UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
   
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 20091, 2010
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 001-5560
SKYWORKS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
   
Delaware04-2302115
Delaware
(State or other jurisdiction of incorporation or organization)
 04-2302115
(I.R.S. Employer Identification No.)
   
20 Sylvan Road, Woburn, Massachusetts01801

(Address of principal executive offices)
 01801
(Zip Code)
Registrant’s telephone number, including area code:(781) 376-3000
Securities registered pursuant to Section 12(b) of the Act:
   
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, par value $0.25 per share NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

þ Yeso No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

o Yesþ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.

þ Yeso No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).oþYeso No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large Acceleratedaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þAccelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yesþ No
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (based on the closing price of the registrant’s common stock as reported on the NASDAQ Global Select Market on the last business day of the registrant’s most recently completed second fiscal quarter (April 3, 2009)2, 2010) was approximately $1,467,316,160.$2,716,065,796. The number of outstanding shares of the registrant’s common stock, par value $0.25 per share, as of November 16, 200921, 2010 was 174,378,774.183,287,033.
DOCUMENTS INCORPORATED BY REFERENCE
   
Part of Form 10-K Documents from which portions are incorporated by reference
Part III Portions of the Registrant’s Proxy Statement relating to the Registrant’s 20102011 Annual Meeting of Stockholders (to be filed) are incorporated by reference into Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.
 
 


 

SKYWORKS SOLUTIONS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED OCTOBER 2, 20091, 2010
TABLE OF CONTENTS
     
  PAGE NO.
 
    
     
BUSINESS.  4 
RISK FACTORS.  11 
UNRESOLVED STAFF COMMENTS.  24 
PROPERTIES.  24 
LEGAL PROCEEDINGS.  25 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  25 
  
25
     
    
     
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.  26 
SELECTED FINANCIAL DATA.  27 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  2930
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  4542
 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.  4744
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  8077
 
CONTROLS AND PROCEDURES.  8077
 
OTHER INFORMATION.  8178 
     
    
     
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.  8280
 
EXECUTIVE COMPENSATION.  8280
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.  8280
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.  8280
 
PRINCIPAL ACCOUNTING FEES AND SERVICES.  8280 
     
    
     
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.  8381 
     
  8482 
 EX-12
 EX-21
 EX-23.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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CAUTIONARY STATEMENT
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, and is subject to the “safe harbor” created by those sections. Any statements that are not statements of historical fact should be considered to be forward-looking statements. Words such as “believes”, “expects”, “may”, “will”, “would”, “should”, “could”, “seek”, “intends”, “plans”, “projects”, “potential”, “continue”, “estimates”, “targets”, “anticipates”, “predicts” and similar expressions or variations or negatives of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual Report. Additionally, forward-looking statements include, but are not limited to:
  our plans to develop and market new products, enhancements or technologies and the timing of these development programs;
 
  our estimates regarding our capital requirements and our needs for additional financing;
 
  our estimates of expenses and future revenues and profitability;
 
  our estimates of the size of the markets for our products and services;
 
  the rate and degree of market acceptance of our products; and
 
  the success of other competing technologies that may become available.
Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements involve inherent risks and uncertainties and actual results and outcomes may differ materially and adversely from the results and outcomes discussed in or anticipated by the forward-looking statements. A number of important factors could cause actual results to differ materially and adversely from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed elsewhere in this report and in the other documents filed by us with the Securities and Exchange Commission (“SEC”) in evaluating our forward-looking statements. We have no plans, and undertake no obligation, to revise or update our forward-looking statements to reflect any event or circumstance that may arise after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
This Annual Report also contains estimates made by independent parties and by us relating to market size and growth and other industry data. These estimates involve a number of assumptions and limitations and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation”. These and other factors could cause results to differ materially and adversely from those expressed in the estimates made by the independent parties and by us.

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In this document, the words “we”, “our”, “ours” and “us” refer only to Skyworks Solutions, Inc., and its consolidated subsidiaries and not any other person or entity. In addition, the following industry standards are referenced throughout the document:
 CATV (Cable Television): a system of providing television to consumers via radio frequency signals transmitted to televisions through fixed optical fibers or coaxial cables as opposed to the over-the-air method used in traditional television broadcasting
 
 CDMA (Code Division Multiple Access): a method for transmitting simultaneous signals over a shared portion of the Radio Frequency (“RF”) spectrum
 
 EDGE (Enhanced Data Rates for GSM Evolution): an enhancement to the GSM and TDMA wireless communications systems that increases data throughput to 474Kbps
 
 GPRS (General Packet Radio Service): an enhancement to the GSM mobile communications system that supports transmission of data packets
 
 GSM (Global System for Mobile Communications): a digital cellular phone technology based on TDMA that is the predominant system in Europe, and is also used around the world
 
 LTE (Long Term Evolution): 4th generation (4G) radio technologies designed to increase the capacity and speed of mobile telephone networks
 
 RFID (Radio Frequency Identification): refers to the use of an electronic tag (typically referred to as an RFID tag) for the purpose of identification and tracking objects using radio waves
 
 Satcom (Satellite Communications): where a satellite stationed in space is used for the purpose of telecommunications
 
 TD-SCDMA (Time Division Synchronous Code Division Multiple Access): a 3G (third generation wireless services) mobile communications standard, being pursued in the People’s Republic of China
 
 WCDMA (Wideband CDMA): a 3G technology that increases data transmission rates
 
 WEDGEWEDGE: an acronym for technologies that support both WCDMA and EDGE wireless communication systems
 
 WiMAX (Worldwide Interoperability for Microwave Access): a standards-based technology enabling the delivery of last mile wireless broadband access as an alternative to cable and DSL
 
 WLAN (Wireless Local Area Network): a type of local-area network that uses high-frequency radio waves rather than wires to communicate between nodes
Skyworks, Breakthrough Simplicity, the star design logo, Intera and Trans-Tech are trademarks or registered trademarks of Skyworks Solutions, Inc. or its subsidiaries in the United States and in other countries. All other brands and names listed are trademarks of their respective companies.
PART l
ITEM 1. BUSINESS
Skyworks Solutions, Inc., together with its consolidated subsidiaries, (“Skyworks” or the “Company”) is an innovator of high reliability analog and mixed signal semiconductors. Leveraging core technologies, Skyworks offers diverse standard and custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and cellular handset applications. The Company’s portfolio includes amplifiers, attenuators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF

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subsystems, mixers/demodulators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, receivers, switches and technical ceramics.
We have aligned our product portfolio around two broad markets: cellular handsets and analog semiconductors. In general, our handset portfolio includes highly customized power amplifiers and front-end solutions that are in many of today’s cellular devices, from entry level to multimedia platforms and smart phones. OurSome of our primary handset customers include LG Electronics, Motorola, Nokia, Samsung, Sony Ericsson, Research in Motion, and HTC. Our competitors include Avago andTechnologies, RF Micro Devices.Devices and Triquint Semiconductor.
In parallel, we offer over 2,500 different catalog and custom linear products to a highly diversified non-handset customer base. Our customers include infrastructure, automotive, energy management, medical and military providers such as Huawei, Ericsson, Landis + Gyr, Sensus, Itron, Siemens, and Northrop Grumman. Our competitors in the linear products markets include Analog Devices, Hittite Microwave, Linear Technology and Maxim Integrated Products.
Headquartered in Woburn, Massachusetts, the Company is a Delaware corporation that was formed in 1962. The Company changed its corporate name from Alpha Industries, Inc. to Skyworks Solutions, Inc. on June 25, 2002, following a business combination. We have worldwide operations with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America. Our Internet address is www.skyworksinc.com. We make available on our Website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 filings on Forms 3, 4 and 5, and amendments to those reports as soon as practicable after we electronically submit such material to the SEC. The information contained in our Website is not incorporated by reference in this Annual Report. You may read and copy materials that we have filed with the SEC at the SEC public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public on the SEC’s Internet Website at www.sec.gov.
INDUSTRY BACKGROUND
We believe there are several key growth trends shaping the wireless industry. First is the advent of the mobile Internet, where consumers are increasingly demanding mobile devices with faster data rates, advanced image quality and improved Web connections. We believe this demand is one of the biggest secular growth trends in technology.
On the high-end of the cellular handset market, the smart phone growth - which is at the heart of the mobile Internet phenomenon - is fostering this industry wide sea change. In effect, the smart phone is moving from a higher end tool reserved for the corporate executive to an increasingly mainstream communication platform necessity - one that is changing the way in which we live, work and play. Social networking sites such as Facebook and Twitter are only fueling this trend. Furthermore, this segment is being embraced and widely promoted by carriers who benefit from the highly profitable data services revenue stream as subscribers move to enhanced data plans.
Another trend in the wireless industry is the convergenceThe increased presence of multimedia-rich mobile devices and the recognition ofhas led manufacturers to recognize the increasingly important role multimode Front-End Modules (“FEM”) play in the rapidly evolving wireless handset market, particularly as the industry migrates to 3G and 4G technologies which enable applications such as Web browsing, video streaming, gaming, MP3 players and cameras. Next-generation EDGE, WEDGE and WCDMA wireless platforms are becomingnow being used in the majority of the more than one billion cellular phones the industry produces annually. With this accelerating trend, theannually which results in increasing complexity in the FEM increases asbecause each new wireless platform and operating frequency band requires additional amplifier, filtering and switching content to support:
  backward compatibility to existing networks,
 
  simultaneous transmission of voice and data,
 
  international roaming, and
broadband functionality to accommodate music, video, data, and other multimedia features.

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broadband functionality to accommodate music, video, data, and other multimedia features.
Further, given constraints on handset size and power consumption, these complex modulesFEMs must remain physically small, energy efficient and cost effective, while also managing an unprecedented level of potential signal interference within the handset.

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Finally, and a direct result of this increasing front-end moduleFEM complexity, the addressable semiconductor content within the transmit and receive chain portion of the cellular handsetmobile device is increasing. We believe this trend is creating an incremental market opportunity measured in the billions of dollars as switching, filtering and wireless local area networking functionality are integrated.
Meanwhile, outside of the handset market, wireless technologies and the opportunity for applications for analog semiconductor products are also rapidly proliferating. According to Gartner, a leading independent market research firm, the total available market for the analog semiconductor segment is expected to exceed $15$18 billion in 2011.2014. Today, this adjacent analog semiconductor market, which is characterized by longer product lifecycles and relatively high gross margins, is fragmented and diversified among various end-markets, customer bases and applications including:
  Infrastructure
 
  Automotive
 
  CATV/Satcom
 
  Smart Energy
 
  Medical
 
  Military
 
  RFID
 
  Test & Measurement
 
  WiMAX
 
  WLAN
SKYWORKS’ STRATEGY
Skyworks’ mission is to achieve mobile connectivity leadership through semiconductor innovation. Key elements in our strategy include:
Diversifying Our Business
By leveraging our core analog and mixed signal technology, Skyworks is able to deliver solutions to a broad and diverse set of end markets and customers. In the handset market, we currently support all five tier-onetop tier handset manufacturers as well as the leading smart phone suppliers, and have strategic relationships with each key baseband supplier. In non-handset markets, we continue to take advantage of our catalog business, intellectual property and worldwide distribution network, to bolster our product pipeline and expand our addressable markets beyond the approximately 1,000 global customers and 2,500 analog components currently marketed.

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Diversifying our Business
Gaining Market Share
Our customer engagements are increasingly centered on solving highly complex multimode, multiband, switching, filtering, digital control and amplification challenges — system-level requirements which intersect with Skyworks’ core competencies. Skyworks continues to invest in developing architectures which optimize power efficiency while minimizing cost and footprint, allowingwhich we believe will allow us to meet our customers’ demanding next-generation technology requirements as well as stringent quality standards and manufacturing scale necessities.
Capitalizing on Content Growth in Third and Fourth Generation Applications
As the industry migrates to multi-mode EDGE, WEDGE, WCDMA and LTE architectures across a multitude of wireless broadband applications, RF complexity in the transmit and receive chain substantially increases given simultaneous voice and high speed data communications requirements, coupled with the need for backward compatibility to existing networks. As a result of this complexity in the front-end module,FEM, we believe that our addressable market is increasing significantly.
Capitalizing on Content Growth

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Delivering Operational Excellence
Skyworks’ strategy is to either vertically integrate our supply chain where we can differentiate or otherwise enter alliances and strategic relationships for leading-edge capabilities. This hybrid manufacturing approach allows us to better balance external capacity with the demands of the marketplace. Internally, our capacity utilization remains high and we are therefore able to maintain margins and our return on invested capital on a broader range of revenues. We are focusedcontinue to focus on achieving the industry’s shortest cycle times, highest yields and ultimately the lowest product cost structure.

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SKYWORKS’ PRODUCT PORTFOLIO
Our product portfolio consists of:
  Amplifiers: the modules that strengthen the signal so that it has sufficient energy to reach a base station
 
  Attenuators:circuits that allow a known source of power to be reduced by a predetermined factor (usually expressed as decibels)
 
  Detectors:intended for use in power management applications
 
  Diodes:semiconductor devices that pass current in one direction only
 
  Directional Couplers:transmission coupling devices for separately sampling the forward or backward wave in a transmission line
 
  Front-End Modules: power amplifiers that are integrated with switches, diplexers, filters and other components to create a single package front-end solution
 
  Hybrid:a type of directional coupler used in radio and telecommunications
 
  Infrastructure RF Subsystems:highly integrated transceivers and power amplifiers for wireless base station applications
 
  MIS Silicon Chip Capacitors:used in applications requiring DC blocking and RF bypassing, or as a fixed capacitance tuning element in filters, oscillators, and matching networks
 
  Mixers/Demodulators:integrated, high-dynamic range, zero IF architecture downconverter for use in wireless communication applications
 
  Modulators:designed for direct modulation of high frequency AM, PM or compound carriers
 
  Phase Locked Loops (PLL):closed-loop feedback control system that maintains a generated signal in a fixed phase relationship to a reference signal
 
  Phase Shifters:designed for use in power amplifier distortion compensation circuits in base station applications
 
  Power Dividers/Combiners:utilized to equally split signals into in-phase signals as often found in balanced signal chains and local oscillator distribution networks
 
  Receivers:electronic devices that change a radio signal from a transmitter into useful information
 
  Switches:components that perform the change between the transmit and receive function, as well as the band function for cellular handsets
 
  Synthesizers:provides ultra-fine frequency resolution, fast switching speed, and low phase-noise performance

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  Technical Ceramics:polycrystalline oxide materials used for a wide variety of electrical, mechanical, thermal and magnetic applications
 
  Transceivers:devices that have both a transmitter and a receiver which are combined and share common circuitry or a single housing
 
  VCOs/Synthesizers:fully integrated, high performance signal source for high dynamic range transceivers

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We believe we possess a broad technology capabilitycapabilities and one of the most complete wireless communications product portfolios in the industry.
THE SKYWORKS ADVANTAGE
By turning complexity into simplicity, we provide our customers with the following competitive advantages:
  Broad front-end module and precision analog product portfolio
 
  Technology leadership in power amplifier and front-end moduleFEM product segments
 
  Solutions for key air interface standards, including CDMA2000, GSM/GPRS/EDGE, LTE, WCDMA, WLAN and WiMAX
 
  Engagements with a diverse set of top-tier customers
 
  Analog, RF and mixed signal design capabilities
Strategic partnerships with all leading baseband providers
 
  Access to key process technologies: GaAs HBT, pHEMT, BiCMOS, SiGE, CMOS, RF CMOS, and silicon
 
  World-class manufacturing capabilities and scale
 
  High level of customer service and technical support
 
  Commitment to technology innovation
MARKETING AND DISTRIBUTION
Our products are primarily sold through a direct Skyworks sales force. This team is globally deployed across all of our major market regions. In some markets we supplement our direct sales effort with independent manufacturers’ representatives, assuring broader coverage of territories and customers. We also utilize distribution partners, some of which are franchised globally with others focused in specific regional markets (e.g., Europe, North America, China and Taiwan).
We maintain an internal marketing organization that is responsible for developing sales and advertising literature, print media, such as product announcements and catalogs, as well as a variety of Web-based content. Skyworks’ sales engagement begins at the earliest stages in a customer design. We strive to provide close technical collaboration with our customers at the inception of new programs. This relationship allows our team to facilitate customer-driven solutions, which leverage the unique strength of our product portfolio while providing high value and greatly reducing time-to-market.
We believe that the technical and complex nature of our products and markets demand an extraordinary commitment to maintain intimate ongoing relationships with our customers. As such, we strive to expand the scope of our customer relationship to include design, engineering, manufacturing, purchasing and project management. We also employ a collaborative approach in developing these relationships by combining the support of our design teams, applications engineers, manufacturing personnel, sales and marketing staff and senior management.

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We believe that maintaining frequent and interactive contact with our customers is paramount to our continuous efforts to provide world-class sales and service support. By listening and responding to feedback, we are able to mobilize resources to raise theour level of customer satisfaction, improve our ability to anticipate future product needs, and enhance our understanding of key market dynamics. We are confident that diligence in following this path will position Skyworks to participate in numerous opportunities for growth in the future.

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REVENUES FROM AND DEPENDENCE ON CUSTOMERS; CUSTOMER CONCENTRATION
For information regarding customer concentration and revenues from external customers, for each of the last three fiscal years, see Note 18 of Item 8 of this Annual Report on Form 10-K.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We own and are licensed under numerous United States and foreign patents and patent applications related to our products, our manufacturing operations and processes, and other activities. In addition, we own a number of trademarks and service marks applicable to certain of our products and services. We believe that intellectual property, including patents, patent applications, trade secrets and trademarks are of material importance to our business. We rely on patent, copyright, trademark, trade secret and other intellectual property laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our confidential and proprietary technologies, devices, algorithms and processes. We cannot guarantee that these efforts will meaningfully protect our intellectual property, and others may independently develop substantially equivalent proprietary technologies, devices, algorithms or processes. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and effective copyright, patent, trademark and trade secret protection may not be available in those jurisdictions. In addition to protecting our proprietary technologies and processes, we strive to strengthen our intellectual property portfolio to enhance our ability to obtain cross-licenses of intellectual property from others, to obtain access to intellectual property we do not possess and to more favorably resolve potential intellectual property claims against us. Furthermore we seek to generate high gross margin revenue through the sale and license of non-core intellectual property and occasionally purchase intellectual property to support our core business. Due to rapid technological changes in the industry, we believe that establishing and maintaining a technological leadership position depends primarily on our ability to develop new innovative products through the technical competence of our engineering personnel.
COMPETITIVE CONDITIONS
We compete on the basis of time-to-market, new product innovation, overall product quality and performance, price, compliance with industry standards, strategic relationships with customers and baseband vendors, and protection of our intellectual property. Certain competitors may be able to adapt more quickly than we can to new or emerging technologies and changes in customer requirements, or may be able to devote greater resources to the development, promotion and sale of their products than we can.
RESEARCH AND DEVELOPMENT
Our products and markets are subject to continued technological advances. Recognizing the importance of such technological advances, we maintain a high level of research and development activities. We maintain close collaborative relationships with many of our customers to help identify market demands and target our development efforts to meet those demands. We are focusingfocus our development efforts on new products, design tools and manufacturing processes usingleveraging our core technologies. Our research and development expenditures for fiscal years ended October 2, 2009, October 3, 2008, and September 28, 2007 were $124.0 million, $146.0 million, and $126.1 million, respectively. The reduction in research and development expenditures between fiscal year 2008 and fiscal year 2009 was principally the result of the exit of non-core product areas in the second quarter of fiscal 2009.
RAW MATERIALS
Raw materials for our products and manufacturing processes are generally available from several sources. It is our policy not to depend on a sole source of supply unless market or other conditions dictate otherwise. Consequently,

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there are limited situations where we procure certain components and services for our products from single or limited sources. We purchase materials and services primarily pursuant to individual purchase orders. However, we have a limited number of long-term supply contracts with our suppliers. Certain of our suppliers consign raw materials to us at our manufacturing facilities. We request these raw materials and take title to them as they are needed in our manufacturing process. We believe we have adequate sources for the supply of raw materials and components for our manufacturing needs with suppliers located around the world.

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BACKLOG AND INVENTORY
Our sales are made primarily pursuant to standard purchase orders for delivery of products, with such purchase orders officially acknowledged by us according to our own terms and conditions. We also maintain Skyworks-owned finished goods inventory at certain customer “hub” locations. We do not recognize revenue until these customers consume the Skyworks-owned inventory from these hub locations. Due to industry practice, which allows customers to cancel orders with limited advance notice to us prior to shipment, and with little or no penalty, we believe that backlog as of any particular date may not be a reliable indicator of our future revenue levels. The cancellation or deferral of product orders, the return of previously sold products, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition.
ENVIRONMENTAL REGULATIONS
Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes, and other activities affecting the environment have had, and will continue to have, an impact on our manufacturing operations. Most of our customers have mandated that our products comply with local and regional lead free and other “green” initiatives. We believe that our current expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection, and other expenditures for the resolution of environmental claims, will not have a material adverse effect on our liquidity and capital resources, competitive position or financial condition. We cannotare unable to assess the possible effect of compliance with future requirements.
SEASONALITY
Sales of our products are subject to seasonal fluctuation and periods of increased demand in end-user consumer applications, such as cellular handsets. The highest demand for our handset products generally occurs in the calendar quarter ending in December. The lowest demand for our handset products generally occurs in the calendar quarter ending in March.
GEOGRAPHIC INFORMATION
For information regarding net revenues by geographic region for each of the last three fiscal years, see Note 18 of Item 8 of this Annual Report on Form 10-K. The majority of our tangible long lived assets are located in the United States of America and Mexico (see Note 18 of Item 8). Risks attendant to our foreign operations are discussed in Item 1A-Risk Factors.
EMPLOYEES
As of October 2, 2009,1, 2010, we employed approximately 3,3003,700 persons. Approximately 400450 of our employees in Mexico are covered by collective bargaining agreements.
ITEM 1A. RISK FACTORS.
You should carefully consider the risks described below in addition to the other information contained in this report, before making an investment decision. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not currently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations, financial condition or results from operations.

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We operate in the highly cyclical wireless communications semiconductor industry, which is subject to significant downturns.
We operate primarily in the wireless communications semiconductor industry, which is cyclical and subject to rapid declines in demand for end-user products in both the consumer and enterprise markets. Recently, weak andSince late 2008, uncertain economic conditions worldwide, together with other factors such as the continued volatility of the financial markets, have made it difficult for our customers and for us to accurately forecast and plan future business activities. If such uncertainty and economic weakness continues,

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Although we believe that the market for wireless communications semiconductor products has stabilized, continued uncertainty and economic weakness could further contractresult in another market contraction and, as a result, our business, financial condition and results of operations for our current fiscal year would likely be materially and adversely affected. Such periods of industry downturn are characterized by diminished product demand and revenues, manufacturing overcapacity, excess inventory levels, and accelerated erosion of average selling prices.prices, and restructuring and/or impairment charges. Furthermore, downturns in the wireless communications semiconductor industry may be prolonged, and any extended delay or failure of the wireless semiconductor market to recover from an economic downturn would materially and adversely affect our business, financial condition and results of operations beyond our current fiscal year.
Our operating results may be adversely affected by substantial quarterly and annual fluctuations and market downturns.
Our revenues, earnings and other operating results have fluctuated substantiallysignificantly on a quarterly and annual basis in the pastprior fiscal years and our revenues, earnings and other operating results may fluctuate in the future. These fluctuations are due to a number of factors, many of which are beyond our control.
These factors include, among others:
  changes in end-user demand for the products (principally cellular handsets) manufactured and sold by our customers,
 
  the effects of competitive pricing pressures, including decreases in average selling prices of our products,
 
  production capacity levels and fluctuations in manufacturing yields,
 
  availability and cost of materials and services from our suppliers,
 
  the gain or loss of significant customers,
 
  our ability to develop, introduce and market new products and technologies on a timely basis,
 
  new product and technology introductions by competitors,
 
  changes in the mix of products produced and sold,
 
  market acceptance of our products and our customers,
 
  our ability to continue to generate revenues by licensing and/or selling non-core intellectual property, and
 
  intellectual property disputes, including those concerning payments associated with the licensing and/or sale of intellectual property.
The foregoing factors are difficult to forecast, and these, as well as other factors, could materially and adversely affect our quarterly or annual operating results. If our operating results fail to meet the expectations of analysts or investors, it could materially and adversely affect the price of our common stock.

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Our stock price has been volatile and may fluctuate in the future.
The trading price of our common stock has and may continue to fluctuate significantly. Such fluctuations may be influenced by many factors, including:
  the recent unprecedented volatility of the financial markets,
 
  uncertainty regarding the prospects of the domestic and foreign economies,

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  our performance and prospects,
 
  the performance and prospects of our major customers,
 
  the depth and liquidity of the market for our common stock,
 
  investor perception of us and the industry in which we operate,
 
  changes in earnings estimates or buy/sell recommendations by analysts, and
 
  domestic and international political conditions.
Public stock markets have recently experienced extreme price and trading volume volatility. This volatility has significantly and negatively affected the market prices of securities of many technology companies, including the market price of our common stock. Thesestock in late 2008 and early 2009. The return of such volatility could result in broad market fluctuations may furtherthat could materially and adversely affect the market price of our common stock in future periods.
In addition, fluctuations in our stock price, volume of shares traded, and changes in our trading multiples may make our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction. Our company has been, and in the future may be, the subject of commentary by financial news media. Such commentary may contribute to volatility in our stock price. If our operating results do not meet the expectations of securities analysts, the financial news media or investors, our stock price may decline, possibly substantially over a short period of time.
The wireless communications semiconductor markets are characterized by significant competition which may cause pricing pressures, decreased gross margins and rapid loss of market share and may materially and adversely affect our business, financial condition and results of operations.
The wireless communications semiconductor industry in general and the markets in which we compete in particular are very competitive. We compete with U.S.United States and international semiconductor manufacturers of all sizes in terms of resources and market share, including Avago Technologies, RF Micro Devices and Avago.Triquint Semiconductor.
We currently face significant competition in our markets and expect that intense price and product competition will continue. This competition has resulted in, and is expected to continue to result in, declining average selling prices for our products and increased challenges in maintaining or increasing market share. Furthermore, additional competitors may enter our markets as a result of growth opportunities in communications electronics, the trend toward global expansion by foreign and domestic competitors and technological and public policy changes. We believe that the principal competitive factors for semiconductor suppliers in our markets include, among others:
  rapid time-to-market and product ramp,
 
  timely new product innovation,
 
  product quality, reliability and performance,
 
  product price,

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  features available in products,
 
  compliance with industry standards,
 
  strategic relationships with customers,
 
  access to and protection of intellectual property, and
maintaining access to raw materials, supplies and services at a competitive cost.

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maintaining access to raw materials, supplies and services at a competitive cost.
We might not be able to successfully address these factors. Many of our competitors enjoy the benefit of:
  long presence in key markets,
 
  brand recognition,
 
  high levels of customer satisfaction,
 
  ownership or control of key technology or intellectual property, and
 
  strong financial, sales and marketing, manufacturing, distribution, technical or other resources.
As a result, certain competitors may be able to adapt more quickly than we can to new or emerging technologies and changes in customer requirements or may be able to devote greater resources to the development, promotion and sale of their products than we can.
Current and potential competitors have established, or may in the future establish, financial or strategic relationships among themselves or with customers, resellers or other third parties. These relationships may affect customers’ purchasing decisions. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly acquire significant market share. We may not be able to compete successfully against current and potential competitors. Increased competition could result in pricing pressures, decreased gross margins and loss of market share and may materially and adversely affect our business, financial condition and results of operations.
Our success depends upon our ability to develop new products and reduce costs in a timely manner.
The wireless communications semiconductor industry generally and, in particular, the markets into which we sell our products are highly cyclical and characterized by constant and rapid technological change, continuous product evolution, price erosion, evolving technical standards, short product life cycles, increasing demand for higher levels of integration, increased miniaturization, reduced power consumption and wide fluctuations in product supply and demand. Our operating results depend largely on our ability to continue to cost-effectively introduce new and enhanced products on a timely basis. The successful development and commercialization of semiconductor devices and modules is highly complex and depends on numerous factors, including:
  the ability to anticipate customer and market requirements and changes in technology and industry standards,
 
  the ability to obtain capacity sufficient to meet customer demand,
 
  the ability to define new products that meet customer and market requirements,
 
  the ability to complete development of new products and bring products to market on a timely basis,
 
  the ability to differentiate our products from offerings of our competitors,
 
  overall market acceptance of our products,

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  the length of time that a particular product is in demand, and
 
  the ability to obtain adequate intellectual property protection for our new products.
Our ability to manufacture current products, and to develop new products, depends, among other factors, on the viability and flexibility of our own internal information technology systems, or IT Systems.

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We will be required to continually evaluate expenditures for planned product development and to choose among alternative technologies based on our expectations of future market growth. We may not be able to develop and introduce new or enhanced wireless communications semiconductor products in a timely and cost-effective manner, and our products may not satisfy customer requirements or achieve market acceptance or we may not be able to anticipate new industry standards and technological changes. We also may not be able to respond successfully to new product announcements and introductions by competitors or to changes in the design or specifications of complementary products of third parties with which our products interface. If we fail to rapidly and cost-effectively introduce new and enhanced products in sufficient quantities that meet our customers’ requirements, our business and results of operations would be materially and adversely harmed.
In addition, prices of many of our products decline, sometimes significantly, over time. Our products may become obsolete earlier than planned or may not have life cycles long enough to allow us to recoup the cost of our investment in designing such products. Accordingly, we believe that to remain competitive, we must continue to reduce the cost of producing and delivering existing products at the same time that we develop and introduce new or enhanced products. We may not be able to continue to reduce the cost of our products to remain competitive.
If Original Equipment Manufactures, or OEMs and Original Design Manufacturers, or ODMs, of communications electronics products do not design our products into their equipment, we will have difficulty selling those products. Moreover, a “design win” from a customer does not guarantee future sales to that customer.
Our products are not sold directly to the end-user, but are components or subsystems of other products. As a result, we rely on OEMs and ODMs of wireless communications electronics products to select our products from among alternative offerings to be designed into their equipment. Without these “design wins,” we would have difficulty selling our products. If a manufacturer designs another supplier’s product into one of its product platforms, it is more difficult for us to achieve future design wins with that platform because changing suppliers involves significant cost, time, effort and risk on the part of that manufacturer. Also, achieving a design win with a customer does not ensure that we will receive significant revenues from that customer. Even after a design win, the customer is not obligated to purchase our products and can choose at any time to reduce or cease use of our products, for example, if its own products are not commercially successful, or for any other reason. We may not continue to achieve design wins or to convert design wins into actual sales, and failure to do so could materially and adversely affect our operating results.
Our manufacturing processes are extremely complex and specialized and disruptions could have a material adverse effect on our business, financial condition and results of operations.
Our manufacturing operations are complex and subject to disruption, including due to causes beyond our control. The fabrication of integrated circuits is an extremely complex and precise process consisting of hundreds of separate steps. It requires production in a highly controlled, clean environment. Minor impurities, contamination of the clean room environment, errors in any step of the fabrication process, defects in the masks used to print circuits on a wafer, defects in equipment or materials, human error, or a number of other factors can cause a substantial percentage of wafers to be rejected or numerous die on each wafer to malfunction. Because our operating results are highly dependent upon our ability to produce integrated circuits at acceptable manufacturing yields, these factors could have a material adverse affect on our business. In addition, although we invest significant resources in the testing of our products, we may discover from time to time defects in our products after they have been shipped, and we may be required to incur additional development and remediation costs, pursuant to warranty and indemnification provisions in our customer contracts and purchase orders. The potential liabilities associated with these, and similar, provisions in certain of our customer contracts are capped at significant amounts, or are uncapped. These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others, including liability for costs associated with product

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recalls, or other obligations under customer contracts, which may adversely impact our operating results. If any of our products contain defects, or have reliability, quality or compatibility problems, our reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results.
Additionally, our operations may be affected by lengthy or recurring disruptions of operations at any of our production facilities or those of our subcontractors. These disruptions may result from electrical power outages, fire,

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earthquake, flooding, war, acts of terrorism, health advisories or risks, or other natural or manmade disasters, as well as equipment maintenance, repairs and/or upgrades such as the conversion to a 6” wafer manufacturing line currently in process at our Newbury Park, California facility.upgrades. Disruptions of our manufacturing operations could cause significant delays in shipments until we are able to shift the products from an affected facility or subcontractor to another facility or subcontractor. In the event of such delays, the required alternative capacity, particularly wafer production capacity, may not be available on a timely basis or at all. Even if alternative wafer production or assembly and test capacity is available, we may not be able to obtain it on favorable terms, which could result in higher costs and/or a loss of customers. We may be unable to obtain sufficient manufacturing capacity to meet demand, either at our own facilities or through external manufacturing or similar arrangements with others.
Due to the highly specialized nature of the gallium arsenide integrated circuit manufacturing process, in the event of a disruption at the Newbury Park, California or Woburn, Massachusetts semiconductor wafer fabrication facilities for any reason, alternative gallium arsenide production capacity would not be immediately available from third-party sources. These disruptions could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to warranty claims, product recalls and liability claims.
Although we invest significant resources in the testing of our products, we may discover from time to time defects in our products after they have been shipped, and we may be required to incur additional development and remediation costs, pursuant to warranty and indemnification provisions in our customer contracts and purchase orders. The potential liabilities associated with these, and similar, provisions in certain of our customer contracts are capped at significant amounts, or are uncapped. These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others, including liability for costs associated with product recalls, or other obligations under customer contracts, which may adversely impact our operating results. If any of our products contain defects, or have reliability, quality or compatibility problems, our reputation may be damaged and we could be subject to liability claims, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results.
We may not be able to maintain and improve manufacturing yields that contribute positively to our gross margin and profitability.
Minor deviations or perturbations in the manufacturing process can cause substantial manufacturing yield loss, and in some cases, cause production to be suspended. Manufacturing yields for new products initially tend to be lower as we complete product development and commence volume manufacturing, and typically increase as we bring the product to full production. Our forward product pricing includes this assumption of improving manufacturing yields and, as a result, material variances between projected and actual manufacturing yields will have a direct effect on our gross margin and profitability. The difficulty of accurately forecasting manufacturing yields and maintaining cost competitiveness through improving manufacturing yields will continue to be magnified by the increasing process complexity of manufacturing semiconductor products. Our manufacturing operations will also face pressures arising from the compression of product life cycles, which will require us to manufacture new products faster and for shorter periods while maintaining acceptable manufacturing yields and quality without, in many cases, reaching the longer-term, high-volume manufacturing conducive to higher manufacturing yields and declining costs.
We are dependent upon third parties for the manufacture, assembly and test of our products.
We rely upon independent wafer fabrication facilities, called foundries, to provide silicon-based products and to supplement our gallium arsenide wafer manufacturing capacity. There are significant risks associated with reliance on third-party foundries, including:
  the lack of wafer supply, potential wafer shortages and higher wafer prices,
 
  limited control over delivery schedules, manufacturing yields, production costs and quality assurance, and
 
  the inaccessibility of, or delays in, obtaining access to, key process technologies.

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Although we have long-term supply arrangements to obtain additional external manufacturing capacity, the third-party foundries we use for our standby manufacturing capacity may allocate their limited capacity to the production requirements of other customers. If we choose to use a new foundry, it will typically take an extended period of time to complete the qualification process before we can begin shipping products from the new foundry. The foundries may experience financial difficulties, be unable to deliver products to us in a timely manner or suffer damage or destruction to their facilities, particularly since some of them are located in earthquake zones. If any disruption of manufacturing capacity occurs, we may not

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have alternative manufacturing sources immediately available. We may therefore experience difficulties or delays in securing an adequate supply of our products, which could impair our ability to meet our customers’ needs and have a material adverse effect on our operating results.
Although we own and operate a test and assembly facility, we still depend on subcontractors to package, assemble and test certain of our products at cost-competitive rates. We do not have long-term agreements with any of our assembly or test subcontractors and typically procure services from these suppliers on a per order basis. If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of assembly or testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner and/or at cost-competitive rates. Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components. Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations. We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products. However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above.
We are dependent upon third parties for the supply of raw materials and components.
Our manufacturing operations depend on obtaining adequate supplies of raw materials and the components used in our manufacturing processes at a competitive cost. Although we maintain relationships with suppliers located around the world with the objective of ensuring that we have adequate sources for the supply of raw materials and components for our manufacturing needs, increases in demand from the semiconductor industry for such raw materials and components, as well as increased demand for commodities in general, can result in tighter supplies.supplies and higher costs. Our suppliers may not be able to meet our delivery schedules, we may lose a significant or sole supplier, a supplier may not be able to meet performance and quality specifications and we may not be able to purchase such supplies or material at a competitive cost. If a supplier were unable to meet our delivery schedules or if we lost a supplier or a supplier were unable to meet performance or quality specifications, our ability to satisfy customer obligations would be materially and adversely affected. In addition, we review our relationships with suppliers of raw materials and components for our manufacturing needs on an ongoing basis. In connection with our ongoing review, we may modify or terminate our relationship with one or more suppliers. We may also enter into other sole supplier arrangements to meet certain of our raw material or component needs. While we do not typically rely on a single source of supply for our raw materials, we are currently dependent on a sole-source supplier for epitaxial wafers used in the gallium arsenide semiconductor manufacturing processes at our manufacturing facilities. If we were to lose this sole source of supply, for any reason, a material adverse effect on our business could result until an alternate source is obtained. To the extent we enter into additional sole supplier arrangements for any of our raw materials or components, the risks associated with our supply arrangements would be exacerbated.
Our reliance on a small number of customers for a large portion of our sales could have a material adverse effect on the results of our operations.
Significant portions of our sales are concentrated among a limited number of customers. If we lost one or more of these major customers, or if one or more major customers significantly decreased its orders for our products, our business could be materially and adversely affected. Sales to ourIn fiscal year 2010, the Company had three largest OEM/distribution customers, in fiscal 2009, Samsung Electronics Co., Sony Ericsson Mobile Communication AB (SEMC), and Asian Information Technology, Inc. (AIT), including sales to their manufacturing subcontractors (in the case of SEMC and Samsung), represented approximately 38%each with greater than ten percent of our net revenues for fiscal 2009.revenues: Samsung, Nokia and Foxconn.
If we are unable to attract and retain qualified personnel to contribute to the design, development, manufacture and sale of our products, we may not be able to effectively operate our business.

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As the source of our technological and product innovations, our key technical personnel represent a significant asset. Our success depends on our ability to continue to attract, retain and motivate qualified personnel, including executive officers and other key management and technical personnel. The competition for management and technical personnel is intense in the semiconductor industry, and therefore we may not be able to continue to attract and retain the qualified management and other personnel necessary for the design, development, manufacture and

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sale of our products. We may have particular difficulty attracting and retaining key personnel during periods of poor operating performance and/or declines in the price of our common stock, given among other things, the use of equity-based compensation by us and our competitors. The loss of the services of one or more of our key employees or our inability to attract, retain and motivate qualified personnel, could have a material adverse effect on our ability to operate our business.
Our business would be adversely affected by the departure of existing members of our senior management team or if our senior management team is unable to effectively implement our strategy.
Our success depends, in large part, on the continued contributions of our senior management team, none of whom is bound by a written employment contract to remain with us for a specified period. The loss of any of our senior management could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.
Lengthy product development and sales cycles associated with many of our products may result in significant expenditures before generating any revenues related to those products.
After our product has been developed, tested and manufactured, our customers may need three to six months or longer to integrate, test and evaluate our product and an additional three to six months or more to begin volume production of equipment that incorporates the product. This lengthy cycle time increases the possibility that a customer may decide to cancel or change product plans, which could reduce or eliminate our sales to that customer. As a result of this lengthy sales cycle, we may incur significant research and development expenses, and selling, general and administrative expenses, before we generate the related revenues for these products. Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans.
Uncertainties involving the ordering and shipment of, and payment for, our products could adversely affect our business.
Our sales are typically made pursuant to individual purchase orders and not under long-term supply arrangements with our customers. Our customers may cancel orders before shipment. Additionally, we sell a portion of our products through distributors, some of whom have rights to return unsold products if the product is defective. We may purchase and manufacture inventory based on estimates of customer demand for our products, which is difficult to predict. This difficulty may be compounded when we sell to OEMs indirectly through distributors or contract manufacturers, or both, as our forecasts of demand will then be based on estimates provided by multiple parties. In addition, our customers may change their inventory practices on short notice for any reason. The cancellation or deferral of product orders, the return of previously sold products, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition.
In addition, if a customer encounters financial difficulties of its own as a result of a change in demand or for any other reason, the customer’s ability to make timely payments to us for non-returnable products could be impaired.
We may be subject to claims of infringement of third-party intellectual property rights, or demands that we license third-party technology, which could result in significant expense and prevent us from using our technology.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark and other

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intellectual property rights to technologies that are important to our business and have demanded and may in the future demand that we license their technology or refrain from using it.
Any litigation to determine the validity of claims that our products infringe or may infringe intellectual property rights of another, including claims arising from our contractual indemnification of our customers, regardless of their merit or resolution, could be costly and divert the efforts and attention of our management and technical personnel. Regardless of the merits of any specific claim, we may not prevail in litigation because of the complex technical issues and inherent uncertainties in intellectual property litigation. If litigation were to result in an adverse ruling, we could be required to:
  pay substantial damages,
 
  cease the manufacture, import, use, sale or offer for sale of infringing products or processes,
 
  discontinue the use of infringing technology,

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  expend significant resources to develop non-infringing technology, and
 
  license technology from the third party claiming infringement, which license may not be available on commercially reasonable terms.
Our operating results or financial condition may be materially adversely affected if we, or one of our customers, were required to take any one or more of the foregoing actions.
In addition, if another supplier to one of our customers, or a customer of ours itself, were found to be infringing upon the intellectual property rights of a third party, the supplier or customer could be ordered to cease the manufacture, import, use, sale or offer for sale of its infringing product(s) or process(es), either of which could result, indirectly, in a decrease in demand from our customers for our products. If such a decrease in demand for our products were to occur, it could have an adverse impact on our operating results.
Many of our products incorporate technology licensed or acquired from third parties. If licenses to such technology are not available on commercially reasonable terms and conditions, our business could be adversely affected.
We sell products in markets that are characterized by rapid technological changes, evolving industry standards, frequent new product introductions, short product life cycles and increasing levels of integration. Our ability to keep pace with this market depends on our ability to obtain technology from third parties on commercially reasonable terms to allow our products to remain competitive. If licenses to such technology are not available on commercially reasonable terms and conditions, and we cannot otherwise integrate such technology, our products or our customers’ products could become unmarketable or obsolete, and we could lose market share. In such instances, we could also incur substantial unanticipated costs or scheduling delays to develop substitute technology to deliver competitive products.
If we are not successful in protecting our intellectual property rights, it may harm our ability to compete.
We rely on patent, copyright, trademark, trade secret and other intellectual property laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary technologies, information, data, devices, algorithms and processes. In addition, we often incorporate the intellectual property of our customers, suppliers or other third parties into our designs, and we have obligations with respect to the non-use and non-disclosure of such third-party intellectual property. In the future, it may be necessary to engage in litigation or like activities to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others, including our customers. This could require us to expend significant resources and to divert the efforts and attention of our management and technical personnel from our business operations. We cannot be assured that:

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  the steps we take to prevent misappropriation, infringement, dilution or other violation of our intellectual property or the intellectual property of our customers, suppliers or other third parties will be successful,
 
  any existing or future patents, copyrights, trademarks, trade secrets or other intellectual property rights or ours will not be challenged, invalidated or circumvented, or
 
  any of the measures described above would provide meaningful protection.
Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, develop similar technology independently or design around our patents. If any of our intellectual property protection mechanisms fails to protect our technology, it would make it easier for our competitors to offer similar products, potentially resulting in loss of market share and price erosion. Even if we receive a patent, the patent claims may not be broad enough to adequately protect our technology. Furthermore, even if we receive patent protection in the United States, we may not seek, or may not be granted, patent protection in foreign countries. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited for certain technologies and in certain foreign countries.

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We attempt to control access to and distribution of our proprietary information through operational, technological and legal safeguards. Despite our efforts, parties, including former or current employees, may attempt to copy, disclose or obtain access to our information without our authorization. Furthermore, attempts by computer hackers to gain unauthorized access to our systems or information could result in our proprietary information being compromised or interrupt our operations. While we attempt to prevent such unauthorized access we may be unable to anticipate the methods used, or be unable to prevent the release of our proprietary information.
We are subject to the risks of doing business internationally.
A substantial majority of our net revenues are derived from customers located outside the United States, primarily in countries located in the Asia-Pacific region and Europe. In addition, we have suppliers located outside the United States, and third-party packaging, assembly and test facilities and foundries located in the Asia-Pacific region. Finally, we have our own packaging, assembly and test facility in Mexicali, Mexico. Our international sales and operations are subject to a number of risks inherent in selling and operating abroad. These include, but are not limited to, risks regarding:
  currency exchange rate fluctuations, including changes in commodities prices related to such fluctuations,
 
  local economic and political conditions, including social, economic and political instability,
 
  disruptions of capital and trading markets,
 
  inability to collect accounts receivable,
 
  restrictive governmental actions (such as restrictions on transfer of funds and trade protection measures, including export duties, quotas, customs duties, increased import or export controls and tariffs),
 
  changes in, or non-compliance with, legal or regulatory import/export requirements,
 
  natural disasters, acts of terrorism, widespread illness and war,
 
  limitations on the repatriation of funds,
 
  difficulty in obtaining distribution and support,
 
  cultural differences in the conduct of business,
 
  the laws and policies of the United States and other countries affecting trade, foreign investment and loans, and import or export licensing requirements,

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changes in current or future tax law or regulations or new interpretations thereof, by federal or state agencies or foreign governments could adversely affect our results of operations,
 
  our future results could be adversely affected by changes in the effective tax laws,rate as a result of our overall profitability and mix of earnings in countries with differing statutory tax rates and the results of audits and examinations of previously filed tax returns,
 
  the possibility of being exposed to legal proceedings in a foreign jurisdiction, and
 
  limitations on our ability under local laws to protect or enforce our intellectual property rights in a particular foreign jurisdiction.
Additionally, we are subject to risks in certain global markets in which wireless operators provide subsidies on handset sales to their customers. Increases in cellular handset prices that negatively impact handset sales can result from changes in regulatory policies or other factors, which could impact the demand for our products. Limitations or changes in policy on phone subsidies in South Korea, Japan, China and other countries may have additional negative impacts on our revenues.

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We face a risk that capital needed for our business will not be available when we need it.
To the extent that our existing cash and cash equivalents and cash generated from operations are insufficient to fund our future activities or repay debt when it becomes due, we may need to raise additional funds through public or private equity or debt financing. If unfavorable capital market conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on favorable terms and on a timely basis (if at all). Failure to obtain capital when required by our business circumstances would have a material adverse effect on us.
In addition, any strategic investments and acquisitions that we may make to help us grow our business may require additional capital resources. The capital required to fund these investments and acquisitions may not be available in the future.
Our leverage and our debt service obligations may adversely affect our cash flow.
On October 2, 2009,1, 2010, we had total indebtedness of approximately $129.7$74.7 million, which represented approximately 10.5%5.4% of our total capitalization. AlthoughAs of October 1, 2010, we have short-term debt of $50.0 million under the credit facility with Wells Fargo Bank, N.A. (the “Credit Facility”). Our ability to borrow under the Credit Facility expired in October 2010 and, given our strong cash position, management has determined that the Credit Facility is no longer required and cash equivalents balance currently exceeds our total indebtedness,accordingly, has been substantially repaid as of November 29, 2010. Also as of October 1, 2010, we have long-term debt obligations of $26.7 million in aggregate principal value ($24.7 million carrying value) that mature in March 2012, and wewhich are described in more detail in Note 9 to Item 8 of this Annual Report on Form 10-K. We may require additional financing prior to the maturity of such debt in order to allow us to sufficiently fund our research and development, capital expenditures, acquisitions, working capital and other cash requirements, particularly if our short-term revolving credit facility were not renewed.debt.
Our indebtedness could have significant negative consequences, including:
  increasing our vulnerability to general adverse economic and industry conditions,
 
  limiting our ability to obtain additional financing,
 
  requiring the dedication of a portion of any cash flow from operations to service our indebtedness, thereby reducing the amount of cash flow available for other purposes,

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  limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete, and
 
  placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.
Despite our current debt levels, we believe we are able to incur substantially more debt, which would increase the risks described above.
We have incurred substantial operating losses in the past and may experience future losses.
In the past, weak global economic conditions have led to a slowdown in customer orders, an increase in the number of cancellations and rescheduling of backlog, and higher overhead costs as a percentage of our reduced net revenue. These factors contributed to operating losses for our business in the past. While we had positive operating results during the last three fiscal years, we may experience future losses as a result of a significant downturn in the economy, as a result of corporate restructuring activities, as a result of market factors beyond our control, or as a result of a combination of the foregoing.
Accounting Rule Changes for Certain Convertible Debt Instruments Will Alter Trends Established in Previous Periods.
In May 2008, the Financial Accounting Standards Board (“FASB”) issued ASC 470-20-Debt, Debt with Conversion and Other Options(“ASC 470-20”).On October 3, 2009, we will adopt ASC 470-20. This Topic alters the

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accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. Specifically, it will significantly increase the non-cash interest expense associated with our existing 1.25% and 1.50% convertible notes, and previously held 4.75% convertible notes including interest expense in prior periods. This accounting guidance will result in significantly higher non-cash interest expense in fiscal year 2010 and beyond, as well as non-cash interest expense in prior periods which has yet to be determined.
Remaining competitive in the semiconductor industry requires transitioning to smaller geometry process technologies and achieving higher levels of design integration.
In order to remain competitive, we expect to continue to transition our semiconductor products to increasingly smaller geometries. This transition requires us to modify the manufacturing processes for our products, design new products to more stringent standards, and to redesign some existing products. In the past, we have experienced some difficulties migrating to smaller geometry process technologies or new manufacturing processes, which resulted in sub-optimal manufacturing yields, delays in product deliveries and increased expenses. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes in the future. In some instances, we depend on our relationships with our foundries to transition to smaller geometry processes successfully. Our foundries may not be able to effectively manage the transition or we may not be able to maintain our foundry relationships. If our foundries or we experience significant delays in this transition or fail to efficiently implement this transition, our business, financial condition and results of operations could be materially and adversely affected. As smaller geometry processes become more prevalent, we expect to continue to integrate greater levels of functionality, as well as customer and third party intellectual property, into our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis, or at all.
Increasingly stringent environmental laws, rules and regulations may require us to redesign our existing products and processes, and could adversely affect our ability to cost-effectively produce our products.
The electronics industry has been subject to increasing environmental regulations. A number of domestic and foreign jurisdictions seek to restrict the use of various substances, a number of which have been or are currently used in our products or processes. For example, the European Union Restriction of Hazardous Substances in Electrical and Electronic Equipment (RoHS) Directive now requires that certain substances which may be found in certain products we have manufactured in the past, be removed from all electronics components. RemovingEliminating such substances from our manufacturing processes requires the expenditure of additional research and development funds to seek alternative substances for our products, as well as increased testing by third parties to ensure the quality of our products and compliance with the RoHS Directive. While we have implemented a compliance program to ensure our product offering meets these regulations, there may be instances where alternative substances will not be available or commercially feasible, or may only be available from a single source, or may be significantly more expensive than their restricted counterparts. Additionally, if we were found to be non-compliant with any such rule or regulation, we could be subject to fines, penalties and/or restrictions imposed by government agencies that could adversely affect our operating results.
We may be liable for penalties under environmental laws, rules and regulations, which could adversely impact our business.
We have used, and will continue to use, a variety of chemicals and compounds in manufacturing operations and have been and will continue to be subject to a wide range of environmental protection regulations in the United States and in foreign countries. Current or future regulation of the materials necessary for our products may have a material adverse effect on our business, financial condition and results of operations. Environmental regulations often require parties to fund remedial action for violations of such regulations regardless of fault. Consequently, it is often difficult to estimate the future impact of environmental matters, including potential liabilities. Furthermore, our customers increasingly require warranties or indemnity relating to compliance with environmental regulations. The amount of expense and capital expenditures that might be required to satisfy environmental liabilities, to complete remedial actions and to continue to comply with applicable environmental laws may have a material adverse effect on our business, financial condition and results of operations.

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Our gallium arsenide semiconductors may cease to be competitive with silicon alternatives.
Among our product portfolio, we manufacture and sell gallium arsenide semiconductor devices and components, principally power amplifiers and switches. The production of gallium arsenide integrated circuits is more costly than the production of silicon circuits. The cost differential is due to higher costs of raw materials for gallium arsenide and higher unit costs associated with smaller sized wafers and lower production volumes. Therefore, to remain competitive, we must offer gallium arsenide products that provide superior performance over their silicon-based counterparts. IfAlthough we manufacture and sell silicon-based power amplifiers, if we do not continue to offer GaAs products that provide sufficiently superior performance to justify the cost differential, our operating results may be materially and adversely affected. We expect the costs of producing gallium arsenide devices will continue to exceed the costs of producing their silicon counterparts. Silicon semiconductor technologies are widely used process technologies for certain integrated circuits and these technologies continue to improve in performance. We may not continue to identify products and markets that require performance attributes of gallium arsenide solutions.
To be successful we may need to effect investments, alliances and acquisitions, and to integrate companies we acquire.
Although we have invested in the past, and intend to continue to invest, significant resources in internal research and development activities, the complexity and rapidity of technological changes and the significant expense of internal research and development make it impractical for us to pursue development of all technological solutions on our own. On an ongoing basis, we review investment, alliance and acquisition prospects that would complement our product offerings, augment our market coverage or enhance our technological capabilities. We may not be able to identify and consummate suitable investment, alliance or acquisition transactions in the future. Moreover, if such transactions are consummated, they could result in:
  issuances of equity securities dilutive to our stockholders,
 
  large, one-time write-offs,
 
  the incurrence of substantial debt and assumption of unknown liabilities,
 
  the potential loss of key employees from the acquired company,
 
  amortization expenses related to intangible assets, and
 
  the diversion of management’s attention from other business concerns.
Moreover, integrating acquired organizations and their products and services may be difficult, expensive, time-consuming and a strain on our resources and our relationship with employees and customers and ultimately may not be successful. Additionally, in periods following an acquisition, we will be required to evaluate goodwill and acquisition-related intangible assets for impairment. When such assets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings.
Certain provisions in our organizational documents and Delaware law may make it difficult for someone to acquire control of us.
We have certain anti-takeover measures that may affect our common stock. Our certificate of incorporation, our by-laws and the Delaware General Corporation Law contain several provisions that would make more difficult an acquisition of control of us in a transaction not approved by our Board of Directors. Our certificate of incorporation and by-laws include provisions such as:
  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 preferred stock in one or more series without further authorization of stockholders,

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  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,
 
  a requirement that the affirmative vote of at least 66 2/3 percent of our shares be obtained to amend or repeal any provision of our by-laws or the provision of our certificate of incorporation relating to amendments to our by-laws,
 
  a requirement that the affirmative vote of at least 80% of our shares be obtained to amend or repeal the provisions of our certificate of incorporation relating to the election and removal of directors, the classified board or the right to act by written consent,
 
  a requirement that the affirmative vote of at least 80% of our shares be obtained for business combinations unless approved by a majority of the members of the Board of Directors and, in the event that the other party to the business combination is the beneficial owner of 5% or more of our shares, a majority of the members of Board of Directors in office prior to the time such other party became the beneficial owner of 5% or more of our shares,
 
  a fair price provision, and
 
  a requirement that the affirmative vote of at least 90% of our shares be obtained to amend or repeal the fair price provision.
In addition to the provisions in our certificate of incorporation and by-laws, Section 203 of the Delaware General Corporation Law generally provides that a corporation shallmay not engage in any business combination with any interested stockholder during the three-year period following the time that such stockholder becomes an interested stockholder, unless a majority of the directors then in office approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder or specified stockholder approval requirements are met.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
We are headquartered in Woburn, Massachusetts and have executive offices in Irvine, California. For information regarding property, plant and equipment by geographic region for each of the last two fiscal years, see Note 18 of Item 8 of this Annual Report on Form 10-K. The following table sets forth our principal facilities:
         
Location Owned/Leased Square Footage Primary Function
 
Woburn, Massachusetts Owned 158,000  Corporate headquarters and manufacturing
Irvine, CaliforniaAdamstown, Maryland Leased117,300Owned  Office146,100Manufacturing and office space and design center
Newbury Park, California Owned 111,600  Manufacturing and office space
Newbury Park, California Leased 108,400  Design center
Adamstown, MarylandIrvine, California Owned146,100Leased  Manufacturing63,400Office space and office spacedesign center
Cedar Rapids, Iowa Leased  28,500  Design center
Mexicali, Mexico Owned 380,000  Manufacturing and office space

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ITEM 3. LEGAL PROCEEDINGS.
From time to time, various lawsuits, claims and proceedings have been, and may in the future be, instituted or asserted against the Company, including those pertaining to patent infringement, intellectual property, environmental, product liability, safety and health, employment and contractual matters.
Additionally, the semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark and other intellectual property rights to technologies that are important to our business and have demanded and may in the future demand that we license their technology. The outcome of any such litigation cannot be predicted with certainty and some such lawsuits, claims or proceedings may be disposed of unfavorably to the Company. Generally speaking, intellectual property disputes often have a risk of injunctive relief, which, if imposed against the Company, could materially and adversely affect the Company’s financial condition, or results of operations. From time to time we are also involved in legal proceedings in the ordinary course of business.
We believe that there is no pending litigation involving the Company that will have, individually or in the aggregate, a material adverse effect on our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.REMOVED AND RESERVED.
There were no matters submitted to a vote of security holders during the quarter ended October 2, 2009.

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the NASDAQ Global Select Market under the symbol “SWKS”. The following table sets forth the range of high and low saleclosing prices for our common stock for the periods indicated, as reported by the NASDAQ Global Select Market. The number of stockholders of record of Skyworks’ common stock as of November 16, 2009,21, 2010, was approximately 30,146.29,000.
                
 High Low 
Fiscal year ended October 1, 2010:
 
 
First quarter $14.30 $10.27 
Second quarter 16.41 12.69 
Third quarter 17.91 14.23 
Fourth quarter 21.09 16.33 
 High Low 
Fiscal year ended October 2, 2009:
  
  
First quarter $7.51 $3.81  $7.51 $3.81 
Second quarter 8.84 4.07  8.84 4.07 
Third quarter 10.50 8.02  10.50 8.02 
Fourth quarter 14.28 9.50  14.28 9.50 
 
Fiscal year ended October 3, 2008:
 
 
First quarter $9.36 $8.01 
Second quarter 9.03 6.71 
Third quarter 11.20 7.28 
Fourth quarter 10.85 7.47 
Skyworks has not paid cash dividends on its common stock and we do not anticipate paying cash dividends in the foreseeable future. Our expectationOn August 3, 2010 the Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to reinvestrepurchase up to $200 million of the Company’s common stock from time to time on the open market or retain all future earnings, if any.in privately negotiated transactions as permitted by securities laws and other legal requirements. The program will be funded using the Company’s working capital and may be terminated at any time. During fiscal year 2010 the Company did not repurchase any shares under the program.
The following table provides information regarding repurchases of common stock made by us during the fiscal quarter ended October 2, 2009:1, 2010:
                 
          Total Number of Shares Maximum Number (or
  Total Number     Purchased as Part of Publicly Approximately Dollar Value) of
  of Shares Average Price Announced Plans or Shares that May Yet Be Purchased
Period Purchased Paid per Share Programs Under the Plans or Programs
7/04/09-7/31/09        N/A(2)  N/A(2)
8/01/09-8/28/09  3,181(1) $11.69   N/A(2)  N/A(2)
8/29/09-10/02/09  25,920(1) $13.22   N/A(2)  N/A(2)
             
          Total Number of Shares Maximum Number (or
          Purchased as Part of Publicly Approximately Dollar Value) of
  Total Number of Average Price Paid Announced Plans or Shares that May Yet Be Purchased Under
Period Shares Purchased per Share Programs (2) the Plans or Programs (2)
7/03/10-7/30/10       N/A N/A
7/31/10-8/27/10  4,923(1) $17.59   $200 million
8/28/10-10/01/10        $200 million
 
(1) All shares of common stock reported in the table above were repurchased by Skyworks at the fair market value of the common stock as of the period stated above, in connection with the satisfaction of tax withholding obligations under restricted stock agreements between Skyworks and certain of its employees.
 
(2) Skyworks has no publicly announced plansOn August 3, 2010, the Company’s Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to repurchase up to $200 million of the Company’s common stock from time to time on the open market or programs.in privately negotiated transactions as permitted by securities laws and other legal requirements.

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ITEM 6. SELECTED FINANCIAL DATA.
You should read the data set forth below in conjunction with Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operation, and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The Company’s fiscal year ends on the Friday closest to September 30. Fiscal years 20092010 and 20072009 each consisted of 52 weeks and ended on October 1, 2010 and October 2, 2009, and September 28, 2007, respectively. Fiscal 2008 consisted of 53 weeks and ended on October 3, 2008. The following balance sheet data and statements of operations data for the five years ended October 2, 20091, 2010, were derived from our audited consolidated financial statements. Consolidated balance sheets at October 2, 20091, 2010 and at October 3, 2008,2, 2009, and the related consolidated statements of operations, and cash flows, stockholders equity and comprehensive income (loss) for each of the three fiscal years in the period ended October 2, 2009,1, 2010, and notes thereto appear elsewhere in this Annual Report on Form 10-K.

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 Fiscal Year Fiscal Year 
(In thousands except per share data) 2009 (6) 2008 (6) 2007 (6) 2006 (6) 2005  2010 (6) 2009 (6)(8) 2008 (6)(8) 2007 (6)(8) 2006 (6)(8) 
    
 
Statement of Operations Data:
  
Net revenues $802,577 $860,017 $741,744 $773,750 $792,371  $1,071,849 $802,577 $860,017 $741,744 $773,750 
 
Cost of goods sold (1) 484,357 517,054 454,359 511,071 484,599  615,016 484,357 517,054 454,359 511,071 
                      
 
Gross profit 318,220 342,963 287,385 262,679 307,772  456,833 318,220 342,963 287,385 262,679 
 
Operating expenses:  
 
Research and development 123,996 146,013 126,075 164,106 152,215  134,140 123,996 146,013 126,075 164,106 
 
Selling, general and administrative (2) 100,421 100,007 94,950 135,801 103,070  117,853 100,421 100,007 94,950 135,801 
 
Amortization of intangible assets (3) 6,118 6,005 2,144 2,144 2,354  6,136 6,118 6,005 2,144 2,144 
 
Restructuring and other charges (4) 15,982 567 5,730 26,955    (1,040) 15,982 567 5,730 26,955 
           
            
Total operating expenses 246,517 252,592 228,899 329,006 257,639  257,089 246,517 252,592 228,899 329,006 
                      
 
Operating income (loss) 71,703 90,371 58,486  (66,327) 50,133  199,744 71,703 90,371 58,486  (66,327)
 
Interest expense  (3,644)  (7,330)  (12,026)  (14,797)  (14,597)  (4,246)  (8,290)  (16,324)  (24,187)  (26,929)
Loss on early retirement of convertible debt (5)  (4,066)  (6,836)  (564)   
Other income, net 1,753 5,983 10,874 8,350 5,453 
 
(Loss) gain on early retirement of convertible debt (5)  (79) 4,590 2,158  (6,964)  (5,489)
 
Other (loss) income, net  (345) 1,753 5,983 11,438 8,921 
           
            
Income (loss) before income taxes 65,746 82,188 56,770  (72,774) 40,989  195,074 69,756 82,188 38,773  (89,824)
 
Provision (benefit) for income taxes (7)  (27,543)  (28,818)  (880) 15,378 15,378  57,780  (25,227)  (28,818)  (880) 15,378 
           
            
Net income (loss) $93,289 $111,006 $57,650 $(88,152) $25,611  $137,294 $94,983 $111,006 $39,653 $(105,202)
                      
 
Per share information:  
 
Net income (loss), basic $0.56 $0.69 $0.36 $(0.55) $0.16  $0.78 $0.57 $0.69 $0.25 $(0.66)
           
            
Net income (loss), diluted $0.55 $0.68 $0.36 $(0.55) $0.16  $0.75 $0.56 $0.67 $0.25 $(0.66)
                      
 
Balance Sheet Data:
  
Working capital $393,132 $345,916 $316,494 $245,223 $337,747  $585,541 $393,884 $345,916 $316,808 $245,223 
 
Total assets 1,355,326 1,236,099 1,189,908 1,090,496 1,187,843  1,564,052 1,352,591 1,235,371 1,188,834 1,090,002 
 
Long-term liabilities 53,202 143,143 206,338 185,783 237,044  43,132 47,569 125,026 173,382 171,846 
 
Stockholders’ equity 1,105,129 944,216 786,347 729,093 792,564  1,316,596 1,108,779 961,604 818,543 742,536 
 
(1) During the second quarter of fiscal year 2009, we implemented a restructuring plan to reducethat reduced global headcount by approximately 4% or 150 employees. The total charges related to the plan were $19.4 million of which $3.5 million was charged to cost of goods sold for inventory write-downs.
 
  During fiscal year 2006, we recorded $23.3 million of inventory charges and reserves primarily related to the exit of our baseband product area.
 
(2) During fiscal year 2006, we recorded bad debt expense of $35.1 million related to certain baseband customers.

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(3) The increase in amortization expense in fiscal 2009 and fiscalyear 2008 is primarily due to the acquisitions completed in October 2007 and in May 2009.2007.
 
(4) In fiscal year 2010, we recognized a gain of $1.0 million on the sale of an asset that was previously impaired during the 2009 restructuring noted below.
In fiscal year 2009, we implemented a restructuring plan to reduce global headcount by approximately 4% or 150 employees. The total charges related to the plan were $19.4 million of which $16.0 million was charged to restructuring and other charges. This primarily consisted of $4.5 million related to severance and benefits, $5.6 million related to the impairment of long-lived assets, $2.1 million related to lease obligations, $2.3 million related to the impairment of technology licenses and design software and $1.5 million related to other charges.
 
  In fiscal year 2007, we recorded restructuring and other charges of $4.9 million related to the exit of the baseband product area.
 
  In fiscal year 2006, we recorded restructuring and other charges of $27.0 million related to the exit of our baseband product area.
 
(5) In the fourth quarterfiscal years 2010, 2009, and 2008 we retired approximately $53.0 million, $57.9 million, and $62.4 million aggregate principal amount of fiscal 2009, weour $200.0 million aggregate principal amount convertible subordinate notes due in March 2010 and March 2012 (the “2007 Convertible Notes”), respectively. We recorded approximately $6.1$0.1 million of costsloss relating to the early retirement in fiscal year 2010 and gains of $17.4$4.6 million of our 1.25% convertible subordinated notes. This is offset by a $2.0and $2.2 million gain recorded during the first quarter offor fiscal year 2009 relating to the early retirement of $40.5 million of the Company’s 1.50% convertible subordinated notes. The notes were retired at a gain of approximately $2.9 million offset by a $0.9 million write-off of deferred financing costs.and fiscal year 2008, respectively.
 
  In fiscal 2008,years 2007 and 2006 we recordedretired approximately $5.8$130.0 million and $50.7 million aggregate principal balance of premium in excessour 4.75% convertible subordinated notes due November 2007, respectively. We recognized losses of par value$7.0 million and $1.0$5.5 million of deferred financing costs relating toon the early retirement of $62.4 million of 1.25%these notes for fiscal year 2007 and 1.50% convertible subordinated notes.fiscal year 2006, respectively.
 
(6) Fiscal years ended October 1, 2010, October 2, 2009, October 3, 2008, September 28, 2007 and September 29, 2006 included $40.7 million, $23.5 million, $23.2 million, $13.7 million and $14.2 million, respectively, of share-based compensation expense due to the adoption of the Statement of ASC 718-Compensation-Stock Compensation (“ASC 718”).
 
(7) Based on the Company’s evaluation of the realizability of its United States net deferred tax assets through the generation of future taxable income, $40.9$38.6 million, $40.0 million and $14.2$15.0 million of the Company’s valuation allowance was reversed during the fiscal years ended October 2, 2009, October 3, 2008 and September 28, 2007, respectively. For fiscal year 2009, the amount reversed consisted of $27.7$25.4 million recognized as income tax benefit, and $13.2 million recognized as a reduction to goodwill. For fiscal year 2008, the amount reversed consisted of $36.4 million recognized as income tax benefit, and $3.6 million recognized as a reduction to goodwill. For fiscal year 2007, the amount reversed consisted of $1.7 million recognized as income tax benefit, and $12.5$13.3 million recognized as a reduction to goodwill.
(8)Effective October 3, 2009, the Company adopted ASC 470-20-Debt, Debt with Conversion and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Annual Report onForm 10-K.10-K. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially and adversely from those referred to herein due to a number of factors, including but not limited to those described below and elsewhere in this Annual Report on Form 10-K.
OVERVIEW
Skyworks Solutions, Inc., together with its consolidated subsidiaries, (“Skyworks” or the “Company”) is an innovator of high reliability analog and mixed signal semiconductors. Leveraging core technologies, Skyworks offers diverse standard and custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and cellular handset applications. The Company’s portfolio includes

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amplifiers, attenuators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, mixers/demodulators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, receivers, switches and technical ceramics.
BUSINESS FRAMEWORK
We have aligned our product portfolio around two broad markets: cellular handsets and analog semiconductors. In general, our handset portfolio includes highly customized power amplifiers and front-end solutions that are in many of today’s cellular devices, from entry level to multimedia platforms and smart phones. OurSome of our primary handset customers include LG Electronics, Motorola, Nokia, Samsung, Sony Ericsson, Research in Motion, and HTC. Our competitors include Avago andTechnologies, RF Micro Devices.Devices and Triquint Semiconductor.
In parallel, we offer over 2,500 different catalog and custom linear products to a highly diversified non-handset customer base. Our customers include infrastructure, automotive, energy management, medical and military providers such as Huawei, Ericsson, Landis + Gyr, Sensus, Itron, Siemens, and Northrop Grumman. Our competitors in the linear products markets include Analog Devices, Hittite Microwave, Linear Technology and Maxim Integrated Products.
BASIS OF PRESENTATION
The Company’s fiscal year ends on the Friday closest to September 30. Fiscal years 20092010 and 20072009 each consisted of 52 weeks and ended on October 1, 2010 and October 2, 2009, and September 28, 2007, respectively. Fiscal year 2008 consisted of 53 weeks and ended on October 3, 2008.
In June,Effective October 3, 2009, we adopted ASC 470-20-Debt, Debt with Conversion and Other Options (“ASC 470-20”) in accordance with GAAP. Our financial statements and the Financial Accounting Standards Board, (“FASB”), establishedaccompanying footnotes for all prior periods presented have been adjusted to reflect the Accounting Standards Codification, (“Codification”), as the sourceretrospective adoption of authoritative GAAP recognized by the FASB. The Codification is effective in the first interim and annual periods ending after September 15, 2009 and had no effect on our audited consolidated financial statements.
We have evaluated subsequent events through November 30, 2009, the date of issuance of the audited consolidated financial statements. During this period we did not have any material subsequent events.new accounting principle.

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RESULTS OF OPERATIONS
YEARS ENDED OCTOBER 1, 2010, OCTOBER 2, 2009, AND OCTOBER 3, 2008, AND SEPTEMBER 28, 2007.2008.
The following table sets forth the results of our operations expressed as a percentage of net revenues for the fiscal years below:
                        
 2009 2008 2007 2010 2009 2008
    
Net revenues  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
Cost of goods sold 60.4 60.1 61.3  57.4 60.4 60.1 
              
Gross margin 39.6 39.9 38.7  42.6 39.6 39.9 
Operating expenses:  
Research and development 15.4 17.0 17.0  12.5 15.4 17.0 
Selling, general and administrative 12.5 11.6 12.8  11.0 12.5 11.6 
Amortization of intangible assets 0.8 0.7 0.3  0.6 0.8 0.7 
Restructuring and other charges 2.0 0.1 0.8 
Restructuring and other charges (credits)  (0.1) 2.0 0.1 
              
Total operating expenses 30.7 29.4 30.9  24.0 30.7 29.4 
              
Operating income 8.9 10.5 7.8  18.6 8.9 10.5 
Interest expense  (0.5)  (0.9)  (1.6)  (0.4)  (1.0)  (1.9)
Loss on early retirement of convertible debt  (0.5)  (0.8)  (0.1) 0.0 0.6 0.2 
Other income, net 0.2 0.7 1.5  0.0 0.2 0.7 
              
Income before income taxes 8.1 9.5 7.6  18.2 8.7 9.5 
Benefit for income taxes  (3.4)  (3.4)  (0.1)
Provision (benefit) for income taxes 5.4  (3.1)  (3.4)
              
Net income  11.5%  12.9%  7.7%  12.8%  11.8%  12.9%
              

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GENERAL
During fiscal 2009,year 2010, certain key factors contributed to our overall results of operations and cash flows from operations. More specifically:
  According to some industry estimates, sales of smart phones and mobile internet devices are growing four times faster than traditional cellular handset unit volumes erodedhandsets given consumer’s appetite for anytime, anywhere connectivity. We believe that this is the driving force behind the higher overall demand for our wireless semiconductor products that support mobile internet, wireless infrastructure, energy management and diversified analog applications. The increase in excess of 12% between 2008 and 2009 primarily as a result of adverse global macroeconomic conditions. Despite the overall estimated decreasemarket coupled with an increase in our market share are the primary drivers of the approximately 12% in demand, our revenues declined by only 6.7%33.6% or $57.4$269.3 million year-over-year due to market share gains and a strengthening position in high dollar content 3G and multimode segments.revenue growth.
 
  We maintained relatively consistent grossGross profit marginsincreased by $138.6 million or 300 basis points to 42.6% of approximately 40%net revenue for the fiscal year endedending October 2, 20091, 2010 as compared to the prior fiscal year despite2009. The increase in gross profit in aggregate dollars and as a year-over-year decrease in the overallpercentage of net revenue base. This was principallyis primarily the result of aggressivecontinued factory process and productivity enhancements, product end-to-end yield improvements, year-over-year material cost reductions, yield improvements,targeted capital expenditure investments, and the aforementioned increase in net revenues.
Operating income increased by $128.0 million or 178.6% over the prior year to 18.6% of revenue for fiscal year 2010. The increase is primarily due to the aforementioned increases in net revenue and gross margin along with a higher degree of operating leverage of our fixed costs and cost control measures including capacity management enhanced byas the flexibility of our hybrid manufacturing model.Company maintained relatively constant operating expenditures.
 
  We generated $210.1$223.0 million in cash provided byfrom operations forduring fiscal 2009 as compared to $173.7 in fiscal 2008 (a 21% increase year-over-year). This resultedyear 2010 resulting in a cash, cash equivalents and restricted cash balance of $370.1$459.4 million at October 2, 2009, as compared to $231.1 million at October 3, 2008.1, 2010.
 
  In fiscal year 2009,2010, we retired $40.5$53.0 million and $17.4 millionin aggregate principal amount of our 2007 Convertible Notes (due in 2012 and 2010, respectively).Notes. These retirements reduced the remaining aggregate outstanding principal balance on our 2007 Convertible Notes to $79.7 million. In addition we generated $210.1$26.7 million (carrying value of cash$24.7 million) resulting in fiscal year 2009 which has allowed us to improve oura net cash position from $43.5of $384.6 million at October 3, 2008 to $240.4 million at October 2, 2009.1, 2010.
As revenue declined $57.4 million sequentially between fiscal 2008 and 2009, we implemented broad-based cost control measures in order to offset the anticipated decline in operating income. As a result, our operating income declined only modestly by $18.7 million in fiscal 2009 as compared to fiscal 2008.

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NET REVENUES
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
 
Net revenues $802,577  (6.7)% $860,017  15.9% $741,744  $1,071,849  33.6% $802,577  (6.7)% $860,017 
We market and sell our products directly to Original Equipment Manufacturers (“OEMs”) of communication electronic products, third-party Original Design Manufacturers (“ODMs”) and, contract manufacturers, and indirectly through electronic components distributors. We periodically enter into revenue generating arrangements that leverage our broad intellectual property portfolio by licensing or selling ournon-core patents or other intellectual property. We anticipate continuing this intellectual property strategy in future periods.
Overall revenues in fiscal year 2010 increased by $269.3 million, or 33.6%, from fiscal year 2009. This revenue increase was principally driven by market share gains and higher overall demand for our products used in mobile internet, wireless infrastructure, energy management and diversified analog applications.
Overall revenues in fiscal year 2009 decreased by $57.4 million, or 6.7%, from fiscal year 2008. This revenue decline was principally due to a reduction in demand in our end markets as a result of adverse global macroeconomic conditions, in addition to our exit from certain product areas such as mobile transceivers in the second fiscal quarter of 2009. Net revenues from our top three customers decreased to 38.2% for the fiscal year ended October 2, 2009 as compared to 43.5% for the corresponding period in the prior year, reflecting continued diversification of our customer base.
Overall revenues in fiscal 2008 increased by $118.3 million, or 15.9%, from fiscal 2007. This revenue growth was principally due to the ramp of new mobile platform products, the addition of new mobile platform customers,

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diversification into new, adjacent markets and the expansion of our market share in increasingly complex front-end modules at our existing customers.
For information regarding net revenues by geographic region and customer concentration, for each of the last three fiscal years, see Note 18 of Item 8 of this Annual Report on Form 10-K.
GROSS PROFIT
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
 
Gross profit $318,220  (7.2)% $342,963  19.3% $287,385  $456,833  43.6% $318,220  (7.2)% $342,963 
% of net revenues  39.6%  39.9%  38.7%  42.6%  39.6%  39.9%
Gross profit represents net revenues less cost of goods sold. Cost of goods sold consists primarily of purchased materials, labor and overhead (including depreciation and equity based compensation expense) associated with product manufacturing.
We increased our gross profit by $138.6 million for the fiscal year ending October 1, 2010 as compared to the prior fiscal year, resulting in a 300 basis point expansion in gross profit margin to 42.6%. This was principally the result of continued factory process and productivity enhancements, product end-to-end yield improvements, year-over-year material cost reductions, targeted capital expenditure investments and the aforementioned increase in net revenue. During fiscal 2010 we continued to benefit from higher contribution margins associated with the licensing and/or sale of intellectual property.
We maintained relatively consistent gross profit margins of 40%39.6% for the fiscal year ended October 2, 2009 as compared to the prior fiscal year 2008 despite a year-over-year decrease in the overall revenue base between the two fiscal years. This was principally the result of aggressive year-over-year material cost reductions, yield improvements, leverage of our fixed costs and cost control measures including capacity management enhanced by the flexibility of our hybrid manufacturing model. Gross profit in aggregate dollars decreased by $24.7 million between fiscal year 2009 and fiscal year 2008 primarily as the result of the aforementioned $57.4 million decrease in overall revenues. In fiscal year 2009, we continued to benefit from higher grosscontribution margins associated with the licensing and/or sale of intellectual property revenues.property.

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Gross profit as a percentage of net revenues improved to 39.9% in fiscal year 2008, from 38.7% in fiscal year 2007, and was principally the result of a more favorable revenue mix. Additionally, gross profit margin improved as a result of higher equipment efficiencies at all of our factories as our established hybrid manufacturing model with multiple external foundries allows us to maintain high internal capacity utilization by using second-sources for high fixed cost services like foundry and assembly. This approach provides supply chain flexibility, lower capital investment, the ability to meet upside demand and provides cost advantages. Furthermore, yield improvements and year-over-year material cost reductions along with the increased overall revenue contributed to the gross profit and margin improvement in both aggregate dollars and as a percentage of sales. In fiscal year 2008, we continued to benefit from higher gross margins associated with intellectual property revenue.
RESEARCH AND DEVELOPMENT
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
 
Research and development $123,996  (15.1)% $146,013  15.8% $126,075  $134,140  8.2% $123,996  (15.1)% $146,013 
% of net revenues  15.4%  17.0%  17.0%  12.5%  15.4%  17.0%
Research and development expenses consist principally of direct personnel costs, costs for pre-production evaluation and testing of new devices, masks and engineering prototypes, equity based compensation expense and design and test tool costs.
The 8.2% increase in research and development expenses in fiscal year 2010 when compared to fiscal year 2009 is principally attributable to higher head count and related compensation costs. In addition, the Company had ramped design activity resulting in higher mask, prototype and materials costs in support of increased product development for our target markets. Research and development expenses decreased as a percentage of net revenue for fiscal year 2010 as a result of the aforementioned increase in net revenue.
The decrease in research and development expenses in aggregate dollars and as a percentage of net revenues for fiscal year 2009 when compared to fiscal year 2008 iswas principally attributable to the restructuring plan implemented on January 22, 2009 in which we exited non-core product areas.
The increase in research and development expenses in aggregate dollars for fiscal year 2008 when compared to fiscal year 2007 is principally attributable to increased labor and benefit costs and increases in engineering builds

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and mask expenditures and variable materials and supplies expenses as we continued to invest in new product developments in both our mobile platforms and linear product areas.
SELLING, GENERAL AND ADMINISTRATIVE
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
 
Selling, general and administrative $100,421  0.4% $100,007  5.3% $94,950  $117,853  17.4% $100,421  0.4% $100,007 
% of net revenues  12.5%  11.6%  12.8%  11.0%  12.5%  11.6%
Selling, general and administrative expenses include legal, accounting, treasury, human resources, information systems, customer service, bad debt expense, sales commissions, stock basedshare-based compensation expense, advertising, marketing and other costs.
The increase in selling, general and administrative expenses for fiscal year 2010 as compared to fiscal year 2009 is principally due to share-based compensation which increased primarily as a result of our increased stock price in fiscal year 2010 as compared to 2009. Selling, general and administrative expenses as a percentage of net revenues decreased for fiscal year 2010, as compared to fiscal year 2009, due to the aforementioned increase in fiscal year 2010 revenue.
Selling, general and administrative expenses remained relatively unchanged in aggregate dollars for fiscal year 2009 as compared to fiscal year 2008. Selling, general and administrative expenses as a percentage of net revenues increased for fiscal year 2009, as compared to fiscal year 2008, mainly due to the aforementioned decline in fiscal year 2009 revenue.
Selling, general and administrative expenses increased in aggregate dollars for fiscal year 2008 as compared to fiscal year 2007, primarily due to higher share-based compensation expense, higher incentive compensation costs and higher sales commissions. Selling, general and administrative expenses as a percentage of net revenues decreased for fiscal 2008, as compared to fiscal 2007, as a result of net revenue growth greater than increases in selling, general and administrative costs.
AMORTIZATION OF INTANGIBLE ASSETS
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
 
Amortization $6,118  1.9% $6,005  180.1% $2,144  $6,136  0.3% $6,118  1.9% $6,005 
% of net revenues  0.8%  0.7%  0.3%  0.6%  0.8%  0.7%
The increase in amortizationAmortization expense remained consistent during the fiscal year ended October 2, 2009 as compared to fiscal year 2008 is due to additional amortization expense on intangible assets recorded as part of the acquisition of Axiom Microdevices, Inc., completed in the third fiscal quarter of 2009.years presented above.

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The increase in amortization expense during the fiscal year ended October 3, 2008 as compared to fiscal 2007 is due to the acquisitions completed in October 2007 and the associated amortizable customer relationships, patents, order backlog, foundry services agreement and developed technology that were acquired. In fiscal 2008, the gross of our amortizable intangible assets increased by approximately $13.2 million.
In 2002, we recorded $36.4 million of intangible assets consisting of developed technology, customer relationships and a trademark acquired by the Company. These assets are principally being amortized on a straight-line basis over a 10-year period.
For additional information regarding goodwill and intangible assets, see Note 8 of Item 8 of this Annual Report on Form 10-K.

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RESTRUCTURING AND OTHER CHARGES
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
Restructuring and other charges $15,982  2718.7% $567  (90.1)% $5,730  $(1,040)  (106.5)% $15,982  2718.7% $567 
% of net revenues  2.0%  0.1%  0.8%  (0.1)%  2.0%  0.1%
Restructuring and other charges consist of charges for asset impairments and restructuring activities, as follows:activities.
On January 22, 2009, we implemented a restructuring plan to realign our costs given currentthe business conditions.conditions at the time. We exited our mobile transceiver product area and reduced global headcount by approximately 4%, or 150 employees which resulted in a reduction to annual operating expenditures of approximately $20 million. We recorded various charges associated with this action. In total, we recorded $16.0 million of restructuring and other charges and $3.5 million in inventory write-downs that were charged to cost of goods sold.
The $16.0During fiscal year 2010 we recorded a gain of $1.0 million charge includeson the following: $4.5 million related to severance and benefits, $5.6 million related tosale of a capital asset previously impaired during the impairment of certain long-lived assets, which were written down to their salvage values, $2.1 million related to the exit of certain operating leases, $2.3 million related to the impairment of technology licenses and design software, and $1.5 million related to other charges. These charges total $16.0 million and are recorded in restructuring and other charges.2009 restructuring.
For additional information regarding restructuring charges and liability balances, see Note 16 of Item 8 of this Annual Report on Form 10-K.
INTEREST EXPENSE
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
Interest expense $3,644  (50.3)% $7,330  (39.0)% $12,026  $4,246  (48.8)% $8,290  (49.2)% $16,324 
% of net revenues  0.5%  0.9%  1.6%  0.4%  1.0%  1.9%
Interest expense is comprised principally of paymentsinterest expense related to the Company’s 2007 Convertible Notes which has been calculated under ASC 470-20Debt, Debt with Conversion and Other Options.
Interest expense includes charges in connection with theour $50.0 million credit facilityCredit Facility between Skyworks USA, Inc., our wholly owned subsidiary, and WachoviaWells Fargo Bank, N.A. (“Our ability to borrow under the Credit Facility Agreement”),expired in October 2010 and, given our strong cash position, management has determined that the Company’s 4.75% convertible subordinated notes (the “Junior Notes”),Credit Facility was no longer required and accordingly, has been substantially repaid as of November 29, 2010.
The decrease in interest expense for the Company’s 1.25%fiscal year ended October 1, 2010 as compared to fiscal year 2009 is primarily due to the decline in interest payments and 1.50% convertible subordinated notes (the “2007amortization of discount associated with the early retirement and settlement of $53.0 million in aggregate principal amount of our 2007 Convertible Notes”).Notes.

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The decrease in interest expense for the fiscal year ended October 2, 2009 as compared to fiscal year 2008 in aggregate dollars and as a percentage of net revenues is due to the early retirement of $57.9 million in aggregate principal amount of the Company’s 2007 Convertible Notes in the first and fourth quarters of fiscal year 2009.
The decreaseFor additional information regarding our borrowing arrangements, see Note 9 of Item 8 of this Annual Report on Form 10-K.
(LOSS) GAIN ON EARLY RETIREMENT OF CONVERTIBLE DEBT
                     
  Fiscal Years Ended
  October 1,     October 2,     October 3,
(dollars in thousands) 2010 Change 2009 Change 2008
   
 
(Loss) gain on early retirement of convertible debt $(79)  (101.7)% $4,590   112.7% $2,158 
% of net revenues  (0.0)%      0.6%      0.2%
We retired $32.6 million and $20.4 million in interest expense foraggregate principal amount of our 2007 Convertible Notes due in 2010 and 2012, respectively, during the fiscal year. We recorded a net loss of $0.1 million during fiscal year ended October 3, 2008 as compared2010 related to fiscal 2007 in aggregate dollars and as a percentage of net revenues is due to the retirement of the remaining $49.3 million of higher interest rate Junior Notes during the first quarter of fiscal 2008 and the early retirement of these notes.
We retired $57.9 million and $62.4 million in aggregate principal amount of the Company’sour 2007 Convertible Notes and recorded a net gain of $4.6 million and $2.2 million in the fourth quarter of fiscal 2008.year 2009 and fiscal year 2008, respectively.
For additional information regarding our borrowing arrangements, see Note 9 of Item 8 of this Annual Report on Form 10-K.

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LOSS ON EARLY RETIREMENT OF CONVERTIBLE DEBT
                     
  Fiscal Years Ended
  October 2,     October 3,     September 28,
(dollars in thousands) 2009 Change 2008 Change 2007
   
Loss on early retirement of convertible debt $4,066   (40.5)% $6,836   1112.1% $564 
% of net revenues  0.5%      0.8%      0.1%
In the first quarter of fiscal 2009 we retired $40.5 million principal amount of our 2007 Convertible Notes due in 2012. We recorded a gain of $2.0 million in the first quarter of fiscal 2009 related to the early retirement of these notes, reflecting a $2.9 million discount received on the early retirement of these notes offset by a $0.9 million write-off of deferred financing costs. In the fourth quarter of fiscal 2009 we retired $17.4 million of our 2007 Convertible Notes due in 2010. We recorded a loss of $6.1 million in the fourth quarter related to the early retirement of these notes. We retired a total of $57.9 million of our 2007 Convertible Notes in fiscal year 2009.
In September 2008, we retired $50.0 million and $12.4 million of our 2007 Convertible Notes due in 2010 and 2012, respectively. We recorded a loss of $6.8 million during the three months and fiscal year ended October 3, 2008 related to the early retirement of these notes. Approximately $5.8 million of this charge represents a premium paid to retire the notes and $1.0 million of the charge represents a write-off of deferred financing costs.
OTHER (LOSS) INCOME, NET
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
Other income, net $1,753  (70.7)% $5,983  (45.0)% $10,874 
Other (loss) income, net $(345)  (119.7)% $1,753  (70.7)% $5,983 
% of net revenues  0.2%  0.7%  1.5%  (0.0)%  0.2%  0.7%
Other income, net is comprised primarily of interest income on invested cash balances, other non-operating income and expense items and foreign exchange gains/losses.
The decreases in other income in both aggregate dollars and as a percentage of net revenues for the fiscal year ended October 2, 20091, 2010 as compared to fiscal 2008 as well as for the fiscal year ended October 3, 2008 as compared to fiscal 2007, is due2009 related to an overall decline in interest income on invested cash balances due to lower rates combined with a net loss on foreign currency translation.
For the fiscal year ended October 2, 2009 as compared to fiscal year 2008, the overall decline in interest income on invested cash balances is due to lower interest rates in fiscal 2008 andyear 2009.
BENEFITPROVISION (BENEFIT) FOR INCOME TAXES
                                        
 Fiscal Years Ended Fiscal Years Ended
 October 2, October 3, September 28, October 1, October 2, October 3,
(dollars in thousands) 2009 Change 2008 Change 2007 2010 Change 2009 Change 2008
    
Benefit for income taxes $(27,543)  (4.4)% $(28,818)  3174.8% $(880)
Provision (benefit) for income taxes $57,780  329.0% $(25,227)  12.5% $(28,818)
% of net revenues  3.4%  3.4%  0.1%  5.4%  (3.1)%  (3.4)%
IncomeThe income tax benefitprovision for the fiscal 2009year ended October 1, 2010 was $(27.5)$57.8 million as compared to a $(28.8)benefit of $25.2 million benefitin fiscal year 2009. The annual effective tax rate for fiscal 2008 and $(0.9) million for fiscal 2007. The fiscal 2009 benefit is dueyear 2010 was 29.6% as compared to a $(45.5) million reduction in the valuation allowance related to current year utilization and the recognition of future tax benefits on United States state net operating losses, credit carryforwards, and other temporary items and United States income tax benefit of $(1.0)36.2% for fiscal year 2009. The income tax provision for fiscal year 2010 consisted of $51.9 million, offset by$5.0 million and $0.9 million for United States tax expense, reserves for tax uncertainties, of $0.3 million.and foreign tax expense, respectively. The fiscal 2008year 2009 benefit of $(28.2)$25.2 million iswas primarily due to a $(36.4)$25.4 million reduction in the valuation allowance related to the partialutilization and recognition of future tax benefits on United States federal and state net operating loss and credit carryforwards,carry forwards and other items, and United States income tax benefit of $1.0 million, offset by increases to reserves for tax uncertainties of $0.3 million and foreign tax expense of $0.9 million.
The income tax benefit was $25.2 million and $28.8 million for fiscal year 2009 and 2008, respectively. The fiscal year 2008 benefit of $28.8 million is due to a $36.4 million reduction in the valuation allowance related to the partial recognition of future tax benefits from United States federal and state net operating loss and credit carry forwards, offset by United States income tax expense of $1.2 million, and a charge in lieu of tax expense of $7.0 million, and foreign tax benefit of $0.6 million. The fiscal year 2008 charge in lieu of tax expense resulted from a partial recognition of certain acquired tax benefits that were subject to a valuation allowance at the time of acquisition, the realization of which required a reduction of goodwill. The fiscal 2007 United States income tax benefit of $(2.2) million is due to a

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$(1.7) million reduction in the valuation allowance related to the partial recognition of future tax benefits on United States federal and state net operating loss carryforwards and the reversal of $(0.5) million of tax reserve no longer required.
The provision (benefit) for foreign income taxes for fiscal 2009, 2008, and 2007 was $0.9 million, $(0.6) million, and $1.3 million, respectively. The foreign tax benefit for fiscal 2008 included a reversal of $(1.0) million of reserves for tax uncertainties that are no longer required.
In accordance with GAAP, management hasASC 740,Income Taxes, we have determined that it is more likely than not that a portion of our historic and current year income tax benefits will not be realized. Accordingly, as of October 2, 2009,1, 2010, we have maintained a valuation allowance of $26.6$25.6 million of which $25.0$24.0 million relates to our United States deferred tax assets (principally related to state research tax credits), and $1.6 million relates to our foreign operations. If these benefits are recognized in a future period the valuation allowance on deferred tax assets will be reversed and up to a $25.2 million income tax benefit, and up to a $0.4 million reduction to goodwill may be recognized.
Our balance of deferred tax assets, net of deferred tax liabilities, as of October 1, 2010 is $93.0 million. Realization of our deferred tax assets is dependent upon generating taxable income in the future. We have considered several factors in evaluating our capacity to generate future earnings. Skyworks has produced a strong earnings trend generating cumulative earnings before income taxes of $204.7 million in fiscal years 2007 through 2009. In addition, despite the current economic slowdown, earnings before income taxes of $65.7 million were reported for fiscal year 2009. Based on management’s evaluation of the realizability of its net deferred tax assets through the generation of future income, $40.9 million of our valuation allowance was reversed at October 2, 2009. The amount reversed consisted of $27.7 million recognized as income tax benefit, and $13.2 million recognized as a reduction to goodwill, which includes $5.6 million related to the acquired Axiom deferred tax assets. The remaining valuation allowance as of October 2, 2009 is $26.6 million, principally related to state research tax credits that management has determined is more likely than not that it will not be realized. When recognized, the tax benefits relating to any future reversal of the valuation allowance on deferred tax assets will be accounted for as follows: approximately $22.3 million will be recognized as an income tax benefit, $0.4 million will be recognized as a reduction to goodwill and $3.9 million will be recognized as an increase to shareholders’ equity for certain tax deductions from employee stock options.
We will continue to evaluate our valuation allowance in future periods and depending upon the outcome of that assessment, additional amounts could be reversed or recorded and recognized as a reduction to goodwill or an adjustment to income tax benefit or expense. Such adjustments could cause our effective income tax rate to vary in future periods. We will need to

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generate $181.3$189.9 million of future United States federal taxable income to utilize all of our federal net operating loss carryforwards and federal research and experimentationUnited States deferred tax credit carryforwardsassets as of October 2, 2009.1, 2010.
No provision has been made for United States, state, or additional foreign income taxes related to approximately $4.9$52.3 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings, were not permanently reinvested.
On September 29, 2007, we adopted ASC 740-Income Taxes(“ASC 740”) — (formerly referencedOur gross unrecognized tax benefits totaled $19.9 million and $8.9 million as FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. ASC 740 prescribes a recognition thresholdOctober 1, 2010 and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This statement also provides guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. The provisions of ASC 740 will be applied to all income tax provisions commencing from that date.
October 2, 2009, respectively. Of the total unrecognized tax benefits at October 2, 2009, $6.51, 2010, $11.4 million would lower the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized.recognized, due to our valuation allowance and certain positions which were required to be capitalized. There are no positions which we anticipate could change materially within the next twelve months.
On October 1, 2007, Mexico enacted a new “flat tax” regime which became effective January 1, 2008. GAAP prescribes that the effect of the new tax on deferred taxes must be included in tax expense in the period that includes the enactment date. The effect of recording deferred taxes in the first fiscal quarter of 2008 to the foreign tax provision (benefit) was $(0.2) million. We have accrued flat tax for the year ended October 2, 2009 of $0.5 million.

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LIQUIDITY AND CAPITAL RESOURCES
                        
 Fiscal Years Ended  Fiscal Years Ended 
 October 2, October 3, September 28,  October 1, October 2, October 3, 
(dollars in thousands) 2009 2008 2007  2010 2009 2008 
    
Cash and cash equivalents at beginning of period $225,104 $241,577 $136,749  $364,221 $225,104 $241,577 
  
Net cash provided by operating activities 210,149 173,678 84,778  222,962 218,805 182,673 
Net cash used in investing activities  (49,528)  (94,959)  (20,146)  (95,329)  (49,528)  (94,959)
Net cash provided by (used in) financing activities  (21,504)  (95,192) 40,196 
Net cash used in financing activities  (38,597)  (30,160)  (104,187)
              
  
Cash and cash equivalents at end of period(1) $364,221 $225,104 $241,577  $453,257 $364,221 $225,104 
              
(1)Does not include restricted cash balances
FISCAL 2009Cash Flow from Operating Activities:
Cash provided from operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities. For fiscal year 2010 we generated $223.0 million in cash flow from operations, an increase of $4.2 million when compared to the $218.8 million generated in fiscal year 2009. During fiscal year 2010, net income increased by $42.3 million to $137.3 million when compared to fiscal year 2009. Despite the increase in net income, net cash provided by operating activities remained relatively consistent. This was primarily due to:
Fiscal year 2010 net income included a deferred tax expense of $38.5 million compared to a $24.9 million deferred tax benefit included in 2009 net income due to the release of the tax valuation allowance in fiscal year 2009.
During fiscal year 2010, the Company invested in working capital as result of higher business activity. Compared to fiscal year 2009, accounts receivable, inventory and accounts payable increased by $60.9 million, $38.8 million and $42.9 million, respectively.
Cash Flow from Investing Activities:
Cash flow from investing activities consists primarily of capital expenditures and acquisitions. We had net cash outflows of $95.3 million in fiscal year 2010, compared to $49.5 million in fiscal year 2009. The increase is primarily due to an increase of $49.8 million in capital expenditures. We anticipate our capital spending to be consistent in fiscal year 2011 to maintain our projected growth rate.
Cash Flow from Financing Activities:
Cash flows from financing activities consist primarily of cash transactions related to debt and equity. During fiscal year 2010, we had net cash outflows of $38.6 million, compared to $30.2 million in fiscal year 2009. During the year we had the following significant transactions:

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We retired $53.0 million in aggregate principal amount (carrying value of $51.1 million) of 2007 Convertible Notes for $80.7 million, which included a $29.6 million premium paid for the equity component of the instrument.
We received net proceeds from employee stock option exercises of $40.5 million in fiscal year 2010, compared to $38.7 million in fiscal year 2009.
Liquidity:
Cash and cash equivalent balances increased $89.0 million to $453.3 million at October 1, 2010 from $364.2 million at October 2, 2009. Our net cash position, after deducting our short and long term debt, increased by $137.7 million to $378.5 million at October 1, 2010 from $240.8 million at October 2, 2009. Based on our historical results of operations, for fiscal 2009, along with current trends, we expect our existing sources of liquidity, together with cash expected to be generated from operations, will be sufficient to fund our research and development, capital expenditures, debt obligations, working capital and other cash requirements for at least the next 12 months. However, we cannot be certain that the capital required to fund these expenses will be available in the future. In addition, any strategic investments and acquisitions that we may make to help us grow our business may require additional capital resources. If we are unable to obtain sufficient capital to meet our capital needs on a timely basis and on favorable terms, (if at all), our business and operations could be materially adversely affected.
Cash and cash equivalent balances increased $139.1 million to $364.2 million at October 2, 2009 from $225.1 million at October 3, 2008. We generated $210.1 in cash from operations during the fiscal year ended October 2, 2009, which was offset by the retirement of $57.9 million of the 2007 Convertible Notes, capital expenditures of $39.2 million and expenditures on acquisitions of $10.4 million. The number of days sales outstanding for the fiscal year ended October 2, 2009 decreased to 46 from 57 for fiscal 2008.
During fiscal 2009, we generated net income of $93.3 million. We experienced a decrease in receivables and inventories of $29.9 million and $15.7 million, respectively, an increase in accounts payable of $9.2 million and incurred multiple non-cash charges (e.g., depreciation, amortization, contribution of common shares to savings and retirement plans, share-based compensation expense, non-cash restructuring expense, asset impairments and inventory write-downs) totaling $93.5 million. This was offset by a decrease in accrued liabilities of $2.5 million, an increase to other assets of $3.9 million, and an increase to our deferred tax assets of $27.2 million (primarily the result of a partial release of our tax valuation allowance in fiscal 2009).
Cash used in investing activities for the fiscal year ended October 2, 2009, consisted of investments in capital equipment of $39.2 million primarily to expand fabrication and assembly and test capacity. We believe a focused program of capital expenditures will be required to sustain our current manufacturing capabilities and can be funded by the generation of positive cash flows from operations. We also made payments for acquisitions, net of cash acquired of $10.4 million. We may also consider additional future acquisition opportunities to extend our technology portfolio and design expertise and to expand our product offerings.
Cash used in financing activities for the fiscal year ended October 2, 2009, consisted of early retirement of $57.9 million of our 2007 Convertible Notes, the repurchase of treasury stock of $2.4 million, offset by proceeds from stock option exercises of $38.7 million. For additional information regarding our borrowing arrangements, see Note 9 of Item 8 of this Annual Report on Form 10-K.
Our invested cash balances primarily consist of money market funds and repurchase agreements where the underlying securities primarily consist of United States treasury obligations, United States agency obligations, overnight repurchase agreements backed by United States treasuries and/or United States agency obligations and highly rated commercial paper. Our invested cash balances also include time deposits/deposits and certificates of deposit. At October 2, 2009,1, 2010, we also held a $3.2 million par value auction rate security which historically has provided liquidity through a Dutch auction process.security. Disruptions in the credit markets have substantially eliminatedimpaired the liquidityvalue of this process resulting in failed auctions.security. During the fiscal year ended October 3, 2008, we performed a comprehensive valuation

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and discounted cash flow analysis onconcluded the auction rate security. We concluded thefair value of the auction rate security was $2.3 million, and the carrying value of these securities was reduced by $0.9 million, reflecting this change in fair value. Accordingly, inmillion. In the fiscal year ended October 3, 2008, we recorded temporary unrealized losses on this auction rate security of approximately $0.9 million. We assessed these declinesmillion in fair market value to be temporaryother comprehensive income and consider the security to be illiquid until there is a successful auction or the security matures. Accordingly, the remaining auction rate security balance has beenwas reclassified to non-current other assets and the loss has been recorded in Other Comprehensive Income.assets. We will continue to monitor the liquidity and accounting classification of this security in future periods.security. If in a future period we determine that the impairment is other than temporary, we will impair the security to its fair value and charge the loss to earnings.
On July 15, 2003, we entered into a receivables purchase agreement under which we have agreed to sell from time to time certain of our accounts receivable to Skyworks USA, Inc. (“Skyworks USA”), a wholly-owned special purpose entity that is fully consolidated for accounting purposes. Concurrently, Skyworks USA entered into an agreement with Wachovia Bank, N.A. providing for a $50.0 million credit facility (“Facility Agreement’’) secured by the purchased accounts receivable. As a part of the consolidation, anyCredit Facility. Any interest incurred by Skyworks USA related to monies it borrows under the Credit Facility Agreement is recorded as interest expense in the Company’s consolidated results of operations. We perform collections and administrative functions on behalf of Skyworks USA. Interest related to the Credit Facility Agreement is at LIBOR plus 0.75%. We renewed the Facility Agreement for another year in July 2009, and asAs of October 2, 2009,1, 2010, Skyworks USA had borrowed $50.0 million under this agreement. Our ability to borrow under the Credit Facility expired in October 2010 and, given our strong cash position, management has determined that the Credit Facility was no longer required and accordingly, has been substantially repaid as of November 29, 2010.
FISCAL 2008OFF-BALANCE SHEET ARRANGEMENTS
Cash and cash equivalent balances decreased $16.5 million to $225.1 million at October 3, 2008 from $241.6 million at September 28, 2007. We generated $173.7 millionhave no significant contractual obligations not fully recorded on our consolidated balance sheet or fully disclosed in cash from operations during the fiscal year ended October 3, 2008, which was offset by the retirement of $49.3 million of Junior Notes, $62.4 million of the 2007 Convertible Notes, capital expenditures of $64.8 million and expenditures on acquisitions of $32.6 million. The number of days sales outstanding for the fiscal year ended October 3, 2008 decreased to 57 from 80 for fiscal 2007.
During fiscal 2008, we generated net income of $111.0 million. We experienced a decrease in receivables and other assets of $21.2 million and $2.9 million, respectively, an increase in accounts payable balances of $2.1 million and incurred multiple non-cash charges (e.g., depreciation, amortization, charge in lieu of income tax expense, contribution of common shares to savings and retirement plans, share-based compensation expense and non-cash restructuring expense) totaling $94.9 million. This was offset by an increase in inventories of $16.1 million, a decrease in other accrued liabilities of $5.1 million and an increasenotes to our deferred tax assets of $36.6 million (primarily the result of a partial release of our tax valuation allowanceconsolidated financial statements. We have no material off-balance sheet arrangements as defined in fiscal 2008)SEC Regulation S-K- 303(a)(4)(ii).
Cash used in investing activities for the fiscal year ended October 3, 2008, consisted of net sales of $2.5 million in auction rate securities and investments in capital equipment of $64.8 million primarily to expand fabrication and assembly and test capacity. We believed a focused program of capital expenditures would have been required to sustain our manufacturing capabilities. We expected that future capital expenditures would be funded by the generation of positive cash flows from operations. In addition, we paid $32.6 million in cash to acquire certain assets from two separate companies. We acquired Freescale Semiconductor’s handset power amplifier business and also acquired patents from another company.
Cash used in financing activities for the fiscal year ended October 3, 2008, consisted of the retirement of the remaining $49.3 million in Junior Notes, the retirement of $62.4 million of our 2007 Convertible Notes, and the repurchase of treasury stock of $2.1 million, offset by cash provided by stock option exercises of $18.0 million. For additional information regarding our borrowing arrangements, see Note 9 of Item 8 of this Annual Report on Form 10-K.
Our invested cash balances primarily consist of money market funds and repurchase agreements where the underlying securities primarily consist of United States treasury obligations, United States agency obligations, overnight repurchase agreements backed by United States treasuries and/or United States agency obligations and highly rated commercial paper. Our invested cash balances also include time deposits/certificates of deposit. At October 3, 2008, we also held a $3.2 million auction rate security which historically has provided liquidity through a Dutch auction process. The recent disruptions in the credit markets have substantially eliminated the liquidity of

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this process resulting in failed auctions. During the fiscal year ended October 3, 2008, we performed a comprehensive valuation and discounted cash flow analysis on the auction rate security. We concluded the value of the auction rate security was $2.3 million, and the carrying value of these securities was reduced by $0.9 million, reflecting this change in fair value. Accordingly, in the fiscal year ended October 3, 2008, we recorded unrealized losses on this auction rate security of approximately $0.9 million. We assessed these declines in fair market value to be temporary and consider the security to be illiquid until there is a successful auction or the security matures. Accordingly, the remaining auction rate security balance has been reclassified to non-current other assets and the loss has been recorded in Other Comprehensive Income. We will continue to monitor the liquidity and accounting classification of this security in future periods. If in a future period, we determine that the impairment is other than temporary, we will impair the security to its fair value and charge the loss to earnings.
On July 15, 2003, we entered into a receivables purchase agreement under which we have agreed to sell from time to time certain of our accounts receivable to Skyworks USA, Inc. (“Skyworks USA”), a wholly-owned special purpose entity that is fully consolidated for accounting purposes. Concurrently, Skyworks USA entered into an agreement with Wachovia Bank, N.A. providing for a $50.0 million credit facility (“Facility Agreement’’) secured by the purchased accounts receivable. As a part of the consolidation, any interest incurred by Skyworks USA related to monies it borrows under the Facility Agreement is recorded as interest expense in the Company’s results of operations. We perform collections and administrative functions on behalf of Skyworks USA. Interest related to the Facility Agreement is at LIBOR plus 0.75%. We renewed the Facility Agreement for another year in July 2008, and as of October 3, 2008, Skyworks USA had borrowed $50.0 million under this agreement.
CONTRACTUAL CASH FLOWS
Following is a summary of our contractual payment obligations for consolidated debt, purchase agreements, operating leases, other commitments and long-term liabilities at October 2, 20091, 2010 (see Notes 9 and 13 of Item 8 of this Annual Report on Form 10-K), in thousands:

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 Payments Due By Period (3)  Payments Due By Period 
 Less Than 1        Less Than 1       
Obligation Total Year 1-3 years 3-5 Years Thereafter(1)  Total Year 1-3 years 3-5 Years Thereafter 
Short-Term Debt Obligations(1) $50,000 $50,000 $ $ $ 
Long-Term Debt Obligations $79,733 $32,617 $47,116 $ $  26,677  26,677   
Other Commitments (1) 9,747 4,227 4,895 625  
Other Commitments (2) 11,401 7,720 3,681   
Operating Lease Obligations 10,447 6,702 3,732 13   21,811 5,553 7,274 4,956 4,028 
Other Long-Term Liabilities (2) 6,086 2,750 321 174 2,841 
Other Long-Term Liabilities (3) 18,389 1,753 791 262 15,583 
                      
  $128,278 $65,026 $38,423 $5,218 $19,611 
 $106,013 $46,296 $56,064 $812 $2,841            
           
 
(1) Other Commitments consistShort-Term Debt obligation represents the cancellation and repayment of contractual license and royalty payments.the Credit Facility which will occur during the first quarter of fiscal year 2011.
 
(2) Other Long-Term Liabilities includes $2.4 millionCommitments consist of Executive Deferred Compensation for which there is a corresponding long term asset.contractual license and royalty payments, and other purchase obligations.
 
(3) The aforementioned Facility Agreement is not included inOther Long-Term Liabilities includes our gross unrecognized tax benefits, as well as executive deferred compensation which are both classified as beyond five years due to the table above.uncertain nature of the commitment.
CRITICAL ACCOUNTING ESTIMATES
The preparationdiscussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United StatesGAAP. The preparation of these financial statements requires us to make estimates and assumptionsjudgments that affect the reported amounts of assets, liabilities, revenues and liabilitiesexpenses, and related disclosure of contingent assets and liabilities atliabilities. The SEC has defined critical accounting policies as those that are both most important to the dateportrayal of our financial condition and results and which require our most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies include the financial statementspolicies of revenue recognition, allowance for doubtful accounts, inventory valuation, share-based compensation, impairment of long-lived assets, goodwill and intangibles, and income taxes.
On an ongoing basis, we evaluate the judgments and estimates underlying all of our accounting policies. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures, and reported amounts of revenues and expenses during the reporting period.expenses. These estimates and assumptions are based on our best estimates and judgment. We regularly evaluate our estimates and assumptions based uponusing historical experience and various other factors, thatincluding the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances the results of which form the basis for making judgments about the carrying values of assetsdictate. As future events and liabilities that are not readily apparent from other sources. To the extenttheir effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates ourresulting from continuing changes in the economic environment will be reflected in the financial statements in future results of operations may be affected.periods.
Our significant accounting policies are discussed in detail in Note 1 in Item 8 In this Annual Report on Form 10-K. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment and transfer of title, in accordance with the shipping terms specified in the arrangement with the customer. Revenue from license fees and intellectual property
Effect if Actual Results Differ
DescriptionJudgments and UncertaintiesFrom Assumptions
Revenue Recognition

We recognize revenue in accordance with ASC 605Revenue Recognitionnet of estimated reserves. We maintain revenue reserves for product returns and allowances for price protection / stock rotation for certain electronic component distributors. These reserves are based on historical experience or specific identification of a contractual arrangement necessitating a revenue reserve.

Our revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the value of future credits to customers for product returns, price protection and stock rotation. Our estimates of the amount and timing of the reserves is based primarily on historical experience and specific contractual arrangements.

We have not made any material changes in our accounting methodology used to record revenue reserves during the last three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that would have a material impact to earnings.

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recognized when these fees are due and payable, and all other criteria of ASC 605-Revenue Recognition, have been met. We ship product on consignment to certain customers and only recognize revenue when the customer notifies us that the inventory has been consumed. Revenue recognition is deferred in all instances where the earnings process is incomplete. Certain product sales are made to electronic component distributors under agreements allowing for price protection and/or a right of return on unsold products. A reserve for sales returns and allowances for customers is recorded based on historical experience or specific identification of an event necessitating a reserve.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We maintain general allowances for doubtful accounts for losses that we estimate will arise from our customers’ inability to make required payments. These reserves are determined quarterly and require management to make estimates of the collectability of our accounts receivable by considering factors such as historical bad debt experience, the age of the accounts receivable balances and the impact of the current economic climate on a customer’s ability to pay. In addition, as we become aware of any specific receivables which may be uncollectable, we perform additional analysis and reserves are recorded if deemed necessary. Determination of such additional specific reserves require management to make judgments and estimates pertaining to factors such as a customer’s credit worthiness, intent and ability to pay, and overall financial position. If the data we use to calculate the allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and our results of operations could be materially affected.
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. Each quarter, we estimate and establish reserves for excess, obsolete or unmarketable inventory. These reserves are generally equal to the historical cost basis of the excess or obsolete inventory and once recorded are considered permanent adjustments. Calculation of the reserves requires management to use judgment and make assumptions about forecasted demand in relation to the inventory on hand, competitiveness of our product offerings, general market conditions and product life cycles upon which the reserves are based. When inventory on hand exceeds foreseeable demand (generally in excess of twelve months), reserves are established for the value of such inventory that is not expected to be sold at the time of the review.
If actual demand and market conditions are less favorable than those we project, additional inventory reserves may be required and our results of operations could be materially affected. Some or all of the inventories that have been reserved may be retained and made available for sale, however, they are generally scrapped over time.
SHARE-BASED COMPENSATION
The Company applies ASC 718-Compensation-Stock Compensation(“ASC 718”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, employee stock purchases related to our 2002 Employee Stock Purchase Plan, restricted stock and other special equity awards based on estimated fair values. We adopted ASC 718 using the modified prospective transition method, which requires the application of the applicable accounting standard as of October 1, 2005, the first day of our fiscal year 2006.
Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense recognized in the Company’s Consolidated Statement of Operations for the fiscal year ended October 2, 2009 only included share-based payment awards granted subsequent to September 30, 2005 based on the grant date fair value estimated in accordance with the provisions of ASC 718. As share-based compensation expense recognized in the Consolidated Statement of Operations for the fiscal year ended October 2, 2009 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Upon adoption of ASC 718, we elected to retain our method of valuation for share-based awards using the Black-Scholes option-pricing model (“Black-Scholes model”) which was also previously used for our pro forma information disclosure required under previous accounting guidance.
Effect if Actual Results Differ
DescriptionJudgments and UncertaintiesFrom Assumptions
Allowance for Doubtful Accounts

We record an allowance for doubtful accounts for amounts that we estimate will arise from customers’ inability to make required payments against amounts owed on credit sales. The reserve is based on the analysis of credit risk and aged receivable balances.


Our allowance for doubtful accounts methodology contains uncertainties because it requires management to apply judgment to evaluate credit risk and collectability of aged accounts receivables based on historical experience and forward looking assumptions.


During fiscal year 2010 we modified the process in which we evaluate customers’ creditworthiness when establishing our allowance. This did not have a material effect in our balance. We do not believe there is a reasonable likelihood that there will be a material change in future estimates or assumptions that would have a material impact to earnings.
Inventory Valuation

We value our inventory at the lower of cost of the inventory or fair market value through the establishment of excess and obsolete inventory reserves. Our reserve is based on a detailed analysis of forecasted demand in relation to on-hand inventory, salability of our inventory, general market conditions, and product life cycles.


Our inventory reserves contain uncertainties because the calculation requires management to make assumptions and to apply judgment regarding historical experience, forecasted demand and technological obsolescence.


We have not made any material changes to our inventory reserve methodology during the last three fiscal years. We do not believe that significant changes will be made in future estimates or assumptions we use to calculate these reserves. However, if our estimates are inaccurate or changes in technology affect consumer demand we may be exposed to unforeseen gains or losses. A 10% difference in our inventory reserves as of October 1, 2010 would affect fiscal year 2010 earnings by approximately $1.2 million.
Stock-Based Compensation

We have a stock-based compensation plan which includes non-qualified stock options, share awards, and an employee stock purchase plan. See Note 11 of Item 8 for a detailed listing and complete discussion of our stock-based compensation programs.

We determine the fair value of our non-qualified stock-based compensation at the date of grant using the Black Scholes options-pricing model. Our determination of fair value of share-based payment awards on the date of grant contains assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to; our expected stock price volatility over the term of the award, risk-free rate, the expected life and potential forfeitures of awards. Management periodically evaluates these assumptions and updates stock based compensation expense accordingly.


Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future volatility of our stock price, future employee turnover rates and future employee stock option exercise behaviors. Changes in these assumptions can materially affect the fair value estimate and stock based compensation recognized by the Company.


We have not made any material changes in the accounting methodology we used to calculate stock-based compensation during the past three fiscal years. We do not believe that there is a reasonable likelihood there will be a material change in future estimates or assumptions used to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to a material change in stock-based compensation expense. A 10% difference in our stock-based compensation expense for the year ended October 1, 2010 would affect fiscal year 2010 earnings by approximately $4.1 million.

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fair value of share-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to; our expected stock price volatility over the term of the awards,
Effect if Actual Results Differ
DescriptionJudgments and UncertaintiesFrom Assumptions
Valuation of Long-Lived Assets

Long-lived assets other than goodwill and indefinite-lived intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or circumstances arise that may indicate that the carrying value of the asset may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the assets to the asset’s estimated undiscounted future cash flows (excluding interest). If the estimated undiscounted future cash flows are less than the carrying value of the asset or asset group, we would recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset or asset group.


Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate asset fair values, including estimating future cash flows, useful lives and selecting an appropriate discount rate that reflects the risk inherent in future cash flows.


We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual and projected employee stock option exercise behaviors. For more complex awards with market-based performance conditions, we employ a Monte Carlo simulation method which calculates many potential outcomes for an award and establishes fair value based on the most likely outcome.
ASC 718 requires us to evaluate and periodically validate several assumptions in conjunction with calculating share-based compensation expense. These assumptions include the expected life of a stock option or other equity based award, expected volatility, pre-vesting forfeiture, risk free rate and expected dividend yield. All of these assumptions affect to one degree or another, the valuation of our equity based awards or the recognition of the resulting share-based compensation expense. The most significant assumptions in our calculations are described below.
Expected Life of an Option or other Equity Based Award
Since employee options are non-transferable, ASC 718 allows the use of an expected life to more accurately estimate the value of an employee stock option rather than using the full contractual term.
The vesting of the majority of our stock options are graded over four years (25% at each anniversary) and the contractual term is either 7 years or 10 years. We analyzed our historical exercise experience and exercise behavior by job group. We analyzed the following three exercise metrics: exercise at full vesting, exercise at midpoint in the contractual life and exercise at the end of the full contractual term. We chose the mid-point alternative as the estimate which most closely approximated actual exercise experience of our employee population. The valuation and resulting share-based compensation expense recorded is sensitive to what alternative is chosen and the choice of another alternative in the future could result in a material difference in the amount of share-based compensation expense recorded in a reporting period.
Expected Volatility
Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. ASC 718 does not specify a method for estimating expected volatility; instead it provides a list of factors that should be considered when estimating volatility: historical volatility that is generally commensurate with the expected option life, implied volatilities, the length of time a stock has been publicly traded, regular intervals for price observations, corporate and capital structure and the possibility of mean reversion. We analyzed our volatility history and determined that the selection of a weighting of 50% to historical volatility and 50% to implied volatility (as measured by examining the underlying volatility in the open market of publicly traded call options) would provide the best estimate of expected future volatility of the stock price. The selection of another methodology to calculate volatility or even a different weighting between implied volatility and historical volatility could materially impact the valuation of stock options and other equity based awards and the resulting amount of share-based compensation expense recorded in a reporting period.
Pre-Vesting Forfeiture
ASC 718 specifies that initial accruals of share-based compensation expense should be based on the estimated number of instruments for which the requisite service is expected to be rendered. We examined our options forfeiture history and computed an average annualized forfeiture percentage. We determined that a weighted average of historical annualized forfeitures is the best estimate of future actual forfeiture experience. The application of a different methodology for calculating estimated forfeitures could materially impact the amount of share-based compensation expense recorded in a reporting period.
VALUATION OF LONG-LIVED ASSETS
Carrying values for long-lived assets and definite lived intangible assets, which exclude goodwill, are reviewed for possible impairment as circumstances warrant. Factors considered important that could result in an impairment review include significant underperformance relative to expected, historical or projected future operating results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may incur material losses.
Income Taxes

We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between tax and financial reporting. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Significant management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with GAAP. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This statement also provides guidance on derecognition, classification, interest and penalties, accounting in the interim periods and disclosure.

The application of tax laws and regulations to calculate our tax liabilities is subject to legal and factual interpretation, judgment, and uncertainty in a multitude of jurisdictions. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings. We recognize potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and interest will be due. We record an amount as an estimate of probable additional income tax liability at the largest amount that we feel is more likely than not, based upon the technical merits of the position, to be sustained upon audit by the relevant tax authority. We record a valuation allowance against deferred tax assets that we feel are more likely than not to not be realized.

We have not made any material changes in the accounting methodology we used to measure our deferred tax assets and liabilities or reserves for additional income tax liabilities. If our estimate of income tax liabilities proves to be less than the ultimate assessment, or events caused us to change our estimate of probable additional income tax liability, a further charge to expense would be required. The Company expects to continue to be profitable and therefore has determined that a valuation allowance is not required against our deferred tax assets, except for certain state and foreign tax credits. If certain events caused us to change our estimate of the realizability of our deferred tax assets and liabilities, a further charge to expense would be required.

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significant changes in the manner of use of assets or our business strategy, significant negative industry or economic trends and a significant decline in our stock price for a sustained period of time. In addition, impairment reviews are conducted at the judgment of management whenever asset / asset group values are deemed to be unrecoverable relative to future undiscounted cash flows expected to be generated by that particular asset / asset group. The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset / asset group and its eventual disposition. Such estimates require management to exercise judgment and make assumptions regarding factors such as future revenue streams, operating expenditures, cost allocation and asset utilization levels, all of which collectively impact future operating performance. Our estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to our business model or changes in our operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value of an asset or asset group, we would recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset or asset group.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets with indefinite useful lives are tested at least annually for impairment in accordance with the provisions of ASC 350-Intangibles-Goodwill and Other(“ASC 350”).Intangible assets with indefinite useful lives comprise an insignificant portion of the total book value of our goodwill and intangible assets. We assess the need to test our goodwill for impairment on a regular basis. Pursuant to the guidance provided under ASC 280-Segment Reporting (“ASC 280”), we have determined that we have only one reporting unit for the purposes of allocating and testing goodwill under ASC 350.
The goodwill impairment test is a two-step process. The first step of our impairment analysis compares our fair value to our net book value to determine if there is an indicator of impairment. To determine fair value, ASC 350 allows for the use of several valuation methodologies, although it states that quoted market prices are the best evidence of fair value and shall be used as the basis for measuring fair value where available. In our assessment of our fair value, we consider the average market price of our common stock surrounding the selected testing date, the number of shares of our common stock outstanding during such period and other marketplace activity and related control premiums. If the calculated fair value is determined to be less than the book value of the Company, then we perform step two of the impairment analysis. Step two of the analysis compares the implied fair value of our goodwill, to the book value of our goodwill. If the book value of our goodwill exceeds the implied fair value of our goodwill, an impairment loss is recognized equal to that excess. In Step 2 of our annual impairment analysis, we primarily use the income approach methodology of valuation, which includes the discounted cash flow method as well as other generally accepted valuation methodologies, to determine the implied fair value of our goodwill. Significant management judgment is required in preparing the forecasts of future operating results that are used in the discounted cash flow method of valuation. Should step two of the impairment test be required, the estimates we would use would be consistent with the plans and estimates that we use to manage our business. In addition to testing goodwill for impairment on an annual basis, factors such as unexpected adverse business conditions, deterioration of the economic climate, unanticipated technological changes, adverse changes in the competitive environment, loss of key personnel and acts by governments and courts, are considered by management and may signal that our intangible assets have become impaired and result in additional interim impairment testing.
In fiscal 2009, we performed impairment tests of our goodwill on January 3, 2009, April 4, 2009 and on July 4, 2009. The first impairment test was triggered by a significant decline in our stock price and deterioration in the macro-economic climate during the first fiscal quarter. The second impairment test was triggered by a restructuring action announced on January 22, 2009 and the third test was conducted on the first day of the fourth fiscal quarter, July 4, 2009, in accordance with our regularly scheduled annual testing. The results of all three of these tests indicated that none of our goodwill was impaired based on Step 1 of the test; accordingly Step 2 of the test was not performed. Any management judgments and assumptions made in these tests were generally consistent with those made in prior periods.
INCOME TAXES
We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective

42


tax basis. This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against our deferred tax assets resulting in additional income tax expense in our consolidated statement of operations. We evaluate the realizability of the deferred tax assets and assess the adequacy of the valuation allowance quarterly. Likewise, in the event that we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income or decrease the carrying value of goodwill in the period such determination was made.
The determination of recording or releasing tax valuation allowances is made, in part, pursuant to an assessment performed by management regarding the likelihood that we will generate future taxable income against which benefits of our deferred tax assets may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respect to our ability to generate revenues, gross profits, operating income and taxable income in future periods. Amongst other factors, management must make assumptions regarding overall business and semiconductor industry conditions, operating efficiencies, our ability to develop products to our customers’ specifications, technological change, the competitive environment and changes in regulatory requirements which may impact our ability to generate taxable income and, in turn, realize the value of our deferred tax assets. In addition, the current uncertain economic environment limits our ability to confidently forecast our taxable income. In fiscal years 2008 and 2009, our estimates of future taxable income were prepared in a manner consistent with our assessment of various factors, including market and industry conditions, operating trends, product life cycles and competitive and regulatory environments.
The calculation of our tax liabilities includes addressing uncertainties in the application of complex tax regulations. With the implementation effective September 29, 2007, ASC 740-(“Income Taxes”) (formerly referenced as FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109), clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with GAAP. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
We recognize liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our recognition threshold and measurement attribute of whether it is more likely than not that the positions we have taken in tax filings will be sustained upon tax audit, and the extent to which, additional taxes would be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
ASC 805
In December 2007, the FASB issued amendments to ASC 805-Business Combinations (“ASC 805”), which established principles and requirements for the acquirer of a business to recognize and measure in its financial statements the identifiable assets (including in-process research and development and defensive assets) acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The amendments to ASC 805 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Prior to the adoption of ASC 805, in-process research and development costs were immediately expensed and acquisition costs were capitalized. Under ASC 805 all acquisition costs are expensed as incurred. The standard also provides guidance for recognizing and

43


measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In April 2009 the FASB updated ASC 805 to amend the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This update also eliminates the distinction between contractual and non-contractual contingencies. The Company expects ASC 805 will have an impact on our consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the October 3, 2009 effective date.
ASC 810
In December 2007, the FASB issued amendments to ASC 810-Consolidation(“ASC 810”). ASC 810 amends previously issued authoritative literature to amend accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of consolidation procedures for consistency with the requirements of ASC 805. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement shall be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted. The Company does not expect the adoption of ASC 810 to impact its results of operations or financial position because the Company does not have any minority interests.
ASC 820
In September 2006, the FASB issued ASC 820-Fair Value Measurements and Disclosures(“ASC 820”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 is effective for financial statements issued for fiscal years beginning after November 15, 2007 for financial assets carried at fair value, and years beginning after November 15, 2008 for non-financial assets not carried at fair value. The Company has determined that the adoption of ASC 820 will not have a material impact on the Company’s results from operations or financial position.
ASC 825
In February 2007, the FASB issued ASC 825-Financial Instruments(“ASC 825”), including an amendment of ASC 320-Investments-Debt and Equity Securities(“ASC 320”) , which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. ASC 825 is effective for the Company beginning on October 3, 2009. The adoption of ASC 825 will not have a material impact on the Company’s results from operations or financial position.
ASC 470-20
In May 2008, the FASB issued ASC 470-20-Debt, Debt with Conversions and Other Options(“ASC 470-20”). ASC 470-20 alters the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. ASC 470-20 is expected to impact the Company’s accounting for its 2007 Convertible Notes and previously held Junior Notes. This authoritative accounting literature requires registrants with specified convertible note features to recognize (non-cash) interest expense based on the market rate for similar debt instruments without the conversion feature. Furthermore, pursuant to its retrospective accounting treatment, the accounting literature requires prior period interest expense recognition. ASC 470-20 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company is currently evaluating ASC 470-20 and the impact that it will have on its Consolidated Financial Statements. The Company will adopt ASC Topic 470 on October 3, 2009.
ASC 855
In May 2009, the FASB established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This guidance was included in the Codification under ASC 855-Subsequent Events(“ASC 855”), and became effective for the Company beginning with the third fiscal

44


quarter of 2009. We performed an evaluation of subsequent events through November 30, 2009, and we issued our financial statements on November 30, 2009.
ASC 105
In June 2009, the FASB established the FASB Accounting Standards Codification™ (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This guidance was included in the Codification under ASC 105-Generally Accepted Accounting Principles(“ASC 105”). All prior accounting standard documents were superseded by the Codification and any accounting literature not included in the Codification is no longer authoritative. Rules and interpretive releases of the SEC issued under the authority of federal securities laws will continue to be sources of authoritative GAAP for SEC registrants. The Codification became effective for the Company beginning with the fourth fiscal quarter of 2009. Therefore, beginning with the fourth fiscal quarter of 2009, all references made by the Company to GAAP in its notes to the consolidated financial statements use the new Codification numbering system. The Codification does not change or alter existing GAAP and, therefore, did not have any impact on the Company’s consolidated financial statements.
ASU 2009-13 and ASU 2009-14
In September 2009, the FASB reached a consensus on Accounting Standards Update (“ASU”)-2009-13-Revenue Recognition (“ASC 605”) — Multiple-Deliverable Revenue Arrangements(“ASU 2009-13”) and ASU 2009-14-Software (“ASC 985”) — Certain Revenue Arrangements That Include Software Elements(“ASU 2009-14”). ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: i) VSOE or ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these ASUs will have on our consolidated financial statements.
Effect if Actual Results Differ
DescriptionJudgments and UncertaintiesFrom Assumptions
Goodwill and Intangible Assets

We evaluate goodwill and other indefinite-lived intangible assets for impairment annually on the first day of the fiscal fourth quarter and whenever events or circumstances arise that may indicate that the carrying value of the goodwill or other intangibles may not be recoverable. Intangible assets with indefinite useful lives comprise an insignificant portion of the total book value of our goodwill and intangible assets. Pursuant to the guidance provide under ASC 280-Segment Reporting, we have determined that we have only one reporting unit for the purposes of allocating and testing goodwill.

The impairment evaluation involves comparing the fair value to the carrying value of the reporting unit. We use the market price of the Company’s stock adjusted for a market premium to calculate the fair value of the reporting unit. If the fair value exceeds the carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure the possible goodwill impairment loss.

In the second step, we would use a discounted cash flow methodology to determine the implied fair value of our goodwill. The implied fair value of the reporting unit’s goodwill would then be compared to the carrying value of the goodwill. If the carrying value of the goodwill exceeds the implied fair value of the goodwill, we would recognize a loss equal to the excess.


Our impairment analysis contains uncertainties because it requires management to make assumptions and to apply judgment to estimate control premiums, discount rate, future cash flows and the profitability of future business strategies.


We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years. The carrying value of goodwill and indefinite-lived intangible assets at October 1, 2010 were $485.6 million and $3.3 million, respectively. Based on the results of our impairment test, we had a significant excess fair value over the carrying value. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate goodwill and intangible asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.
OTHER MATTERS
Inflation did not have a material impact upon our results of operations during the three-year period ended October 2, 2009.1, 2010.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to investment risk, interest rate risk, and foreign currency, marketexchange rate and interest risksrisk as described below:below.

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Investment and Interest Rate Risk
Our exposure to interest rate and general market risks relates principally to our investment portfolio, which as of October 2, 20091, 2010 consisted of the following (in thousands):
    
    
Cash and cash equivalents (time deposits, overnight repurchase agreements and money market funds) $364,221  $453,257 
Restricted cash (time deposits and certificates of deposit) 5,863  6,128 
Available for sale securities (auction rate securities) 2,288  2,288 
      
 $372,372  $461,673 
      

45


The main objective of our investment activities is the liquidity and preservation of capital. Credit risk associated with our investments is not significant as our investment policy prescribes high credit quality standards and limits the amount of credit exposure to any one issuer. We do not use derivative instruments for trading, speculative or investment purposes.
In general, our cash and cash equivalent investments have short-term maturity periods which dampen the impact of significant market or interest rate risk. Credit risk associated with our investments is not material as our investment policy prescribes high credit quality standards and limits the amount of credit exposure to any one issuer. We currently do not use derivative instruments for trading, speculative or investment purposes; however, we may use derivatives in the future.
We are however, subject to overall financial market risks, such as changes in market liquidity, credit quality and interest rates. Available for sale securities carry a longer maturity period (contractual maturities exceed ten years). In fiscal 2008, we experienced what we believe will be a temporary unrealized loss on our investment in auction rate securities primarily caused by a disruption in the liquidity of the Dutch auction process which resets interest rates each period. We classified auction rate securities in prior periods as current assets under “Short Term Investments”. Given the failed auctions, the auction rate securities are effectively illiquid until there is a successful auction. Accordingly, the remaining auction rate securities balance has been reclassified to non-current other assets. However, it is not more likely-than-not that we will be required to sell the auction rate securities prior to maturity.
Our short-term debt consists of borrowings under our credit facility with Wachovia Bank, N.A.Credit Facility of $50.0 million. Interest related to our borrowings under our credit facility with Wachovia Bank, N.A.Credit Facility is at a variable rate of LIBOR plus 0.75% and was approximately 0.99%1.01% at October 2, 2009. Consequently, we do not have significant1, 2010. Our ability to borrow under the Credit Facility expired in October 2010 and, given our strong cash flow exposure on this short-term debt or interest rate risk.position, management has determined that the Credit Facility was no longer required and accordingly, has been substantially repaid as of November 29, 2010.
Our long-term debt at October 2, 20091, 2010 consists of $79.7$26.7 million aggregate principal amount of convertible subordinated notes (“our 2007 Convertible Notes”), of which $32.6 million are classified in short-term debt as current maturities. TheseNotes. The 2007 Convertible Notes contain cash settlement provisions, which permit the application of the treasury stock method in determining potential share dilution of the conversion spread should the share price of the Company’s common stock exceed $9.52. It has been the Company’s historical practice to cash settle the principal and interest components of convertible debt instruments, and it is our intention to continue to do so in the future, including settlement of the 2007 Convertible Notes issued in March 2007.future. These shares have been included in the computation of fully diluted earnings per share for the fiscal year ended October 2, 2009.1, 2010.
We do not believe that investment of interest rate risk is material to our business or results of operations.
Exchange Rate Risk
Substantially all sales to customers and arrangements with third-party manufacturers provide for pricing and payment in United States dollars, thereby reducing the impact of foreign exchange rate fluctuations on our results. A small percentage of our international operational expenses are denominated in foreign currencies. Exchange rate volatility could negatively or positively impact those operating costs. For the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, the Company had unrealized foreign exchange gains/(losses) of $(0.6) million, $0.7 million, $(0.6) million, and $0.4$(0.6) million, respectively. Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us. Fluctuations in currency exchange rates could have a greater effect on our business in the future to the extent our expenses increasingly become denominated in foreign currencies.

4643


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the Company for the fiscal year ended October 2, 2009     The following consolidated financial statements of the Company for the fiscal year ended October 1, 2010 are included herewith:
     
 Report of Independent Registered Public Accounting Firm Page 4845
 
 Consolidated Statements of Operations for the Years Ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 Page 4946
 
 Consolidated Balance Sheets at October 2, 20091, 2010 and October 3, 20082, 2009 Page 5047
 
 Consolidated Statements of Cash Flows for the Years Ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 Page 5148
 
 Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the Years Ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 Page 5249
 
 Notes to Consolidated Financial Statements Pages 5351 through 8077

4744


Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Skyworks Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of Skyworks Solutions, Inc. and subsidiaries as of October 2, 20091, 2010 and October 3, 2008,2, 2009, and the related consolidated statements of operations, cash flows, and stockholders’ equity and comprehensive income (loss) for each of the years in the three-year period ended October 2, 2009.1, 2010. In connection with our audit of the consolidated financial statements, we also have audited the financial statement schedule listed in Item 15 of the 20092010 Form 10-K. We also have audited Skyworks Solutions Inc.’s internal control over financial reporting as of October 2, 2009,1, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Skyworks Solutions, Inc.’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule, and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Skyworks Solutions, Inc. and subsidiaries as of October 2, 20091, 2010 and October 3, 2008,2, 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended October 2, 2009,1, 2010, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, Skyworks Solutions, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of October 2, 2009,1, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 9 to the consolidated financial statements, effective October 3, 2009, the Company adopted the provisions of Accounting Standards Codification Topic 470-20,Debt with Conversion and Other Optionsand retrospectively adjusted all periods presented in the consolidated financial statements referred to above.
/s/ KPMG LLP
Boston, Massachusetts
November 30, 200929, 2010

4845


SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
            
             Fiscal Years Ended 
 Fiscal Years Ended October 1, October 2, October 3, 
 October 2, October 3, September 28,  2010 2009 (1) 2008 (1) 
 2009 2008 2007   
Net revenues $802,577 $860,017 $741,744  $1,071,849 $802,577 $860,017 
Cost of goods sold 484,357 517,054 454,359  615,016 484,357 517,054 
              
Gross profit 318,220 342,963 287,385  456,833 318,220 342,963 
  
Operating expenses:  
Research and development 123,996 146,013 126,075  134,140 123,996 146,013 
Selling, general and administrative 100,421 100,007 94,950  117,853 100,421 100,007 
Amortization of intangible assets 6,118 6,005 2,144  6,136 6,118 6,005 
Restructuring and other charges 15,982 567 5,730 
Restructuring and other charges (credits)  (1,040) 15,982 567 
              
Total operating expenses 246,517 252,592 228,899  257,089 246,517 252,592 
              
Operating income 71,703 90,371 58,486  199,744 71,703 90,371 
Interest expense  (3,644)  (7,330)  (12,026)  (4,246)  (8,290)  (16,324)
Loss on early retirement of convertible debt  (4,066)  (6,836)  (564)
Other income, net 1,753 5,983 10,874 
(Loss) gain on early retirement of convertible debt  (79) 4,590 2,158 
Other (expense) income, net  (345) 1,753 5,983 
              
Income before income taxes 65,746 82,188 56,770  195,074 69,756 82,188 
Benefit for income taxes  (27,543)  (28,818)  (880)
Provision (benefit) for income taxes 57,780  (25,227)  (28,818)
              
Net income $93,289 $111,006 $57,650  $137,294 $94,983 $111,006 
              
  
Per share information:  
  
Net income, basic $0.56 $0.69 $0.36  $0.78 $0.57 $0.69 
              
Net income, diluted $0.55 $0.68 $0.36  $0.75 $0.56 $0.67 
              
Number of weighted-average shares used in per share computations, basic 167,047 161,878 159,993  175,020 167,047 161,878 
              
Number of weighted-average shares used in per share computations, diluted 169,663 164,755 161,064  182,738 169,663 164,755 
              
(1)Effective October 3, 2009, the Company adopted ASC 470-20 —Debt, Debt with Conversions and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle. See Note 9 to the Consolidated Financial Statements for further discussion.
See the accompanying notes are an integral part of theseto the consolidated financial statements.

4946


SKYWORKS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)
                
 As of  As of 
 October 2, October 3,  October 1, October 2, 
 2009 2008  2010 2009 (1) 
      
ASSETS
  
Current assets:  
Cash and cash equivalents $364,221 $225,104  $453,257 $364,221 
Restricted cash 5,863 5,962  6,128 5,863 
Receivables, net of allowance for doubtful accounts of $2,845 and $1,048, respectively 115,034 146,710 
Receivables, net of allowance for doubtful accounts of $1,177 and $2,845, respectively 175,232 115,034 
Inventories 86,097 103,791  125,059 86,097 
Other current assets 18,912 13,089  30,189 18,912 
          
Total current assets 590,127 494,656  789,865 590,127 
Property, plant and equipment, net 162,299 173,360  204,363 162,299 
Goodwill 482,893 483,671  485,587 482,893 
Intangible assets, net 18,245 19,746  12,509 18,245 
Deferred tax assets 91,479 53,192  60,569 89,163 
Other assets 10,283 11,474  11,159 9,864 
          
Total assets $1,355,326 $1,236,099  $1,564,052 $1,352,591 
          
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
  
  
Current liabilities:  
Short-term debt $82,617 $50,000  $50,000 $81,865 
Accounts payable 69,098 58,527  111,967 69,098 
Accrued compensation and benefits 29,449 32,110  35,695 29,449 
Other current liabilities 15,831 8,103  6,662 15,831 
          
Total current liabilities 196,995 148,740  204,324 196,243 
Long-term debt, less current maturities 47,116 137,616  24,743 41,483 
Other long-term liabilities 6,086 5,527  18,389 6,086 
          
Total liabilities 250,197 291,883  247,456 243,812 
  
Commitments and contingencies (Note 13 and Note 14)  
  
Stockholders’ equity:  
Preferred stock, no par value: 25,000 shares authorized, no shares issued      
Common stock, $0.25 par value: 525,000 shares authorized; 177,873 shares issued and 172,815 shares outstanding at October 2, 2009 and 170,323 shares issued and 165,592 shares outstanding at October 3, 2008 43,204 41,398 
Common stock, $0.25 par value: 525,000 shares authorized; 185,683 shares issued and 180,263 shares outstanding at October 1, 2010 and 177,873 shares issued and 172,815 shares outstanding at October 2, 2009 45,066 43,204 
Additional paid-in capital 1,499,406 1,430,999  1,641,406 1,568,416 
Treasury stock  (36,307)  (33,918)
Treasury stock, at cost  (40,719)  (36,307)
Accumulated deficit  (399,794)  (493,083)  (327,860)  (465,154)
Accumulated other comprehensive loss  (1,380)  (1,180)  (1,297)  (1,380)
          
Total stockholders’ equity 1,105,129 944,216  1,316,596 1,108,779 
          
Total liabilities and stockholders’ equity $1,355,326 $1,236,099  $1,564,052 $1,352,591 
          
(1)Effective October 3, 2009, the Company adopted ASC 470-20 —Debt, Debt with Conversions and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle. See Note 9 to the Consolidated Financial Statements for further discussion.
See the accompanying notes are an integral part of theseto the consolidated financial statements.

5047


SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
            
 Fiscal Years Ended             
 October 2, October 3, September 28,  Fiscal Years Ended 
 2009 2008 2007  October 1, October 2, October 3, 
       2010 2009 (1) 2008 (1) 
Cash flows from operating activities:
  
Net income $93,289 $111,006 $57,650  $137,294 $94,983 $111,006 
Adjustments to reconcile net income to net cash provided by operating activities:  
Share-based compensation expense 23,466 23,212 13,737  40,741 23,466 23,212 
Depreciation 44,413 44,712 39,237  46,573 44,413 44,712 
Charge in lieu of income tax expense  7,014     7,014 
Amortization of intangible assets 6,118 6,933 2,144  6,136 6,118 6,933 
Amortization of deferred financing costs 943 1,753 2,311 
Amortization of discount and deferred financing costs on convertible debt 2,693 5,589 10,748 
Contribution of common shares to savings and retirement plans 8,502 10,407 8,565  11,706 8,502 10,407 
Non-cash restructuring expense 955 567 419   955 567 
Deferred income taxes  (27,182)  (36,648)  (1,741) 38,543  (24,866)  (36,648)
Excess tax benefit from share-based payments  (6,287)   
Loss on disposal of assets 411 276 227  292 411 276 
Inventory write-downs 3,458     3,458  
Asset impairments 5,616     5,616  
Provision for losses (recoveries) on accounts receivable 1,797  (614) 2,203  703 1,797  (614)
Changes in assets and liabilities net of acquired balances:  
Receivables 29,947 21,223  (10,724)  (60,901) 29,947 21,223 
Inventories 15,678  (16,082)  (247)  (38,818) 15,678  (16,082)
Other current and long-term assets  (3,932) 2,860  (1,534)  (8,349)  (3,932) 2,860 
Accounts payable 9,219 2,110  (16,654) 42,869 9,219 2,110 
Other current and long-term liabilities  (2,549)  (5,051)  (10,815) 9,767  (2,549)  (5,051)
              
Net cash provided by operating activities 210,149 173,678 84,778  222,962 218,805 182,673 
              
  
Cash flows from investing activities:
  
Capital expenditures  (39,172)  (64,832)  (42,596)  (88,929)  (39,172)  (64,832)
Payments for acquisitions  (10,356)  (32,627)    (6,400)  (10,356)  (32,627)
Sale of investments  10,000 978,046    10,000 
Purchase of investments   (7,500)  (955,596)    (7,500)
              
Net cash used in investing activities  (49,528)  (94,959)  (20,146)  (95,329)  (49,528)  (94,959)
              
  
Cash flows from financing activities:
  
Proceeds from 2007 Convertible Notes   200,000 
 
Retirement of 2007 Convertible Notes  (57,883)  (62,384)    (51,107)  (51,107)  (56,570)
Reacquisition of equity component of Convertible Notes  (29,602)  (15,432)  (14,809)
Retirement of Junior Notes   (49,335)  (130,000)    (49,335)
Deferred financing costs    (6,189)
Excess tax benefit from share-based payments 6,287   
Change in restricted cash 100 541  (200)  (265) 100 541 
Repurchase of common stock  (2,389)  (2,063)  (31,681)  (4,412)  (2,389)  (2,063)
Net proceeds from exercise of stock options 38,668 18,049 8,266  40,502 38,668 18,049 
              
Net cash provided by (used in) financing activities  (21,504)  (95,192) 40,196 
Net cash used in financing activities  (38,597)  (30,160)  (104,187)
              
  
Net increase (decrease) in cash and cash equivalents 139,117  (16,473) 104,828  89,036 139,117  (16,473)
Cash and cash equivalents at beginning of period 225,104 241,577 136,749  364,221 225,104 241,577 
              
Cash and cash equivalents at end of period $364,221 $225,104 $241,577  $453,257 $364,221 $225,104 
              
  
Supplemental cash flow disclosures:
  
Taxes paid $1,009 $1,156 $1,117  $14,757 $1,009 $1,156 
              
Interest paid $2,323 $6,023 $12,479  $715 $2,323 $6,023 
              
(1)Effective October 3, 2009, the Company adopted ASC 470-20 —Debt, Debt with Conversions and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle. See Note 9 to the Consolidated Financial Statements for further discussion.
See the accompanying notes are an integral part of theseto the consolidated financial statements.

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SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(In thousands)
                                
 Par value Accumulated     
 Shares of of Shares of Value of Additional Other Total                                 
 Common Common Treasury Treasury Paid-in Accumulated Comprehensive Stockholders’  Par value Accumulated   
 Stock Stock Stock Stock Capital Deficit Loss Equity  Shares of of Shares of Value of Additional Other Total 
                 Common Common Treasury Treasury Paid-in Accumulated Comprehensive Stockholders’ 
Balance at September 29, 2006 161,659 $40,414 31 $(173) $1,351,190 $(661,739) $(599) $729,093 
  Stock Stock Stock Stock Capital Deficit Loss Equity 
Net income      57,650  57,650 
  
Pension adjustment       159 159 
                 
Other comprehensive income       159 159 
                 
Comprehensive income        57,809 
 
Adjustment to initially apply ASC 715       226 226 
 
Issuance and expense of common shares for stock purchase plans, 401(k) and stock option plans 3,221 805   25,468   26,273 
 
Issuance and expense of common shares for restricted stock and performance shares 682 171   4,457   4,628 
 
Repurchase of common stock  (4,255)  (1,064) 4,255  (30,083) 1,064    (30,083)
 
Shares withheld for taxes  (206)  (51) 206  (1,599) 51    (1,599)
                 
Balance at September 28, 2007 161,101 $40,275 4,492 $(31,855) $1,382,230 $(604,089) $(214) $786,347 
Balance at September 28, 2007 (1) 161,101 $40,275 4,492 $(31,855) $1,481,481 $(671,143) $(215) $818,543 
  
Net income      111,006  111,006       111,006  111,006 
  
Impairment of Auction Rate Security        (912)  (912)        (912)  (912)
Pension adjustment        (54)  (54)        (53)  (53)
                                  
Other comprehensive loss        (966)  (966)        (965)  (965)
                                  
Comprehensive income        110,040         110,041 
  
Issuance and expense of common shares for stock purchase plans, 401(k) and stock option plans 3,951 988   40,308   41,296  3,951 988   40,308   41,296 
  
Reacquisition of equity components of convertible notes (1)      (14,809)    (14,809)
 
Issuance and expense of common shares for restricted stock and performance shares 780 195   8,401   8,596  780 195   8,401   8,596 
  
Shares withheld for taxes  (240)  (60) 240  (2,063) 60    (2,063)  (240)  (60) 240  (2,063) 60    (2,063)
                                  
Balance at October 3, 2008 165,592 $41,398 4,732 $(33,918) $1,430,999 $(493,083) $(1,180) $944,216 
Balance at October 3, 2008 (1) 165,592 $41,398 4,732 $(33,918) $1,515,441 $(560,137) $(1,180) $961,604 
  
Net income      93,289  93,289       94,983  94,983 
  
Pension adjustment        (200)  (200)        (200)  (200)
                                  
Other comprehensive loss        (200)  (200)        (200)  (200)
                                  
Comprehensive income        93,089         94,783 
  
Issuance and expense of common shares for stock purchase plans, 401(k) and stock option plans 7,159 1,790   59,214   61,004  7,159 1,790   59,214   61,004 
  
Reacquisition of equity components of convertible notes (1)      (15,432)    (15,432)
 
Issuance and expense of common shares for restricted stock and performance shares 390 98   9,111   9,209  390 98   9,111   9,209 
  
Shares withheld for taxes  (326)  (82) 326  (2,389) 82    (2,389)  (326)  (82) 326  (2,389) 82    (2,389)
                                  
Balance at October 2, 2009 172,815 $43,204 5,058 $(36,307) $1,499,406 $(399,794) $(1,380) $1,105,129 
Balance at October 2, 2009 (1) 172,815 $43,204 5,058 $(36,307) $1,568,416 $(465,154) $(1,380) $1,108,779 
                  
Net income      137,294  137,294 
 
Pension adjustment       83 83 
                 
Other comprehensive income       83 83 
                 
Comprehensive income        137,377 
 
Issuance and expense of common shares for stock purchase plans, 401(k) and stock option plans 6,083 1,521   69,410   70,931 
 
Reacquisition of equity components of convertible notes (after-tax) (1)      (28,832)    (28,832)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
                                 
      Par value                  Accumulated    
  Shares of  of  Shares of  Value of  Additional      Other  Total 
  Common  Common  Treasury  Treasury  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Stock  Stock  Stock  Stock  Capital  Deficit  Loss  Equity 
                                 
Excess tax benefit from share based compensation              11,491         11,491 
                                 
Issuance and expense of common shares for restricted stock and performance shares  1,727   432         20,830         21,262 
                                 
Shares withheld for taxes  (362)  (91)  362   (4,412)  91         (4,412)
                         
Balance at October 1, 2010  180,263  $45,066   5,420  $(40,719) $1,641,406  $(327,860) $(1,297) $1,316,596 
                         
(1)Effective October 3, 2009, the Company adopted ASC 470-20 —Debt, Debt with Conversions and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle. See Note 9 to the Consolidated Financial Statements for further discussion.
See the accompanying notes are an integral part of theseto the consolidated financial statements.

5250


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Skyworks Solutions, Inc. together with its consolidated subsidiaries, (“Skyworks” or the “Company”) is an innovator of high reliability analog and mixed signal semiconductors. Leveraging core technologies, Skyworks offers diverse standard and custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and cellular handset applications. The Company’s portfolio includes amplifiers, attenuators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, mixers/demodulators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, receivers, switches and technical ceramics.
In June 2009 the Financial Accounting Standards Board, (“FASB”), established the Accounting Standards Codification, (“ASC”), as the source of authoritative GAAP recognized by the FASB. The Codification is effective in the first interim and annual periods ending after September 15, 2009 and had no effect on the Company’s audited consolidated financial statements.
The Company has evaluated subsequent events through November 30, 2009, the date of issuance of the audited consolidated financial statements. During this period the Company did not have any material subsequent events.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment and transfer of title, in accordance with the shipping terms specified in the arrangement with the customer. Revenue from license fees and intellectual property is recognized when these fees are due and payable, and all other criteria of ASC 605-Revenue Recognition,have been met. The Company ships product on consignment to certain customers and only recognize revenue when the customer notifies us that the inventory has been consumed. Revenue recognition is deferred in all instances where the earnings process is incomplete. Certain product sales are made to electronic component distributors under agreements allowing for price protection and/or a right of return on unsold products. A reserve for sales returns and allowances for customers is recorded based on historical experience or specific identification of an event necessitating a reserve.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains general allowances for doubtful accounts for losses that they estimate will arise from their customers’ inability to make required payments. These reserves are determined quarterly and require management to make estimates of the collectability of its accounts receivable by considering factors such as historical bad debt experience, the age of the accounts receivable balances and the impact of the current economic climate on a customer’s ability to pay. In addition, as the Company becomes aware of any specific receivables which may be uncollectable, they perform additional analysis and reserves are recorded if deemed necessary. Determination of such additional specific reserves require management to make judgments and estimates pertaining to factors such as a customer’s credit worthiness, intent and ability to pay, and overall financial position. If the data the Company uses to calculate the allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and its results of operations could be materially affected.
PRINCIPLES OF CONSOLIDATION
All majority owned subsidiaries are included in the Company’s Consolidated Financial Statements and all intercompany balances are eliminated in consolidation.
FISCAL YEAR
The Company’s fiscal year ends on the Friday closest to September 30. Fiscal years 20092010 and 20072009 each consisted of 52 weeks and ended on October 1, 2010 and October 2, 2009, and September 28, 2007, respectively. Fiscal year 2008 consisted of 53 weeks and ended on October 3, 2008.

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USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment and transfer of title, in accordance with the shipping terms specified in the arrangement with the customer. Revenue from license fees and intellectual property is recognized when due and payable, and all other criteria of ASC 605-Revenue Recognition,have been met. The Company ships product on consignment to certain customers and only recognize revenue when the customer notifies us that the inventory has been consumed. Revenue recognition is deferred in all instances where the earnings process is incomplete. Certain product sales are made to electronic component distributors under agreements allowing for price protection and/or a right of return (stock rotation) on unsold products. A reserve for sales returns and allowances for customers is recorded based on historical experience or specific identification of a contractual arrangement necessitating a revenue reserve.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains general allowances for doubtful accounts for losses that they estimate will arise from their customers’ inability to make required payments. These reserves require management to apply judgment in deriving estimates. As the Company becomes aware of any specific receivables which may be uncollectable, they perform additional analysis and reserves are recorded if deemed necessary. Determination of such additional specific reserves require management to make judgments and estimates pertaining to factors such as a customer’s credit worthiness, intent and ability to pay, and overall financial position. If the data the Company uses to calculate the

51


allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and its results of operations could be materially affected.
CASH AND CASH EQUIVALENTS
The Company’s cash and cash equivalents primarily consist of cash money market funds and repurchase agreements where the underlying securities primarily consist of United States treasury obligations, United States agency obligations, overnight repurchase agreements backed by United States treasuries and/or United States agency obligations and highly rated commercial paper.
INVESTMENTS
The Company’s investments areinvestment is classified as available for sale. These investments consistsale and consists of an auction rate security (ARS) which has long-term underlying maturities (ranging from 20 to 40 years)(“ARS”). Due to the recent disruptions in the credit markets the Dutch auction process that normally would allow the Company to sell the security every 28-35 days has failed since August 2007. This investment and the auction rate security market are illiquid at this time. The Company performed a comprehensive valuation and discounted cash flow analysis on the ARS and concluded the value of the ARS was $2.3 million. The $2.3 million valuation from fiscal 2008 remained unchanged in fiscal year 2009. The Company will continue to closely monitor the ARS and evaluate the appropriate accounting treatment in each reporting period.
RESTRICTED CASH
Restricted cash is primarily used to collateralize the Company’s obligation under a receivables purchase agreement underthe Credit Facility, which it has agreedmanagement plans to sell from time to time certainrepay during the first quarter of its accounts receivable to Skyworks USA, Inc. (“Skyworks USA”), a wholly-owned special purpose entity that is fully consolidated for accounting purposes. Concurrently, Skyworks USA entered into an agreement with Wachovia Bank, N.A. providing for a $50 million credit facility (“Facility Agreement’’) secured by the purchased accounts receivable.fiscal 2011. For further information regarding the Credit Facility, Agreement, please see Note 9 to the Consolidated Financial Statements.
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. Each quarter, the Company estimates and establishes reserves for excess, obsolete or unmarketable inventory. These reserves are generally equal to the historical cost basis of the excess or obsolete inventory and once recorded are considered permanent adjustments. Calculation of the reserves requires management to use judgment and make assumptions about forecasted demand in relation to the inventory on hand, competitiveness of its product offerings, general market conditions and product life cycles upon which the reserves are based. When inventory on hand exceeds foreseeable demand (generally in excess of twelve months), reserves are established for the value of such inventory that is not expected to be sold at the time of the review.
If actual demand and market conditions are less favorable than those the Company projects, additional inventory reserves may be required and its results of operations could be materially affected. Some or all of the inventories that have been reserved may be retained and made available for sale,sale; however, they are generally scrapped over time.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method. Significant renewals and betterments are capitalized and equipment taken

54


out of service is written off. Maintenance and repairs, as well as renewals of a minor amount, are expensed as incurred.
Estimated useful lives used for depreciation purposes are 5 to 30 years for buildings and improvements and 3 to 10 years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic life or the life of the associated lease.
SHARE-BASED COMPENSATION
The Company applies ASC 718Compensation-Stock Compensation(“ASC 718”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, employee stock purchases related to the Company’s 2002 Employee Stock Purchase Plan, restricted stock and other special equityshare-based awards based on estimated fair values. The Company

52


adopted ASC 718 using the modified prospective transition method, which requires the application of the applicable accounting standard as of October 1, 2005, the first day of the Company’s fiscal year 2006.
The fair value of stock-based awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. The Company uses a straight-line attribution method for all grants that include only a service condition. Due to the existence of a market condition,both performance and service conditions, certain restricted stock grants are expensed over the service period for each separately vesting tranche.
Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense recognized in the Company’s Consolidated Statement of Operations for the fiscal year ended October 2, 20091, 2010 only included share-based payment awards granted subsequent to September 30, 2005 based on the grant date fair value estimated in accordance with the provisions of ASC 718. As share-based compensation expense recognized in the Consolidated Statement of Operations for the fiscal year ended October 2, 20091, 2010 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Upon adoption of ASC 718, the Company elected to retain its method of valuation for share-based awards using the Black-Scholes option-pricing model (“Black-Scholes model”) which was also previously used for the Company’s pro forma information required under the previous authoritative literature governing stock compensation expense. The Company’s determination of fair value of share-based payment awards on the date of grant using the Black-Scholes model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to; the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. For more complex awards with market-based performance conditions, the Company employs a Monte Carlo simulation method which calculates many potential outcomes for an award and establishes fair value based on the most likely outcome.
VALUATION OF LONG-LIVED ASSETS
Carrying values for long-lived assets and definite lived intangible assets, which exclude goodwill, are reviewed for possible impairment as circumstances warrant. Factors considered important that could result in an impairment review include significant underperformance relative to expected, historical or projected future operating results, significant changes in the manner of use of assets or the Company’s business strategy, significant negative industry or economic trends and a significant decline in its stock price for a sustained period of time. In addition, impairment reviews are conducted at the judgment of management whenever asset / asset group values are deemed to be unrecoverable relative to future undiscounted cash flows expected to be generated by that particular asset / asset group. The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset / asset group and its eventual disposition. Such estimates require management to exercise judgment and make assumptions regarding factors such as future revenue streams, operating expenditures, cost allocation and asset utilization levels, all of which collectively impact future operating performance. The Company’s estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to its business model or changes in its operating performance. If the sum of the

55


undiscounted cash flows (excluding interest) is less than the carrying value of an asset or asset/asset group, the Company would recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset or asset group.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets with indefinite useful lives are tested at least annually for impairment in accordance with the provisions of ASC 350Intangibles-Goodwill and Other(“ASC 350”). Intangible assets with indefinite useful lives comprise an insignificant portion of the total book value of the Company’s goodwill and intangible assets. The Company assesses the need to test its goodwill for impairment on a regular basis. Pursuant to the guidance provided under ASC 280-Segment Reporting(“ASC 280”), the Company has determined that it has only one reporting unit for the purposes of allocating and testing goodwill under ASC 350.

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The goodwill impairment test is a two-step process. The first step of the Company’s impairment analysis compares its fair value to its net book value to determine if there is an indicator of impairment. To determine fair value, ASC 350 allows for the use of several valuation methodologies, although it states that quoted market prices are the best evidence of fair value and shall be used as the basis for measuring fair value where available. In the Company’s assessment of its fair value, the Company considers the average market price of its common stock surrounding the selected testing date, the number of shares of its common stock outstanding during such period and other marketplace activity and related control premiums. If the calculated fair value is determined to be less than the book value of the Company, then the Company performs step two of the impairment analysis. Step two of the analysis compares the implied fair value of the Company’s goodwill, to the book value of its goodwill. If the book value of the Company’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized equal to that excess. In Step 2step two of the Company’s annual impairment analysis, the Company primarily uses the income approach methodology of valuation, which includes the discounted cash flow method as well as other generally accepted valuation methodologies, to determine the implied fair value of the Company’s goodwill. Significant management judgment is required in preparing the forecasts of future operating results that are used in the discounted cash flow method of valuation. Should step two of the impairment test be required, the estimates management would use would be consistent with the plans and estimates that the Company uses to manage its business. In addition to testing goodwill for impairment on an annual basis, factors such as unexpected adverse business conditions, deterioration of the economic climate, unanticipated technological changes, adverse changes in the competitive environment, loss of key personnel and acts by governments and courts, are considered by management and may signal that the Company’s intangible assets have become impaired and result in additional interim impairment testing.
In fiscal 2009,year 2010, the Company performed impairment tests of its goodwill on January 3, 2009, April 4, 2009 and on July 4, 2009. The first impairment test was triggered by a significant decline in the Company’s stock price and deterioration in the macro-economic climate during the first fiscal quarter. The second impairment test was triggered by a restructuring action announced on January 22, 2009 and the third test was conducted onas of the first day of the fourth fiscal quarter July 4, 2009, in accordance with the Company’s regularly scheduled annual testing. The results of all three of these teststhis test indicated that none of the Company’s goodwill was impaired based on Step 1step one of the test; accordingly Step 2step two of the test was not performed. Any management judgments and assumptions made in these tests were generally consistent with those made in prior periods.
DEFERRED FINANCING COSTS
Financing costs are capitalized as an asset on the Company’s balance sheet and amortized on a straight-line basis over the life of the financing. If debt is extinguished early, a proportionate amount of deferred financing costs is charged to earnings.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. This method also requires the recognition of future tax benefits such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured

56


using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The carrying value of the Company’s net deferred tax assets assumes the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets resulting in additional income tax expense in its consolidated statement of operations. Management evaluates the realizability of the deferred tax assets and assesses the adequacy of the valuation allowance quarterly. Likewise, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax assets would increase income or decrease the carrying value of goodwill in the period such determination was made.
The determination of recording or releasing tax valuation allowances is made, in part, pursuant to an assessment performed by management regarding the likelihood that the Company will generate future taxable income against

54


which benefits of its deferred tax assets may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respect to its ability to generate revenues, gross profits, operating income and taxable income in future periods. Amongst other factors, management must make assumptions regarding overall business and semiconductor industry conditions, operating efficiencies, the Company’s ability to develop products to its customers’ specifications, technological change, the competitive environment and changes in regulatory requirements which may impact its ability to generate taxable income and, in turn, realize the value of its deferred tax assets. In addition, the current uncertain economic environment limits the Company’s ability to confidently forecast its taxable income. In fiscal years 20082010 and 2009, the Company’s estimates of future taxable income were prepared in a manner consistent with its assessment of various factors, including market and industry conditions, operating trends, product life cycles and competitive and regulatory environments.
It was previously the Company’s intention to permanently reinvest the undistributed earnings of all its foreign subsidiaries in accordance with ASC 740-10,Income Taxes(“ASC 740-10”). During the fiscal year ended September 30, 2005, the Company reversed its policy of permanently reinvesting the earnings of its Mexican business. For the fiscal year ended October 2, 2009, U.S. income tax was provided on current earnings attributable to its operations in Mexico. No provision has been made for U.S. federal, state, or additional foreign income taxes that would be due upon the actual or deemed distribution of undistributed earnings of the other foreign subsidiaries, which have been, or are, intended to be, permanently reinvested.
The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations. With the implementation effective September 29, 2007, ASC 740-(formerly740 (formerly referenced as FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109), clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with GAAP. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
The Company recognizes liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its recognition threshold and measurement attribute of whether it is more likely than not that the positions the Company has taken in tax filings will be sustained upon tax audit, and the extent to which, additional taxes would be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.

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FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable, other current assets, accounts payable, short-term debt and accrued liabilities approximates fair value due to short-term maturities of these assets and liabilities. Fair values of long-term debt and investments are based on quoted market prices if available, and if not available a fair value is determined through a discounted cash flow analysis at the date of measurement.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)LOSS
The Company accounts for comprehensive income (loss)loss in accordance with the provisions of ASC 220-220 -Comprehensive Income(“ASC 220”). ASC 220 is a financial statement presentation standard that requires the Company to disclose non-owner changes included in equity but not included in net income or loss. Accumulated other comprehensive loss presented in the financial statements consists of adjustments to the Company’s auction rate securities and minimum pension liability as follows (in thousands):

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 Accumulated  Accumulated 
 Auction Rate Other  Auction Rate Other 
 Pension Securities Comprehensive  Pension Securities Comprehensive 
 Adjustments Adjustment Loss  Adjustments Adjustment Loss 
Balance as of September 28, 2007 $(214) $ $(214)
Pension adjustment  (54)   (54)
Impairment of auction rate security   (912)  (912)
       
Balance as of October 3, 2008 $(268) $(912) $(1,180) $(268) $(912) $(1,180)
Pension adjustment  (200)   (200)  (200)   (200)
              
Balance as of October 2, 2009 $(468) $(912) $(1,380) $(468) $(912) $(1,380)
Pension adjustment 83  83 
              
Balance as of October 1, 2010 $(385) $(912) $(1,297)
       
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
ASC 805
In December 2007, the FASB issued amendments to ASC 805-Business Combinations(“ASC 805”), which established principles and requirements for the acquirer of a business to recognize and measure in its financial statements the identifiable assets (including in-process research and development and defensive assets) acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The amendments to ASC 805 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Prior to the adoption of ASC 805, in-process research and development costs were immediately expensed and acquisition costs were capitalized. Under ASC 805 all acquisition costs are expensed as incurred. The standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In April 2009, the FASB updated ASC 805 to amend the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This update also eliminates the distinction between contractual and non-contractual contingencies. The Company expects ASC 805 will have an impact on its consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the October 3, 2009 effective date.
ASC 810
In December 2007, the FASB issued amendments to ASC 810-Consolidation(“ASC 810”). ASC 810 amends previously issued authoritative literature to amend accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of consolidation procedures for consistency with the requirements of ASC 805. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement shall bewas applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted.year. The Company does not expect the

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adoption of ASC 810 todid not have an impact itson the Company’s results of operations or financial position because the Company does not have any minority interests.
ASC 820
In September 2006, the FASB issued ASC 820-Fair Value Measurements and Disclosures(“ASC 820”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 is effective for financial statements issued for fiscal years beginning after November 15, 2007 for financial assets carried at fair value, and years beginning after November 15, 2008 for non-financial assets not carried at fair value. The Company has determined that the adoption of ASC 820 will not have a material impact on the Company’s results from operations or financial position.
ASC 825
In February 2007, the FASB issued ASC 825-Financial Instruments(“ASC 825”), including an amendment of ASC 320-Investments-Debt and Equity Securities(“ASC 320”), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. ASC 825 iswas effective for the Company beginning on October 3, 2009. The adoption of ASC 825 willdid not have a material impact on the Company’s results from operations or financial position.
ASC 470-20
In May 2008, the FASB issued ASC 470-20-Debt, Debt with Conversions and Other Options(“ASC 470-20”).ASC 470-20 alters the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. ASC 470-20 is expected to impact the Company’s accounting for its 2007 Convertible Notes and previously held Junior Notes. This authoritative accounting literature requires registrants with specified convertible note features to recognize (non-cash) interest expense based on the market rate for similar debt instruments without the conversion feature. Furthermore, pursuant to its retrospective accounting treatment, the accounting literature requires prior period interest expense recognition. ASC 470-20 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company is currently evaluating ASC 470-20 and the impact that it will have on its Consolidated Financial Statements. The Company will adopt ASC Topic 470-20 on October 3, 2009.
ASC 855
In May 2009, the FASB established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This guidance was included in the Codification under ASC 855-Subsequent Events(“ASC 855”), and became effective for the Company beginning with the third fiscal quarter of 2009. The Company performed an evaluation of subsequent events through November 30, 2009, and issued its financial statements on November 30, 2009.
ASC 105
In June 2009, the FASB established the FASB Accounting Standards Codification™ (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This guidance was included in the Codification under ASC 105-Generally Accepted Accounting Principles(“ASC 105”). All prior accounting standard documents were superseded by the Codification and any accounting literature not included in the Codification is no longer authoritative. Rules and interpretive releases of the SEC issued under the authority of federal securities laws will continue to be sources of authoritative GAAP for SEC registrants. The Codification became effective for the Company beginning with the fourth fiscal quarter of 2009. Therefore, beginning with the fourth fiscal quarter of 2009, all references made by the Company to GAAP in its notes to the consolidated financial statements use the new Codification numbering system. The Codification does not change or alter existing GAAP and, therefore, did not have any impact on the Company’s consolidated financial statements.

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ASU 2009-13 and ASU 2009-14
In September 2009, the FASB reached a consensus on Accounting Standards Update (“ASU”)-2009-13-Revenue Recognition(“Recognition (“ASC 605”) — Multiple-Deliverable Revenue Arrangements(“ASU 2009-13”) and ASU 2009-14-Software(“Software (“ASC 985”) — Certain Revenue Arrangements That Include Software Elements(“ASU 2009-14”). ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: i) Vendor Specific Objective Evidence or VSOE or ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these ASUs will have on its consolidated financial statements.
3. BUSINESS COMBINATIONS
In 2009, theThe Company acquired all of the outstanding stock of Axiom Microdevices, Inc. (“Axiom”) and purchased certain patents from other companies for $10.4 million in cash. The purchase of Axiom isdid not expected to have a significant impact on the Company’s future results from operations and financial condition and therefore, proforma disclosures have been omitted.complete any business combinations during its fiscal year ended October 1, 2010.

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4. MARKETABLE SECURITIES
The Company accounts for its investment in debt and equity securities in accordance with ASC 320-Investments-Debt and Equity Securities, and classifies them as “available for sale”. At October 2, 2009,1, 2010, these securities consisted of $3.2 million par value in auction rate securities, (“ARS”), which are long-term debt instruments whichintended to provide liquidity through a Dutch auction process that resets interest rates each period. The uncertainties in the credit markets have caused the ARS to become illiquid resulting in failed auctions.
During the fiscal year ended October 3, 2008, the Company performed a comprehensive valuation and discounted cash flow analysis on the ARS. The Company concluded the value of the ARS was $2.3 million thus the carrying value of these securities was reduced by $0.9 million, reflecting this change in fair value. The Company assessed the decline in fair value to be temporary and recorded this reduction in shareholders’ equity in accumulated other comprehensive loss. The Company will continue to closely monitor the ARS and evaluate the appropriate accounting treatment in each reporting period. If in a future period the Company determines that the impairment is other than temporary, the Company will impair the security to its fair value and charge the loss to earnings. The Company holds no other auction rate securities.
5. FINANCIAL INSTRUMENTS
On October 4, 2008, the Company adopted ASC 820-Fair Value Measurements and Disclosure(“ASC 820”). In accordance with for financial assets and liabilities measured at fair value. The Company adopted ASC 820-10-55, the Company has deferred the adoption of ASC 820 for non-financial assets and liabilities including intangible assets and reporting units measured at fair value in the first step of a goodwill impairment test. The Company will adopt the remainder of ASC 820test on October 3, 2009. In accordance with ASC 820, the Company groups its financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
  Level 1 — Valuation is based upon quoted market price for identical instruments traded in active markets.
 
  Level 2 — Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation

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techniques for which all significant assumptions are observable in the market.
 
  Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques.
Under ASC 820, the Company groups marketable securities measured at fair value on a recurring basis in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.
The Company has cash equivalents classified as Level 1 and has no Level 2 securities. The Company’s ARS, discussed in Note 4, Marketable Securities, is classified as level 3 assets. There have been no transfers between Level 1, Level 2 or Level 3 assets during the fiscal year ending October 1, 2010. There have been no purchases, sales, issuances or settlements of the marketable securities classified as Level 3 are auction rate securities.assets during the fiscal year.
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the balances of cash equivalents and marketable securities measured at fair value on a recurring basis as of October 2, 20091, 2010 (in thousands):
                                
 Fair Value Measurements  Fair Value Measurements 
 Quoted Prices in Significant Significant  Quoted Prices in Significant Significant 
 Active Markets for Other Unobservable  Active Markets for Other Unobservable 
 Identical Assets Observable Inputs Inputs  Identical Assets Observable Inputs Inputs 
 Total (Level 1) (Level 2) (Level 3)  Total (Level 1) (Level 2) (Level 3) 
Cash equivalents:  
Money market/repurchase agreements $355,388 $355,388 $ $  $427,789 $427,789 $ $ 
Auction rate securities 2,288   2,288  2,288   2,288 
                  
Total $357,676 $355,388 $ $2,288  $430,077 $427,789 $ $2,288 
                  

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Non-Financial Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets, such as goodwill, intangible assets, and other long lived assets resulting from business combinations are measured at fair value at the date of acquisition and subsequently re-measured if there is an indicator of impairment. There was no impairment recognized during the fiscal year ending October 1, 2010.
6. INVENTORY
Inventories consist of the following (in thousands):
                
 As of  As of 
 October 2, October 3,  October 1, October 2, 
 2009 2008  2010 2009 
    
Raw materials $9,889 $8,005  $16,108 $9,889 
Work-in-process 56,074 64,305  74,701 56,074 
Finished goods 12,950 18,711  20,209 12,950 
Finished goods held on consignment by customers 7,184 12,770  14,041 7,184 
          
Total inventories $86,097 $103,791  $125,059 $86,097 
          
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
                
 As of  As of 
 October 2, October 3,  October 1, October 2, 
 2009 2008  2010 2009 
    
Land $9,423 $9,423  $9,423 $9,423 
Land and leasehold improvements 5,063 4,989  5,475 5,063 
Buildings 39,992 39,708  42,918 39,992 
Furniture and Fixtures 24,450 24,889 
Furniture and fixtures 24,784 24,450 
Machinery and equipment 393,566 382,582  455,157 393,566 
Construction in progress 19,209 29,845  28,901 19,209 
          
Total property, plant and equipment, gross 491,703 491,436  566,658 491,703 
Accumulated depreciation and amortization  (329,404)  (318,076)  (362,295)  (329,404)
          
Total property, plant and equipment, net $162,299 $173,360  $204,363 $162,299 
          
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consist of the following (in thousands):
                             
  Weighted  As of  As of 
  Average  October 1, 2010  October 2, 2009 
  Amortization  Gross      Net  Gross      Net 
  Period Remaining  Carrying  Accumulated  Carrying  Carrying  Accumulated  Carrying 
  (Years)  Amount  Amortization  Amount  Amount  Amortization  Amount 
Goodwill     $485,587  $  $485,587  $482,893  $  $482,893 
                       
Amortized intangible assets                            
Developed technology  1.7  $14,150  $(10,862) $3,288  $13,750  $(8,899) $4,851 
Customer relationships  1.9   21,510   (15,894)  5,616   21,510   (12,697)  8,813 
Patents and other  1.2   5,966   (5,630)  336   5,966   (4,654)  1,312 
                       
       41,626   (32,386)  9,240   41,226   (26,250)  14,976 
                             
Unamortized intangible assets                            
Trademarks      3,269      3,269   3,269      3,269 
                       
Total intangible assets     $44,895  $(32,386) $12,509  $44,495  $(26,250) $18,245 
                       

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      October 2, 2009  October 3, 2008 
  Weighted                     
  Average  Gross      Net  Gross      Net 
  Amortization  Carrying  Accumulated  Carrying  Carrying  Accumulated  Carrying 
  Period (Years)  Amount  Amortization  Amount  Amount  Amortization  Amount 
Goodwill     $482,893  $  $482,893  $483,671  $  $483,671 
                       
Amortized intangible assets                            
Developed technology  5-10  $13,750  $(8,899) $4,851  $11,850  $(7,533) $4,317 
Customer relationships  5-10   21,510   (12,697)  8,813   21,210   (9,650)  11,560 
Patents  3   2,417   (1,105)  1,312   900   (300)  600 
Other  .5-3   3,549   (3,549)     2,649   (2,649)   
                       
       41,226   (26,250)  14,976   36,609   (20,132)  16,477 
Unamortized intangible assets                            
Trademarks      3,269      3,269   3,269      3,269 
                       
Total intangible assets     $44,495  $(26,250) $18,245  $39,878  $(20,132) $19,746 
                       
Annual amortizationAmortization expense related to intangible assets is as follows (in thousands):
             
  Fiscal Years Ended
  October 2, 2009 October 3, 2008 September 28, 2007
Amortization expense $6,118  $6,933  $2,144 
was $6.1 million for each of fiscal years 2010 and 2009 and $6.9 million for fiscal year 2008.
The changes in the gross carrying amount of goodwill and intangible assets are as follows:
                         
      Developed  Customer  Patents and       
  Goodwill  Technology  Relationships  Other  Trademarks  Total 
Balance as of September 28, 2007 $480,890  $10,550  $12,700  $122  $3,269  $507,531 
Additions during period  13,779   1,300   8,510   3,427      27,016 
Deductions during year  (10,998)              (10,998)
                   
Balance as of October 3, 2008 $483,671  $11,850  $21,210  $3,549  $3,269  $523,549 
Additions during period  6,395   1,900   300   2,417      11,012 
Deductions during year  (7,173)              (7,173)
                   
Balance as of October 2, 2009 $482,893  $13,750  $21,510  $5,966  $3,269  $527,388 
                   
In 2009, the Company acquired all of the outstanding stock of Axiom and purchased certain patents from other companies for $10.4 million in cash. This resulted in the allocation of approximately $6.4 million to goodwill. The purchase of Axiom is not expected to have a significant impact on the Company’s future results from operations and financial condition.
In October 2007, the Company paid $32.6 million in cash to acquire certain assets from two separate companies resulting in the allocation of approximately $13.8 million to goodwill.
                         
   
      Developed  Customer  Patents and       
  Goodwill  Technology  Relationships  Other  Trademarks  Total 
   
Balance as of October 3, 2008 $483,671  $11,850  $21,210  $3,549  $3,269  $523,549 
Additions during period  6,395   1,900   300   2,417      11,012 
Deductions during year  (7,173)              (7,173)
                   
Balance as of October 2, 2009 $482,893  $13,750  $21,510  $5,966  $3,269  $527,388 
Additions during period  2,731   400            3,131 
Deductions during year  (37)              (37)
                   
Balance as of October 1, 2010 $485,587  $14,150  $21,510  $5,966  $3,269  $530,482 
                   
Goodwill is adjusted as required as a result of the realization of deferred tax assets. The benefit from the recognition of a portion of these deferred items reduces the carrying value of goodwill instead of reducing income tax expense. Accordingly, future realization of certain deferred tax assets will reduce the carrying value of goodwill. For the fiscal yearsyear ended October 2, 2009 October 3, 2008, and September 28, 2007, goodwill was reduced by $7.2

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million, $11.0 million, and $12.5 million, respectively. million. The remaining deferred tax assets that could reduce goodwill in future periods are $0.4 million as of October 2, 2009.
The Company tests its goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired. In accordance with ASC350,Intangibles-Goodwill and Other,the Company performed a goodwill impairment test and determined that as of July 4, 2009, its goodwill was not impaired.1, 2010.
Annual amortization expense for the next five years related to intangible assets is expected to be as follows (in thousands):
                     
  2010 2011 2012 2013 2014
Amortization expense $6,002  $5,052  $3,783  $139   
                     
  2011 2012 2013 2014 2015
Amortization expense $5,319  $3,783  $138     
9. BORROWING ARRANGEMENTS
LONG-TERM DEBT
     Long-term debt consists of the following (in thousands):
        
         Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, 
 October 2, October 3,  2010 2009 
 2009 2008   
2007 Convertible Notes $79,733 $137,616  $24,743 $73,348 
Less-current maturities 32,617    31,865 
          
Total long-term debt $47,116 $137,616  $24,743 $41,483 
          
On March 2, 2007, the Company issued $200.0 million aggregate principal amount of convertible subordinated notes (“2007 Convertible Notes”). The offering contained two tranches. The first tranche consisted of $100.0 million of 1.25% convertible subordinated notes due March 2010.2010 (the “1.25% Notes”). The second tranche consisted of $100.0 million aggregate principal amount of 1.50% convertible subordinated notes due March 2012.2012 (the “1.50% Notes”). The Company pays interest in cash semi-annually in arrears on March 1 and September 1 of each year on the 1.50% Notes. The conversion price of the 2007 Convertible1.50% Notes is 105.0696 shares per $1,000 principal amount of notes to be redeemed, which is the equivalent of a conversion price of approximately $9.52 per share, plus accrued and unpaid interest, if any, to the conversion date. Holders of the 1.50% Notes may require the Company to repurchase the 2007 Convertible Notes upon a change in control of the Company. The Company pays interest
These 2007 Convertible Notes contain cash settlement provisions, which permit the application of the treasury stock method in cash semi-annually in arrears on March 1 and September 1determining potential share dilution of each year.the conversion spread should the share price of the Company’s common stock exceed $9.52. It has been the Company’s historical practice to cash settle the principal and interest components of convertible debt instruments, and it is itsour intention to continue to do so in the future, including settlement of the 2007 Convertible Notes.future.

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During the first quarter of fiscal
On October 3, 2009, the Company redeemed $40.5 millionadopted ASC 470-20 —Debt, Debt with Conversions and Other Options (“ASC 470-20”). Our financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle. ASC 470-20 requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability and equity components of the convertible debt instrument and requires retrospective application to all periods presented in the financial statements to which it is applicable. ASC 470-20 applies to the Company’s 2007 Convertible Notes. Using a non-convertible borrowing rate of 6.86%, the Company estimated the fair value of the liability component of the 1.50% Notes to be $77.3 million. As of the issuance date, the difference between the fair value of the liability component of the 1.50% Notes and the corresponding aggregate principal amount of such notes, which is equal to the fair value of the equity component of the 1.50% convertible subordinated notes at an average price of 92.6% of par value. A discount of approximately $2.9 million offset by approximately $0.9 million in deferred financing costsNotes ($22.7 million), was retrospectively recorded as a gain during the period.debt discount and as an increase to additional paid-in capital, net of tax. The Company also redeemed $17.4 million of principal amountdiscount of the 1.25% convertible subordinated notes duringliability component of the fourth quarter1.50% Notes is being amortized over the life of fiscal 2009. A premium of approximately $6.0 million, along with approximately $0.1 million in deferred financing costs was recorded as a charge against earnings.the instrument.
During the fiscal year endedending October 3, 2008,1, 2010, the Company redeemed $50.0the remaining $32.6 million and $12.4 million inof aggregate principal amount of the 1.25% Notes and 1.50% convertible subordinated notes, respectively, at an average priceredeemed $20.4 million of 109.0% of par value. A premium of approximately $5.8 million, along with approximately $1.0 million in deferred financing costs was recorded as a charge against earnings in fiscal 2008.
On December 21, 2006, the Financial Accounting Standards Board (“FASB”) issued ASC 825,Financial Instruments(“ASC 825”). ASC 825 specifies that the contingent obligation to make future payments, or otherwise transfer consideration under a registration payment arrangement, should be separately recognized and measured in accordance with ASC 450,Contingencies. The Company adopted ASC 825 on September 29, 2007. The Company agreed to file a shelf registration statement under the Securities Act of 1933 (the “Securities Act”) not later than 120 days after the first date of original issuanceaggregate principal amount of the 2007 Convertible1.50% Notes. The Company agreed to utilize commercially reasonable efforts to have this shelf registration statement declared effective not later than 180 days afterpaid a cash premium (cash paid less principal amount) of $15.1 million and $12.4 million on the first date of original issuanceretirements of the notes,1.25% and to keep it effective until1.50% Notes, respectively. After applying ASC 470-20, the earliest of: 1) two years fromCompany recorded a total gain on the transaction of approximately $0.1 million (including commissions and deferred financing).
The following tables provide additional information about the Company’s 2007 Convertible Notes (in thousands):
         
  Fiscal Years Ended
  October 1, October 2,
  2010 2009
   
Equity component of the convertible notes outstanding $6,061  $15,670 
Principal amount of the convertible notes  26,677   79,733 
Unamortized discount of the liability component  1,934   6,385 
Net carrying amount of the liability component  24,743   73,348 
         
  Fiscal Years Ended
  October 1, October 2,
  2010 2009
   
Effective interest rate on the liability component  6.86%  6.86%
Cash interest expense recognized (contractual interest) $734  $1,391 
Effective interest expense recognized $2,502  $4,954 
The remaining unamortized discount on the 1.50% Notes will be amortized over the next seventeen months. As of October 1, 2010, the if converted value of the remaining 1.50% Notes exceeds the related principal amount by approximately $31.2 million. As of October 1, 2010 and October 2, 2009, the number of shares of the Company’s common stock underlying the then remaining 2007 Convertible Notes (which at October 2, 2009 included both the 1.25% Notes and the 1.50% Notes) were 2.8 million and 8.4 million, respectively.
The retrospective application of ASC 470-20 had the following effect on the Company’s Consolidated Statements of Operations as follows (in thousands):
                         
  Fiscal Year Ended Fiscal Year Ended
  October 2, 2009 October 3, 2008
  Previously As Effect of Previously As Effect of
  Reported Adjusted Change Reported Adjusted Change
     
Interest expense $(3,644) $(8,290) $(4,646) $(7,330) $(16,324) $(8,994)
(Loss) Gain on early retirement of convertible debt (1)  (4,066)  4,590   8,656   (6,836)  2,158   8,994 
(Benefit) for income taxes  (27,543)  (25,227)  (2,316)  (28,818)  (28,818)   
Net income  93,289   94,983   1,694   111,006   111,006    
Per share information:                        
Net income, basic $0.56  $0.57  $0.01  $0.69  $0.69  $ 
Net income, diluted $0.55  $0.56  $0.01  $0.67  $0.67  $ 

6360


effective date
(1)The previously reported gain on early retirement of the 1.25% and 1.50% Notes for the fiscal year ended October 2, 2009 was net of deferred financing cost write-downs of $0.9 million.
The retrospective application of ASC 470-20 had the shelf registration statement; 2)following effect on the date when all registrable securities have been registered under the Securities Act and disposed of; and 3) the date on which all registrable securities held by non-affiliates are eligible to be sold to the public pursuant to Rule 144(k) under the Securities Act. The Company filed the shelf registration statement within 120 daysCompany’s Consolidated Balance Sheet as of the original issuance of the 2007 Convertible Notes and the shelf registration statement was declared effective within 180 days after the first date of original issuance of the notes. If the shelf registration statement ceases to be effective within two years from the effective date of the shelf registration statement the Company will be obligated to pay an additional 0.25% interest per annum for the first 90 days after the occurrence of the registration default and at the rate of 0.50% per annum thereafter. The Company has concluded that it is not probable that a contingent liability has been incurred at October 2, 2009 pursuant to the(in thousands):
             
  Previously Reported As Adjusted Effect of Change
   
Other assets $10,283  $9,864  $(419)
Deferred tax assets  91,479   89,163   (2,316)
Short-term debt  82,617   81,865   (752)
Long-term debt  47,116   41,483   (5,633)
Additional paid-in capital  1,499,406   1,568,416   69,010 
Accumulated deficit  (399,794)  (465,154)  (65,360)
The retrospective application of ASC 450 and thus has not recorded a liability.470-20 had the following effect on the Company’s Consolidated Statement of Cash Flows as follows (in thousands):
                         
  Fiscal Year Ended Fiscal Year Ended
  October 2, 2009 October 3, 2008
  Previously As Effect of Previously As Effect of
  Reported Adjusted Change Reported Adjusted Change
   
Cash flows from operating activities:
                        
Net income $93,289  $94,983  $1,694  $111,006  $111,006  $ 
Amortization of deferred financing costs and discount on convertible debt  943   5,589   4,646   1,753   10,748   8,995 
Deferred income taxes  (27,182)  (24,866)  2,316   (36,648)  (36,648)   
Net cash provided by operating activities:  210,149   218,805   8,656   173,678   182,673   8,995 
                         
Cash flows from financing activities:
                        
Retirement of 2007 Convertible Notes $(57,883) $(51,107) $6,776  $(62,384) $(56,570) $5,814 
Reacquisition of equity component of convertible notes     (15,432)  (15,432)     (14,809)  (14,809)
Net cash used in financing activities:  (21,504)  (30,160)  (8,656)  (95,192)  (104,187)  (8,995)
Aggregate annual maturities of long-term debt are as follows (in thousands):
        
Fiscal Year Maturity  Maturity 
2010 $32,617 
 
2011   $ 
2012 47,116  24,743 
      
 $79,733  $24,743 
      

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SHORT-TERM DEBT
Short-term debt consists of the following (in thousands):
        
         Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, 
 October 2, October 3,  2010 2009 
 2009 2008   
Current maturities of long-term debt $32,617 $  $ $31,865 
Facility Agreement 50,000 50,000 
Credit Facility 50,000 50,000 
          
 $82,617 $50,000  $50,000 $81,865 
          
On July 15, 2003, the Company entered into a receivables purchase agreement under which it has agreed to sell from time to time certain of its accounts receivable to Skyworks USA, Inc. (“Skyworks USA”), a wholly-owned special purpose entity that is consolidated for accounting purposes. Concurrently, Skyworks USA entered into an agreement with Wells Fargo Bank, N.A. (previously Wachovia Bank, N.A.) providing for a $50.0 million credit facility (“Credit Facility Agreement’’) secured by the purchased accounts receivable. As a part of the consolidation, any interest incurred by Skyworks USA related to monies it borrows under the Credit Facility Agreement is recorded as interest expense in the Company’s results of operations. The Company performs collections and administrative functions on behalf of Skyworks USA. The Company renewedextended the Credit Facility Agreementeffective on July 9, 20092010 for a one year term.an additional term of three months. Interest related to the Credit Facility Agreement is at LIBOR plus 0.75%. and was approximately 1.01% at October 1, 2010. As of October 2, 2009,1, 2010, Skyworks USA had borrowed $50.0 million under this agreement. Our ability to borrow under the Credit Facility expired in October 2010 and, given our strong cash position, management has determined that the Credit Facility was no longer required and accordingly, has been substantially repaid as of November 29, 2010.
10. INCOME TAXES
Income before income taxes consists of the following components (in thousands):
            
             Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, October 3, 
 October 2, October 3, September 28,  2010 2009 2008 
 2009 2008 2007   
United States $61,593 $79,931 $54,685  $164,094 $65,603 $79,931 
Foreign 4,153 2,257 2,085  30,980 4,153 2,257 
              
 $65,746 $82,188 $56,770  $195,074 $69,756 $82,188 
              
The provision (benefit) for income taxes consists of the following (in thousands):
             
  Fiscal Years Ended 
  October 1,  October 2,  October 3, 
  2010  2009  2008 
   
Current tax expense (benefit):            
Federal $11,855  $(251) $1,310 
State  946   (413)  (72)
Foreign  684   966   (94)
          
   13,485   302   1,144 
Deferred tax expense (benefit):            
Federal  44,072   (25,436)  (36,405)
State  (12)      
Foreign  235   (93)  (571)
          
   44,295   (25,529)  (36,976)
             
Charge in lieu of tax expense        7,014 
          
Provision (benefit) for income taxes $57,780  $(25,227) $(28,818)
          

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  Fiscal Years Ended 
  October 2,  October 3,  September 28, 
  2009  2008  2007 
Current tax expense (benefit):            
Federal $(251) $1,310  $ 
State  (413)  (72)  (461)
Foreign  966   (94)  1,149 
          
   302   1,144   688 
Deferred tax expense (benefit):            
Federal  (27,752)  (36,405)  (1,672)
State         
Foreign  (93)  (571)  104 
          
   (27,845)  (36,976)  (1,568)
             
Charge in lieu of tax expense     7,014    
          
Provision (benefit) for income taxes $(27,543) $(28,818) $(880)
          
The actual income tax expense is different than that which would have been computed by applying the federal statutory tax rate to income before income taxes. A reconciliation of income tax expense as computed at the United States Federal statutory income tax rate to the provision for income tax expense follows (in thousands):
            
             Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, October 3, 
 October 2, October 3, September 28,  2010 2009 2008 
 2009 2008 2007   
Tax expense at United States statutory rate $23,011 $28,766 $19,870  $68,276 $24,415 $28,766 
Foreign tax rate difference  (580)  (436)  (301)  (8,889)  (580)  (436)
Deemed dividend from foreign subsidiary 774 102   884 774 102 
Research and development credits  (7,211)  (7,970)  (7,495)  (5,820)  (7,211)  (7,970)
Change in tax reserve 295  (999)  (461) 4,413 295  (999)
Change in valuation allowance  (45,510)  (59,315)  (14,306) 2,834  (39,089)  (54,011)
Charge in lieu of tax expense  7,014     7,014 
Foreign withholding tax   825 
Non deductible debt retirement premium 2,001 1,741   64  (3,508)  (3,563)
Alternative minimum tax  (958) 1,306     (958) 1,306 
Domestic production activities deduction  (2,263)   
International restructuring  (3,468)   
Other, net 635 973 988  1,749 635 973 
              
Provision (benefit) for income taxes $(27,543) $(28,818) $(880) $57,780 $(25,227) $(28,818)
              
During fiscal year 2010, the fiscal years ended October 2, 2009, October 3, 2008 and September 28, 2007,Company restructured its international operations resulting in a tax benefit of $3.5 million. This consisted of a tax benefit of $6.3 million due to reassessing the valuation allowance was reducedUnited States income tax required to be recorded on earnings of our operations in Mexico, offset by $12.8$2.8 million including $5.6 millionof tax provision related to acquired Axiom deferredthe transfer of assets to an affiliated foreign company. As a result of this restructuring, the Company is no longer required to assess United States income tax assets, $11.0 million and $12.5 million, respectively, resulting fromon the partial recognitionearnings of certain acquired tax benefits that were subject to a valuation allowance at the time of acquisition, the realization of which required a reduction of goodwill. Of this amount, $0.0 million, $7.0 million and $0.0 million is included in the charge in lieu of tax expense in the table above for fiscal 2009, fiscal 2008 and fiscal 2007, respectively, and $12.8 million, $4.0 million and $12.5 million is included in the change in the valuation allowance for fiscal 2009, fiscal 2008 and fiscal 2007, respectively.its Mexican business.
Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in thousands):
        
         Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, 
 October 2, October 3,  2010 2009 
 2009 2008   
Deferred Tax Assets:  
Current:  
Inventories $5,261 $3,726  $4,451 $5,261 
Bad debts 1,025 329  427 1,025 
Accrued compensation and benefits 3,219 3,460  2,536 3,219 
Product returns, allowances and warranty 686 849  572 686 
Restructuring 1,503 888  794 1,503 
Other — net 943  
          
Current deferred tax assets 11,694 9,252  9,723 11,694 
Less valuation allowance  (963)  (3,420)  (2,130)  (963)
          
Net current deferred tax assets 10,731 5,832  7,593 10,731 
          
Long-term: 
Property, plant and equipment  3,762 
Intangible assets 9,422 11,121 
Retirement benefits and deferred compensation 21,327 15,576 
Net operating loss carry forwards 6,120 24,438 
Federal tax credits 28,243 42,787 
State investment credits 24,173 21,513 
     
Long-term deferred tax assets 89,285 119,197 
Less valuation allowance  (23,480)  (25,630)
     
Net long-term deferred tax assets 65,805 93,567 
     

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 Fiscal Years Ended Fiscal Years Ended 
 October 2, October 3,  October 1, October 2, 
 2009 2008  2010 2009 
  
Long-term: 
Property, plant and equipment 3,762 9,726 
Intangible assets 11,121 9,904 
Retirement benefits and deferred compensation 15,576 13,817 
Net operating loss carryforwards 24,438 44,903 
Federal tax credits 42,787 37,170 
State investment credits 21,513 19,106 
Other — net 180 733 
     
Long-term deferred tax assets 119,377 135,359 
Less valuation allowance  (25,630)  (79,429)
     
Net long-term deferred tax assets 93,747 55,930 
       
  
Deferred tax assets 131,071 144,611  99,008 130,891 
Less valuation allowance  (26,593)  (82,849)  (25,610)  (26,593)
          
Net deferred tax assets 104,478 61,762  73,398 104,298 
          
  
Deferred Tax Liabilities:  
Current:  
Prepaid insurance  (787)  (739)  (724)  (787)
Other — net  (5,439)  (2,221)   (5,439)
          
Current deferred tax liabilities  (6,226)  (2,960)  (724)  (6,226)
          
Long-term:  
Property, plant and equipment  (4,636)  
Other — net  (272)  (2,136)
Intangible assets  (2,267)  (2,738)  (329)  (2,267)
          
Long-term deferred tax liabilities  (2,267)  (2,738)  (5,237)  (4,403)
          
  
Net deferred tax liabilities  (8,493)  (5,698)  (5,961)  (10,629)
          
Total deferred tax assets $95,985 $56,064  $67,437 $93,669 
          
In accordance with GAAP, management has determined that it is more likely than not that a portion of its historic and current year income tax benefits will not be realized. As of October 2, 2009,1, 2010, the Company has maintained a valuation allowance for deferred tax assets of $26.6$25.6 million, principally related to state research tax credits that management has determined is more likely than not that it will not be realized. The net changecredits. If these benefits are recognized in the valuation allowance of $56.3 million during fiscal 2009 is principally due to the recognition of tax benefits offset against current year taxable income of $85.7 million and a reduction in the end of year valuation allowance of $40.9 million based on the Company’s assessment of the amount of deferred tax assets that are realizable on a more likely than not basis. When recognized, the tax benefits relating to any future reversal ofperiod the valuation allowance on deferred tax assets at October 2, 2009 will be accounted for as follows: approximately $22.3reversed and up to a $25.2 million will be recognized as an income tax benefit, and up to a $0.4 million will be recognized as a reduction to goodwill and $3.9may be recognized. During fiscal year 2010, the Company recognized a net decrease in its valuation allowance of $1.0 million. The change in the valuation allowance resulted in a tax expense of $2.8 million will be recognized asand an increase to shareholders’ equity for certainadditional paid-in capital of $3.8 million. The Company will need to generate $189.9 million of future United States federal taxable income to utilize our United States deferred tax deductions from employee stock options.assets as of October 1, 2010.
Based on the Company’s evaluation of the realizability of its United States net deferred tax assets and other future deductible items through the generation of future taxable income, $40.9$38.6 million of the Company’s valuation allowance was reversed at October 2, 2009. The amount reversed consisted of $27.7$25.4 million recognized as income tax benefit, and $13.2 million recognized as a reduction to goodwill.
Deferred tax assets have beenare recognized for foreign operations when management believes they willit is more likely than not that the deferred tax assets will be recovered during the carryforwardcarry forward period. The Company will continue to assess its valuation allowance in future periods.
As of October 2, 2009,1, 2010, the Company has United States federal net operating loss carryforwardscarry forwards of approximately $71.1$17.7 million, which will expire at various dates through 20282029 and aggregate state net operating loss carryforwardscarry forwards of approximately $2.3$1.4 million, which will expire at various dates through 2018.2019. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The Company also has United States federal and state income tax credit carryforwardscarry forwards of approximately $64.3 million.$75.3 million, of which $9.9 million of federal income tax credit carry forwards have not been recorded as a deferred tax asset. The United States federal tax credits expire at various dates through 2029.2030. The state tax credits relate primarily to California research tax credits which can be carried forward indefinitely.

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NoThe Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of October 1, 2010, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately $4.9$52.3 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings, were not permanently reinvested.

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The Company adopted ASC 740-Income Taxes-(formerly referenced as FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109) as of the beginning of fiscal year 2008. As of October 3, 2008, the Company’s gross unrecognized tax benefits totaled $7.9 million. As$19.9 million and $8.9 million as of October 1, 2010 and October 2, 2009, the Company’s gross unrecognized tax benefits totaled $8.9 million.respectively. Included in this amountthe $19.9 million is $6.5$11.4 million which would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance.allowance and certain positions which were required to be capitalized. There are no positions which the Company anticipates could change within the next twelve months.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
        
Balance at October 3, 2008 $7,874 
Decreases based on positions related to prior years  (82)
Balance at October 2, 2009 $8,859 
Increases based on positions related to prior years 437 
Increases based on positions related to current year 1,074  11,221 
Decreases relating to settlements with taxing authorities  
Decreases relating to lapses of applicable statutes of limitations  (7)  (617)
      
Balance at October 2, 2009 $8,859 
Balance at October 1, 2010 $19,900 
      
The Company’s major tax jurisdictions as of October 2, 20091, 2010 are the U.S.,United States, California, and Iowa. For the U.S.,United States, the Company has open tax years dating back to fiscal year 1998 due to the carryforwardcarry forward of tax attributes. For California the Company has open tax years dating back to fiscal year 2002 due to the carryforward of tax attributes. Forand Iowa, the Company has open tax years dating back to fiscal year 2002 due to the carryforwardcarry forward of tax attributes.
During the year ended October 2, 2009, there was no significant recognition1, 2010, $0.6 million of previously unrecognized tax benefits related to the expiration of the statute of limitations period. Total year-to-dateperiod were recognized. The Company’s policy is to recognize accrued interest related to the Company’sand penalties, if incurred, on any unrecognized tax benefits was $0.0 million.as a component of income tax expense. The Company did not incur any significant accrued interest or penalties related to unrecognized tax benefits during fiscal year 2010.
11. STOCKHOLDERS’ EQUITY
COMMON STOCK
The Company is authorized to issue (1) 525,000,000 shares of common stock, par value $0.25 per share, and (2) 25,000,000 shares of preferred stock, without par value.
Holders of the Company’s common stock are entitled to such dividends as may be declared by the Company’s Board of Directors out of funds legally available for such purpose. Dividends may not be paid on common stock unless all accrued dividends on preferred stock, if any, have been paid or declared and set aside. In the event of the Company’s liquidation, dissolution or winding up, the holders of common stock will be entitled to share pro rata in the assets remaining after payment to creditors and after payment of the liquidation preference plus any unpaid dividends to holders of any outstanding preferred stock.
Each holder of the Company’s common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors. The Company’s second amended and restated certificate of incorporation provides that, unless otherwise determined by the Company’s Board of Directors, no holder of common stock has any preemptive right to purchase or subscribe for any stock of any class which the Company may issue or sell.
In March 2007, the Company repurchased approximately 4.3 million of its common shares for $30.1 million as authorized byOn August 3, 2010, the Company’s Board of Directors.Directors approved a stock repurchase program, pursuant to which the Company is authorized to repurchase up to $200 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions as permitted by securities laws and other legal requirements. The Company has no publicly disclosedhad not repurchased any shares under the program for the fiscal year ended October 1, 2010. As of November 29, 2010, the Company had repurchased 786,400 shares of common stock repurchase plans.for approximately $18.2 million. These shares were not retired and are currently being held in our Treasury Stock.
At October 2, 2009,1, 2010, the Company had 177,873,067185,683,236 shares of common stock issued and 172,815,222180,263,009 shares outstanding.

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PREFERRED STOCK
The Company’s second amended and restated certificate of incorporation permits the Company to issue up to 25,000,000 shares of preferred stock in one or more series and with rights and preferences that may be fixed or designated by the Company’s Board of Directors without any further action by the Company’s stockholders. The designation, powers, preferences, rights and qualifications, limitations and restrictions of the preferred stock of each series will be fixed by the certificate of designation relating to such series, which will specify the terms of the preferred stock. At October 2, 2009,1, 2010, the Company had no shares of preferred stock issued or outstanding.
EMPLOYEE STOCK BENEFIT PLANS
As of October 1, 2010, the Company had nine equity compensation plans under which its equity securities were authorized for issuance to its employees and/or directors:
the 1994 Non-Qualified Stock Option Plan
the 1996 Long-Term Incentive Plan
the 1999 Employee Long-Term Incentive Plan
the Directors’ 2001 Stock Option Plan
the Non-Qualified Employee Stock Purchase Plan
the 2002 Employee Stock Purchase Plan
the Washington Sub, Inc. 2002 Stock Option Plan
the 2005 Long-Term Incentive Plan
the 2008 Director Long-Term Incentive Plan
Except for the 1999 Employee Long-Term Incentive Plan, the Washington Sub, Inc. 2002 Stock Option Plan and the Non-Qualified Employee Stock Purchase Plan, each of the foregoing equity compensation plans was approved by the Company’s stockholders.
The following table summarizes pre-tax share-based compensation expense related to employee stock options, restricted stock grants, performance stock grants, employee stock purchases, and management incentive compensation under ASC 718 for the fiscal years ended October 2, 2009, October 3, 2008, and September 28, 2007, respectively.
             
(In thousands) Fiscal Years Ended 
  October 2,  October 3,  September 28, 
  2009  2008  2007 
   
             
Stock Options $12,669  $13,046  $7,781 
Non-vested restricted stock with service and market conditions  3,144   3,935   2,501 
Non-vested restricted stock with service conditions  1,088   1,111   1,451 
Performance shares  5,003   3,525   655 
Employee Stock Purchase Plan  1,562   1,595   1,349 
          
  $23,466  $23,212  $13,737 
          
Share-based compensation for the fiscal year ended1, 2010, October 2, 2009, and October 3, 2008, includes approximately $2.1 million and $1.7 million, respectively, related to the portions of fiscal 2009 and fiscal 2008 short-term management incentive compensation that exceeded target metrics which were paid in common stock after year end. The Company anticipates an immaterial amount of share dilution as a result of this arrangement.respectively.
Employee Stock Purchase Plan
The Company maintains a domestic and an international employee stock purchase plan. Under these plans, eligible employees may purchase common stock through payroll deductions of up to 10% of compensation. The price per share is the lower of 85% of the market price at the beginning or end of each offering period (generally six months). The plans provide for purchases by employees of up to an aggregate of 8.1 million shares through December 31, 2012. Shares of common stock purchased under these plans in fiscal 2009, 2008, and 2007 were 1,058,736, 790,556, and 830,103, respectively. At October 2, 2009, there are 1.6 million shares available for purchase. The Company recognized compensation expense of $1.6 million for both the fiscal years ended October 2, 2009 and October 3, 2008, and $1.3 million for the fiscal year ended September 28, 2007.
             
  Fiscal Years Ended 
  October 1,  October 2,  October 3, 
(In thousands) 2010  2009  2008 
             
Stock Options $12,682  $10,518  $11,382 
Non-vested restricted stock with service and market conditions  689   3,144   3,935 
Non-vested restricted stock with service conditions  1,040   1,088   1,111 
Non-vested performance shares  19,545   5,003   3,525 
Management Incentive Plan stock awards  4,873   2,151   1,664 
Employee Stock Purchase Plan  1,912   1,562   1,595 
          
  $40,741  $23,466  $23,212 
          
Employee and Director Stock Option Plans
The Company has share-based compensation plans under which employees and directors may be granted options to purchase common stock. Options are generally granted with exercise prices at not less than the fair market value on the grant date, generally vest over 4 years and expire 7 or 10 years after the grant date. As of October 2, 2009,1, 2010, a total of 83.1 million shares are authorized for grant under the Company’s share-based compensation plans, with 18.415.3 million options outstanding. The number of common shares reserved for granting of future awards to employees and directors under these plans was 15.09.3 million at October 2, 2009.1, 2010. The remaining unrecognized compensation expense on stock options at October 2, 20091, 2010 was $16.0$21.1 million, and the weighted average period over which the cost is expected to be recognized is approximately 2.2 years.
As of October 2, 2009, the Company had 10 equity compensation plans under which its equity securities were authorized for issuance to its employees and/or directors:

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the 1994 Non-Qualified Stock Option Plan
the 1996 Long-Term Incentive Plan
the Directors’ 1997 Non-Qualified Stock Option Plan
the 1999 Employee Long-Term Incentive Plan
the Directors’ 2001 Stock Option Plan
the Non-Qualified Employee Stock Purchase Plan
the 2002 Employee Stock Purchase Plan
the Washington Sub, Inc. 2002 Stock Option Plan
the 2005 Long-Term Incentive Plan
the 2008 Director Long-Term Incentive Plan
Except for the 1999 Employee Long-Term Incentive Plan, the Washington Sub, Inc. 2002 Stock Option Plan and the Non-Qualified Employee Stock Purchase Plan, each of the foregoing equity compensation plans was approved by the Company’s stockholders. The 1999 Employee Long-Term Incentive Plan expired on April 26, 2009.
Non-Vested Restricted Stock Awards Issued in connection with the Fiscal Year 2008 Management Incentive PlanService and Market Conditions
The Company issued 238,706granted 576,688 shares of commonrestricted stock in fiscal year 2009 to certain key employees based on the Company’s exceeding target metrics under the fiscal year 2008 Management Incentive Plan. The Company recorded $1.7 million in expense during fiscal year ended October 3, 2008 as a resultwith service and market conditions on vesting. The remaining portion of this performance.these grants were fully vested and expensed during the first quarter of fiscal year 2010.
Non-Vested Restricted Stock Awards with Service Conditions
The Company’s share-based compensation plans provide for awards of restricted shares of common stock and other stock-based incentive awards to officers, other employees and certain non-employees.directors. Restricted stock awards are subject to forfeiture if employment terminates during the prescribed retention period (generally within four years ofperiod.
For the date of award).
Thefiscal year ended October 1, 2010, the Company granted 10,000, 50,000, and 38,000100,000 shares of restricted stock that vest in the fiscal years ended October 2, 2009, October 3, 2008, and September 28, 2007, respectively, withvarying amounts over a four year graded vesting.three-year period. The remaining unrecognized compensation expense on restricted stock with service conditions outstanding at October 2, 20091, 2010 was $0.4$1.6 million, and the weighted average period over which the cost is expected to be recognized is 2.9 years.
The Company also granted 37,500 shares of restricted stock duringFor the fiscal year ended October 2, 2009 the Company granted 47,500 shares of restricted stock that will vest in varying amounts over a two-year period (100% at the end of year 2).four-year period. The remaining unrecognized compensation expense on restricted stock with service conditions outstanding at October 2, 20091, 2010 was $0.1 million, and the weighted average period over which the cost is expected to be recognized is approximately1.5 years.
For the fiscal year ended October 3, 2008 the Company granted 50,000 shares of restricted stock that vest in varying amounts over a four-year period. The remaining unrecognized compensation expense on restricted stock with service conditions outstanding at October 1, 2010 was $0.1 million, and the weighted average period over which the cost is expected to be recognized is 1.7 years.
In addition, during botheach of the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, under the 2008 Director Long-Term Incentive Plan, the Company issued a total of 100,000 restricted stock awards to Directors with a three-year graded vesting. The remaining unrecognized compensation expense on restricted stock with service conditions outstanding at October 2, 20091, 2010 was $1.0$1.8 million. The weighted average period over which the cost is expected to be recognized is approximately 2.41.9 years.
Restricted StockPerformance Share Awards with Market Conditions and Service Conditions
The Company granted 576,688 and 606,488 shares of restricted stock during the fiscal years ended October 3, 2008, and September 28, 2007, respectively, with service and market conditions on vesting. If the restricted stock recipient meets the service condition but not the market condition in years 1, 2, 3 and 4, then the restricted stock vests 0% at the end of year 1, 33.3% at the end of year 2, 33.3% at the end of year 3 and 33.3% at the end of year 4. The market condition allows for accelerated vesting of the award as of the first, second and if not previously accelerated, the third anniversaries of the grant date. Specifically, if the Company’s stock performance meets or exceeds the 60th percentile of its selected peer group for the years ended on each of the first three anniversaries of the grant date, then 33.3% of the award vests upon each anniversary (up to 100%). The Company calculated a derived service period of

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approximately 3.0 years using a Monte-Carlo simulation to simulate a range of possible future stock prices for the Company and the members of the Company’s selected peer group.
The remaining unrecognized compensation expense on restricted stock with market and service conditions outstanding at October 2, 2009 was $0.6 million. This cost is expected to be recognized during the first quarter of fiscal 2010.
Performance Units with Milestone-Based Performance Conditions
The Company granted 219,000, 56,000, and 160,500 and 223,200 performance unitsawards with milestone-based performance conditions to non-executives during the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, respectively. The performance unitsawards will convert to common stock at such time that the performance conditions are deemed to be achieved. The performance unitsawards will be expensed over implicit performance periods ranging from 11-346-40 months. The Company will utilize both quantitative and qualitative criteria to judge whether the milestones are probable of achievement. If the milestones are deemed to be not probable of achievement, no expense will be recognized until such time as they become probable of achievement. If a milestone is initially deemed probable of achievement and subsequent to that date it is deemed to be not probable of achievement, the Company will discontinue recording expense on the units.awards. If the milestone is deemed to be improbable of achievement, any expense recorded on those performance unitsawards will be reversed. As of the fiscal year ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, the fair value of the performance unitsawards at the date of grant were $3.5 million, $0.6 million, $1.4 million, and $1.5$1.4 million, respectively. The Company issued 24,331 shares, 30,419 shares, 100,466 shares, and 103,688100,466 shares in fiscal year 2010, 2009, 2008, and fiscal 2007,year 2008, respectively as a result of milestone achievement. In addition, certain other milestones were deemed to be probable of achievement thus, the Company recorded total compensation expense of $1.2 million, $(0.1) million, and $1.2 million, and $0.7 million in the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, respectively.
2007 Executive Performance Share Awards
The Company awarded 725,000 performance shares based on future stock price appreciation to executives during the fiscal year ended October 3, 2008. Each executive hadOn June 10, 2009, the ability to earn Nominal (50% of Target), Target, Stretch (150% of Target), or no shares depending on performance within a three year period. On November 6, 2007 a base priceExecutive Performance Share Award was set (based on the trailing 60 day average stock price) and stock price hurdles were set (based on appreciation of 20%, 40% and 60% of the base price). Actual performance would have been measured using a rolling 60 day average and shares would have been locked in when Skyworks met or exceeded a stock price hurdle. Shares were not cumulative and each targeted stock price was a “hurdle” (there was no interpolation for performance between hurdles). Locked in shares would have been delivered to the executive at the end of the three year period as long as the executive was actively employed. If the Nominal stock price hurdle (1st Hurdle) was not met or exceeded by the end of the three year period then the shares would have expired. If a change of control had occured within the three year performance period then the executive would have received the higher of the actual amount earned (locked in) or Target (the last day of the 60 day average would have included the closing price on the date of the transaction).As of the fiscal year ended October 3, 2008, the fair value of the performance units at the date of grant was $7.5 million. These

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modified. The awards under this plan were forfeited by the executives on June 9, 2009 and replaced with the 2009 Executive Restricted Stock and Performance Share Awards as described below.
2009 Executive Restricted Stock and Performance Share Awards
On June 4, 2009, the Company gave its executives the opportunity to forfeit the aforementioned performance shares that were valuedoriginally granted on November 6, 2007 and the executives received in its place a modified award with both a restricted stock component and performance share component.
On June 10, 2009, the Company modified the November 6, 2007 performance shares by issuing 337,500 restricted stock awards based on a service condition. Thesecondition: The restricted shares willwould cliff vest on November 6, 2010 provided the executive continuescontinued employment with the Company through such date. TheAt November 6, 2010 the service condition was met and the Company released 337,500 shares to the executives.
Under the performance share award component can be earned byof the executive ifplan, the following conditions are met: The target relativeexecutives would earn up to 675,000 additional shares based on a comparison of (x) the change in Skyworks’ common stock price condition shall be deemed met on November 6, 2010 ifto (y) the percentage change in the price of the common stock of companies in a peer group over a three year period. The change in price of both the Company’s common stock price exceedsand each peer company’s common stock was determined by comparing its average stock price for the 6090 day period beginning November 6, 2007 to its average stock price for the 90 day period ending November 6, 2010. If the percentage change in Skyworks’ stock price exceeded the 70th percentile of the peer group, then the target metrics under the award would be deemed to have been met and all of the shares would have been earned. The Company determined that the Company’s relative stock price, measured as described above, did exceed the 70th percentile of athe peer group as selected by the Company’s compensation committee. Should such condition be metcommittee as of November 6, 2010. As a result, under the executive will be issued an additional 337,500terms of the plan, the shares of common stockwere earned and the executives were entitled to receive the shares in two tranches (50% on November 6, 2010 and 50% on November 6, 2011 should the executive continue employment with the Company through such dates). The stretch relative stock price condition shall be deemed met on November 6, 2010 ifCompany released 337,500 shares to the percentage changeexecutives. The Company recorded compensation expense of $3.2 million, $2.4 million, and $2.3 million, and in the pricefiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, respectively. The remaining unrecognized compensation expense on these performance share awards at October 1, 2010 was $0.8 million.
2010 Operating Margin Performance Share Awards
The Company awarded 0.9 million performance shares to executives and key employees based on operating margin performance for fiscal year 2010. The fair value of the

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Company’s stock price exceedsthese shares at target on the 70th percentilegrant date was $10.3 million. Each participant had the ability to earn minimum (50% of a peer grouptarget), target, stretch, or maximum (200% of target), depending on performance as selectedpublicly announced by the Company’s compensation committee. Should such condition be metCompany following the executive will be granted an additional 337,500fiscal year end. Upon achievement of the performance target, the participants would earn the corresponding number of shares issued as follows: One-third on the initial issuance date anniversary of common stock (50% on November 6,10, 2010 and 50%one-third on each of the second and third anniversary of the initial issuance date, providing the employee was actively employed. On November 6, 2011 should10, 2010, performance was met at the executive continue employment with the Company through such dates). The measurement period for both the aforementioned target relative stock price conditionmaximum level and the stretch stock price condition was deemed1.7 million performance shares were issued to have started on November 6, 2007,executives and will end on November 6, 2010. Compensation expense of $4.7 million has been recorded ratably between November 6, 2007 andkey employees. For the fiscal year ended October 2, 2009. The amount of additional1, 2010, the Company recorded compensation expense that will be recorded as a result of the modification of the November 6, 2007$10.7 million. The remaining unrecognized compensation expense on these performance share awards and the replacement of those awards with the 2009 Executive Restricted Stock and Performance Share Awards will be $1.7 million (assuming all service and performance conditions are achieved).at October 1, 2010 was $9.6 million.
2009 Operating Margin Performance Share Awards
The Company awarded 846,4560.8 million performance shares to executives and key employees based on operating margin performance for fiscal year 2009. Each participant hashad the ability to earn Minimum (50% of Target), Target, Stretch, or Maximum (200% of Target), depending on performance as publicly announced by the Company following the fiscal year end. Upon achievement of the performance target, the participants will earn the corresponding number of shares issued as follows: One-third on the initial issuance date anniversary of November 4, 2009 and one-third on each of the second and third anniversary of the initial issuance date, providing the employee is actively employed. As of November 4, 2009, performance was met at the maximum level. The Company’s performance earned 1.5 million shares, two-thirds of which have been released to the executives and key employees as of November 4, 2010 and one-third of which is to be released on the third anniversary assuming the employee is still actively employed. As of the fiscal year ended October 2, 2009,1, 2010, the fair value of the performance unitsawards at the date of grant was $6.7$13.3 million. At October 2, 2009,1, 2010, the Company had recorded total compensation expense of $2.7$7.0 million.

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Restricted Stock Awards Issued in Fiscal Year 2010 in connection with the Management Incentive Plans
The Company issued 298,830 shares of common stock in fiscal year 2010 in lieu of cash under the Management Incentive Plans. In November 2009, the Company issued 178,006 shares in lieu of cash under the Fiscal Year 2009 Management Incentive Plan for performance related to the second half of fiscal year 2009. In May 2010, 120,824 shares were issued to certain key employees for the first half of fiscal year 2010 based on the Company exceeding its target metrics under the Fiscal Year 2010 Management Incentive Plan. The Company recorded $4.8 million in expense related to the Fiscal Year 2010 Management Incentive Plan during the fiscal year. The expenses associated with the 2009 Management Incentive Plan were expensed during fiscal year 2009.
Share-Based Compensation Plans for DirectorDirectors
The Company has fourthree share-based compensation plans under which options and restricted stock have been granted for non-employee directors — the 1994 Non-Qualified Stock Option Plan, the 1997 Directors’ Non-Qualified Stock Option Plan, the Directors’ 2001 Stock Option Plan, and the 2008 Directors’ Long-Term Incentive Plan. Under the fourthree plans, a total of 2.21.9 million shares have been authorized for option grants. Under the current 2008 Directors’ Long-Term Incentive Plan, a total of 0.40.3 million shares are available for new grants as of October 2, 2009.1, 2010. The 2008 Directors’ Long-Term Incentive Plan is structured to provide options and restricted common stock to non-employee directors as follows: a new director receives a total of 25,000 options and 12,500 shares of restricted common stock upon becoming a member of the Board; and continuing directors receive 12,500 shares of restricted common stock after each Annual Meeting of Stockholders. Under this plan, the option price is the fair market value at the time the option is granted. All options granted are exercisable at 25% per year beginning one year from the date of grant. The maximum contractual term of the director plansawards is 10 years (excluding the 2008 Directors’ Long-Term Incentive Plan which has a maximum contractual term of 7 years).years. As of October 2, 2009,1, 2010, a total of 0.80.7 million options at a weighted average exercise price of $9.89$10.41 per share were outstanding under these four plans, and 0.7 million options were exercisable at a weighted average exercise price of $10.40$10.62 per share. The remaining unrecognized compensation expense on director stock options at October 2, 20091, 2010 was $0.2$0.1 million and the weighted average period over which the cost is expected to be recognized is approximately 1.10.5 years. There were 121,500, 105,000, and 60,000 options exercised under these plans during the fiscal yearyears ended October 1, 2010, October 2, 2009, and 60,000 options exercised under these plans during both the fiscal years ended October 3, 2008, and September 28, 2007.respectively. The above-mentioned activity for the share-based compensation plans for directors is included in the option tables below.
Distribution and Dilutive Effect of OptionsEmployee Stock Purchase Plan
The following table illustratesCompany maintains a domestic and an international employee stock purchase plan. Under these plans, eligible employees may purchase common stock through payroll deductions of up to 10% of compensation. The price per share is the grant dilutionlower of 85% of the market price at the beginning or end of each offering period (generally six months). The plans provide for purchases by employees of up to an aggregate of 8.1 million shares through December 31, 2012. Shares of common stock purchased under these plans in fiscal years 2010, 2009, and exercise dilution:2008 were 640,341, 1,058,736, and 790,556, respectively. At October 1, 2010, there are 1.0 million shares available for purchase. The Company recognized compensation expense of $1.9 million for the fiscal year ended October 1, 2010 and $1.6 million for both the fiscal years ended October 2, 2009 and October 3, 2008.

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  Fiscal Years Ended
  October 2, October 3, September 28,
(In thousands) 2009 2008 2007
   
Shares of common stock outstanding  172,815   165,592   161,101 
             
             
Granted  3,596   3,002   3,192 
Cancelled/forfeited  (4,702)  (3,628)  (4,495)
Expired         
             
Net options granted  (1,106)  (626)  (1,303)
Grant dilution (1)  (0.6%)  (0.4%)  (0.8%)
             
Exercised  5,203   2,582   1,707 
             
Exercise dilution (2)  3.0%  1.6%  1.1%
(1)The percentage for grant dilution is computed based on net options granted as a percentage of shares of common stock outstanding.
(2)The percentage for exercise dilution is computed based on options exercised as a percentage of shares of common stock outstanding.
General Option Information
A summary of stock option transactions follows (shares in thousands):
                        
 Options Outstanding   Options Outstanding 
 Shares Available Weighted average  Shares Available Weighted average 
 for exercise price of  for exercise price of 
 Grant Shares shares under plan 
  
Balance outstanding at September 29, 2006 15,031 30,878 $12.17 
Granted (1)  (4,524) 3,192 6.78 
Exercised   (1,707) 4.84 
Cancelled/forfeited (2) 3,247  (4,495) 12.47 
Additional shares reserved    
        Grant Shares shares under plan 
Balance outstanding at September 28, 2007 13,754 27,868 $11.96  13,754 27,868 $11.96 
Granted (1)  (5,965) 3,002 9.25   (5,965) 3,002 9.25 
Exercised   (2,582) 6.99    (2,582) 6.99 
Cancelled/forfeited (2) 826  (3,628) 17.52  826  (3,628) 17.52 
Additional shares reserved 720    720   
              
Balance outstanding at October 3, 2008 9,335 24,660 $11.38  9,335 24,660 $11.38 
Granted (1)  (9,342) 3,596 7.33   (9,342) 3,596 7.33 
Exercised   (5,203) 7.43 
Cancelled/forfeited (2) 2,478  (4,702) 16.32 
Additional shares reserved 12,500   
       
Balance outstanding at October 2, 2009 14,971 18,351 $10.44 
       

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      Options Outstanding 
  Shares Available      Weighted average 
  for      exercise price of 
  Grant  Shares  shares under plan 
Exercised     (5,203)  7.43 
Cancelled/forfeited (2)  2,478   (4,702)  16.32 
Additional shares reserved  12,500       
          
Balance outstanding at October 2, 2009  14,971   18,351  $10.44 
Granted (1)  (5,737)  3,234   12.57 
Exercised     (4,823)  8.40 
Cancelled/forfeited (2)  113   (1,473)  21.22 
          
Balance outstanding at October 1, 2010  9,347   15,289  $10.49 
          
 
(1) “Granted” under “Shares Available for Grant” at the maximum amount of shares per the share-based plans includes restricted and performance stock awards for the years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 of 1.6 million, 3.8 million, 2.0 million, and 0.92.0 million shares, respectively. Pursuant to the plan under which they were awarded, these restricted and performance stock grants are deemed equivalent to the issue of 2.5 million, 5.7 million, 3.0 million, and 1.33.0 million stock options, respectively.
 
(2) “Cancelled” under “Shares Available for Grant” at the maximum amount of shares per the share-based plans do not include any cancellations under terminated plans. For the years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, cancellations under terminated plans were 1.2 million, 3.0 million, 2.5 million, and 1.62.5 million shares, respectively. “Cancelled” under “Shares Available for Grant” also include restricted and performance grants cancellations of 1.40.1 million, 0.21.4 million, and 0.2 million for the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, respectively. Pursuant to the plan under which they were awarded, these cancellations are deemed

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equivalent to the cancellation of 2.10.1 million, 0.32.1 million, and 0.3 million stock options for the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, respectively.
Options exercisable at the end of each fiscal year (shares in thousands):
                
 Weighted average Weighted average
 Shares exercise price Shares exercise price
  
2010  7,921  $11.09 
2009 11,398 $12.20   11,398  $12.20 
2008 17,687 $12.86   17,687  $12.86 
2007 20,909 $13.72 
The following table summarizes information concerning currently outstanding and exercisable options as of October 2, 20091, 2010 (shares and aggregate intrinsic value in thousands):
                                 
      Options Outstanding         Options Exercisable  
      Weighted             Weighted Weighted  
      average Weighted         average average  
      remaining average Aggregate     remaining exercise Aggregate
Range of exercise Number contractual exercise price Intrinsic Options contractual price per Intrinsic
prices outstanding life (years) per share Value exercisable life (years) share Value
 
$3.45 — $6.73  4,295   5.3  $5.71  $26,577   2,606   4.8  $5.46  $16,795 
$6.74 — $8.48  3,707   7.2  $7.25   17,258   371   5.7  $7.50   1,632 
$8.54 — $9.33  5,093   5.9  $9.18   13,879   3,336   5.0  $9.10   9,338 
$9.40 — $14.56  2,286   3.8  $11.07   2,867   2,115   3.3  $11.13   2,582 
$15.18 — $21.31  2,385   1.5  $20.75      2,385   1.5  $20.75    
$21.93 — $61.40  585   1.2  $31.85      585   1.2  $31.85    
                                 
   18,351   5.0  $10.44  $60,581   11,398   3.7  $12.20  $30,347 
                                 
                                 
  Options Outstanding  Options Exercisable 
      Weighted              Weighted       
      average  Weighted          average  Weighted    
      remaining  average  Aggregate      remaining  average  Aggregate 
Range of exercise Number  contractual  exercise price  Intrinsic  Options  contractual  exercise price  Intrinsic 
prices outstanding  life (years)  per share  Value  exercisable  life (years)  per share  Value 
$3.45 - $6.73  2,591   4.6  $5.84  $38,373   2,013   4.4  $5.64  $30,219 
$6.74 - $7.50  2,873   6.2  $7.19   38,690   581   5.9  $7.17   7,826 
$7.51 - $9.33  3,852   5.0  $9.14   44,339   2,657   4.3  $9.09   30,713 
$9.40 - $12.07  3,714   5.4  $11.55   33,787   868   3.2  $10.12   9,150 
$12.08 - $22.29  1,830   2.6  $18.41   4,792   1,373   1.4  $19.33   2,495 
$23.96 - $39.8  429   0.4  $29.96      429   0.4  $29.96    
                         
   15,289   4.9  $10.49  $159,981   7,921   3.6  $11.09  $80,403 
                         
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $11.90$20.65 as of October 2, 2009,1, 2010, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised for the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 were $16.5$40.8 million, $20.9 million, and $7.5 million, and $4.4 million, respectively. The intrinsic fair value of stock options vested at October 1, 2010, October 2,

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2009, and October 3, 2008 and September 28, 2007 were $30.2 million, $39.1 million, $54.7 million, and $58.8$54.7 million, respectively. The total number of in-the-money options exercisable as of October 2, 20091, 2010 was 7.76.5 million.
Restricted Shares and Performance UnitShare Award Information
A summary of the share transactions follows (shares in thousands):
                
 Weighted average  Weighted average 
 Grant-date  Grant-date 
 Shares fair value  Shares fair value 
  
Balance Outstanding at September 29, 2006 1,154 $5.17 
Non-Vested Awards Outstanding at September 28, 2007 1,220 $6.04 
Granted 768 6.86  827 8.82 
Vested(1)  (616) 5.51   (691) 6.08 
Forfeited  (86) 5.41   (47) 6.76 
          
Balance Outstanding at September 28, 2007 1,220 $6.04 
Non-Vested Awards Outstanding at October 3, 2008 1,309 $7.75 
Granted 827 8.82  754 8.27 
Vested(1)  (691) 6.08   (1,012) 7.22 
Forfeited  (47) 6.76   (136) 8.33 
          
Balance Outstanding at October 3, 2008 1,309 $7.75 
Non-Vested Awards Outstanding at October 2, 2009 915 $8.69 
Granted 754 8.27  2,037 11.50 
Vested(1)  (1,023) 7.22   (1,246) 9.64 
Forfeited  (125) 8.33   (11) 7.18 
          
Balance Outstanding at October 2, 2009 915 $8.69 
Non-Vested Awards Outstanding at October 1, 2010 1,695 $9.03 
          

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(1) Restricted stock vested during the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 were 484,997417,979 shares, 590,092743,062 shares, and 512,256590,092 shares, respectively. Performance units vestedawards issued during the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 were 528,846 shares, 30,419 shares, 100,466 shares, and 103,688100,466 shares, respectively. During the fiscal year ended October 1, 2010 and October 2, 2009, 298,830 shares and 238,706 shares of common stock were issued to certain key employees based on exceeding target metrics of the fiscal year 2008 management incentive program.programs.
Valuation and Expense Information under ASC 718
The following table summarizes pre-tax share-based compensation expense related to employee stock options, employee stock purchases, restricted stock grants, and performance stock grants for the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 which was allocated as follows:
                        
 Fiscal Years Ended  Fiscal Years Ended 
 October 2, October 3, September 28,  October 1, October 2, October 3, 
(In thousands) 2009 2008 2007  2010 2009 2008 
  
Cost of sales 3,129 2,974 1,274  3,857 3,129 2,974 
Research and development 6,195 8,700 5,590  7,419 6,195 8,700 
Selling, general and administrative 14,142 11,538 6,873  29,465 14,142 11,538 
              
 
Share-based compensation expense included in operating expenses $23,466 $23,212 $13,737  $40,741 $23,466 $23,212 
              
During both of the fiscal years ended October 1, 2010 and October 2, 2009, October 3, 2008, and September 28, 2007, the Company capitalized share-based compensation expense of $0.1 million,million. During the fiscal year ended October 3, 2008, the Company capitalized share-based compensation expense of $(0.1) million and $0.3 million, respectively, in inventory.
The weighted-average estimated grant date fair value of employee stock options granted during the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 were $5.76 per share, $3.93 per share, $4.78 per share, and $3.82$4.78 per share, respectively, using the Black Scholes option-pricing model with the following weighted-average assumptions:

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 Fiscal Years Ended Fiscal Years Ended 
 October 2, October 3, September 28, October 1, October 2, October 3, 
 2009 2008 2007 2010 2009 2008 
    
Expected volatility  60.90%  53.87%  57.32%  56.19%  60.90%  53.87%
Risk free interest rate (7 year contractual life options)  2.36%  3.08%  4.18%  1.12%  2.36%  3.08%
Risk free interest rate (10 year contractual life options)  2.67%  3.54%  4.30% N/A  2.67%  3.54%
Dividend yield 0.00 0.00 0.00  0.00 0.00 0.00 
Expected option life (7 year contractual life options) 4.42 4.42 4.57  4.23 4.42 4.42 
Expected option life (10 year contractual life options) 5.79 5.80 5.86  N/A 5.79 5.80 
The Company used an arithmetic average of historical volatility and implied volatility to calculate its expected volatility during the year ended October 2, 2009.1, 2010. Historical volatility was determined by calculating the mean reversion of the weekly-adjusted closing stock price over the 6.367.40 years between June 25, 2002 and November 4, 2008.10, 2009. The implied volatility was calculated by analyzing the 52-week minimum and maximum prices of publicly traded call options on the Company’s common stock. The Company concluded that an arithmetic average of these two calculations provided for the most reasonable estimate of expected volatility under the guidance of ASC 718.
The risk-free interest rate assumption is based upon observed Treasury bill interest rates (risk free) appropriate for the expected life of the Company’s employee stock options.
The expected life of employee stock options represents a calculation based upon the historical exercise, cancellation and forfeiture experience for the Company over the 6.257.25 years between June 25, 2002 and October 3, 2008. The Company deemed that exercise, cancellation and forfeiture experience in 2008 was consistent with historical norms thus expected life was not recalculated at October 2, 2009. The Company determined that it had two populations with unique exercise behavior. These populations included stock options with a contractual life of 7 years and 10 years, respectively.

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As share-based compensation expense recognized in the Consolidated Statement of Operations for the fiscal years ended October 2, 2009, October 3, 2008, and September 28, 2007 is actually based on awards ultimately expected to vest, it has been reduced for annualized estimated forfeitures of 11.10%, 11.79%, and 12.85%, respectively. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.
STOCK OPTION DISTRIBUTION
The following table summarizes information concerning currently outstanding options as of October 2, 2009 (shares in thousands):
         
      % of total
      common
  Number stock
  outstanding outstanding
   
Stock options held by employees and directors  16,708   9.67%
Stock options held by non-employees (excluding directors) (1)  1,643   0.95%
         
   18,351   10.62%
         
(1)Due to a previous business combination, certain non-employees hold Skyworks stock options.
As of October 2, 2009, October 3, 2008, and September 28, 2007, non-employees, excluding directors, held 1.6 million, 4.1 million, and 6.4 million options at a weighted average exercise price per share of $21.18, $20.69, and $20.62, respectively.
12. EMPLOYEE BENEFIT PLAN, PENSIONS AND OTHER RETIREE BENEFITS
The Company maintains the following pension and retiree benefit plans:
401(k) plan covering substantially all employees based in the United States
Pre-merger defined benefit pension and retiree health plans covering certain former employees
401(k) Plan:
The Company maintains a 401(k) plan covering substantially all of its employees. All ofemployees based in the Company’sUnited States under which all employees who are at least 21 years old are eligible to receive discretionary Company contributions under the 401(k) plan.contributions. Discretionary Company contributions are determined by the Board of Directors and may be in the form of cash or the Company’s stock. The Company has generally contributed a match of up to 4.0% of an employee’s annual eligible compensation. For the fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, the Company contributed shares of 0.3 million, 0.7 million, and 0.6 million, respectively, and recognized expense for 0.7of $4.8 million, 0.6$4.6 million, and 0.7$5.0 million, shares, respectively,respectively.
Pre-Merger Defined Benefit Pension and Retiree Health Plans:
The Pension Benefits and Retiree Medical Benefits plans identified below were inherited as part of the Company’s common stock valued at $4.6 million, $5.0 million,merger in 2002 that created Skyworks. Since the plans were inherited, no new participants have been added. In accordance with ASC 715, the liability and $4.8 million, respectively, to fundrelated plan assets have been reported in the Company’s obligation underconsolidated balance sheet as follows (in thousands):
                 
  Pension Benefits  Retiree Medical Benefits 
  Fiscal Years Ended  Fiscal Years Ended 
  October 1,  October 2,  October 1,  October 2, 
  2010  2009  2010  2009 
   
Benefit obligation at end of fiscal year $3,035  $3,120  $  $431 
Fair value of plan assets at end of fiscal year  2,650   2,652       
             
Funded status $(385) $(468) $  $(431)
             
The Company incurred net periodic benefit costs of $0.1 million for pension benefits during the 401(k) plan.fiscal year ended October 1, 2010, and $0.2 million for pension benefits in fiscal year ending October 2, 2009.

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The Company realized a benefit of $0.4 million for the fiscal year ended October 1, 2010 related to the curtailment of the Retiree Medical Benefits Health Plan, and incurred net periodic benefit of $0.4 million in fiscal year ending October 2, 2009. In fiscal year 2008, the Company began phasing out its funding of retiree medical benefits. On September 18, 2007, a letter was mailedthe Retiree Medical Benefits Health Plan and participants were informed that Skyworks’ contributions to the participants of the Retiree Health Plan informing them of the Company’s plan to phase out the Planwould be phased-out over a three year period effective January 2008. Skyworks contributions will be phased out on the following basis:as follows:
   
Calendar  
Year Skyworks
2008 Employer portion of contribution will be reduced by 20%
2009 Employer portion of contribution will be reduced by 40%
2010 Employer portion of contribution will be reduced by 80%
2011 Employer portion of contribution will be reduced by 100%
The13. COMMITMENTS
In April 2010, the Company incurred net periodic benefit costs of $0.2 million for pension benefits during the fiscal year ended October 2, 2009, and $0.1 million for pension benefits in each of the fiscal years ending October 3, 2008, and September 28, 2007, respectively.
The Company realizedentered into a credit of $0.4 million for the fiscal year ended October 2, 2009 relatedmanufacturing services supply agreement which contained a minimum purchase obligation. Pursuant to the curtailmentterms of this agreeement, the retiree medical benefits health plan, and incurred net periodic benefit cost of $0.1Company is committted to approximately $13 million in eachminimum purchases between April 2010 and December 2010. As of October 1, 2010, the fiscal years ending October 3, 2008 and September 28, 2007, respectively.

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The Company adopted ASC 715-Compensation-Retirement Benefits(“ASC 715”) on September 28, 2007, onexpects to meet the required prospective basis. In accordance with ASC 715, the funded status as of September 28, 2007, is recorded as a liability in the accompanying consolidated balance sheet. The funded status of the Company’s principal defined benefit and retiree medical benefit plans are as follows (in thousands):
                 
  Pension Benefits  Retiree Medical Benefits 
  Fiscal Years Ended  Fiscal Years Ended 
  October 2,  October 3,  October 2,  October 3, 
  2009  2008  2009  2008 
   
Benefit obligation at end of fiscal year $3,120  $3,229  $431  $843 
Fair value of plan assets at end of fiscal year  2,652   2,961       
             
Funded status $(468) $(268) $(431) $(843)
             
13. COMMITMENTSminimum purchase obligations under this agreement.
The Company has various operating leases primarily for computer equipment and buildings. Rent expense amounted to $7.6 million, $8.0 million, $8.6 million, and $8.5$8.6 million in fiscal years ended October 1, 2010, October 2, 2009, and October 3, 2008, and September 28, 2007, respectively. Purchase options may be exercised, at fair market value, at various times for some of these leases. Future minimum payments under these non-cancelable leases are as follows (in thousands):
     
Fiscal Year    
2010 $6,702 
2011  2,910 
2012  822 
2013  13 
2014   
Thereafter   
    
  $10,447 
    
The Company is attempting to sublet certain properties that were vacated upon the exit of the baseband product area and, if successful, future operating lease commitments will be partially offset by proceeds received from the subleases.
     
Fiscal Year    
 
2011 $5,553 
2012  4,289 
2013  2,985 
2014  2,663 
2015  2,293 
Thereafter  4,028 
    
  $21,811 
    
In addition, the Company has entered into licensing agreements for intellectual property rights and maintenance and support services. Pursuant to the terms of these agreements, the Company is committed to making aggregate payments of $4.2$4.1 million, $3.4 million, $1.5$3.0 million, and $0.6$0.7 million in fiscal years 2010, 2011, 2012, and 2013, respectively.
14. CONTINGENCIES
From time to time, various lawsuits, claims and proceedings have been, and may in the future be, instituted or asserted against the Company, including those pertaining to patent infringement, intellectual property, environmental, product liability, safety and health, employment and contractual matters.
Additionally, the semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark and other intellectual property rights to technologies that are important to ourthe Company’s business and have demanded and may in the future demand that the Company license their technology. The outcome of any such litigation cannot be predicted with certainty and some such lawsuits, claims or proceedings may be disposed of unfavorably to the Company. IntellectualGenerally speaking, intellectual property disputes often have a risk of injunctive relief, which, if imposed against the Company, could materially and adversely affect the Company’s financial condition, or results of operations.
From time to time the Company is also involved in legal proceedings in the ordinary course of business.
The Company believes that there is no such ordinary course litigation pending that will have, individually or in the aggregate, a material adverse effect on its business.

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15. GUARANTEES AND INDEMNITIES
The Company has made no guarantees. Thecontractual guarantees for the benefit of third parties. However, the Company generally indemnifies its customers from third-party intellectual property infringement litigation claims related to its products, and, on occasion, also provides other indemnities related to product sales. In connection with certain facility leases, the Company has indemnified its lessors for certain claims arising from the facility or the lease.
The Company indemnifies its directors and officers to the maximum extent permitted under the laws of the state of Delaware. The duration of the indemnities varies, and in many cases is indefinite. The indemnities to customers in connection with product sales generally are subject to limits based upon the amount of the related product sales and in many cases are subject to geographic and other restrictions. In certain instances, the Company’s indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities in the accompanying consolidated balance sheets.sheets and does not expect that such obligations will have a material adverse impact on its financial condition or results of operations.
16. RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges consists of the following (in thousands):
            
             Fiscal Years Ended 
 Fiscal Years Ended  October 1, October 2, October 3, 
 October 2,
2009
 October 3,
2008
 September 28,
2007
  2010 2009 2008 
     
Asset impairments $5,616  $  $  $(1,040) $5,616 $ 
Restructuring and other charges  10,366   567   5,730   10,366 567 
                
 $15,982  $567  $5,730  $(1,040) $15,982 $567 
                
2009 RESTRUCTURING CHARGES AND OTHER
On January 22, 2009, the Company implemented a restructuring plan to realign its costs given current business conditions.
The Company exited its mobile transceiver product area and reduced global headcount by approximately 4%, or 150 employees which resulted in a reduction to annual operating expenditures of approximately $20 million. The Company recorded various charges associated with this action. In total, they recorded $16.0 million of restructuring and other charges and $3.5 million in inventory write-downs that were charged to cost of goods sold.
The $16.0 million charge includes the following: $4.5 million related to severance and benefits, $5.6 million related to the impairment of certain long-lived assets which were written down to their salvage values, $2.1 million related to the exit of certain operating leases, $2.3 million related to the impairment of technology licenses and design software, and $1.5 million related to other charges. These charges total $16.0 million and are recorded in restructuring and other charges.
The Company made cash payments related to the restructuring plan of $5.9$1.5 million during the fiscal year ended October 2, 2009.2010 and recorded a gain of $1.0 million on the sale of a capital asset previously impaired during the 2009 restructuring.

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Activity and liability balances related to the fiscal year 2009 restructuring actions are as follows (in thousands):
                                        
 License and        License and       
 Facility Software Write-offs Workforce Asset    Facility Software Write- Workforce Asset   
 Closings and Other Reductions Impairments Total  Closings offs and Other Reductions Impairments Total 
    
Charged to costs and expenses $1,967 $3,892 $4,507 $5,616 $15,982  $1,967 $3,892 $4,507 $5,616 $15,982 
Other 9  (368) 161   (198) 9  (368) 161   (198)
Non-cash items   (955)   (5,616)  (6,571)   (955)   (5,616)  (6,571)
Cash payments  (766)  (983)  (4,185)   (5,934)  (766)  (983)  (4,185)   (5,934)
                      
Restructuring balance, October 2, 2009 $1,210 $1,586 $483 $ $3,279  $1,210 $1,586 $483 $ $3,279 
Other 450 248  (247)  451 
Cash payments  (648)  (657)  (236)   (1,541)
                      
Restructuring balance, October 1, 2010 $1,012 $1,177 $ $ $2,189 
           
The remaining restructuring reserve at October 2, 2009 of $3.3 million is classified as other current liabilities. The Company anticipates completing the restructuring plan and remitting the remaining payments within the next fifteen months.

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17. EARNINGS PER SHARE
            
 Fiscal Years Ended   
             October 1, October 2, October 3, 
(In thousands, except per share amounts) Fiscal Years Ended  2010 2009 2008 
 October 2, October 3, September 28, 
 2009 2008 2007 
     
Net income $93,289 $111,006 $57,650  $137,294 $94,983 $111,006 
              
  
Weighted average shares outstanding — basic 167,047 161,878 159,993  175,020 167,047 161,878 
Effect of dilutive stock options and restricted stock 2,093 2,172 1,071  5,928 2,093 2,172 
Dilutive effect of Junior Notes  705  
Dilutive effect of Convertible Notes 523   
Dilutive effect of 4.75% Notes   705 
Dilutive effect of 2007 Convertible Notes 1,790 523  
              
Weighted average shares outstanding — diluted 169,663 164,755 161,064  182,738 169,663 164,755 
              
  
Net income per share — basic $0.56 $0.69 $0.36  $0.78 $0.57 $0.69 
Effect of dilutive stock options 0.01 0.01   0.03 0.01 0.02 
              
Net income per share — diluted $0.55 $0.68 $0.36  $0.75 $0.56 $0.67 
              
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share includes the dilutive effect of equity based awards using the treasury stock method, the Junior Notes on an if-converted basis, and the 2007 Convertible Notes using the treasury stock method, if their effect is dilutive.method.
Equity based awards exercisable for approximately 4.6 million shares, 16.5 million shares and 23.0 million shares were outstanding but not included in the computation of earnings per share for the fiscal year ended October 1, 2010, October 2, 2009 and October 3, 2008, respectively, as their effect would have been anti-dilutive.
Junior Notes convertible into approximately 5.5 million shares and equity based awards exercisable for approximately 19.3 million shares were outstanding but not included in the computation of earnings per share for the fiscal year ended September 28, 2007 as their effect would have been anti-dilutive. If the Company had earned at least $78.8 million in net income for the fiscal year ended September 28, 2007 the Junior Notes would have been dilutive to earnings per share.
In addition, the Company issued $200.0 million aggregate principal amount of convertible subordinated notes (“2007 Convertible Notes”) in March 2007. These 2007 Convertible Notes contain cash settlement provisions, which permit the application of the treasury stock method in determining potential share dilution of the conversion spread should the share price of the Company’s common stock exceed $9.52. It has been the Company’s historical practice to cash settle the principal and interest components of convertible debt instruments, and it is the Company’s intention to continue to do so in the future, including settlement of the 2007 Convertible Notes issued in March 2007. These shares have not been included in the computation of earnings per sharefuture. The convertible debt was anti-dilutive for the fiscal year ended October 3, 2008 or September 28, 2007 as their effect would have been anti-dilutive.and therefore was not included in the calculation of diluted earnings per share.
18. SEGMENT INFORMATION AND CONCENTRATIONS
In accordance with ASC 280-Segment Reporting(“ASC 280”), the Company has one reportable operating segment which designs, develops, manufactures and markets proprietary semiconductor products, including intellectual property, for manufacturers of wireless communication products.property. ASC 280 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and in interim reports to shareholders. The method for determining what information to report is based on management’s organizationuse of segments withinfinancial information for the Company forpurposes of assessing performance and making operating decisions and assessing financial performance.decisions. In evaluating financial performance and making operating decisions, management primarily uses sales andconsolidated net revenue, gross profit, operating profit as the measure of the segments’ profit or loss. All of the and earnings per share. The

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Company’s operating segmentsbusiness units share similar economic characteristics, as they have a similar long term business model, and have similarmodels, research and development expenses and similar selling, general and administrative expenses, thus,expenses. Furthermore, the Company’s chief decision makers base operating decision on consolidated financial information. The Company has concluded at October 2, 20091, 2010 that it has only one reportable operating segment. The Company will re-assess its conclusions at least annually.

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GEOGRAPHIC INFORMATION
Net revenues by geographic area are presented based upon the country of destination. Net revenues by geographic area are as follows (in thousands):
                        
 Fiscal Years Ended  Fiscal Years Ended 
 October 2, October 3, September 28,  October 1, October 2, October 3, 
 2009 2008 2007  2010 2009 2008 
     
United States $76,435 $79,952 $66,868  $115,610 $76,435 $79,952 
Other Americas 26,078 10,636 11,230  36,724 26,078 10,636 
              
Total Americas 102,513 90,588 78,098  152,334 102,513 90,588 
  
China 414,208 410,645 293,035  628,858 414,208 410,645 
South Korea 174,744 184,208 128,253  144,758 174,744 184,208 
Taiwan 48,443 86,544 101,107  51,353 48,443 86,544 
Other Asia-Pacific 23,098 36,005 98,200  30,922 23,098 36,005 
              
Total Asia-Pacific 660,493 717,402 620,595  855,891 660,493 717,402 
  
Europe, Middle East and Africa 39,571 52,027 43,051  63,624 39,571 52,027 
              
  
 $802,577 $860,017 $741,744  $1,071,849 $802,577 $860,017 
              
The Company’s revenues by geography do not necessarily correlate to end market demand by region. For example, if the Company sells a power amplifier module to a customer in South Korea, the sale is recorded within the South Korea account although that customer, in turn, may integrate that module into a product sold to an end customer in a service provider (its customer) in Africa, China, Europe, the Middle East, the Americas, or within South Korea.different geography.
GeographicNet property, plant and equipment balances, including property held for sale, are based on the physical locations within the indicated geographic areas and are as follows (in thousands):
                
 As of  As of 
 October 2, October 3,  October 1, October 2, 
 2009 2008  2010 2009 
     
United States $100,254 $114,794  $104,846 $100,254 
Mexico 61,455 56,378  98,667 61,455 
Other 590 2,188  850 590 
          
 $162,299 $173,360  $204,363 $162,299 
          
CONCENTRATIONS
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. Trade accounts receivables are primarily derived from sales to manufacturers of communications and consumer products.products and electronic component distributors. Ongoing credit evaluations of customers’ financial condition are performed and collateral, such as letters of credit and bank guarantees, are required whenever deemed necessary.
AsIn fiscal year 2010, the Company had three customers, each with greater than ten percent of October 2, 2009, Motorola, Inc., LG Electronics,our net revenues: Samsung, Nokia and Samsung Electronics Co. accounted for approximately 12%, 11% and 11%, respectively, of the Company’s gross accounts receivable.Foxconn.
As of October 3, 2008, Motorola, Inc., Samsung Electronics Co., and Sony Ericsson Mobile Comm. AB accounted for approximately 14%, 12% and 10%, respectively, of the Company’s gross accounts receivable.
The following customers accounted for 10% or more of net revenues:
             
  Fiscal Years Ended
  October 2,
2009
 October 3,
2008
 September 28,
2007
   
Sony Ericsson Mobile Communications AB  12%  18%  22%
Samsung Electronics Co  15%  14%  11%
Asian Information Technology, Inc  11%  11%  11%
Motorola, Inc  *   *   16%
*Customers accounted for less than 10% of net revenues.

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19. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
                                        
 First Second Third Fourth   First Second Third Fourth   
 Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year 
            
Fiscal 2009(2)
 
Fiscal 2010
 
Net revenues $210,228 $172,990 $191,213 $228,146 $802,577  $245,138 $238,058 $275,370 $313,283 1,071,849 
Gross profit 83,867 64,875 76,950 92,528 318,220  102,554 99,854 118,266 136,159 456,833 
Net income 22,024  (4,589) 19,849 56,005 93,289  28,010 27,744 34,736 46,804 137,294 
Per share data (1)  
Net income, basic 0.13  (0.03) 0.12 0.33 0.56  0.16 0.16 0.20 0.26 0.78 
Net income, diluted 0.13  (0.03) 0.12 0.32 0.55  0.16 0.15 0.19 0.25 0.75 
  
Fiscal 2008
 
Fiscal 2009 (2,3)
 
Net revenues $210,533 $201,708 $215,210 $232,566 $860,017  $210,228 $172,990 $191,213 $228,146 $802,577 
Gross profit 82,338 80,367 86,434 93,824 342,963  83,867 64,875 76,950 92,528 318,220 
Net income 19,078 16,673 20,466 54,789 111,006 
Net income (loss) 23,584  (5,678) 18,740 58,337 94,983 
Per share data (1)  
Net income, basic 0.12 0.10 0.13 0.33 0.69 
Net income, diluted 0.12 0.10 0.12 0.33 0.68 
Net income (loss), basic 0.14  (0.03) 0.11 0.34 0.57 
Net income (loss), diluted 0.14  (0.03) 0.11 0.33 0.56 
 
(1) Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding and included common stock equivalents in each period. Therefore, the sums of the quarters do not necessarily equal the full year earnings per share.
 
(2) During the second quarter of fiscal year 2009, the Company implemented a restructuring plan to reduce global headcount by approximately 4%, or 150 employees. The total charges related to the plan were $19.4 million. Due to accounting classifications, the charges associated with the plan are recorded in various lines and are summarized as follows: Cost of goods sold adjustments include approximately $3.5 million of inventory write-downs. Restructuring and other charges primarily consisted of $4.5 million related to severance and benefits, $5.6 million related to the impairment of long-lived assets, $2.0 million related to lease obligations, $2.3 million related to the impairment of technology licenses and design software and $1.5 million related to other charges.
(3)Effective October 3, 2009, the Company adopted ASC 470-20-Debt, Debt with Conversion and Other Options(“ASC 470-20”) in accordance with GAAP. The Company’s financial statements and the accompanying footnotes for all prior periods presented have been adjusted to reflect the retrospective adoption of this new accounting principle.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures.
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of October 2, 2009.1, 2010. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,

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including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on management’s evaluation of our disclosure controls and procedures as of October 2, 2009,1, 2010, our chief executive officer and chief

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financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in internal controls over financial reporting.
No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the fiscal quarter ended October 2, 20091, 2010 that have materially affected, or is reasonably likely to materially affect, Skyworks’the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, 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 and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of October 2, 2009.1, 2010. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on their assessment, management concluded that, as of October 2, 2009,1, 2010, the Company’s internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page 48.45.
ITEM 9B. OTHER INFORMATION.
None.The following information would have otherwise been disclosed by the Company in a current report on Form 8-K but for the timing of the filing of this Annual Report on Form 10-K

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Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 23, 2010, the Company amended and restated the Change of Control / Severance Agreement of Mr. David J. Aldrich, the Company’s Chief Executive Officer (the “Agreement”). Specifically, the Agreement was amended as follows: (1) the initial term of the Agreement was extended for three (3) years until January 22, 2014, at which time the Agreement will become renewable on an annual basis by mutual agreement of the parties for up to five (5) additional one year periods; and (2) in order to ensure that Performance Share Awards (“PSAs”) issued to Mr. Aldrich continue to be treated as performance based compensation under Section 162(m) of the Internal Revenue Code, the Agreement was amended to clarify that if Mr. Aldrich is involuntarily terminated, terminates his employment for good reason or for no reason, he is entitled to receive only the number of performance shares under outstanding PSAs that he would have received had he actually remained employed through the end of the performance period applicable to such PSAs. All other terms and conditions of the Agreement remain the same.

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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information under the captions “Directors and Executive Officers”, “Corporate Governance-Committees of the Board of Directors” and “Other Matters-Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for the 20102011 Annual Meeting of Stockholders is incorporated herein by reference.
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We make available our code of business conduct and ethics free of charge through our website, which is located at www.skyworksinc.com. We intend to disclose any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC and the NASDAQ Global Select Market by posting any such amendment or waivers on our website and disclosing any such waivers in a Form 8-K filed with the SEC.
ITEM 11. EXECUTIVE COMPENSATION.
The information to be included under the caption “Information about Executive and Director Compensation” in our definitive proxy statement for the 20102011 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information to be included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our definitive proxy statement for the 20102011 Annual Meeting of Stockholders is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information to be included under the captions “Certain Relationships and Related Transactions” and “Corporate Governance-Director Independence” in our definitive proxy statement for the 20102011 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information to be included under the caption “Ratification of Independent Registered Public Accounting Firm-Audit Fees” in our definitive proxy statement for the 20102011 Annual Meeting of Stockholders is incorporated herein by reference.

8280


PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(a) The following are filed as part of this Annual Report on Form 10-K:
   
1.      Index to Financial Statements Page number in this report
   
 Page 4845
Page 49
 Page 5046
Page 47
Consolidated Statements of Cash Flows for the Years Ended October 1, 2010, October 2, 2009, and October 3, 2008 and September 28, 2007 Page 5148
 Page 5249
 Pages 5351 through 8077
   
2.      The schedule listed below is filed as part of this Annual Report on Form 10-K: Page number in this report
   
 Page 8684
  All other required schedule information is included in the Notes to Consolidated Financial Statements or is omitted because it is either not required or not applicable.
3. The Exhibits listed in the Exhibit Index immediately preceding the Exhibits are filed as a part of this Annual Report on Form 10-K.
(b) Exhibits
  The exhibits required by Item 601 of Regulation S-K are filed herewith and incorporated by reference herein. The response to this portion of Item 15 is submitted under Item 15 (a) (3).

8381


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: November 30, 2009
     
Date: November 29, 2010

 SKYWORKS SOLUTIONS, INC.
Registrant
 
 
 By:  /s/ David J. Aldrich   
  David J. Aldrich  
  Chief Executive Officer
President
Director 
 

8482


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on November 30, 2009.29, 2010.
     
Signature and Title
/s/ David J. Aldrich    
Signature and TitleDavid J. Aldrich   
SignatureChief Executive Officer
President and TitleDirector
(principal executive officer) 
  
   
/s/ Donald W. Palette  
Donald W. Palette 
Chief Financial Officer
Vice President
(principal accounting and financial officer) 
    
Signature and Title
/s/ David J. McLachlan
David J. McLachlan
Chairman of the Board

/s/ David J. Aldrich
David J. Aldrich
Chief Executive Officer
President and Director (principal
executive officer)

/s/ Donald W. Palette
Donald W. Palette
Chief Financial Officer
Vice President (principal accounting and
financial officer)
 
 
 /s/ Kevin L. Beebe
Kevin L. Beebe
Director

/s/ Moiz M. Beguwala
Moiz M. Beguwala
Director

/s/ Timothy R. Furey
Timothy R. Furey
Director

/s/ Balakrishnan S. Iyer
Balakrishnan S. Iyer
Director

/s/ Thomas C. Leonard
Thomas C. Leonard
Director

/s/ David P. McGlade
David P. McGlade
Director

/s/ Robert A. Schriesheim
Robert A. Schriesheim
Director
 
Director 
 


8583


VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
                                        
 Charged to   Charged to  
 Beginning Cost and Ending Beginning Cost and Ending
Description Balance Expenses Deductions Misc. Balance Balance Expenses Deductions Misc. Balance
 
Year Ended September 28, 2007 
Allowance for doubtful accounts $37,022 $2,623 $(37,983) $ — $1,662 
Reserve for sales returns $4,104 $2,271 $(3,893) $ $2,482 
Allowance for excess and obsolete inventories $27,705 $8,641 $(20,189) $ $16,157 
  
Year Ended October 3, 2008  
Allowance for doubtful accounts $1,662 $2,258 $(2,872) $ $1,048  $1,662 $2,258 $(2,872) $ — $1,048 
Reserve for sales returns $2,482 $1,926 $(2,273) $ $2,135  $2,482 $1,926 $(2,273) $ — $2,135 
Allowance for excess and obsolete inventories $16,157 $4,515 $(12,843) $ $7,829  $16,157 $4,515 $(12,843) $ — $7,829 
  
Year Ended October 2, 2009  
Allowance for doubtful accounts $1,048 $2,507 $(710) $ $2,845  $1,048 $2,507 $(710) $ — $2,845 
Reserve for sales returns $2,135 $3,132 $(3,501) $ $1,766  $2,135 $3,132 $(3,501) $ — $1,766 
Allowance for excess and obsolete inventories $7,829 $8,665 $(4,784) $ $11,710  $7,829 $8,665 $(4,784) $ — $11,710 
 
Year Ended October 1, 2010 
Allowance for doubtful accounts $2,845 $728 $(2,396) $ — $1,177 
Reserve for sales returns $1,766 $2,130 $(2,644) $ — $1,252 
Allowance for excess and obsolete inventories $11,710 $7,259 $(7,169) $ — $11,800 

8684


EXHIBIT INDEX
               
Exhibit     Incorporated by Reference Filed
Number Exhibit Description Form File No. Exhibit Filing Date Herewith
 
3.A Amended and Restated Certificate of Incorporation 10-K 001-5560  3.A  12/23/2002  
               
3.B Second Amended and Restated By-laws 10-K 001-5560  3.B  12/23/2002  
               
4.A Specimen Certificate of Common Stock S-3 333-92394  4  7/15/2002  
               
4.B Indenture dated as of March 2, 2007 between the Registrant and U.S. Bank National Association, as Trustee 8-K 001-5560  4.1  3/5/2007  
               
10.A* Skyworks Solutions, Inc., Long-Term Compensation Plan dated September 24, 1990; amended March 28, 1991; and as further amended October 27, 1994 10-K 001-5560  10.B  12/14/2005  
               
10.B* Skyworks Solutions, Inc. 1994 Non-Qualified Stock Option Plan for Non-Employee Directors 10-K 001-5560  10.C  12/14/2005  
               
10.C* Skyworks Solutions, Inc. Executive Compensation Plan dated January 1, 1995 and Trust for the Skyworks Solutions, Inc. Executive Compensation Plan dated January 3, 1995 10-K 001-5560  10.D  12/14/2005  
               
10.D* Skyworks Solutions, Inc. 1997 Non-Qualified Stock Option Plan for Non-Employee Directors 10-K 001-5560  10.E  12/14/2005  
               
10.E* Skyworks Solutions, Inc. 1996 Long-Term Incentive Plan 10-K 001-5560  10.F  12/13/2006  
               
10.F* Skyworks Solutions, Inc. 1999 Employee Long-Term Incentive Plan 10-K 001-5560  10.L  12/23/2002  
               
10.G* Washington Sub Inc., 2002 Stock Option Plan S-3 333-92394  99.A  7/15/2002  
               
10.H* Skyworks Solutions, Inc. Non-Qualified Employee Stock Purchase Plan 10-Q 001-5560  10.H  5/7/2008  
               
10.I* Skyworks Solutions Inc. 2002 Qualified Employee Stock Purchase Plan (as amended 1/31/2006) 10-Q 001-5560  10.L  2/07/2007  
               
10.J Credit and Security Agreement, dated as of July 15, 2003, by and between Skyworks USA, Inc. and WachoviaWells Fargo Bank, N.A. 10-Q 001-5560  10.A  8/11/2003  
               
10.K Servicing Agreement, dated as of July 15, 2003, by and between the Company and Skyworks USA, Inc. 10-Q 001-5560  10.B  8/11/2003  
               
10.L Receivables Purchase Agreement, dated as of July 15, 2003, by and between Skyworks USA, Inc. and the Company 10-Q 001-5560  10.C  8/11/2003  

8785


               
Exhibit     Incorporated by Reference Filed
Number Exhibit Description Form File No. Exhibit Filing Date Herewith
 
10.N* Skyworks Solutions, Inc. 2005 Long-Term Incentive Plan (as amended and restated 5/12/2009) DEF 14A 001-5560 APPENDIX 3/30/2009  
               
10.O* Skyworks Solutions, Inc. Directors’ 2001 Stock Option Plan 8-K 001-5560  10.2  5/04/2005  
               
10.P* Form of Notice of Grant of Stock Option under the Company’s 2001 Directors’ Plan 8-K 001-5560  10.3  5/04/2005  
               
10.Q* Form of Notice of Stock Option Agreement under the Company’s 2005 Long-Term Incentive Plan 10-Q 001-5560  10.A  5/11/2005  
               
10.R* Form of Notice of Restricted Stock Agreement under the Company’s 2005 Long-Term Incentive Plan 10-Q 001-5560  10.B  5/11/2005  
               
10.S* Amended and Restated Change in Control/Severance Agreement, dated January 22, 2008, between the Company and David J. Aldrich 10-Q 001-5560  10.W  5/7/2008  
               
10.T* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Liam K. Griffin 10-Q 001-5560  10.X  5/7/2008  
               
10.U* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and George M. LeVan 10-Q 001-5560 10.AA 5/7/2008  
               
10.V* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Gregory L. Waters 10-Q 001-5560 10.BB 5/7/2008  
               
10.W* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Mark V. B. Tremallo 10-Q 001-5560 10.DD 5/7/2008  
               
10.X* Form of Restricted Stock Agreement under the Company’s 2005 Long-Term Incentive Plan 8-K 001-5560  10.1  11/15/2005  
               
10.Y* Skyworks Solutions In.Inc. Cash Compensation Plan for Directors 10-Q 001-5560 10.HH 8/8/2007  
               
10.Z Registration Rights Agreement dated March 2, 2007 between the Registrant and Credit Suisse Securities (USA) LLC 8-K 001-5560 10.HH 3/5/2007  
               
10.AA* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Donald W. Palette 10-Q 001-5560 10.II 5/7/2008  
               
10.BB* Form of Performance Share Agreement Under the 2005 Long-Term Incentive Plan 10-Q 001-5560 10.JJ 2/06/2008  

8886


               
Exhibit     Incorporated by Reference Filed
Number Exhibit Description Form File No. Exhibit Filing Date Herewith
 
10.CC* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Bruce Freyman 10-Q 001-5560 10.KK 5/7/2008  
               
10.DD* Change in Control/Severance Agreement, dated January 22, 2008, between the Company and Stan Swearingen 10-Q 001-5560 10-LL 5/7/2008  
               
10.EE* 2008 Director Long-Term Incentive Plan 10-Q 001-5560 10-MM 5/7/2008  
               
10.FF* Form of Restricted Stock Agreement under the Company’s 2008 Director Long-Term Incentive Plan 10-Q 001-5560 10-NN 5/7/2008  
               
10.GG* Form of Nonstatutory Stock Option Agreement under the Company’s 2008 Director Long-Term Incentive Plan 10-Q 001-5560 10-OO 5/7/2008  
               
10.HH* Skyworks Solutions, Inc. 2002 Employee Stock Purchase Plan 10-Q 001-5560 10-PP 5/7/2008  
               
10.II* Fiscal 20092010 Executive Incentive
Compensation Plan
 10-Q 001-5560 10-II 2/11/200909/2010  
               
10.JJ* Form of Executive Performance Award Forfeiture and Replacement Agreement Dated June 4, 2009. 10-Q 001-5560 10-QQ 8/11/2009  
               
12 Computation of Ratio of Earnings to Fixed Charges           X
               
21 Subsidiaries of the Company           X
               
23.1 Consent of KPMG LLP           X
               
31.1 Certification of the Company’s Chief Executive Officer pursuant to Securities and Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002           X
               
31.2 Certification of the Company’s Chief Financial Officer pursuant to Securities and Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002           X
               
32.1 Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002           X
               
32.2 Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002           X
 
* Indicates a management contract or compensatory plan or arrangement.

8987