assets, net:
Auction rate securities	$	—	$	—	$	5,759	$	5,759
Total	$	—	$	—	$	5,759	$	5,759
Total	$	132,469	$	387,458	$	5,759	$	525,686

Schedule of maturities of the Company's available-for-sale investments

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at March 30, 2019 (in thousands):

	Cost		Fair Value
Due in one year or less	$	363,143	$	362,990
Due after one year through ten years	159,416		159,877
Due after ten years	6,000		5,761
	$	528,559	$	528,628

Schedule of available-for-sale investments in continuous unrealized loss position by length of time

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
As of March 30, 2019	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	11,437	$	(3	)	$	72,515	$	(325	)	$	83,952	$	(328	)
Corporate debt securities	31,053		(33		)	43,724		(179		)	74,777		(212		)
Auction rate securities	—		—			5,761		(239		)	5,761		(239		)
	$	42,490	$	(36	)	$	122,000	$	(743	)	$	164,490	$	(779	)

	Less Than 12 Months					12 Months or Greater					Total
As of December 29, 2018	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	13,278	$	(10	)	$	88,696	$	(583	)	$	101,974	$	(593	)
Corporate debt securities	112,699		(273		)	76,310		(448		)	189,009		(721		)
Auction rate securities	—		—			5,759		(241		)	5,759		(241		)
	$	125,977	$	(283	)	$	170,765	$	(1,272	)	$	296,742	$	(1,555	)

Summary of quantitative information about level 3 fair value measurements

Auction rate securities

Fair Value at March 30, 2019 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	5,761	Discounted cash flow	Estimated yield	3.42%
			Expected holding period	10 years
			Estimated discount rate	3.43%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three months ended March 30, 2019 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	5,759
Gain included in other comprehensive income (loss)	2
Balance at March 30, 2019	$	5,761

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Balance Sheet Details (Tables)

3 Months Ended

Mar. 30, 2019

Balance Sheet Details

Schedule of Inventories

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

Inventories

	March 30, 2019		December 29, 2018
Work in progress	$	46,996	$	50,983
Finished goods	23,493		23,989
	$	70,489	$	74,972

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Debt (Tables)

3 Months Ended

Mar. 30, 2019

Debt

Summary of information about the equity and liability components of convertible debt

The carrying amount of the Notes consisted of the following (in thousands):

	March 30, 2019			December 29, 2018
Liability component
Principal	$	400,000		$	400,000
Unamortized debt discount	(36,412		)	(39,298		)
Unamortized debt issuance costs	(5,495		)	(5,931		)
Net carrying amount	$	358,093		$	354,771
Equity component
Net carrying amount	$	57,735		$	57,735

Schedule of components of interest expense

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Contractual interest expense	$	1,390	$	1,390
Amortization of debt discount	2,886		2,753
Amortization of debt issuance costs	435		416
	$	4,711	$	4,559

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Leases (Tables)

3 Months Ended

Mar. 30, 2019

Leases

Summary of supplemental lease information

Supplemental Lease Information

Balance Sheet Information (in thousands)	March 30, 2019
Operating lease right-of-use assets	$	19,374
Operating lease liabilities	$	21,096

	Three Months Ended
Cash Flow Information (in thousands)	March 30, 2019
Cash paid for operating lease liabilities	$	1,671
Right-of-use assets obtained in exchange for operating lease obligations	$	2,488

Operating Lease Information	March 30, 2019
Weighted-average remaining lease term	5.0 years
Weighted-average discount rate	5.22%

Schedule of maturities of operating lease liabilities

The maturities of operating lease liabilities as of March 30, 2019 were as follows (in thousands):

Fiscal Year
2019	$	4,406
2020	5,531
2021	4,401
2022	3,656
2023	3,022
Thereafter	3,609
Total lease payments	24,625
Less imputed interest	(3,529		)
Total lease liabilities	$	21,096

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 30, 2019

Stockholders' Equity

Schedule of reclassifications out of accumulated other comprehensive loss

The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive loss (in thousands):

	Three Months Ended
Reclassification	March 30, 2019			March 31, 2018
Losses on available-for-sales securities to:
Interest income and other, net	$	—		$	(49	)
Losses on cash flow hedges to:
Operating expenses	(237		)	—
	(237		)	(49		)
Income tax expense	50			10
Total reclassifications	$	(187	)	$	(39	)

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Revenues (Tables)

3 Months Ended

Mar. 30, 2019

Revenues

Schedule of disaggregation of revenue by product category

The following disaggregates the Company’s revenue by product category (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Internet of Things	$	106,421	$	103,091
Infrastructure	45,823		49,420
Broadcast	26,265		36,065
Access	9,604		16,808
Revenues	$	188,113	$	205,384

Schedule of disaggregation of revenue by sales channel

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

	Three Months Ended
	March 30, 2019		March 31, 2018
Distributors	$	134,129	$	150,271
Direct customers	53,984		55,113
Revenues	$	188,113	$	205,384

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 30, 2019

Stock-Based Compensation

Schedule of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 30, 2019		March 31, 2018
Cost of revenues	$	318	$	296
Research and development	6,097		5,769
Selling, general and administrative	6,169		6,127
	12,584		12,192
Income tax benefit	3,320		5,219
	$	9,264	$	6,973

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Significant Accounting Policies - Basis of Presentation and Principles of Consolidation (Details)	3 Months Ended	12 Months Ended
	Mar. 30, 2019	Dec. 28, 2019	Dec. 29, 2018
Significant Accounting Policies
Length of fiscal year		364 days	364 days
Number of days in each fiscal quarter for 52-week fiscal year	91 days
Low end of range
Significant Accounting Policies
Length of fiscal year	364 days
High end of range
Significant Accounting Policies
Length of fiscal year	371 days

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Significant Accounting Policies - Adoption of New Revenue Accounting Standard (Details) - USD ($) $ in Thousands	Dec. 30, 2018	Mar. 30, 2019	Dec. 29, 2018
Balance Sheet effect
Prepaid expenses and other current assets		$ 60,274	$ 64,650
Other current liabilities		$ 69,240	$ 81,180
ASU 2016-02 - Leases
Adoption of New Accounting Standard
Election of practical expedients package, leases	true
ASU 2016-02 - Leases | Cumulative-effect adjustment
Balance Sheet effect
Prepaid expenses and other current assets	$ (481)
Other assets, net	18,166
Other current liabilities	3,516
Other non-current liabilities	$ 14,169

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Earnings Per Share
Net income	$ 5,398	$ 26,405
Shares used in computing basic earnings per share	43,189	42,963
Effect of dilutive securities:
Stock options and other stock-based awards	527	955
Shares used in computing diluted earnings per share	43,716	43,918
Earnings per share:
Basic (in dollars per share)	$ 0.12	$ 0.61
Diluted (in dollars per share)	$ 0.12	$ 0.60
Shares consisting of restricted stock awards (RSUs), market stock awards (MSUs) and stock options excluded from computation of diluted earning per share	500	0
Shares attributable to dilutive effect of conversion of debt securities		100

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Fair Value of Financial Instruments - Summary of financial instruments (Details) - USD ($) $ in Thousands	Mar. 30, 2019	Dec. 29, 2018
Financial assets and liabilities measured at fair value on a recurring basis
Total short-term investments	$ 382,710	$ 416,779
Recurring
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	140,157	103,148
Total short-term investments	382,710	416,779
Other assets, net	5,761	5,759
Total assets at fair value	528,628	525,686
Recurring | Money market funds
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	84,151	74,990
Recurring | Corporate debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	14,665	18,820
Total short-term investments	256,790	269,427
Recurring | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	41,341	9,338
Total short-term investments	125,920	147,352
Recurring | Auction rate securities
Financial assets and liabilities measured at fair value on a recurring basis
Other assets, net	5,761	5,759
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	106,029	84,328
Total short-term investments	55,571	48,141
Total assets at fair value	161,600	132,469
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	84,151	74,990
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	21,878	9,338
Total short-term investments	55,571	48,141
Recurring | Significant Other Observable Inputs (Level 2)
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	34,128	18,820
Total short-term investments	327,139	368,638
Total assets at fair value	361,267	387,458
Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	14,665	18,820
Total short-term investments	256,790	269,427
Recurring | Significant Other Observable Inputs (Level 2) | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	19,463
Total short-term investments	70,349	99,211
Recurring | Significant Unobservable Inputs (Level 3)
Financial assets and liabilities measured at fair value on a recurring basis
Other assets, net	5,761	5,759
Total assets at fair value	5,761	5,759
Recurring | Significant Unobservable Inputs (Level 3) | Auction rate securities
Financial assets and liabilities measured at fair value on a recurring basis
Other assets, net	$ 5,761	$ 5,759

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Fair Value of Financial Instruments - Available-for-sale investments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Dec. 29, 2018
Cost
Due in one year or less, Cost	$ 363,143
Due after one year through ten years, Cost	159,416
Due after ten years, Cost	6,000
Total Cost	528,559
Fair Value
Due in one year or less, Fair Value	362,990
Due after one year through ten years, Fair Value	159,877
Due after ten years, Fair Value	5,761
Total Fair Value	528,628
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	42,490	$ 125,977
Fair value of available-for-sale securities, continuous loss position for twelve months or greater	122,000	170,765
Total fair value of available-for-sale securities, continuous loss position	164,490	296,742
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(36)	(283)
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(743)	(1,272)
Available-for-sale securities, total gross unrealized losses	(779)	(1,555)
Other than temporary impairment losses
Other-than-temporary impairment losses	0
Government debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	11,437	13,278
Fair value of available-for-sale securities, continuous loss position for twelve months or greater	72,515	88,696
Total fair value of available-for-sale securities, continuous loss position	83,952	101,974
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(3)	(10)
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(325)	(583)
Available-for-sale securities, total gross unrealized losses	(328)	(593)
Corporate debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	31,053	112,699
Fair value of available-for-sale securities, continuous loss position for twelve months or greater	43,724	76,310
Total fair value of available-for-sale securities, continuous loss position	74,777	189,009
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(33)	(273)
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(179)	(448)
Available-for-sale securities, total gross unrealized losses	(212)	(721)
Auction rate securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for twelve months or greater	5,761	5,759
Total fair value of available-for-sale securities, continuous loss position	5,761	5,759
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(239)	(241)
Available-for-sale securities, total gross unrealized losses	$ (239)	$ (241)

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Fair Value of Financial Instruments - Auction rate securities (Details) - Auction rate securities - Significant Unobservable Inputs (Level 3) $ in Thousands	Mar. 30, 2019 USD ($) Y item	Dec. 29, 2018 USD ($)
Weighted Average | Estimated yield | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements Assets
Unobservable Input	0.0342
Weighted Average | Expected holding period | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements Assets
Unobservable Input | Y	10
Weighted Average | Estimated discount rate | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements Assets
Unobservable Input	0.0343
Recurring
Quantitative information for Level 3 Fair Value Measurements Assets
Fair value balance at the end of the period | $	$ 5,761	$ 5,759

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Fair Value of Financial Instruments - Activity in Level 3 financial instruments (Details) - Significant Unobservable Inputs (Level 3) - Recurring - Auction rate securities $ in Thousands	3 Months Ended
	Mar. 30, 2019 USD ($)
Fair value assets reconciliation of changes
Balance at the beginning of the period	$ 5,759
Gain included in other comprehensive income (loss)	2
Balance at the end of the period	$ 5,761

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Fair Value of Financial Instruments - Fair Values of Other Financial Instruments (Details) - USD ($) $ in Millions	Mar. 30, 2019	Dec. 29, 2018
Convertible Senior Notes
Fair values of other financial instruments
Fair value of debt	$ 433.8	$ 419.0

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Derivative Financial Instruments (Details) - Foreign currency forward contracts $ in Millions	3 Months Ended
	Mar. 30, 2019 USD ($)
Non-designated Hedges
Derivative Financial Instruments
Notional value	$ 6.6
Cash flow hedges
Derivative Financial Instruments
Notional value	$ 8.9
Cash flow hedges | Low end of range
Derivative Financial Instruments
Maturity of contracts	1 month
Cash flow hedges | High end of range
Derivative Financial Instruments
Maturity of contracts	12 months

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Balance Sheet Details (Details) - USD ($) $ in Thousands	Mar. 30, 2019	Dec. 29, 2018
Inventories
Work in progress	$ 46,996	$ 50,983
Finished goods	23,493	23,989
Inventories	$ 70,489	$ 74,972

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Debt - Convertible Senior Notes (Details) $ / shares in Units, shares in Millions, $ in Millions	Mar. 06, 2017 USD ($) item $ / shares shares
Amended Credit Agreement | Credit Facility
Debt
Repayments of Lines of Credit	$ 72.5
1.375% Convertible Senior Notes
Debt
Principal amount	$ 400.0
Semi-annual interest rate	1.375%
Conversion rate, shares per $1,000 principal	10.7744
Number of shares of common stock | shares	4.3
Initial conversion price | $ / shares	$ 92.81
Number of trading days within 30 trading day period | item	20
Number of consecutive trading days | item	30
Minimum amount the sales price of the Company's stock exceeds the conversion price (as a percent)	130.00%
Number of consecutive business days after the 10 consecutive trading day period	5 days
Number of consecutive trading days before the five consecutive business days	10 days
Maximum amount the sales price of the Company's stock exceeds the conversion price (as a percent)	98.00%
Debt issuance costs	$ 10.6

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Debt - Carrying amount and interest expense of notes (Details) - 1.375% Convertible Senior Notes - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018	Dec. 29, 2018
Liability component
Principal	$ 400,000		$ 400,000
Unamortized debt discount	(36,412)		(39,298)
Unamortized debt issuance costs	(5,495)		(5,931)
Net carrying amount	358,093		354,771
Equity component
Net carrying amount	$ 57,735		$ 57,735
Effective interest rate	4.75%		4.75%
Amortization period of debt discount and debt issuance costs	2 years 10 months 24 days
Interest expense related to the Notes
Contractual interest expense	$ 1,390	$ 1,390
Amortization of debt discount	2,886	2,753
Amortization of debt issuance costs	435	416
Interest Expense, Total	$ 4,711	$ 4,559

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Debt - Credit Facility (Details) $ in Millions			3 Months Ended
	Mar. 06, 2017 USD ($)	Feb. 27, 2017 USD ($)	Mar. 30, 2019	Jul. 24, 2015 USD ($)	Jul. 31, 2012 USD ($)
Credit Facility
Debt
Maximum borrowing capacity					$ 72.5
Revolving Credit Facility | Base Rate | Low end of range
Debt
Interest rate margin (as a percent)			0.25%
Revolving Credit Facility | Base Rate | High end of range
Debt
Interest rate margin (as a percent)			1.00%
Revolving credit facility, other than swingline loans | Federal Funds
Debt
Interest rate margin (as a percent)			0.50%
Revolving credit facility, other than swingline loans | Eurodollar Base Rate
Debt
Interest rate margin (as a percent)			1.00%
Revolving credit facility, other than swingline loans | Eurodollar Base Rate | Low end of range
Debt
Interest rate margin (as a percent)			1.25%
Revolving credit facility, other than swingline loans | Eurodollar Base Rate | High end of range
Debt
Interest rate margin (as a percent)			2.00%
Amended Credit Agreement | Credit Facility
Debt
Repayment of credit facility amount	$ 72.5
Amended Credit Agreement | Revolving Credit Facility
Debt
Maximum borrowing capacity				$ 300.0
Second Amended Credit Agreement | Credit Facility
Debt
Maximum leverage ratio			3.00
Minimum fixed charge coverage ratio			1.25
Second Amended Credit Agreement | Revolving Credit Facility
Debt
Additional increase in borrowing capacity of the line of credit available at the entity's option		$ 200.0
Second Amended Credit Agreement | Swingline Loans
Debt
Maximum borrowing capacity		10.0
Second Amended Credit Agreement | Letter of Credit
Debt
Maximum borrowing capacity		$ 25.0

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Leases - Supplemental Lease Information (Details) $ in Thousands	3 Months Ended
	Mar. 30, 2019 USD ($)
Leases
Operating lease costs	$ 1,500
Balance Sheet Information
Operating lease right-of-use assets	$ 19,374
Operating lease right-of-use assets, Statement of Financial Position	us-gaap:OtherAssetsNoncurrent
Operating lease liabilities	$ 21,096
Operating lease liabilities, Statement of Financial Position	us-gaap:OtherLiabilitiesCurrent us-gaap:LiabilitiesOtherThanLongtermDebtNoncurrent
Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities	$ 1,671
Right-of-use assets obtained in exchange for operating lease obligations	$ 2,488
Operating Lease Information
Weighted-average remaining lease term	5 years
Weighted-average discount rate	5.22%

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Leases - Maturities of operating lease liabilities (Details) $ in Thousands	Mar. 30, 2019 USD ($)
Maturities of operating lease liabilities
2019	$ 4,406
2020	5,531
2021	4,401
2022	3,656
2023	3,022
Thereafter	3,609
Total lease payments	24,625
Less imputed interest	(3,529)
Total lease liabilities	$ 21,096

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Stockholders' Equity - Common Stock and Share Repurchase Program (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Oct. 31, 2018	Sep. 30, 2018
Share Repurchase Programs
Value of shares repurchased and retired	$ 15,004
Common Stock
Common Stock
Number of shares issued during the period	400,000
Share Repurchase Programs
Number of shares repurchased and retired	177
Program Authorization Date October 2017
Share Repurchase Programs
Program amount authorized to repurchase		$ 200,000	$ 100,000
Program Authorization Date October 2017 | Common Stock
Share Repurchase Programs
Number of shares repurchased and retired	200,000,000
Value of shares repurchased and retired	$ 15,000

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Stockholders' Equity - Reclassified from AOCI (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Amounts Reclassified from AOCI
Operating expenses	$ (110,782)	$ (100,522)
Income before income taxes	2,918	22,034
Income tax expense	(2,480)	(4,371)
Net income	5,398	26,405
Reclassifications From Accumulated Other Comprehensive Loss
Amounts Reclassified from AOCI
Income before income taxes	(237)	(49)
Income tax expense	(50)	(10)
Net income	(187)	(39)
Reclassifications From Accumulated Other Comprehensive Loss | Losses on available-for-sales securities
Amounts Reclassified from AOCI
Interest income and other, net		$ (49)
Reclassifications From Accumulated Other Comprehensive Loss | Gains (losses) on cash flow hedges
Amounts Reclassified from AOCI
Operating expenses	$ (237)

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Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Revenues
Revenues	$ 188,113	$ 205,384
Revenue from performance obligations	11,000	12,700
Distributors
Revenues
Revenues	134,129	150,271
Direct customers
Revenues
Revenues	53,984	55,113
Internet of Things
Revenues
Revenues	106,421	103,091
Infrastructure
Revenues
Revenues	45,823	49,420
Broadcast
Revenues
Revenues	26,265	36,065
Access
Revenues
Revenues	$ 9,604	$ 16,808

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Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Stock-based compensation costs
Stock based compensation costs	$ 12,584	$ 12,192
Income tax benefit	3,320	5,219
Share based compensation costs after tax	9,264	6,973
Total unrecognized compensation costs related to awards	$ 98,800
Weighted-average period of recognition of unrecognized compensation costs	2 years 3 months 18 days
Cost of revenues
Stock-based compensation costs
Stock based compensation costs	$ 318	296
Research and development
Stock-based compensation costs
Stock based compensation costs	6,097	5,769
Selling, general and administrative
Stock-based compensation costs
Stock based compensation costs	$ 6,169	$ 6,127

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 30, 2019	Mar. 31, 2018
Income Taxes
Provision (benefit) for income taxes	$ (2,480)	$ (4,371)
Effective income tax rate (as a percent)	(85.00%)	(19.80%)
Gross unrecognized tax benefits	$ 2,100
Gross unrecognized tax benefits which would affect the effective tax rate if recognized	2,100
Unrecognized tax benefits as a result of a lapse in the statute of limitations	300
Reductions for tax positions as a result of a lapse of the applicable statute of limitations	300
2013 | Norwegian
Income Taxes
Adjustment to the pricing of the intercompany transaction	$ 16,400