Company Quick10K Filing
Quick10K
Silicon Laboratories
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$102.05 43 $4,420
10-Q 2019-06-29 Quarter: 2019-06-29
10-Q 2019-03-30 Quarter: 2019-03-30
10-K 2018-12-29 Annual: 2018-12-29
10-Q 2018-09-29 Quarter: 2018-09-29
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-30 Annual: 2017-12-30
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-07-01 Quarter: 2017-07-01
10-Q 2017-04-01 Quarter: 2017-04-01
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-10-01 Quarter: 2016-10-01
10-Q 2016-07-02 Quarter: 2016-07-02
10-Q 2016-04-02 Quarter: 2016-04-02
10-K 2016-01-02 Annual: 2016-01-02
10-Q 2015-10-03 Quarter: 2015-10-03
10-Q 2015-07-04 Quarter: 2015-07-04
10-Q 2015-04-04 Quarter: 2015-04-04
10-K 2015-01-03 Annual: 2015-01-03
10-Q 2014-09-27 Quarter: 2014-09-27
10-Q 2014-06-28 Quarter: 2014-06-28
10-Q 2014-03-29 Quarter: 2014-03-29
10-K 2013-12-28 Annual: 2013-12-28
8-K 2019-08-07 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-04-18 Shareholder Vote
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-24 Officers, Exhibits
8-K 2019-01-24 Officers
8-K 2019-01-24 Officers
8-K 2019-01-24 Officers, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-10-23 Officers, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-04-19 Shareholder Vote
8-K 2018-04-18 M&A, Exhibits
8-K 2018-01-25 Officers, Exhibits
NVRO Nevro 1,910
NXGN Nextgen Healthcare 1,260
CUE Cue Biopharma 167
MVIS Microvision 94
CLIR Clearsign Combustion 21
UTGN UTG 0
BBOX Black Box 0
RAS RAIT Financial Trust 0
POWW Ammo 0
C130 Ministry Partners Investment Company 0
SLAB 2019-06-29
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 slab-20190629ex3111ed677.htm
EX-31.2 slab-20190629ex312046cbc.htm
EX-32.1 slab-20190629ex321c1472f.htm

Silicon Laboratories Earnings 2019-06-29

SLAB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 29, 2019

or

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

For the transition period from _________to _________

Commission file number: 000-29823

SILICON LABORATORIES INC.

(Exact name of registrant as specified in its charter)

Delaware

    

74-2793174

(State or other jurisdiction of incorporation or organization)

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

400 West Cesar Chavez, Austin, Texas

    

78701

(Address of principal executive offices)

(Zip Code)

(512) 416-8500

(Registrant’s telephone number, including area code)

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

Title of each class

    

Trading Symbol(s)

    

Name of each exchange
on which registered

Common Stock, $0.0001 par value

SLAB

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes No

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

Large accelerated filer þ

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of July 16, 2019, 43,343,867 shares of common stock of Silicon Laboratories Inc. were outstanding.

Table of Contents

Table of Contents

Part I. Financial Information

Page
Number

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets at June 29, 2019 and December 29, 2018

3

Condensed Consolidated Statements of Operations for the three and six months ended June 29, 2019 and June 30, 2018

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 29, 2019 and June 30, 2018

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 29, 2019 and June 30, 2018

6

Condensed Consolidated Statements of Cash Flows for the six months ended June 29, 2019 and June 30, 2018

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

Part II. Other Information

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

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

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

    

June 29,

    

December 29,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

189,549

$

197,043

Short-term investments

452,265

 

416,779

Accounts receivable, net

72,301

 

73,194

Inventories

73,865

 

74,972

Prepaid expenses and other current assets

59,662

 

64,650

Total current assets

847,642

 

826,638

Property and equipment, net

137,644

 

139,049

Goodwill

397,344

 

397,344

Other intangible assets, net

150,356

 

170,832

Other assets, net

69,954

 

90,491

Total assets

$

1,602,940

$

1,624,354

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

41,585

$

41,171

Deferred revenue and returns liability

21,266

 

22,494

Other current liabilities

68,186

 

81,180

Total current liabilities

131,037

 

144,845

Convertible debt

361,430

354,771

Other non-current liabilities

59,202

 

57,448

Total liabilities

551,669

 

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; 43,344 and 43,088 shares issued and outstanding at June 29, 2019 and December 29, 2018, respectively

4

 

4

Additional paid-in capital

99,665

 

107,517

Retained earnings

950,712

 

961,343

Accumulated other comprehensive income (loss)

890

 

(1,574)

Total stockholders’ equity

1,051,271

 

1,067,290

Total liabilities and stockholders’ equity

$

1,602,940

$

1,624,354

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

3

Table of Contents

Silicon Laboratories Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

    

June 29,

    

June 30,

    

June 29,

    

June 30,

2019

2018

2019

2018

Revenues

$

206,709

$

217,106

$

394,822

$

422,490

Cost of revenues

 

79,660

 

85,814

151,899

 

166,961

Gross profit

 

127,049

 

131,292

242,923

 

255,529

Operating expenses:

Research and development

 

63,856

 

59,495

125,422

 

114,323

Selling, general and administrative

 

48,637

 

53,796

97,853

 

99,490

Operating expenses

 

112,493

 

113,291

223,275

 

213,813

Operating income

14,556

18,001

19,648

 

41,716

Other income (expense):

Interest income and other, net

3,696

1,609

6,519

 

4,811

Interest expense

(5,005)

(4,888)

(10,002)

 

(9,771)

Income before income taxes

13,247

14,722

16,165

 

36,756

Provision (benefit) for income taxes

 

29,276

 

442

26,796

 

(3,929)

Net income (loss)

$

(16,029)

$

14,280

$

(10,631)

$

40,685

Earnings (loss) per share:

Basic

$

(0.37)

$

0.33

$

(0.25)

$

0.94

Diluted

$

(0.37)

$

0.32

$

(0.25)

$

0.92

Weighted-average common shares outstanding:

Basic

43,386

 

43,312

43,287

43,138

Diluted

43,386

 

44,294

43,287

44,106

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

    

June 29,

    

June 30,

    

June 29,

    

June 30,

2019

2018

2019

2018

Net income (loss)

$

(16,029)

$

14,280

$

(10,631)

$

40,685

Other comprehensive income (loss), before tax

Net changes to available-for-sale securities

Unrealized gains (losses) arising during the period

 

1,207

 

396

2,632

 

(363)

Reclassification for losses included in net income (loss)

49

Net changes to cash flow hedges

Unrealized gains (losses) arising during the period

44

(397)

56

(420)

Reclassification for losses included in net income (loss)

 

194

 

33

431

 

33

Other comprehensive income (loss), before tax

1,445

32

3,119

 

(701)

Provision (benefit) for income taxes

 

304

 

7

655

 

(148)

Other comprehensive income (loss)

 

1,141

 

25

2,464

 

(553)

Comprehensive income (loss)

$

(14,888)

$

14,305

$

(8,167)

$

40,132

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended June 29, 2019

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of March 30, 2019

43,341

$

4

$

90,988

$

966,741

$

(251)

$

1,057,482

Net income (loss)

 

 

 

(16,029)

(16,029)

Other comprehensive income (loss)

 

 

 

 

1,141

 

1,141

Stock issuances, net of shares withheld for taxes

127

 

 

6,713

 

 

 

6,713

Repurchases of common stock

(124)

 

 

(11,712)

 

 

 

(11,712)

Stock-based compensation

 

 

13,676

 

 

 

13,676

Balance as of June 29, 2019

43,344

$

4

$

99,665

$

950,712

$

890

$

1,051,271

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended June 30, 2018

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of March 31, 2018

43,227

$

4

$

98,396

$

904,160

$

(1,985)

$

1,000,575

Net income (loss)

 

 

 

14,280

 

 

14,280

Other comprehensive income (loss)

 

 

 

 

25

 

25

Stock issuances, net of shares withheld for taxes

159

 

 

4,836

 

 

 

4,836

Repurchases of common stock

(36)

 

 

(3,397)

 

 

 

(3,397)

Stock-based compensation

 

 

12,149

 

 

 

12,149

Balance as of June 30, 2018

43,350

$

4

$

111,984

$

918,440

$

(1,960)

$

1,028,468

    

    

    

Additional

    

    

Accumulated Other 

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Six Months Ended June 29, 2019

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of December 29, 2018

 

43,088

$

4

$

107,517

$

961,343

$

(1,574)

$

1,067,290

Net income (loss)

 

 

 

 

(10,631)

 

 

(10,631)

Other comprehensive income (loss)

 

 

 

 

 

2,464

 

2,464

Stock issuances, net of shares withheld for taxes

 

557

 

 

(7,400)

 

 

 

(7,400)

Repurchases of common stock

 

(301)

 

 

(26,716)

 

 

 

(26,716)

Stock-based compensation

 

 

 

26,264

 

 

 

26,264

Balance as of June 29, 2019

 

43,344

$

4

$

99,665

$

950,712

$

890

$

1,051,271

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Six Months Ended June 30, 2018

Shares

Stock

Capital

Earnings

Income (Loss)

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 (loss)

 

 

 

 

40,685

 

 

40,685

Other comprehensive income (loss)

 

 

 

 

 

(553)

 

(553)

Stock issuances, net of shares withheld for taxes

 

679

 

 

(11,823)

 

 

 

(11,823)

Repurchases of common stock

 

(36)

 

 

(3,397)

 

 

 

(3,397)

Stock-based compensation

 

 

 

24,342

 

 

 

24,342

Balance as of June 30, 2018

 

43,350

$

4

$

111,984

$

918,440

$

(1,960)

$

1,028,468

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended

    

June 29,

    

June 30,

2019

2018

Operating Activities

Net income (loss)

$

(10,631)

$

40,685

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation of property and equipment

 

8,447

 

7,643

Amortization of other intangible assets and other assets

 

20,476

 

18,366

Amortization of debt discount and debt issuance costs

6,659

6,354

Stock-based compensation expense

 

26,253

 

24,311

Deferred income taxes

 

24,043

 

(5,830)

Changes in operating assets and liabilities:

Accounts receivable

 

893

 

(16,705)

Inventories

 

1,118

 

(565)

Prepaid expenses and other assets

 

11,326

 

(1,759)

Accounts payable

 

5,321

 

2,980

Other current liabilities and income taxes

 

(18,101)

 

(17,249)

Deferred income, deferred revenue and returns liability

 

(1,228)

 

(4,193)

Other non-current liabilities

(3,222)

(3,260)

Net cash provided by operating activities

 

71,354

 

50,778

Investing Activities

Purchases of available-for-sale investments

 

(184,170)

 

(148,437)

Sales and maturities of available-for-sale investments

 

151,428

 

295,405

Purchases of property and equipment

 

(9,402)

 

(11,406)

Purchases of other assets

(2,588)

(5,893)

Acquisition of business, net of cash acquired

(239,729)

Net cash used in investing activities

 

(44,732)

 

(110,060)

Financing Activities

Repurchases of common stock

(26,716)

(3,397)

Payment of taxes withheld for vested stock awards

(14,509)

(18,408)

Proceeds from the issuance of common stock

7,109

6,585

Net cash used in financing activities

 

(34,116)

 

(15,220)

Decrease in cash and cash equivalents

 

(7,494)

 

(74,502)

Cash and cash equivalents at beginning of period

 

197,043

 

269,366

Cash and cash equivalents at end of period

$

189,549

$

194,864

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

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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 June 29, 2019 and December 29, 2018, the condensed consolidated results of its operations for the three and six months ended June 29, 2019 and June 30, 2018, the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 29, 2019 and June 30, 2018, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 29, 2019 and June 30, 2018, and the Condensed Consolidated Statements of Cash Flows for the six months ended June 29, 2019 and June 30, 2018. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three and six months ended June 29, 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/A filed with the Securities and Exchange Commission (SEC) on May 3, 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

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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 Operations 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.

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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 (Loss) Per Share

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

Three Months Ended

Six Months Ended

    

June 29,

    

June 30,

    

June 29,

    

June 30,

2019

2018

2019

2018

Net income (loss)

$

(16,029)

$

14,280

$

(10,631)

$

40,685

Shares used in computing basic earnings (loss) per share

43,386

 

43,312

43,287

 

43,138

Effect of dilutive securities:

Stock-based awards and convertible debt

 

982

 

968

Shares used in computing diluted earnings (loss) per share

43,386

 

44,294

43,287

 

44,106

Earnings (loss) per share:

Basic

$

(0.37)

$

0.33

$

(0.25)

$

0.94

Diluted

$

(0.37)

$

0.32

$

(0.25)

$

0.92

Diluted shares used in calculating net loss per share for the three and six months ended June 29, 2019 excluded 0.6 million shares due to the Company’s net loss for the periods.

The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion. Accordingly, shares issuable upon conversion of the principal amount have been excluded from the calculation of diluted earnings (loss) 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 (loss) per share using the treasury stock method. Due to the net loss in the three and six months ended June 29, 2019, approximately 0.2 million shares and 0.1 million shares, respectively, were not included in the denominator for the calculation of diluted earnings (loss) per share. For the three and six months ended June 30, 2018, approximately 0.3 million shares and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings (loss) per share. See Note 7, Debt, to the Condensed Consolidated Financial Statements for additional information.

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.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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 June 29, 2019 Using

    

Quoted Prices in

    

Significant Other

    

Significant

    

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Assets:

Cash equivalents:

Money market funds

$

84,467

$

$

$

84,467

Corporate debt securities

11,626

11,626

Total cash equivalents

$

84,467

$

11,626

$

$

96,093

Short-term investments:

Government debt securities

$

72,422

$

93,899

$

$

166,321

Corporate debt securities

285,944

285,944

Total short-term investments

$

72,422

$

379,843

$

$

452,265

Other assets, net:

Auction rate securities

$

$

$

5,647

$

5,647

Total

$

$

$

5,647

$

5,647

Total

$

156,889

$

391,469

$

5,647

$

554,005

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Fair Value Measurements

at December 29, 2018 Using

    

Quoted Prices in

    

Significant Other

    

Significant

    

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Assets:

Cash equivalents:

Money market funds

$

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 income (loss) in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at June 29, 2019 (in thousands):

    

    

Fair

Cost

Value

Due in one year or less

$

394,836

$

395,419

Due after one year through ten years

144,592

145,639

Due after ten years

13,300

12,947

$

552,728

$

554,005

12

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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

    

    

Gross

    

    

Gross

    

    

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

As of June 29, 2019

Value

Losses

Value

Losses

Value

Losses

Government debt securities

$

12,126

$

(6)

$

58,758

$

(98)

$

70,884

$

(