Synaptics Incorporated : INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Forward-Looking Statements and Factors That May Affect Results

This Quarterly Report on Form 10-Q for the quarter ended September 26, 2020
(this "Report") contains forward-looking statements that are subject to the safe
harbors created under the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act").
For ease of presentation, this Report shows reporting periods ending on calendar
quarter end dates as of and for all periods presented, unless otherwise
indicated. Forward-looking statements give our current expectations and
projections relating to our financial condition, results of operations, plans,
objectives, future performance and business, including our expectations
regarding the potential impacts on our business of the COVID-19 pandemic, and
can be identified by the fact that they do not relate strictly to historical or
current facts. Such forward-looking statements may include words such as
"expect," "anticipate," "intend," "believe," "estimate," "plan," "target,"
"strategy," "continue," "may," "will," "should," variations of such words, or
other words and terms of similar meaning. All forward-looking statements reflect
our best judgment and are based on several factors relating to our operations
and business environment, all of which are difficult to predict and many of
which are beyond our control. Such factors include, but are not limited to
following: our dependence on our solutions for the mobile product applications
market and the PC product applications market for a substantial portion of our
revenue; risks related to the volatility of our net revenue from our solutions
for mobile product applications; our dependence on one or more large customers;
the risk that our business, results of operations and financial condition
(including liquidity) and prospects may be materially and adversely affected by
heath epidemics, including the recent COVID-19 pandemic; our exposure to
industry downturns and cyclicality in our target markets; the risk that our
product solutions for new markets will not be successful; our ability to
maintain and build relationships with our customers; our dependence on third
parties to maintain satisfactory manufacturing yields and deliverable schedule;
and the risks as identified in the "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
sections of our Annual Report on Form 10-K for the fiscal year ended June 27,
2020, and other risks as identified from time to time in our SEC reports.
Forward-looking statements are based on information available to us on the date
hereof, and we do not have, and expressly disclaim, any obligation to publicly
release any updates or any changes in our expectations, or any change in events,
conditions, or circumstances on which any forward-looking statement is based.
Our actual results and the timing of certain events could differ materially from
the forward-looking statements. These forward-looking statements do not reflect
the potential impact of any mergers, acquisitions, or other business
combinations that had not been completed as of the date of this filing.

Statements made in this Report, unless the context otherwise requires, include
the use of the terms "us," "we," "our," the "Company" and "Synaptics" to refer
to Synaptics Incorporated and its consolidated subsidiaries.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak
a pandemic, which continues to spread broadly in the U.S. and globally. In
response to the outbreak, governmental authorities implemented numerous
containment measures, including travel bans and restrictions, quarantines,
shelter-in-place orders, and business restrictions and shutdowns, resulting in
rapidly changing market and economic conditions. In certain countries in which
we operate governments took rapid and effective measures to stem the spread,
while in other countries in which we operate governments were slow to react or
have missed opportunities to effectively contain the spread. Although some of
these restrictions and other containment measured have since been lifted or
scaled back, ongoing surges of COVID-19 have resulted in the re-imposition of
certain restrictions and containment measures and may lead to other restrictions
being re-implemented in the future in response to efforts to reduce the spread
of COVID-19.

The health and wellbeing of our workforce is our highest priority. Many of our
employees are able to work from home to minimize the potential risk of spread of
COVID-19 in our office environment. For those employees that are comfortable
returning to an office work environment, we have introduced various return to
work protocols, based on guidance from local and global health organizations, to
monitor and assess the health of our employees, including temperature checks and
risk assessments, and further require all employees that do work in the office
to wear face coverings and social distance while in communal locations in the
office.

While the severity and duration of business disruption to our customers and
suppliers due to the COVID-19 pandemic remains uncertain, we expect that it will
continue to weigh on our business and consolidated results of operations in the
near term and may further impact our financial condition (including liquidity)
in the future. The full extent of the impact of the COVID-19 pandemic to our
business, operations and financial results will depend on numerous evolving
factors that we may not be able to anticipate. While we have not incurred
significant disruptions thus far from the COVID-19 outbreak, we are unable to
accurately predict the full impact COVID-19 will have on our future results due
to numerous uncertainties, including the severity of the disease, the duration
of the outbreak, the severity and duration of future surges of the outbreak,
further containment actions that may be taken by governmental authorities, the
impact to the businesses of our customers and suppliers and other factors.

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We will continue to evaluate the nature and scope of the impact to our business,
consolidated results of operations, and financial condition, and may take
further actions altering our business operations and managing our costs and
liquidity that we deem necessary or appropriate to respond to this fast moving
and uncertain global health crisis and the resulting global economic
consequences.

Overview

We are a leading worldwide developer and supplier of custom-designed human
interface semiconductor product solutions that enable people to interact more
easily and intuitively with a wide variety of mobile computing, communications,
entertainment, and other electronic devices. We currently generate revenue from
the markets for smartphones, tablets, personal computer, or PC, products,
primarily notebook computers, Internet of Things, or IoT, products which include
smart devices with voice, speech and video solutions, wireless connectivity and
other select electronic devices, including devices in automobiles, with our
custom human interface solutions. The solutions we deliver either contain or
consist of our touch-, display driver-, fingerprint authentication-based-, voice
and speech-, wireless- or video-semiconductor solutions, which include our chip,
and, as applicable, customer-specific firmware and software.

Many of our customers have manufacturing operations in China, and many of our
OEM customers have established design centers in Asia. With our expanding global
presence, including offices in China, Hong Kong, India, Japan, Korea, Poland,
Switzerland, Taiwan, the United Kingdom, and the United States, we are well
positioned to provide local sales, operational, and engineering support services
to our existing customers, as well as potential new customers, on a global
basis.

Our manufacturing operations are based on a variable cost model in which we
outsource all of our production requirements and generally drop ship our
products directly to our customers from our contract manufacturers' facilities,
eliminating the need for significant capital expenditures and allowing us to
minimize our investment in inventories. This approach requires us to work
closely with our contract manufacturers and semiconductor fabricators to ensure
adequate production capacity to meet our forecasted volume requirements. We
provide our contract manufacturers with six-month rolling forecasts and issue
purchase orders based on our anticipated requirements for the next 90 days.
However, we generally do not have long-term supply contracts with our contract
manufacturers. We use third-party wafer manufacturers to supply wafers and
third-party packaging manufacturers to package our proprietary ASICs. In certain
cases, we rely on a single source or a limited number of suppliers to provide
other key components of our products. Our cost of revenue includes all costs
associated with the production of our products, including materials; logistics;
amortization of intangibles related to acquired developed technology; backlog;
supplier arrangements; manufacturing, assembly, and test costs paid to
third-party manufacturers; and related overhead costs associated with our
indirect manufacturing operations personnel. Additionally, we charge all
warranty costs, losses on inventory purchase obligations, and write-downs to
reduce the carrying value of obsolete, slow moving, and non-usable inventory to
net realizable value, to cost of revenue.

Our gross margin generally reflects the combination of the added value we bring
to our OEM customers' products by meeting their custom design requirements and
the impact of our ongoing cost-improvement programs. These cost-improvement
programs include reducing materials and component costs and implementing design
and process improvements. Our newly introduced products may have lower margins
than our more mature products, which have realized greater benefits associated
with our ongoing cost-improvement programs. As a result, new product
introductions may initially negatively impact our gross margin.

Our research and development expenses include costs for supplies and materials
related to product development, as well as the engineering costs incurred to
design ASICs and human interface solutions for OEM customers prior to and after
our OEMs' commitment to incorporate those solutions into their products. In
addition, we expense in-process research and development projects acquired as
part of a business acquisition, which have not yet reached technological
feasibility, and which have no foreseeable alternative future use. We continue
to commit to the technological and design innovation required to maintain our
position in our existing markets, and to adapt our existing technologies or
develop new technologies for new markets.

Selling, general, and administrative expenses include expenses related to sales, marketing, and administrative personnel; internal sales and outside sales representatives' commissions; market and usability research; outside legal, accounting, and consulting costs; and other marketing and sales activities.

Acquired intangibles amortization, included in operating expenses, consists primarily of amortization of customer relationship and tradenames intangible assets recognized under the purchase method for business combinations.

Restructuring costs primarily reflect severance and facilities consolidation
costs related to the restructuring of our operations to reduce operating
expenses. These headcount and facilities related costs were in cost of revenue,
research and development, and selling, general and administrative expenses.

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Interest and other expense, net, primarily reflects interest expense on our
convertible notes and revolving line of credit as well as the amortization of
debt issuance costs and discount on our convertible notes, partially offset by
interest income earned on our cash, cash equivalents and short-term investments.

Equity investment loss includes amortization of intangible assets as well as our portion of the net loss reflected under the equity method of accounting in connection with our investment in OXi Technology Ltd.

Acquisitions

DisplayLink

On July 17, 2020, we entered into a definitive agreement to acquire all of the
equity interests in DisplayLink Corporation, or DisplayLink, a leader in
high-performance video compression technology. The acquisition closed on July
31, 2020. As of September 26, 2020, our preliminary purchase consideration was
$443.2 million, subject to certain additional post-closing adjustments. The
results of DisplayLink are included in our condensed consolidated financial
statements for the period from August 1, 2020 through September 26, 2020. For
further discussion of the DisplayLink acquisition, see Note 6 included in the
condensed consolidated financial statements contained elsewhere in this Report.

Broadcom

On July 2, 2020, we entered into definitive agreements with Broadcom to acquire
certain assets and assume certain liabilities of, and obtain non-exclusive
licenses relating to, Broadcom's existing Wi-Fi, Bluetooth and GPS/GNSS products
and business in the IoT market, or Broadcom Business Acquisition, for an
aggregate consideration of $250 million in cash which closed on July 23,
2020. We also entered into certain transition agreements with Broadcom for a
period of three years. The results of the Broadcom Business Acquisition are
included in our condensed consolidated financial statements for the period from
July 24, 2020 through September 26, 2020. For further discussion of the Broadcom
Business Acquisition, see Note 6 included in the condensed consolidated
financial statements contained elsewhere in this Report.

Divestiture

In December 2019, we entered into an asset purchase agreement with a third party
to sell the assets of our LCD Touch Controller and Display Driver Integration,
or TDDI, product line for LCD mobile displays. We retained our automotive TDDI
product line and our discrete touch and discrete display driver product lines
supporting LCD and OLED for the mobile market. The assets sold under the asset
purchase agreement for cash consideration of $138.7 million and had a carrying
value of approximately $33.6 million as of the closing date of the transaction
in April 2020. The gain on sale of this business component was $105.1 million.

Critical Accounting Policies and Estimates

Business Combinations

We have applied significant estimates and judgments in order to determine the
fair value of the identified assets acquired, liabilities assumed and goodwill
recognized in connection with our business combinations to ensure the value of
the assets and liabilities acquired are recognized at fair value as of the
acquisition date. In measuring the fair value, we utilize valuation techniques
consistent with the market approach, income approach, or cost approach.

The valuation of the identifiable assets and liabilities includes assumptions
made in performing the valuation, such as projected revenue, weighted average
cost of capital, discount rates, estimated useful lives, and other relevant
assessments. These assessments can be significantly affected by our estimates,
judgments, and assumptions. If actual results are not consistent with our
estimates, judgments, or assumptions, or if additional or new information arises
in the future that affects our fair value estimates, then adjustments to our
initial fair value estimates may have a material impact to our purchase
accounting or our results of operations.

Other than the above item, there have been no significant changes in our
critical accounting policies and estimates during the three months ended
September 26, 2020, compared with our critical accounting policies and estimates
disclosed in Management's Discussion and Analysis of Financial Condition and
Results of Operations included in our Annual Report on Form 10-K for the fiscal
year ended June 27, 2020.

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Results of Operations

Certain of the data used in our condensed consolidated statements of income for
the periods indicated, together with comparative absolute and percentage changes
in these amounts, were as follows (in millions, except percentages):



                                                 Three Months Ended September
                                        2020        2019        $ Change      % Change
Mobile product applications            $ 133.5     $ 184.3     $    (50.8 )       (27.6 %)
PC product applications                   80.5        67.8           12.7          18.7 %
IoT product applications                 114.4        87.8           26.6          30.3 %
Net revenue                              328.4       339.9          (11.5 )        (3.4 %)
Gross margin                             134.5       126.2            8.3           6.6 %
Operating expenses:
Research and development                  80.9        86.0           (5.1 )        (5.9 %)
Selling, general, and administrative      35.3        27.5            7.8          28.4 %
Acquired intangibles amortization          6.7         2.9            3.8         131.0 %
Restructuring costs                        5.6         6.6           (1.0 )       (15.2 %)
Operating income                           6.0         3.2            2.8          87.5 %
Interest and other expense, net           (4.7 )      (3.6 )         (1.1 )       (30.6 %)
Income/(loss) before provision/
  (benefit) for income taxes               1.3        (0.4 )          1.7         425.0 %
Provision/(benefit) for income taxes       3.6        (4.9 )          8.5         173.5 %
Equity investment loss                    (0.5 )      (0.5 )            -           0.0 %
Net income/(loss)                      $  (2.8 )   $   4.0     $     (6.8 )      (170.0 %)




Certain of the data used in our condensed consolidated statements of income
presented here as a percentage of net revenue for the periods indicated were as
follows:



                                                                     Percentage
                                         Three Months Ended            Point
                                              September              Increase/
                                         2020           2019         (Decrease)
Mobile product applications                 40.7 %        54.3 %           (13.6 %)
PC product applications                     24.5 %        19.9 %             4.6 %
IoT product applications                    34.8 %        25.8 %             9.0 %
Net revenue                                100.0 %       100.0 %            (0.0 %)
Gross margin                                41.0 %        37.1 %             3.9 %
Operating expenses:
Research and development                    24.6 %        25.3 %            (0.7 %)
Selling, general, and administrative        10.7 %         8.1 %             2.6 %
Acquired intangibles amortization            2.0 %         0.9 %             1.1 %
Restructuring costs                          1.7 %         1.9 %            (0.2 %)
Operating income                             1.8 %         0.9 %             0.9 %
Interest and other expense, net             (1.4 %)       (1.1 %)           (0.3 %)
Income/(loss) before provision/
  (benefit) for income taxes                 0.4 %        (0.1 %)            0.5 %
Provision/(benefit) for income taxes         1.1 %        (1.4 %)            2.5 %
Equity investment loss                      (0.2 %)       (0.1 %)           (0.1 %)
Net income/(loss)                           (0.9 %)        1.2 %            (2.1 %)


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Net Revenue

Net revenue was $328.4 million for the three months ended September 26, 2020,
compared with $339.9 million for the three months ended September 28, 2019, a
decrease of $11.5 million, or 3.4%. Of this net revenue, $133.5 million, or
40.7%, was from Mobile product applications, $114.4 million, or 34.8%, was from
IoT product applications, and $80.5 million, or 24.5%, was from PC product
applications. The decrease in net revenue for the three months ended September
26, 2020 was primarily attributable to a decrease in net revenue from Mobile
product applications, partially offset by an increase in net revenue from IoT
product applications and PC product applications. Net revenue from Mobile
product applications decreased as a result of a decline in units sold (which
decreased 23%) as well as slightly lower average selling prices for Mobile
product applications. The decline in unit sales in Mobile product applications
was primarily due to the divestiture of our TDDI business in the fourth quarter
of fiscal 2020. Net revenue from IoT product applications, which includes
products from both acquisitions that closed in July 2020, increased as a result
of higher average selling prices for IoT product applications due to our product
sales mix (which increased 24%) and an increase in units sold (which increased
5%). Net revenue from PC product applications increased due to a growth in units
sold (which increased 8%) for PC product applications as well as higher average
selling prices (which increased 10%).

Gross Margin

Gross margin as a percentage of net revenue was 41.0%, or $134.5 million, for
the three months ended September 26, 2020, compared with 37.1%, or $126.2
million, for the three months ended September 28, 2019. The 390 basis point
increase in gross margin for the three months ended September 26, 2020, was
primarily due to a favorable product mix and product cost reductions, partially
offset by a $10.5 million increase in amortization for amortizable intangibles
related to the acquisition of DisplayLink and the Broadcom Business Acquisition
and $9.8 million of inventory fair value adjustments associated with the
DisplayLink acquisition.

We continuously introduce new product solutions, that may have life cycles of
less than one year. Further, because we sell our technology solutions in designs
that are generally unique or specific to an OEM customer's application, gross
margin varies on a product-by-product basis, making our cumulative gross margin
a blend of our product specific designs. As a fabless manufacturer, our gross
margin percentage is generally not materially impacted by our shipment
volume. We charge losses on inventory purchase obligations and write-downs to
reduce the carrying value of obsolete, slow moving, and non-usable inventory to
net realizable value (including warranty costs) to cost of revenue.

Operating Expenses

Research and Development Expenses. Research and development expenses decreased
$5.1 million to $80.9 million for the three months ended September 26, 2020,
compared with the three months ended September 28, 2019. The decrease in
research and development expenses primarily reflected a $3.7 million decrease
due to acquired in-process research and development recorded in the first
quarter of fiscal 2020, a net $2.9 million decrease in personnel-related costs,
which was due to a reduction in average headcount for the three months ended
September 26, 2020 as compared to the three months ended September 28, 2019, as
a result of restructuring activities to reduce operating costs, partially offset
by increased headcount as a result of recent acquisitions; a $1.3 million
decrease in travel related costs, partially offset by an increase of $2.1
million in project related costs.

Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased $7.8 million to $35.3 million for the three
months ended September 26, 2020, compared with the three months ended September
28, 2019. The increase in selling, general, and administrative expenses
primarily reflected a $6.7 million increase in stock based compensation costs
which was incurred in connection with grants of awards primarily to new
employees in fiscal 2020 and the first quarter of fiscal 2021, as well as a $1.4
million increase in legal and accounting fees related to recent acquisitions.

Acquired Intangibles Amortization. Acquired intangibles amortization reflects
the amortization of intangibles acquired through acquisitions. For further
discussion of acquired intangibles amortization, see Note 7 Acquired Intangibles
and Goodwill included in the condensed consolidated financial statements
contained elsewhere in this Report.

Restructuring Costs. Restructuring costs of $5.6 million in the three months
ended September 26, 2020 reflect severance costs for restructuring of our
operations to reduce ongoing operating costs. Restructuring activities commenced
in each of fiscal 2020 and 2021 and are all expected to be complete by the end
of fiscal 2021. See Note 16 Restructuring Activities included in the condensed
consolidated financial statements contained elsewhere in this Report.

Interest and Other Expense, Net. Interest and other expense, net primarily
includes the amortization of debt discount and issuance costs, as well as
interest on our debt, partially offset by interest income earned on our cash,
cash equivalents and short-term investments. Interest and other expense, net
increased $1.0 million to $4.6 million for the three months ended September 26,
2020, as compared to $3.6 million for the three months ended September 28, 2019.
The increase in interest and other expense, net is primarily due to a decrease
in interest income as a result of lower cash balances and interest rates, higher
interest expense on our debt due to borrowings under our revolving line of
credit, partially offset by $1.2 million income from the sale of non-operating
assets.

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Provision for Income Taxes. On March 27, 2020, the Coronavirus Aid, Relief and
Economic Security, or CARES, Act was enacted and signed into law. The CARES Act
did not have a material impact on the income tax provision for the three months
ended September 26, 2020.

We account for income taxes under the asset and liability method. The provision
for income taxes recorded in interim periods is recorded by applying the
estimated annual effective tax rate to year-to-date income before provision for
income taxes, excluding the effects of significant unusual or infrequently
occurring discrete items, and jurisdictions where annual effective tax rate
cannot be reasonably estimated. In these cases, we will determine the actual
effective tax rate for the year-to-date period. The tax effects of discrete
items are recorded in the same period that the related discrete items are
reported and results in a difference between the actual effective tax rate and
the estimated annual effective tax rate.

The provision for income taxes of $3.6 million and a benefit of $4.9 million for
the three months ended September 26, 2020 and September 28, 2019, respectively,
represented estimated federal, foreign, and state income taxes. The effective
tax rate for the three months ended September 26, 2020 diverged from the
combined U.S. federal and state statutory tax rate primarily because of foreign
withholding taxes, non-deductible officer compensation, the impact of accounting
for qualified stock options and global intangible low-taxed income, or GILTI,
partially offset by the benefit of income taxed at lower rates, research credits
and foreign tax credits. The effective tax rate for the three months ended
September 28, 2019, diverged from the combined U.S. federal and state statutory
tax rate, primarily because of foreign deemed-paid taxes, foreign income taxed
at higher tax rates, and GILTI, partially offset by the benefit of research
credits and foreign tax credits. .

Liquidity and Capital Resources

Our cash and cash equivalents were $180.2 million as of September 26, 2020,
compared with $763.4 million as of June 27, 2020, a decrease of $583.2 million.
The decrease primarily reflected $621.8 million used for the acquisition of
businesses, net of cash and cash equivalents acquired, partially offset by $31.1
million of proceeds from maturities of investments, $10.4 of proceeds from
issuance of shares and $6.5 million of net cash provided by operating
activities. At this time, we consider earnings of our foreign subsidiaries
indefinitely invested overseas and have made no provision for income or
withholding taxes, other than the one-time transition tax incurred as part of
the Tax Cuts and Jobs Act, that may result from a future repatriation of those
earnings. As of September 26, 2020, $158.9 million of cash, cash equivalents and
short-term investments was held by our foreign subsidiaries. If these funds are
needed for our operations in the United States, we would be required to accrue
and pay foreign withholding taxes to repatriate certain of these funds.

Cash Flows from Operating Activities. Operating activities during the three
months ended September 26, 2020 generated $6.5 million compared with $47.3
million net cash generated during the three months ended September 28, 2019. For
the three months ended September 26, 2020, the primary operating activities were
adjustments for non-cash charges of $47.7 million and a net change in operating
assets and liabilities of $38.4 million. The net change in operating assets and
liabilities was primarily attributable to a $25.4 million increase in accounts
receivable, net, a $16.2 million decrease in income taxes payable, a $11.4
million increase in other assets, and a $10.0 million increase in prepaid
expenses and other current assets, partially offset by a $20.5 million decrease
in inventories and a $11.7 increase in accounts payable. From June 27, 2020 to
September 26, 2020, our days sales outstanding remained flat at 63 days compared
to 62 days. Our annual inventory turns remained flat at six.

Cash Flows from Investing Activities. Cash used in investing activities during
the three months ended September 26, 2020 primarily consisted of $621.8 million
used for the acquisition of businesses and $3.9 million for purchases of
property and equipment, partially offset by $31.1 million in proceeds from
maturities of investments.

Cash Flows from Financing Activities. Net cash provided by financing activities
for the three months ended September 26, 2020 was $4.8 million compared with
$16.8 million used in financing activities for the three months ended September
28, 2019. Net cash provided by financing activities for the three months ended
September 26, 2020 consisted of $10.4 of proceeds from issuance of shares,
partially offset by $5.6 million used for payroll taxes on RSUs and MSUs.

Common Stock Repurchase Program. As of September 26, 2020, our board has
cumulatively authorized $1.4 billion for our common stock repurchase program,
which will expire in July 2021. The program authorizes us to purchase our common
stock in the open market or in privately negotiated transactions, depending upon
market conditions and other factors. The number of shares purchased and the
timing of purchases are based on the level of our cash balances, general
business and market conditions, and other factors. Common stock purchased under
this program is held as treasury stock. From April 2005 through September 26,
2020, we purchased 31,749,195 shares of our common stock in the open market for
an aggregate cost of $1.2 billion. During the three months ended September 26,
2020, we did not repurchase any shares of our common stock. As of September 26,
2020, the remaining available authorization under our common stock repurchase
program was $177.4 million.

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Convertible Debt

On June 20, 2017, we entered into a purchase agreement, or the Purchase
Agreement, with Wells Fargo Securities, LLC, as representative of the initial
purchasers named therein, collectively, the Initial Purchasers, pursuant to
which we agreed to issue and sell, and the Initial Purchasers agreed to
purchase, $500 million aggregate principal amount of our 0.50% convertible
senior notes due 2022, or the Notes, in a private placement transaction.
Pursuant to the Purchase Agreement, we also granted the Initial Purchasers a
30-day option to purchase up to an additional $25 million aggregate principal
amount of Notes, which was exercised in full on June 21, 2017. The net proceeds,
after deducting the Initial Purchasers' discounts, were $514.5 million, which
included proceeds from the Initial Purchasers' exercise of their option to
purchase additional Notes. We received the net proceeds on June 26, 2017, which
we used to repurchase shares of our common stock, retire our outstanding bank
debt, and provide additional cash resources to fund the acquisition of Conexant
Systems, LLC and the assets of Marvell Technology Group, Ltd.'s multimedia
solutions business.

The Notes bear interest at a rate of 0.50% per year. Interest has accrued since
June 26, 2017 and is payable semi-annually in arrears, on June 15 and
December 15 of each year, beginning on December 15, 2017. The Notes are senior
unsecured obligations and rank senior in right of payment to any of our
indebtedness that is expressly subordinated in right of payment to the Notes;
equal in right of payment to any our liabilities that are not so subordinated;
effectively junior in right of payment to any of our secured indebtedness to the
extent of the value of the assets securing such indebtedness; and structurally
junior to all indebtedness and other liabilities (including trade payables) of
our subsidiaries.

The Notes mature on June 15, 2022, or the Maturity Date, unless earlier repurchased, redeemed or converted.

Holders may convert all or any portion of their Notes, in multiples of $1,000
principal amounts, at their option at any time prior to the close of business on
the business day immediately preceding March 15, 2022 under certain defined
circumstances.

On or after March 15, 2022 until the close of business on the business day
immediately preceding the Maturity Date, holders may convert all or any portion
of their Notes, in multiples of $1,000 principal amounts, at the option of the
holder. Upon conversion, we will pay or deliver, at our election, shares of
common stock, cash, or a combination of cash and shares of common stock.

The conversion rate for the Notes is initially 13.6947 shares of common stock
per $1,000 principal amount of Notes (equivalent to an initial conversion price
of approximately $73.02 per share of common stock). The conversion rate is
subject to adjustment in certain circumstances.

Upon the occurrence of a fundamental change (as defined in the Notes indenture),
holders of the Notes may require us to repurchase for cash all or a portion of
their Notes at a fundamental change repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus accrued and unpaid
interest up to, but excluding, the fundamental change repurchase date.

Commencing June 20, 2020, we may redeem for cash all or any portion of the
Notes, at our option, if the last reported sale price of our common stock, as
determined by us, has been at least 130% of the conversion price then in effect
for at least 20 trading days (whether or not consecutive) during any 30
consecutive trading day period (including the last trading day of such period)
ending on, and including, the trading day immediately preceding the date on
which we provide notice of redemption at a redemption price equal to 100% of the
principal amount of the Notes to be redeemed, plus accrued and unpaid interest
up to, but excluding, the redemption date. Our policy is to settle the principal
amount of our Notes with cash upon conversion or redemption.

Bank Credit Facility. We have a $200.0 million revolving credit facility,
pursuant to that certain Amended and Restated Credit Agreement, dated September
27, 2017, or the Credit Agreement, which includes a $20 million sublimit for
letters of credit and a $20 million sublimit for swingline loans. Under the
terms of the Credit Agreement, we may, subject to the satisfaction of certain
conditions, request increases in the revolving credit facility commitments in an
aggregate principal amount of up to $100 million to the extent existing or new
lenders agree to provide such increased or additional commitments, as
applicable. Proceeds under the revolving credit facility are available for
working capital and general corporate purposes.

In February 2020, we entered into the First Amendment to the Amended and
Restated Credit Agreement, or the Amendment, with the lenders that are party
thereto, or the Lenders, and Wells Fargo Bank, National Association, as
administrative agent for the Lenders. Pursuant to the Amendment, the Credit
Agreement was amended to, among other things, (i) modify the definition of
Consolidated EBITDA (as defined in the Credit Agreement) to increase the maximum
limit on the add back of certain restructuring and integration cost and expenses
to 30% from 15% of Consolidated EBITDA, (ii) modify the negative covenant for
Consolidated Total Leverage Ratio (as defined in the Credit Agreement) at the
end of any fiscal quarter to 4.75:1.00 from 3.50:1.00, and for any four quarter
period following a Material Acquisition (as defined in the Credit Agreement) to
5:00:1.00 from 3.75:1.00, (iii) modify the circumstances under which the
maturity date of the Credit Agreement would be accelerated in advance of the
maturity date of the Notes to eliminate the acceleration of the maturity date of
the Credit Agreement if we meet certain specified leverage and liquidity
covenants, (iv) add a minimum liquidity covenant for each two-week period
beginning on the date that is 120 days prior to the maturity date of the
Company's existing convertible senior notes, (v) add certain technical
amendments to address LIBOR transition

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matters, and (vi) include or revise certain definitions and certain customary
representation, warranties and acknowledgments. As of September 26, 2020, there
was $100.0 million balance outstanding under the revolving credit facility. The
weighted average annualized interest rate on these borrowings for the three
months ended September 26, 2020 was 2.75%.

The revolving credit facility is required to be repaid in full on the earlier of
(i) September 27, 2022, and (ii) the date 91 days prior to the Maturity Date of
the Notes if the Notes have not been refinanced in full by such date, subject to
certain exceptions based on specific covenant calculations. Debt issuance costs
of $2.3 million relating to the revolving credit facility will be amortized over
60 months

Our obligations under the Credit Agreement are guaranteed by the material
domestic subsidiaries of our Company, subject to certain exceptions (such
material subsidiaries, together with our Company, collectively, the Credit
Parties). The obligations of the Credit Parties under the Credit Agreement and
the other loan documents delivered in connection therewith are secured by a
first priority security interest in substantially all of the existing and future
personal property of the Credit Parties, including, without limitation, 65% of
the voting capital stock of certain of the Credit Parties' direct foreign
subsidiaries, subject to certain exceptions.

The revolving credit facility bears interest at our election of a Base Rate plus
an Applicable Margin or LIBOR plus an Applicable Margin. Swingline loans bear
interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating
rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis
points, or LIBOR plus 100 basis points. The Applicable Margin is based on a
sliding scale which ranges from 0.25 to 100 basis points for Base Rate loans and
100 basis points to 175 basis points for LIBOR loans. We are required to pay a
commitment fee on any unused commitments under the Credit Agreement which is
determined on a leverage-based sliding scale ranging from 0.175% to 0.25% per
annum. Interest and fees are payable on a quarterly basis. The LIBOR index is
expected to be discontinued at the end of 2021. Under our credit facility, when
the LIBOR index is discontinued, we will switch to a comparable or successor
rate as selected by the Administrative Agent and the Company, which may include
the Secured Overnight Financing Rate, or SOFR.

Under the Credit Agreement, there are various restrictive covenants, including
three financial covenants which limit the consolidated total leverage ratio, or
leverage ratio, the consolidated interest coverage ratio, or interest coverage
ratio, a restriction which places a limit on the amount of capital expenditures
that may be made in any fiscal year, a restriction that permits up to $50
million per fiscal quarter of accounts receivable financings, and sets the
Specified Leverage Ratio. The leverage ratio is the ratio of debt as of the
measurement date to earnings before interest, taxes, depreciation and
amortization, or EBITDA, for the four consecutive quarters ending with the
quarter of measurement. The current leverage ratio shall not exceed 4.75 to 1.00
provided that for the four fiscal quarters ending after the date of a material
acquisition, such maximum leverage ratio shall be adjusted to 5.0 to 1.00, and
thereafter 4.75 to 1.0. The interest coverage ratio is EBITDA to interest
expense for the four consecutive quarters ending with the quarter of
measurement. The interest coverage ratio must not be less than 3.50 to 1.0
during the term of the Credit Agreement. The Specified Leverage Ratio is the
ratio used in determining, among other things, whether we are permitted to make
dividends and/or prepay certain indebtedness, at a fixed ratio of 2.25 to 1.00.

$100 Million Shelf Registration. We have registered an aggregate of $100.0 million of common stock and preferred stock for issuance in connection with acquisitions, which shares will generally be freely tradeable after their issuance under the Securities Act unless held by an affiliate of the Company, in which case such shares will be subject to the volume and manner of sale restrictions of Rule 144 of the Securities Act.

Liquidity and Capital Resources. Although consequences of the COVID-19 pandemic
and resulting economic uncertainty could adversely affect our liquidity and
capital resources in the future, we believe our existing cash and cash
equivalents, anticipated cash flows from operating activities, and available
credit under our revolving credit facility will be sufficient to meet our
working capital and other cash requirements, including the DisplayLink
acquisition, the Broadcom Business Acquisition, and our debt service
obligations, for at least the next 12 months. On April 2, 2020, the Company
borrowed $100 million under the Credit Agreement in order to increase its cash
position and preserve financial flexibility out of an abundance of caution as a
result of the ongoing uncertainty and volatility in the global markets driven by
the COVID-19 pandemic. Our future capital requirements will depend on many
factors, including our revenue, the length, duration and severity of the
COVID-19 pandemic, the timing and extent of spending to support product
development efforts, costs associated with restructuring activities net of
projected savings from those activities, costs related to protecting our
intellectual property, the expansion of sales and marketing activities, timing
of introduction of new products and enhancements to existing products, costs to
ensure access to adequate manufacturing, costs of maintaining sufficient space
for our workforce, the continuing market acceptance of our product solutions,
our common stock repurchase program, and the amount and timing of our
investments in, or acquisitions of, other technologies or companies. Further
equity or debt financing may not be available to us on acceptable terms or at
all. If sufficient funds are not available or are not available on acceptable
terms, our ability to fund our future long-term working capital needs, take
advantage of business opportunities or to respond to competitive pressures could
be limited or severely constrained.

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Based on our ability to access our cash and cash equivalents, our expected
operating cash flows, and our other sources of cash, we do not currently
anticipate the need to remit undistributed earnings of our foreign subsidiaries
to meet our working capital and other cash requirements, but if we did remit
such earnings, we may be required to accrue and pay certain state and foreign
taxes to repatriate these funds, which would adversely impact our financial
position and results of operations.

Contractual Obligations and Commercial Commitments

Our material contractual obligations and commercial commitments as of September 26, 2020 were as follows (in millions):

                      Remaining
                      in Fiscal        Fiscal          Fiscal          Fiscal          Fiscal
                      Year 2021       Year 2022       Year 2023       Year 2024       Year 2025      Thereafter       Total
Long-term debt (1)   $       4.7     $     627.7     $         -     $         -     $         -     $         -     $ 632.4
Leases                       7.6             9.6             6.0             4.6             3.7            12.6        44.1
Purchase
obligations and
  other
commitments (2)             37.9             3.0             3.0               -               -               -        43.9
Transition tax
payable (3)                    -             0.9             1.8             2.4             3.0               -         8.1
Total                $      50.2     $     641.2     $      10.8     $       7.0     $       6.7     $      12.6     $ 728.5

(1) Represents the principal and interest payable through the maturity date of

the underlying contractual obligation.

(2) Purchase obligations and other commitments include payments due for inventory

purchase obligations with contract manufacturers, long-term software tool

licenses, and other licenses.

(3) Represents the remaining balance of the one-time transition tax liability

associated with our deemed repatriation of accumulated foreign earnings as a

result of the enactment of the Tax Cuts and Jobs Act into law on December 22,

2017.

The amounts in the table above exclude unrecognized tax benefits of $22.0
million. As of September 26, 2020, we were unable to make a reasonably reliable
estimate of when cash settlement with a taxing authority may occur in connection
with our gross unrecognized tax benefit.

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