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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
September 26, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________.

Commission file number 1-34192
maximlogoa25.jpg
MAXIM INTEGRATED PRODUCTS, INC.

(Exact name of registrant as specified in its charter)
Delaware
 
94-2896096
 (State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)

160 Rio Robles
San Jose, CA 95134
(Address of Principal Executive Offices including Zip Code)

(408) 601-1000
(Registrant’s Telephone Number, including Area Code)
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, $0.001 par value
MXIM
The NASDAQ Global Select Market

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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically 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 (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller” reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of October 15, 2020, there were 267,301,195 shares of Common Stock, par value $.001 per share, of the registrant outstanding.
 
 
 
 
 






MAXIM INTEGRATED PRODUCTS, INC.

INDEX

PART I - FINANCIAL INFORMATION
 
Page
 
 
 
Item 1. Financial Statements (Unaudited)
 
 
 
 
Condensed Consolidated Balance Sheets as of September 26, 2020 and June 27, 2020
 
 
 
 
Condensed Consolidated Statements of Income for the Three Months Ended September 26, 2020 and September 28, 2019
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 26, 2020 and September 28, 2019
 
 
 
 
Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended September 26, 2020 and September 28, 2019
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 26, 2020 and September 28, 2019
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
 
 
 
Item 4. Controls and Procedures
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1. Legal Proceedings
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
 
Item 3. Defaults Upon Senior Securities
 
 
 
 
Item 4. Mine Safety Disclosures
 
 
 
 
Item 5. Other Information
 
 
 
 
Item 6. Exhibits
 
 
 
 
SIGNATURE
 

2



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 
September 26,
2020
 
June 27,
2020
 
(in thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,595,089

 
$
1,578,670

Short-term investments
17,022

 
35,536

Total cash, cash equivalents and short-term investments
1,612,111

 
1,614,206

Accounts receivable, net of allowances of $636 at September 26, 2020 and $645 at June 27, 2020
449,376

 
404,778

Inventories
265,664

 
259,626

Other current assets
29,816

 
39,219

Total current assets
2,356,967

 
2,317,829

Property, plant and equipment, net
542,421

 
550,406

Intangible assets, net
82,679

 
87,959

Goodwill
562,540

 
562,540

Other assets
108,920

 
110,569

TOTAL ASSETS
$
3,653,527

 
$
3,629,303

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

 
 
Accounts payable
$
86,831

 
$
91,982

Price adjustment and other revenue reserves
144,255

 
148,916

Income taxes payable
53,655

 
43,457

Accrued salary and related expenses
115,460

 
126,751

Accrued expenses
46,119

 
42,228

Total current liabilities
446,320

 
453,334

Long-term debt
994,381

 
994,022

Income taxes payable
360,164

 
385,072

Other liabilities
141,643

 
139,418

Total liabilities
1,942,508

 
1,971,846

 
 
 
 
Commitments and contingencies (Note 12)


 


 
 
 
 
Stockholders’ equity:
 
 
 
Common stock and capital in excess of par value
12,461

 
266

Retained earnings
1,713,153

 
1,671,786

Accumulated other comprehensive loss
(14,595
)
 
(14,595
)
Total stockholders’ equity
1,711,019

 
1,657,457

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
$
3,653,527

 
$
3,629,303


See accompanying Notes to Condensed Consolidated Financial Statements.

3



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands, except per share data)
 
 
 
 
Net revenues
$
619,357

 
$
533,040

Cost of goods sold
202,343

 
189,717

Gross margin
417,014

 
343,323

Operating expenses:
 
 
 
Research and development
115,466

 
108,989

Selling, general and administrative
82,954

 
76,115

Intangible asset amortization
919

 
756

Severance and restructuring expenses
8,813

 
1,434

Other operating expenses (income), net
7,428

 
25

Total operating expenses
215,580

 
187,319

Operating income
201,434

 
156,004

Interest and other income (expense), net
(7,037
)
 
1,829

Income before provision for income taxes
194,397

 
157,833

Income tax provision
24,883

 
17,677

Net income
$
169,514

 
$
140,156

 
 
 
 
Earnings per share:
 
 
 
Basic
$
0.64

 
$
0.52

Diluted
$
0.63

 
$
0.51

 
 
 
 
Shares used in the calculation of earnings per share:
 
 
 
Basic
266,831

 
271,388

Diluted
269,529

 
274,436


See accompanying Notes to Condensed Consolidated Financial Statements.



4



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands)
Net income
$
169,514

 
$
140,156

Other comprehensive income (loss), net of tax:
 
 
 
Change in net unrealized gains and losses on available-for-sale securities, net of tax benefit (expense) of $9 and $(14), respectively
(80
)
 
118

Change in net unrealized gains and losses on cash flow hedges, net of tax benefit (expense) of $(23) and $165, respectively
63

 
(859
)
Change in net unrealized gains and losses on post-retirement benefits, net of tax benefit (expense) of $11 and $(22), respectively
17

 
98

Other comprehensive income (loss), net

 
(643
)
Total comprehensive income
$
169,514

 
$
139,513


See accompanying Notes to Condensed Consolidated Financial Statements.


5



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
169,514

 
$
140,156

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Stock-based compensation
35,730

 
24,671

Depreciation and amortization
24,199

 
23,921

Deferred taxes
(1,103
)
 
453

Loss on disposal of property, plant and equipment
63

 
376

Other adjustments
1,867

 
27

Changes in assets and liabilities:
 
 
 
Accounts receivable
(44,798
)
 
(10,300
)
Inventories
(5,986
)
 
10,578

Other assets
4,159

 
(52,443
)
Accounts payable
(3,423
)
 
1,242

Price adjustment and other revenue reserves
(4,461
)
 
(10,284
)
Income taxes payable
(14,710
)
 
(25,341
)
All other accrued liabilities
1,460

 
38,214

Net cash provided by (used in) operating activities
162,511

 
141,270

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(12,728
)
 
(20,631
)
Proceeds from sale of property, plant and equipment
4

 
43

Proceeds from maturity of available-for-sale securities
18,425

 
42,921

Purchases of investments in privately-held companies
(84
)
 

Proceeds from sale of investments in privately-held companies
25

 
516

Other investing activities

 
(35
)
Net cash provided by (used in) investing activities
5,642

 
22,814

Cash flows from financing activities:
 
 
 
Net issuance of restricted stock units and awards
(17,018
)
 
(9,943
)
Proceeds from stock options exercised
2,632

 
7,482

Repurchase of common stock
(9,201
)
 
(93,552
)
Dividends paid
(128,147
)
 
(130,222
)
Net cash provided by (used in) financing activities
(151,734
)
 
(226,235
)
Net increase (decrease) in cash and cash equivalents
16,419

 
(62,151
)
Cash, cash equivalents and restricted cash:
 
 
 
Beginning of period
$
1,585,428

 
$
1,757,342

End of period
$
1,601,847

 
$
1,695,191

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid, net, during the period for income taxes
$
29,124

 
$
32,156

Cash paid for interest
$
8,438

 
$
8,438

Noncash financing and investing activities:
 
 
 
Accounts payable related to property, plant and equipment purchases
$
9,858

 
$
8,307

 
 
 
 
Cash, cash equivalents and restricted cash:
 
 
 
Cash and cash equivalents
1,595,089

 
1,695,191

Restricted cash in Other assets
6,758

 

Total cash, cash equivalents and restricted cash
1,601,847

 
1,695,191


See accompanying Notes to Condensed Consolidated Financial Statements.

6



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)


 
Three Months Ended September 26, 2020
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 27, 2020
266,797

 
$
266

 
$

 
$
1,671,786

 
$
(14,595
)
 
$
1,657,457

Net income

 

 

 
169,514

 

 
169,514

Repurchase of common stock 
(150
)
 

 
(9,201
)
 

 

 
(9,201
)
Net issuance of restricted stock units and awards
563

 

 
(17,018
)
 

 

 
(17,018
)
Stock options exercised
94

 

 
2,631

 

 

 
2,631

Stock-based compensation 

 
1

 
35,782

 

 

 
35,783

Dividends paid, $0.48 per common share

 

 

 
(128,147
)
 

 
(128,147
)
Balance, September 26, 2020
267,304

 
$
267

 
$
12,194

 
$
1,713,153

 
$
(14,595
)
 
$
1,711,019

 
 
 
 
 
 
 
 
 
 
 
 


 
Three Months Ended September 28, 2019
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 29, 2019
271,852

 
$
272

 
$

 
$
1,856,358

 
$
(11,354
)
 
$
1,845,276

Net income

 

 

 
140,156

 

 
140,156

Other comprehensive income (loss), net

 

 

 

 
(643
)
 
(643
)
Repurchase of common stock 
(1,622
)
 
(1
)
 
(22,235
)
 
(71,316
)
 

 
(93,552
)
Cumulative-effect adjustment for adoption of ASU 2016-02

 

 

 
(1,964
)
 

 
(1,964
)
Net issuance of restricted stock units
387

 

 
(9,943
)
 

 

 
(9,943
)
Stock options exercised
266

 

 
7,482

 

 

 
7,482

Stock-based compensation 

 

 
24,696

 

 

 
24,696

Dividends paid, $0.48 per common share

 

 

 
(130,222
)
 

 
(130,222
)
Balance, September 28, 2019
270,883

 
$
271

 
$

 
$
1,793,012

 
$
(11,997
)
 
$
1,781,286

 
 
 
 
 
 
 
 
 
 
 
 


See accompanying Notes to Condensed Consolidated Financial Statements.


7



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Maxim Integrated Products, Inc. and all of its majority-owned subsidiaries (collectively, the “Company” or “Maxim Integrated”) included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America (“GAAP”) have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for fair statement have been included. The year-end condensed consolidated balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the three months ended September 26, 2020 are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 2020.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every fifth or sixth fiscal year will be a 53-week fiscal year. Fiscal years 2021 and 2020 are 52-week fiscal years.

Merger with Analog Devices

On July 13, 2020, the Company announced that it had entered into an Agreement and Plan of Merger, dated July 12, 2020 (as it may be amended from time to time, the “ADI Merger Agreement”) with Analog Devices, Inc., a Massachusetts corporation (“Analog Devices” or "ADI"), and Magneto Corp., a wholly-owned subsidiary of Analog Devices (“Acquisition Sub”), under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Acquisition Sub will merge with and into the Company, and the Company will survive the merger as a wholly-owned subsidiary of Analog Devices (the “ADI Merger”). Under the terms of the ADI Merger Agreement, at the effective time of the ADI Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of the Company (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of Company Common Stock held by Analog Devices or Acquisition Sub) will be converted into the right to receive 0.6300 of a fully paid and non-assessable share of common stock, par value $0.16 2/3 per share, of Analog Devices (with cash being paid (without interest and less applicable withholding taxes) in lieu of any fraction of a share of Analog Devices common stock). Analog Devices shareholders will continue to own their existing Analog Devices shares, and the combined company will be named Analog Devices.

The ADI Merger has been approved by both the Company’s Board of Directors and the Board of Directors of Analog Devices. The completion of the ADI Merger is subject to customary closing conditions, including, among others, the required approvals of Maxim Integrated’s stockholders, the approval of ADI’s shareholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the transaction is expected to close in the summer of 2021. The Company cannot guarantee that the ADI Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the ADI Merger Agreement.

As of October 8, 2020, stockholder approval for the ADI Merger has been obtained from Maxim Integrated's stockholders and ADI's shareholders. In addition, the proposed transaction has received antitrust clearance from the United States Federal Trade Commission.


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates relate to the useful lives and fair value of fixed assets, valuation allowance for deferred tax assets, reserves relating to uncertain tax positions, allowance for distributor credits, inventory valuation, reserves relating to litigation matters, assumptions about the fair value of reporting units and asset groups, accrued liabilities and reserves, and the value of intangibles

8



acquired associated with business combinations. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results may differ from those estimates, and such differences may be material to the financial statements.

The ongoing novel coronavirus ("COVID-19") pandemic and the mitigation efforts by governments to attempt to control its spread created uncertainties and disruptions in the economic and financial markets. The Company is not aware of events or circumstances that would require an update to its estimates, judgments, or adjustments to the carrying values of its assets or liabilities as of October 28, 2020, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as developments occur and as the Company obtains additional information. These future developments are highly uncertain, and the outcomes, unpredictable. Actual results may differ from those estimates, and such differences may be material to the financial statements.

(i) New Accounting Update Recently Adopted

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes resulted in earlier recognition of credit losses. We adopted ASU 2016-13 beginning in the first quarter of fiscal year 2021 using the modified retrospective approach. The effect on our consolidated financial statements and related disclosures was not material.

NOTE 3: BALANCE SHEET COMPONENTS

Inventories consist of:
 
September 26,
2020
 
June 27,
2020
 
(in thousands)
Raw materials
$
20,397

 
$
18,287

Work-in-process
172,267

 
164,061

Finished goods
73,000

 
77,278

Total inventories
$
265,664

 
$
259,626



Property, plant and equipment, net, consist of:
 
September 26,
2020
 
June 27,
2020
 
(in thousands) 
Land
$
17,720

 
$
17,720

Buildings and building improvements
314,043

 
312,999

Machinery, equipment and software
1,333,793

 
1,323,791

Total
1,665,556

 
1,654,510

Less: accumulated depreciation
(1,123,135
)
 
(1,104,104
)
Total property, plant and equipment, net
$
542,421

 
$
550,406



9




Accrued salary and related expenses consist of:
 
September 26,
2020
 
June 27,
2020
 
(in thousands)
Accrued vacation
$
36,061

 
$
33,992

Accrued bonus
29,213

 
66,662

Accrued salaries
21,244

 
12,153

ESPP Withholding
16,898

 
5,986

Accrued fringe benefits
4,228

 
4,077

Other
7,816

 
3,881

Total accrued salary and related expenses
$
115,460

 
$
126,751



NOTE 4: DISAGGREGATION OF REVENUE

The following table summarizes net revenue disaggregated by end market. The Company classifies end market revenue by using estimates and assumptions based on historical experience and knowledge of current conditions, given available information.
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
(in thousands, except percentages)
Automotive
$
158,068

 
26
%
 
$
139,769

 
26
%
Communications and Data Center
131,293

 
21
%
 
96,071

 
18
%
Consumer
136,390

 
22
%
 
133,338

 
25
%
Industrial
193,606

 
31
%
 
163,862

 
31
%
 
$
619,357

 
 
 
$
533,040

 
 


The following table summarizes net revenue disaggregated by sales channel:
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
(in thousands, except percentages)
Distributors
$
324,550

 
52
%
 
$
266,586

 
50
%
Direct customers
294,807

 
48
%
 
266,454

 
50
%
 
$
619,357

 
 
 
$
533,040

 
 


NOTE 5: FAIR VALUE MEASUREMENTS

The FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:
 
Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.
 
The Company’s Level 1 assets consist of money market funds.
 

10



Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company’s Level 2 assets and liabilities consist of corporate debt securities and foreign currency forward contracts that are valued using quoted market prices or are determined using a yield curve model based on current market rates.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's Level 3 assets and liabilities consist of acquisition-related contingent consideration liabilities.
 
Assets and liabilities measured at fair value on a recurring basis were as follows:
 
As of September 26, 2020
 
As of June 27, 2020
 
Fair Value
 Measurements Using
 
Total
 
Fair Value
 Measurements Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
Level 1
 
Level 2
 
Level 3
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Money market funds
$
26,629

 
$

 
$

 
$
26,629

 
$
61,814

 
$

 
$

 
$
61,814

Short-term investments
 
 
 
 
 
 


 
 
 
 
 
 
 


    Corporate debt securities

 
17,022

 

 
17,022

 

 
35,536

 

 
35,536

Other current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts

 
1,228

 

 
1,228

 

 
1,151

 

 
1,151

Total assets
$
26,629

 
$
18,250

 
$

 
$
44,879

 
$
61,814

 
$
36,687

 
$

 
$
98,501

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
$

 
$
596

 
$

 
$
596

 
$

 
$
341

 
$

 
$
341

Contingent consideration

 

 
10,000

 
10,000

 

 

 
10,000

 
10,000

Other liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration

 

 
4,165

 
4,165

 

 

 
4,165

 
4,165

Total Liabilities
$

 
$
596

 
$
14,165

 
$
14,761

 
$

 
$
341

 
$
14,165

 
$
14,506



During the three months ended September 26, 2020 and the year ended June 27, 2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

There were no assets or liabilities measured at fair value on a non-recurring basis as of September 26, 2020 and June 27, 2020 other than impairments of long-lived assets.

As of September 26, 2020 and June 27, 2020, the fair value of private company investments amounted to $21.2 million and $20.6 million, respectively. The aggregate amount of unrealized losses recognized from these investments were $3.8 million and $4.3 million, respectively, as of September 26, 2020 and June 27, 2020.

The Company recorded $0.5 million of unrealized gains on private company investments, during the three months ended September 26, 2020. Unrealized gains (loss) on private company investments was not material during the three months ended September 28, 2019. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Condensed Consolidated Statements of Income.


11



NOTE 6: FINANCIAL INSTRUMENTS

Short-term investments
Fair values were as follows:
 
September 26, 2020
 
June 27, 2020
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
(in thousands)
Available-for-sale investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
$
16,983

 
$
47

 
$
(8
)
 
$
17,022

 
$
35,417

 
$
137

 
$
(18
)
 
$
35,536

Total available-for-sale investments
$
16,983

 
$
47

 
$
(8
)
 
$
17,022

 
$
35,417

 
$
137

 
$
(18
)
 
$
35,536



In the three months ended September 26, 2020 and September 28, 2019, the Company did not recognize impairment charges on short-term investments. All available-for-sale investments have maturity dates between October 2, 2020 and March 12, 2021.

Derivative instruments and hedging activities

The Company incurs expenditures denominated in non-U.S. currencies, primarily the Philippine Peso and the Thai Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and European Euro, Indian Rupee, Taiwan New Dollar, South Korean Won, Chinese Yuan, Japanese Yen, Singapore Dollar, and Canadian Dollar expenditures for sales offices and research and development activities undertaken outside of the U.S.

The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. The Company does not use these foreign currency forward contracts for trading purposes.

Derivatives designated as cash flow hedging instruments

The Company designates certain forward contracts as hedging instruments pursuant to Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). As of September 26, 2020 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $57.0 million and $61.6 million, respectively.

Derivatives not designated as hedging instruments

As of September 26, 2020 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $49.5 million and $32.3 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $11.2 million and $12.0 million, respectively.

The Company's foreign currency forward contract gains or losses included in the Condensed Consolidated Statements of Income were not material for the three months ended September 26, 2020 and September 28, 2019, respectively.


12



Effect of hedge accounting on the Condensed Consolidated Statements of Income

The following tables summarize the gains (losses) from hedging activities recognized in the Company's Condensed Consolidated Statements of Income:

 
Three Months Ended
Three Months Ended
 
September 26, 2020
September 28, 2019
 
Net Revenue
 
Cost of Goods Sold
 
Operating Expenses
 
Net Revenue
 
Cost of Goods Sold
 
Operating Expenses
 
(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded
$
619,357

 
$
202,343

 
$
215,580

 
$
533,040

 
$
189,717

 
$
187,319

 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) reclassified from accumulated other comprehensive income into income
$

 
$
435

 
$
670

 
$

 
$
120

 
$
(370
)


Outstanding debt obligations

The following table summarizes the Company’s outstanding debt obligations:
 
September 26, 2020
 
June 27, 2020
 
(in thousands)
3.375% fixed rate notes due March 2023
$
500,000

 
$
500,000

3.45% fixed rate notes due June 2027
500,000

 
500,000

Total outstanding debt
1,000,000

 
1,000,000

Less: Reduction for unamortized discount and debt issuance costs
(5,619
)
 
(5,978
)
Total long-term debt
$
994,381

 
$
994,022



On June 15, 2017, the Company completed a public offering of $500 million aggregate principal amount of the Company's 3.45% senior unsecured and unsubordinated notes due in June 2027 (“2027 Notes”), with an effective interest rate of 3.5%. Interest on the 2027 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2017. The net proceeds of this offering were approximately $495.2 million, after issuing at a discount and deducting paid expenses.

On March 18, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company’s 3.375% senior unsecured and unsubordinated notes due in March 2023 (“2023 Notes”), with an effective interest rate of 3.5%. Interest on the 2023 Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The net proceeds of this offering were approximately $490.0 million, after issuing at a discount and deducting paid expenses.

The debt indentures that govern the 2027 Notes and the 2023 Notes include covenants that limit the Company's ability to grant liens on its facilities and to enter into sale and leaseback transactions, which could limit the Company's ability to secure additional debt funding in the future. In circumstances involving a change of control of the Company followed by a downgrade of the rating of the 2027 Notes or the 2023 Notes, the Company would be required to make an offer to repurchase the affected notes at a purchase price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest.

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net in the Condensed Consolidated Statements of Income over the life of the notes. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes, were $8.9 million and $8.9 million during the three months ended September 26, 2020 and September 28, 2019, respectively.

The estimated fair value of the Company’s outstanding debt obligations was approximately $1.0 billion as of September 26, 2020. The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.

13




The Company recorded interest expense of $9.4 million and $9.3 million during the three months ended September 26, 2020, and September 28, 2019, respectively.

Other Financial Instruments
For the balance of the Company’s financial instruments, cash equivalents, accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.

NOTE 7: STOCK-BASED COMPENSATION

At September 26, 2020, the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the Board of Directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), restricted stock awards ("RSAs") and market stock units (“MSUs”) to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than seven years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are released or converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSUs granted from September 2017 to July 2020 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

RSAs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSAs have certain shareholder rights, such as voting rights, but are not eligible for dividends or dividend equivalents.

MSUs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. MSUs granted in September 2017, September 2018, and September 2019 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three months ended September 26, 2020 and September 28, 2019, respectively:

 
Three Months Ended
 
Three Months Ended
 
September 26, 2020
 
September 28, 2019
 
Stock Options
 
Restricted Stock Units and Other Awards
 
Employee Stock Purchase Plan
 
Total
 
Stock Options
 
Restricted Stock Units and Other Awards
 
Employee Stock Purchase Plan
 
Total
 
(in thousands)
Cost of goods sold
$
11

 
$
3,794

 
$
864

 
$
4,669

 
$
9

 
$
2,280

 
$
669

 
$
2,958

Research and development
3

 
12,267

 
2,106

 
14,376

 
4

 
9,485

 
1,395

 
10,884

Selling, general and administrative
75

 
15,483

 
1,127

 
16,685

 
67

 
9,953

 
810

 
10,830

Pre-tax stock-based compensation expense
$
89

 
$
31,544

 
$
4,097

 
$
35,730

 
$
80

 
$
21,718

 
$
2,874

 
$
24,672

Less: income tax effect
 
 
 
 
 
 
2,531

 
 
 
 
 
 
 
2,888

Net stock-based compensation expense
 
 
 
 
 
$
33,199

 
 
 
 
 
 
 
$
21,784




14



The expense included in the Condensed Consolidated Statements of Income for RSUs and other awards include expenses related to MSUs of $3.6 million and $4.4 million for the three months ended September 26, 2020 and September 28, 2019, respectively. In connection with the proposed ADI Merger, on September 1, 2020, the Company’s Board of Directors granted RSAs to certain employees. For employees who made IRS Section 83(b) elections, Maxim accelerated a portion of the RSAs to satisfy tax withholding requirements. The Company recorded $7.9 million of stock-based compensation expense related to the accelerated RSAs in the three months ended September 26, 2020.

Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

There were no stock options granted in the three months ended September 26, 2020 and September 28, 2019.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of September 26, 2020 and related activity for the three months ended September 26, 2020:
 
Number of
Shares 
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value(1)
Balance at June 27, 2020
104,447

 
$
28.76

 
 
 
 
Options Granted

 

 
 
 
 
Options Exercised
(94,375
)
 
28.30

 
 
 
 
Options Cancelled

 

 
 
 
 
Balance at September 26, 2020
10,072

 
$
33.09

 
0.6
 
$
326,753

Exercisable, September 26, 2020
10,072

 
$
33.09

 
0.6
 
$
326,753

Vested and expected to vest, September 26, 2020
10,072

 
$
33.09

 
0.6
 
$
326,753


(1)Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on September 25, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of September 26, 2020.


As of September 26, 2020, there was no unrecognized stock compensation from unvested stock options.

Restricted Stock Units and Restricted Stock Awards

The fair value of RSUs and RSAs under the Company’s 1996 Plan is estimated using the value of the Company’s common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs and RSAs granted was $69.05 and $47.61 per share for the three months ended September 26, 2020 and September 28, 2019, respectively.

The following table summarizes the outstanding and expected to vest RSUs and RSAs as of September 26, 2020 and related activity during the three months ended September 26, 2020:

15



 
Number of
Shares 
 
Weighted Average
Remaining
Contractual Term
(in Years)
 
 
Aggregate Intrinsic
Value(1) 
Balance at June 27, 2020
4,606,592

 
 
 
 
Restricted stock units and restricted stock awards granted
1,304,862

 
 
 
 
Restricted stock units and restricted stock awards released
(500,583
)
 
 
 
 
Restricted stock units and restricted stock awards cancelled
(45,575
)
 
 
 
 
Balance at September 26, 2020
5,365,296

 
3.2
 
$
351,587,847

Outstanding and expected to vest, September 26, 2020
4,446,092

 
2.9
 
$
291,352,394


(1)Aggregate intrinsic value for RSUs and RSAs represents the closing price per share of the Company’s common stock on September 25, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs and RSAs outstanding or expected to vest as of September 26, 2020.

The Company withheld shares totaling $17.0 million in value as a result of employee withholding taxes based on the value of RSUs and RSAs on their vesting date for the three months ended September 26, 2020. Total payments for employees’ tax obligations to taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of September 26, 2020, there was $209.1 million of unrecognized compensation expense related to 5.4 million unvested RSUs and RSAs, which is expected to be recognized over a weighted average period of approximately 3.2 years.

Market Stock Units (MSUs)

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017, September 2018, and September 2019, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD or the TSR of the companies included in the XSD, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted in September 2017, September 2018, and September 2019 vest based upon annual performance and are subject to continued service through the end of the four-year period but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements. Pursuant to the terms of the ADI Merger Agreement, the Company grants RSUs in lieu of MSUs (or RSAs in lieu of MSUs for any potential “disqualified individuals” within the meaning of Section 280G of the Internal Revenue Code, which RSAs will not be eligible for dividends or dividend equivalent rights) from the date of the ADI Merger Agreement through the date that the transaction closes.

No MSUs were granted during the three months ended September 26, 2020. The weighted-average fair value of MSUs granted was $54.70 per share for the three months ended September 28, 2019.


16



The following table summarizes the number of MSUs outstanding and expected to vest as of September 26, 2020 and their activity during the three months ended September 26, 2020:
 
Number of
Shares 
 
Weighted Average
Remaining
Contractual Term
(in Years)
 
 
Aggregate Intrinsic
Value
(1) 
Balance at June 27, 2020
971,220

 
 
 
 
Market stock units granted

 
 
 
 
Market stock units released

 
 
 
 
Market stock units cancelled
(230,132
)
 
 
 
 
Balance at September 26, 2020
741,088

 
2.2
 
$
48,563,497

Outstanding and expected to vest, September 26, 2020
576,716

 
2.2
 
$
37,792.218


(1)Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on September 25, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of September 26, 2020.


As of September 26, 2020, there was $22.3 million of unrecognized compensation expense related to 0.7 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.2 years.

Employee Stock Purchase Plan

Employees are granted rights to acquire common stock under the 2008 ESPP.

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:
 
Three Months Ended
 
September 26, 2020
 
September 28, 2019
Expected holding period (in years)
0.5 years
 
0.5 years
Risk-free interest rate
0.2% - 1.6%
 
2.3% - 2.7%
Expected stock price volatility
29.2% - 55.2%
 
29.5% - 31.3%
Dividend yield
3.3% - 3.3%
 
3.1% - 3.4%


As of September 26, 2020 and September 28, 2019, there was $2.5 million and $4.0 million, respectively, of unrecognized compensation expense related to the 2008 ESPP. At the end of the current offering period in November 2020, the Company will suspend the 2008 ESPP program pursuant to the terms of the ADI Merger Agreement.

NOTE 8: EARNINGS PER SHARE

Basic earnings per share are computed using the weighted average number of shares of common stock outstanding during the period. For purposes of computing basic earnings per share, the weighted average number of outstanding shares of common stock excludes unvested RSUs, RSAs and MSUs. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options, assumed release of unvested RSUs, RSAs and MSUs, and assumed issuance of common stock under the 2008 ESPP using the treasury stock method.


17



The following table sets forth the computation of basic and diluted earnings per share:
 
Three Months Ended
 
September 26, 2020
 
September 28, 2019
 
(in thousands, except per share data)
Numerator for basic earnings per share and diluted earnings per share
 
 
 
Net income
$
169,514

 
$
140,156

 
 
 
 
Denominator for basic earnings per share
266,831

 
271,388

Effect of dilutive securities:
 
 
 
Stock options, ESPP, RSUs, RSAs and MSUs
2,698

 
3,048

Denominator for diluted earnings per share
269,529

 
274,436

 
 
 
 
Earnings per share
 
 
 
Basic
$
0.64

 
$
0.52

Diluted
$
0.63

 
$
0.51



For the three months ended September 26, 2020 and September 28, 2019 stock awards determined to be anti-dilutive were insignificant and were excluded from the computation of diluted earnings per share in all periods.

NOTE 9: SEGMENT INFORMATION

The Company designs, develops, manufactures and markets a broad range of linear and mixed signal integrated circuits. All of the Company's products are designed through a centralized R&D function, manufactured using centralized manufacturing (internal and external), and sold through a centralized sales force and shared wholesale distributors.

The Company currently has
one operating segment and reportable segment. In accordance with ASC No. 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance. The Chief Operating Decision Maker for the Company was assessed and determined to be the CEO. The CEO reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment.

Enterprise-wide information is provided in accordance with ASC 280. Geographical revenue information is based on customers’ ship-to location. Long-lived assets consist of property, plant and equipment. Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal year.

Net revenues from unaffiliated customers by geographic region were as follows:
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands)
United States
$
60,136

 
$
55,799

China
245,805

 
197,299

Rest of Asia
198,464

 
169,914

Europe
99,505

 
95,940

Rest of World
15,447

 
14,088

 
$
619,357

 
$
533,040



18



Net long-lived assets by geographic region were as follows:
 
September 26,
2020
 
June 27,
2020
 
(in thousands)
United States
$
356,188

 
$
362,093

Philippines
83,006

 
88,660

Rest of World
103,227

 
99,653

 
$
542,421

 
$
550,406



NOTE 10: COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) by component and related tax effects in the three months ended September 26, 2020 and September 28, 2019 were as follows:
(in thousands)
Unrealized Gains and (Losses) on Intercompany Receivables
 
Unrealized Gains and (Losses) on Post-Retirement Benefits
 
Cumulative Translation Adjustment
 
Unrealized Gains and (Losses) on Cash Flow Hedges
 
Unrealized Gains and (Losses) on Available-For-Sale Securities
 
Total
June 27, 2020
$
(6,280
)
 
$
(7,988
)
 
$
(1,136
)
 
$
690

 
$
119

 
$
(14,595
)
Other comprehensive income (loss) before reclassifications

 

 

 
1,191

 
(89
)
 
1,102

Amounts reclassified out of accumulated other comprehensive (income) loss

 
6

 

 
(1,105
)
 

 
(1,099
)
Tax effects

 
11

 

 
(23
)
 
9

 
(3
)
Other comprehensive income (loss), net

 
17

 

 
63

 
(80
)
 

September 26, 2020
$
(6,280
)
 
$
(7,971
)
 
$
(1,136
)
 
$
753

 
$
39

 
$
(14,595
)


(in thousands)
Unrealized Gains and (Losses) on Intercompany Receivables
 
Unrealized Gains and (Losses) on Post-Retirement Benefits
 
Cumulative Translation Adjustment
 
Unrealized Gains and (Losses) on Cash Flow Hedges
 
Unrealized Gains and (Losses) on Available-For-Sale Securities
 
Total
June 29, 2019
$
(6,280
)
 
$
(4,322
)
 
$
(1,136
)
 
$
425

 
$
(41
)
 
$
(11,354
)
Other comprehensive income (loss) before reclassifications

 

 

 
(1,274
)
 
132

 
(1,142
)
Amounts reclassified out of accumulated other comprehensive (income) loss

 
120

 

 
250

 

 
370

Tax effects

 
(22
)
 

 
165

 
(14
)
 
129

Other comprehensive income (loss), net

 
98

 

 
(859
)
 
118

 
(643
)
September 28, 2019
$
(6,280
)
 
$
(4,224
)
 
$
(1,136
)
 
$
(434
)
 
$
77

 
$
(11,997
)


NOTE 11: INCOME TAXES


19



In the three months ended September 26, 2020 and September 28, 2019, the Company recorded an income tax provision of $24.9 million and $17.7 million, respectively. The Company’s effective tax rate for the three months ended September 26, 2020 and September 28, 2019 was 12.8% and 11.2%, respectively.

The Company’s federal statutory tax rate is 21%. The Company’s effective tax rate for the three months ended September 26, 2020 and September 28, 2019 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by U.S. tax expense generated by Global Intangible Low-Taxed Income.

On June 18, 2019, the U.S. Treasury and Internal Revenue Service (“IRS”) released temporary regulations under Internal Revenue Code (“IRC”) Sections 245A and 954(c)(6) (the “Temporary Regulations”), which applied retroactively to intercompany dividends occurring after December 31, 2017. The Temporary Regulations limit the applicability of the foreign personal holding company income (“FPHCI”) look-through exception for certain intercompany dividends received by a controlled foreign corporation. Before application of the retroactive Temporary Regulations, the Company benefited in fiscal years 2018 and 2019 from the FPHCI look-through exception. On August 21, 2020, the U.S. Treasury and IRS released final regulations under IRC Sections 245A and 954(c)(6) (the “Final Regulations”), which generally apply to years ending on or after June 14, 2019. The relevant sections of the Final Regulations are virtually the same as the Temporary Regulations. The Temporary Regulations apply to fiscal year 2018 and the Final Regulations apply to fiscal year 2019 intercompany dividends. The Company does not have any intercompany dividends after fiscal year 2019 that are impacted by relevant sections of the Temporary Regulations or Final Regulations.

The Company previously analyzed the relevant Temporary Regulations and concluded that they were not validly issued, a conclusion which the Company has determined is not altered by issuance of the Final Regulations. The Company has also analyzed the relevant Final Regulations and concluded that they were not validly issued. Therefore, the Company has not accounted for the effects of the Temporary Regulations or Final Regulations in its results of operations for any fiscal period. The Company believes it has strong arguments in favor of its position and that it has met the more likely than not recognition threshold that its position will be sustained. The Company intends to vigorously defend its position, however, due to the uncertainty involved in challenging and litigating the validity of regulations, there can be no assurance that a court of law will rule in favor of the Company. An unfavorable resolution of this issue could have a material adverse impact on the Company's results of operations and financial condition.

The Company’s federal corporate income tax returns are audited on a recurring basis by the IRS. In fiscal year 2020, the IRS commenced an audit of the Company’s federal corporate income tax returns for fiscal years 2015 through 2017, which is ongoing.

NOTE 12: COMMITMENTS AND CONTINGENCIES

Legal Proceedings
 
The Company is party or subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to intellectual property matters. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized or reserved, if any.

Indemnification

The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees, damages and costs awarded against such parties in certain circumstances in which the Company's products are alleged to infringe third party intellectual property rights, including patents, registered trademarks or copyrights. The terms of the Company's indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to the Company's potential liability for indemnification relating to intellectual property infringement claims.

Pursuant to the Company's charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its current officers, employees and directors, as well as certain former officers and directors.


20



NOTE 13: COMMON STOCK REPURCHASES

On October 30, 2018, the Board of Directors of the Company authorized the repurchase of up to $1.5 billion of the Company’s common stock. The stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as current stock price, levels of cash generated from operations, cash requirements, and other factors. All prior repurchase authorizations by the Company’s Board of Directors for the repurchase of common stock were cancelled and superseded by this repurchase authorization.

During the three months ended September 26, 2020, the Company repurchased approximately 149.8 thousand shares of its common stock for $9.2 million. As of September 26, 2020, the Company had remaining authorization of $0.7 billion for future share repurchases. Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date the Company announced its planned merger with ADI.

NOTE 14: LEASES

The Company's lease obligations consist of operating leases for domestic and international office facilities, data centers, and equipment. These leases expire at various dates through fiscal year 2031. For the three months ended September 26, 2020, the Company recorded operating lease expense of $2.4 million.

Leases are included in the following Condensed Consolidated Balance Sheet lines:
 
September 26, 2020
 
June 27, 2020
 
(in thousands)
Other assets
$
52,070

 
$
54,610

 
 
 
 
Accrued expenses
$
10,673

 
$
10,445

Other liabilities
$
46,105

 
$
48,314



Future minimum lease payments under non-cancelable operating leases as of September 26, 2020 are as follows:
 
 
Operating Lease Obligations
Fiscal Year

 
(in thousands)

Remainder of 2021
 
$
9,399

2022
 
11,513

2023
 
9,622

2024
 
8,429

2025
 
6,777

Thereafter
 
17,324

Total
 
63,064

Less imputed interest
 
6,286

Total
 
$
56,778



Future minimum lease payments under non-cancelable operating leases as of September 28, 2019 are as follows:

21



 
 
Operating Lease Obligations

Fiscal Year

 
(in thousands)

Remainder of 2020
 
$
9,051

2021
 
11,647

2022
 
10,665

2023
 
9,549

2024
 
8,215

Thereafter
 
22,064

Total
 
71,191

Less imputed interest
 
8,204

Total
 
$
62,987




Other information related to leases as of September 26, 2020 are as follows:
 
Three Months Ended
 
September 26, 2020
 
September 28, 2019
Supplemental cash flow information:
 
 
 
Operating cash flows used for operating leases, in thousands
$
2,994

 
$
2,863

 
 
 
 
Weighted-average remaining lease term - operating leases, in years
6

 
7

Weighted-average discount rate - operating leases
3.28
%
 
3.45
%


NOTE 15: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable.

There were no changes to goodwill during the three months ended September 26, 2020.

No indicators or instances of impairment were identified during the three months and fiscal year ended September 26, 2020 and June 27, 2020, respectively.


22



Intangible Assets

Intangible assets consisted of the following:
 
September 26, 2020
 
June 27, 2020
 
Original
Cost
 
Accumulated
Amortization
 
Net
 
Original
Cost
 
Accumulated
Amortization
 
Net
 
(in thousands)
Intellectual property
$
525,196

 
$
462,780

 
$
62,416

 
$
525,196

 
$
458,418

 
$
66,778

Customer relationships
118,335

 
109,321

 
9,014

 
118,335

 
108,603

 
9,732

Trade name
11,374

 
9,393

 
1,981

 
11,374

 
9,265

 
2,109

Backlog
170

 
97

 
73

 
170

 
25

 
145

Patents
2,500

 
2,500

 

 
2,500

 
2,500

 

Total amortizable purchased intangible assets
657,575

 
584,091

 
73,484

 
657,575

 
578,811

 
78,764

In-process research & development (IPR&D)
9,195

 

 
9,195

 
9,195

 

 
9,195

Total purchased intangible assets
$
666,770

 
$
584,091

 
$
82,679

 
$
666,770

 
$
578,811

 
$
87,959



The following table presents the amortization expense of intangible assets and its presentation in the Condensed Consolidated Statements of Income:
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands)
Cost of goods sold
$
4,361

 
$
3,111

Intangible asset amortization
919

 
756

Total intangible asset amortization expenses
$
5,280

 
$
3,867



The following table represents the estimated future amortization expense of intangible assets as of September 26, 2020:
 
 
Amount
Fiscal Year
 
(in thousands)
Remainder of 2021
 
$
13,999

2022
 
13,454

2023
 
12,970

2024
 
9,995

2025
 
9,716

Thereafter
 
13,350

Total intangible assets
 
$
73,484




23



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Maxim Integrated Products, Inc. (“Maxim Integrated” or the “Company” and also referred to as “we,” “our” or “us”) disclaims any duty to and undertakes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise, the uncertainties as to the timing of the completion of our pending merger with Analog Devices, Inc. and the ability of each party to complete the merger, and the effects of the ongoing novel coronavirus ("COVID-19") pandemic, or to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, including the impact of the COVID-19 pandemic and the responses to it, except as required by federal securities laws. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should carefully review future reports and documents that the Company files with or furnishes to the SEC from time to time, such as its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.

Overview of Business

Maxim Integrated Products, Inc. (“Maxim Integrated” or the “Company” and also referred to as “we,” “our” or “us”) designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for a large number of customers in diverse geographical locations. The analog market is fragmented and characterized by many diverse applications, a great number of product variations and, with respect to many circuit types, relatively long product life cycles. We are a global company with a wafer manufacturing facility in the U.S., test facilities in the Philippines and Thailand, and sales and circuit design offices around the world. We also utilize third parties for manufacturing and assembly of our products.

Recent Developments

On July 13, 2020, the Company announced that it had entered into an Agreement and Plan of Merger, dated July 12, 2020 (as it may be amended from time to time, the “ADI Merger Agreement”) with Analog Devices, Inc., a Massachusetts corporation (“Analog Devices” or "ADI"), and Magneto Corp., a wholly-owned subsidiary of Analog Devices (“Acquisition Sub”), under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Acquisition Sub will merge with and into the Company, and the Company will survive the merger as a wholly-owned subsidiary of Analog Devices (the “ADI Merger”). Under the terms of the ADI Merger Agreement, at the effective time of the ADI Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of the Company (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of Company Common Stock held by Analog Devices or Acquisition Sub) will be converted into the right to receive 0.6300 of a fully paid and non-assessable share of common stock, par value $0.16 2/3 per share, of Analog Devices (with cash being paid (without interest and less applicable withholding taxes) in lieu of any fraction of a share of Analog Devices common stock). Analog Devices shareholders will continue to own their existing Analog Devices shares, and the combined company will be named Analog Devices.

The ADI Merger has been approved by both the Company’s Board of Directors and the Board of Directors of Analog Devices. The completion of the ADI Merger is subject to customary closing conditions, including, among others, the required approvals of Maxim Integrated’s stockholders, the approval of ADI’s shareholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the transaction is expected to close in the summer of 2021. The Company cannot guarantee that the ADI Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the ADI Merger Agreement.

As of October 8, 2020, stockholder approval for the ADI Merger has been obtained from Maxim Integrated's stockholders and ADI's shareholders. In addition, the proposed transaction has received antitrust clearance from the United States Federal Trade Commission.

The Linear and Mixed-Signal Analog Integrated Circuit Market

All electronic signals generally fall into one of two categories, linear or digital. Linear (or analog) signals represent real world phenomena, such as temperature, pressure, sound or speed, and are continuously variable over a wide range of values. Digital signals represent the “ones” and “zeros” of binary arithmetic and are either on or off.

Three general classes of semiconductor products arise from this distinction between linear and digital signals:
digital devices, such as memories and microprocessors that operate primarily in the digital domain;
linear devices, such as amplifiers, references, analog multiplexers and switches that operate primarily in the analog domain; and

24



mixed-signal devices such as data converter devices that combine linear and digital functions on the same integrated circuit and interface between the analog and digital domains.

Our strategy has been to target both the linear and mixed-signal markets, often collectively referred to as the analog market. However, some of our products are exclusively or principally digital. While our focus continues to be on the linear and mixed-signal market, our capabilities in the digital domain enable development of new mixed-signal and other products with highly sophisticated digital characteristics.

Our linear and mixed-signal products now serve four major end-markets: (i) Automotive, (ii) Communications and Data Center, (iii) Consumer and (iv) Industrial. These major end-markets and their corresponding markets are noted in the table below:

MAJOR END-MARKET
 
MARKET
 
 
 
 
 
AUTOMOTIVE
Infotainment
 
 
Powertrain
 
 
Body Electronics
 
 
Safety & Security
 
 
 
 
COMMUNICATIONS & DATA CENTER
Base Stations
 
 
Data Center
 
 
Data Storage
 
 
Desktop Computers
 
 
Network & Datacom
 
 
Notebook Computers
 
 
Peripherals & Other Computer
 
 
Server
 
 
Telecom
 
 
Other Communications
 
 
 
 
CONSUMER
Smartphones
 
 
Digital Cameras
 
 
Handheld Computers
 
 
Home Entertainment & Appliances
 
 
Wearables
 
 
Other Consumer
 
 
 
 
INDUSTRIAL
Automatic Test Equipment
 
 
Control & Automation
 
 
Electrical Instrumentation
 
 
Financial Terminals
 
 
Medical
 
 
Security
 
 
USB Extension
 
 
Other Industrial
 


CRITICAL ACCOUNTING POLICIES

The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The Securities and Exchange Commission (“SEC”) has defined the most critical

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accounting policies as the ones that are most important to the presentation of our financial condition and results of operations, and that require us to make our most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include valuation of inventories; accounting for income taxes; and assessment of litigation and contingencies. These policies and the estimates and judgments involved are discussed further in the Management’s Discussion and Analysis of Financial Condition in our Annual Report on Form 10-K for the fiscal year ended June 27, 2020. We have other significant accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or it is less likely that such accounting policies would have a material impact on our reported results of operations for a given period.

Except for the accounting policies and estimates outlined under Part I, Item 1. Financial Statements - Note 2, there have been no material changes during the three months ended September 26, 2020 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 27, 2020.


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Impact of COVID-19 on Our Business
The ongoing COVID-19 pandemic has impacted and will continue to impact the Company’s operations, employees, customers, and suppliers, due to shelter-in-place orders, mandated quarantines, reduced facility operations, and travel bans and restrictions. While the operating results for the second quarter of fiscal year 2021 and thereafter may be impacted by COVID-19, the extent and form of such impact to our business is uncertain and cannot be estimated with any degree of certainty.

Employee Health and Safety
During the third and fourth quarters of fiscal year 2020 and the first quarter of fiscal year 2021, the Company's facilities and offices were either operating at reduced capacity or temporarily closed for non-essential operations. In an effort to protect the health and safety of our employees, we implemented safety measures such as work-from-home practices, travel restrictions, extensive cleaning protocols, and social distancing when engaging in essential activities.

Focus on Customers
We continue to work with our sales, supplier, and customer design and engineering teams to meet current demand. Teams meet remotely, through telephonic or video conferences and by leveraging available technology, to continue the design and engineering process that would normally take place at physical customer locations.

Manufacturing and Operations
We will continue to actively monitor this evolving situation and implement changes to protect employee health. In addition to our actions, we will continue to implement government-placed orders in all our locations. While COVID-19 related disruptions have impacted our manufacturing operations, we continue to leverage our manufacturing flexibility to reduce the negative effects of such disruptions.

Please refer certain risk factors included in Item 1A in our Annual Report on Form 10-K for the fiscal year ended June 27, 2020 for discussions of the risks to our business from COVID-19.

RESULTS OF OPERATIONS

The following table sets forth certain Condensed Consolidated Statements of Income data expressed as a percentage of net revenues for the periods indicated:
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
 
 
 
Net revenues
100.0
 %
 
100.0
%
Cost of goods sold
32.7
 %
 
35.6
%
Gross margin
67.3
 %
 
64.4
%
Operating expenses:
 
 
 
Research and development
18.6
 %
 
20.4
%
Selling, general and administrative
13.4
 %
 
14.3
%
Intangible asset amortization
0.1
 %
 
0.1
%
Severance and restructuring expenses
1.4
 %
 
0.3
%
Other operating expenses (income), net
1.2
 %
 
%
Total operating expenses
34.8
 %
 
35.1
%
Operating income
32.5
 %
 
29.3
%
Interest and other income (expense), net
(1.1
)%
 
0.3
%
Income before provision for income taxes
31.4
 %
 
29.6
%
Income tax provision (benefit)
4.0
 %
 
3.3
%
Net income
27.4
 %
 
26.3
%


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The following table shows stock-based compensation included in the components of the Condensed Consolidated Statements of Income reported above as a percentage of net revenues for the periods indicated:

 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
Cost of goods sold
0.8
%
 
0.6
%
Research and development
2.3
%
 
2.0
%
Selling, general and administrative
2.7
%
 
2.0
%
 
5.8
%
 
4.6
%

Net Revenues

Net revenues were $619.4 million and $533.0 million for the three months ended September 26, 2020 and September 28, 2019, respectively. Revenue from communications and data center products was up by 37% driven by an increased demand for base station and data center products. Revenue from industrial products was up by 18% primarily due to higher demand for medical and automatic test equipment products. Revenue from automotive products increased by 13% mainly due to increased demand for powertrain and safety and security products.

During each of the three months ended September 26, 2020 and September 28, 2019, approximately 90% of net revenues were derived from customers outside of the United States. While less than 2% of our sales are denominated in currencies other than U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on our revenue and results of operations for the three months ended September 26, 2020 and September 28, 2019 was immaterial.

Gross Margin

Our gross margin percentages were 67.3% and 64.4% for the three months ended September 26, 2020 and September 28, 2019, respectively. Our gross margin increased by 2.9 percentage points, primarily due to increased factory utilization and higher revenues.

Research and Development

Research and development expenses were $115.5 million and $109.0 million for the three months ended September 26, 2020 and September 28, 2019, respectively, which represented 18.6% and 20.4% of net revenues for each respective period. The $6.5 million increase was primarily due to higher salaries and related personnel costs, including increased stock-based compensation for acceleration of certain RSAs for tax withholding purposes.

Selling, General and Administrative

Selling, general and administrative expenses were $83.0 million and $76.1 million for the three months ended September 26, 2020 and September 28, 2019, respectively, which represented 13.4% and 14.3% of net revenues for each respective period. The $6.9 million increase was mainly due to higher salaries and related personnel costs, including increased stock-based compensation for acceleration of certain RSAs for tax withholding purposes. This was partially offset by lower depreciation expense.

Severance and restructuring

Severance and restructuring expenses were $8.8 million and $1.4 million for the three months ended September 26, 2020 and September 28, 2019, respectively, which represented 1.4% and 0.3% of net revenues for each respective period. The $7.4 million increase was due to increased restructuring activities which, as a result of the pending ADI merger, now include change in control related benefits.

Other operating expense (income), net

Other operating expense (income), net were $7.4 million and less than $0.1 million for the three months ended September 26, 2020 and September 28, 2019, respectively, which represented 1.2% and less than 0.1% of net revenues for each respective period. The $7.3 million increase was primarily due to expenses related to the pending ADI merger such legal and professional services.


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Provision for Income Taxes

In the three months ended September 26, 2020 and September 28, 2019, we recorded an income tax provision of $24.9 million and $17.7 million, respectively. Our effective tax rate for the three months ended September 26, 2020 and September 28, 2019 was 12.8% and 11.2%, respectively.

Our federal statutory tax rate is 21%. The effective tax rate for the three months ended September 26, 2020 and September 28, 2019 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by U.S. tax expense generated by Global Intangible Low-Taxed Income.

BACKLOG

As of September 26, 2020 and June 27, 2020, our current quarter backlog was approximately $493.0 million and $496.4 million, respectively. Our current quarter backlog includes customer request dates to be filled within the next three months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to customers. Accordingly, we believe that our backlog is not a reliable measure for predicting future revenues. All backlog amounts have been adjusted for estimated future distribution ship and debit pricing adjustments.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 
Financial Condition

Cash flows were as follows:
 
Three Months Ended
 
September 26,
2020
 
September 28,
2019
 
(in thousands)
Net cash provided by (used in) operating activities
$
162,511

 
$
141,270

Net cash provided by (used in) investing activities
5,642

 
22,814

Net cash provided by (used in) financing activities
(151,734
)
 
(226,235
)
Net increase (decrease) in cash and cash equivalents
$
16,419

 
$
(62,151
)
Operating activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.

Cash provided by operating activities increased by $21.2 million for the three months ended September 26, 2020 compared with the three months ended September 28, 2019 primarily due to higher net income, partially offset by changes in working capital.

Investing activities

Investing cash flows consist primarily of net investment purchases and maturities, and capital expenditures.

Cash provided by investing activities decreased by $17.2 million for the three months ended September 26, 2020 compared with the three months ended September 28, 2019. The decrease was due to lower proceeds from maturity of available-for-sale securities partially offset by lower purchases of property, plant and equipment.

Financing activities

Financing cash flows consist primarily of payment of debt, dividends to stockholders, and repurchases of common stock.

Cash used in financing activities decreased by $74.5 million for the three months ended September 26, 2020 compared with the three months ended September 28, 2019. The decrease was primarily due to lower repurchases of common stock.


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Liquidity and Capital Resources

Our primary source of liquidity is our cash flows from operating activities resulting from net income and management of working capital.

As of September 26, 2020, our available funds consisted of $1.6 billion in cash, cash equivalents and short-term investments.

On October 30, 2018, we were authorized to repurchase up to $1.5 billion of the Company's common stock. During the three months ended September 26, 2020, we repurchased an aggregate of $9.2 million of the Company's common stock. Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date we announced our planned merger with ADI.

During the three months ended September 26, 2020, we paid cash dividends of $0.48 per common share totaling $128.1 million. The Company will neither declare nor pay a dividend in any of the next succeeding three fiscal quarters, as provided in the ADI Merger Agreement.

We anticipate that the available funds and cash generated from operations will be sufficient to meet cash and working capital requirements, including the anticipated level of capital expenditures, debt repayments and dividend payments for at least the next twelve months.

Off-Balance-Sheet Arrangements

As of September 26, 2020, we did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk has not changed materially from the interest rate and foreign currency risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020.

The impact of inflation and changing prices on the Company’s net revenues and on operating income during the three months ended September 26, 2020 and September 28, 2019 was not material.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer (“CEO”) and our chief financial officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of September 26, 2020. Our management, including the CEO and the CFO, has concluded that the Company’s disclosure controls and procedures were effective as of September 26, 2020. The purpose of these controls and procedures is to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, and that such information is accumulated and communicated to our management, including our CEO and our CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 26, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Due to the COVID-19 pandemic, most of the Company’s employees are working remotely, and the Company is striving to minimize the impact of this on the design and effectiveness of the Company’s internal control over financial reporting. The Company is continually monitoring and assessing its internal control over financial reporting and has not experienced any material impact to its internal control over financial reporting due to the COVID-19 pandemic.

Inherent Limitations on the Effectiveness of Internal Controls

A system of internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with GAAP, and no control system, no matter

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how well designed and operated, can provide absolute assurance. The design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement errors and misstatements. Also, projection of any evaluation of effectiveness to future periods is 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.

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PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The information set forth above under Part I, Item 1, Note 12 “Commitments and Contingencies” to the Condensed Consolidated Financial Statements is incorporated herein by reference.

ITEM 1A: RISK FACTORS

A description of risks associated with our business, financial condition and results of our operations is set forth in Item 1A - Risk Factors of our Annual Report on Form 10-K for the fiscal year ended June 27, 2020, which is incorporated herein by reference.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 30, 2018, the Board of Directors of the Company authorized the repurchase of up to $1.5 billion of the Company’s common stock. This stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as current stock price, levels of cash generated from operations, cash requirements, and other factors. The Company’s prior repurchase authorization was cancelled and superseded by this new repurchase authorization.

The following table summarizes the activity related to stock repurchases for the three months ended September 26, 2020:
 
Issuer Repurchases of Equity Securities
 
(in thousands, except per share amounts)
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Jun 28, 2020 - Sep 26, 2020
150

 
$
61.41

 
150

 
$
664,970

Total for the quarter
150

 
$
61.41

 
150

 
$
664,970


In the three months ended September 26, 2020, the Company repurchased approximately 149.8 thousand shares of its common stock for approximately $9.2 million. As of September 26, 2020, the Company had remaining authorization of $0.7 billion for future share repurchases. Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date we announced our planned merger with ADI.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.


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ITEM 6: EXHIBITS

(a) Exhibits
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
101.SCH
Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
(A) Management contract or compensatory plan or arrangement.

(1) Filed or furnished herewith.

In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.









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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
October 28, 2020
 
MAXIM INTEGRATED PRODUCTS, INC.
 
 
 
 
 
By:/s/ Brian C. White
 
 
Brian C. White
 
 
Senior Vice President, Chief Financial Officer

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