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UNITED STATES FORM 10-Q (Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-34192
MAXIM INTEGRATED PRODUCTS, INC.
Delaware
94-2896096
120 San Gabriel Drive
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the quarterly period ended September 26, 2009
For the transition period from ________to _________
(Exact name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer I. D. No.)
Sunnyvale, California 94086
(Address of Principal Executive Offices including Zip Code)
(408) 737-7600
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 x 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 or a smaller reporting 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 x |
Accelerated filer ¨ |
Non-accelerated filer ¨
|
Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one):
As of October 23, 2009 there were 305,233,410 shares of Common Stock, par value $.001 per share, of the registrant outstanding.
Note: PDF provided as a courtesy
MAXIM INTEGRATED PRODUCTS, INC.
INDEX
2
Part I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) MAXIM INTEGRATED PRODUCTS, INC. See accompanying Notes to Condensed Consolidated Financial Statements. 3
MAXIM INTEGRATED PRODUCTS, INC. See accompanying Notes to Condensed Consolidated Financial Statements. 4
MAXIM INTEGRATED PRODUCTS, INC. See accompanying Notes to Condensed Consolidated Financial Statements. 5
MAXIM INTEGRATED PRODUCTS, INC. NOTE 1: BASIS OF PRESENTATION The accompanying unaudited condensed interim consolidated financial statements of Maxim Integrated
Products, Inc. and all of its majority-owned subsidiaries (collectively, the "Company" or "Maxim") 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 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 considered necessary for fair presentation have been included. The year-end condensed balance sheet data were derived from
audited financial statements but do not include all disclosures required by GAAP. The results of operations for the three months ended
September 26, 2009 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 Annual Report on
Form 10-K for the fiscal year ended June 27, 2009. We have evaluated subsequent events through the date that the financial statements were issued on November 4, 2009. The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every sixth or
seventh fiscal year will be a 53-week fiscal year. Fiscal year 2010 is a 52-week fiscal year. NOTE 2: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 2008, the Financial Accounting Standards Board (the "FASB") issued new accounting guidance related to all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The adoption of the new guidance did not have a material effect on the Company's
consolidated financial condition and results of operations. In December 2007, the FASB issued new accounting guidance related to the
accounting and reporting for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. The guidance improves the relevance, comparability and transparency of financial statements and eliminates diversity in practice
that currently exists in accounting for transactions between an entity and noncontrolling interests. This guidance is effective for annual periods
beginning after December 15, 2008. Earlier adoption is prohibited. The adoption of the new guidance did not have a material effect on
the Company's consolidated financial position, results of operations and cash flows. In December 2007, the FASB issued new accounting guidance related to business
combinations. The new accounting guidance requires the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to
evaluate and understand the nature and financial effect of the business combination. This guidance is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company adopted the new accounting guidance during the first quarter of fiscal year 2010. See Note 15
"Acquisitions". During the first quarter of fiscal year 2010, we adopted three related sets of accounting guidance as issued by the
FASB. The accounting guidance sets forth (i) rules related to determining the fair value of financial assets and financial liabilities when the
activity levels have significantly decreased in relation to the normal market, (ii) guidance related to the determination of other-than-temporary
impairments to include the intent and ability of the holder as an indicator in the determination of whether an other-than-temporary impairment
exists and (iii) interim disclosure requirements for the fair value of financial instruments. The adoption of the three sets of accounting guidance
did not have a material impact on our consolidated financial statements. 6
MAXIM INTEGRATED PRODUCTS, INC. During the first quarter of fiscal year 2010, we adopted new accounting guidance for the determination of the useful life
of intangible assets as issued by the FASB. The new guidance amends the factors that should be considered in developing the renewal or
extension assumptions used to determine the useful life of a recognized intangible asset. The new guidance also requires expanded disclosure
regarding the determination of intangible asset useful lives. The adoption of this accounting guidance did not have a material impact on our
consolidated financial statements. During the first quarter of fiscal year 2010, we adopted the new Accounting Standards Codification (ASC) as issued by
the FASB. The ASC has become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. The
ASC is not intended to change or alter existing GAAP. The adoption of the ASC did not have a material impact on our consolidated financial
statements. NOTE 3: BALANCE SHEET COMPONENTS The components of inventories consist of: The components of other assets consist of: NOTE 4: FAIR VALUE MEASUREMENTS The FASB defines fair value as the price that would be received from
selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining
fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market
participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. Our financial instruments are measured and recorded at fair value, except for cost method investments. Our cost
method investments are measured at fair value quarterly; however, they are only recorded at fair value when an impairment charge is
recognized. Our non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when
there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. 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: Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities. The Company's Level 1 assets and liabilities consist of U.S. Treasury securities and money market funds. 7
MAXIM INTEGRATED PRODUCTS, INC. 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 uses
observable market prices for comparable instruments to value its derivative instruments. The Company's Level 2 assets and liabilities consist of bank certificates of deposit and foreign currency forward
contracts. Level 3 - Unobservable inputs to the valuation methodology that are supported by little or no market activity and
that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value
measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant
management judgment or estimation. The Company's Level 3 assets include assets held for sale. Assets and liabilities measured at fair value on a recurring basis as of September 26, 2009 were as follows:
YES ¨
NO x
PART I. FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of September 26, 2009 and June 27, 2009
Condensed Consolidated Statements of Income for the Three Months Ended September 26, 2009 and September 27, 2008
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 26, 2009 and September 27, 2008
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. Submissions of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits
SIGNATURES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 26,
June 27,
2009
2009
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
$ 836,029
$ 709,348
Short-term investments
101,551
204,055
Total cash, cash equivalents and short-term investments
937,580
913,403
Accounts receivable, net
228,843
207,807
Inventories
192,277
217,847
Deferred tax assets
194,373
211,879
Income tax refund receivable
1,260
13,072
Other current assets
24,078
20,943
Total current assets
1,578,411
1,584,951
Property, plant and equipment, net
1,352,857
1,366,052
Other assets
130,039
130,772
TOTAL ASSETS
$ 3,061,307
$ 3,081,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$ 57,966
$ 70,087
Income taxes payable
26,333
2,140
Accrued salary and related expenses
125,821
141,334
Accrued expenses
40,059
38,455
Deferred income on shipments to distributors
18,764
16,760
Total current liabilities
268,943
268,776
Other liabilities
26,210
26,398
Income taxes payable
126,055
124,863
Deferred tax liabilities
67,760
67,273
Total liabilities
488,968
487,310
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock and capital in excess of par value
324
306
Additional paid-in capital
19,175
21,205
Retained earnings
2,561,185
2,580,610
Accumulated other comprehensive loss
(8,345)
(7,656)
Total stockholders' equity
2,572,339
2,594,465
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$ 3,061,307
$ 3,081,775
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 26,
September 27,
2009
2008
(in thousands)
Net revenues
$ 449,246
$ 501,204
Cost of goods sold (1)
197,619
209,654
Gross margin
251,627
291,550
Operating expenses:
Research and development (1)
116,693
138,915
Selling, general and administrative (1)
54,990
40,243
Impairment of long-lived assets
8,291
7,343
Severance and restructing expenses (recoveries)
(1,561)
4,106
Other operating expenses, net
(16,885)
7,358
Total operating expenses
161,528
197,965
Operating income
90,099
93,585
Interest income and other, net
1,901
9,101
Income before provision for income taxes
92,000
102,686
Provision for income taxes
50,048
35,119
Net income
$ 41,952
$ 67,567
Earnings per share:
Basic
$ 0.14
$ 0.21
Diluted
$ 0.13
$ 0.21
Shares used in the calculation of earnings per share:
Basic
306,276
320,553
Diluted
312,162
323,815
Dividends declared per share
$ 0.20
$ 0.20
(1) Includes stock-based compensation expenses as follows:
Cost of goods sold
$ 5,461
$ 11,920
Research and development
16,741
19,419
Selling, general and administrative
4,263
6,222
$ 26,465
$ 37,561
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 26,
September 27,
2009
2008
(in thousands)
Cash flows from operating activities:
Net income
$ 41,952
$ 67,567
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation
26,465
37,561
Depreciation and amortization
36,496
46,781
Deferred taxes
17,809
(924)
Tax benefit (shortfall) related to stock-based compensation
(4,347)
1,062
Excess tax benefit related to stock-based compensation
(1,983)
(52)
Impairment of long-lived assets
8,291
7,343
Loss from sale of property,plant and equipment
699
700
Loss from sale of equity investments
149
-
Changes in assets and liabilities:
Accounts receivable
(21,036)
3,460
Inventories
24,525
6,429
Other current assets
10,595
11,146
Accounts payable
(14,891)
15,471
Income taxes payable
24,490
21,503
Deferred income on shipments to distributors
2,004
(138)
Accrued liabilities-goodwill payments above settlement date fair value
(453)
(8,948)
All other accrued liabilities
(12,250)
(51,897)
Net cash provided by operating activities
138,515
157,064
Cash flows from investing activities:
Purchase of property, plant and equipment
(26,463)
(37,995)
Proceeds from sale of property, plant, and equipment
340
322
Other non-current assets
953
(3,206)
Acquisition
(4,000)
-
Purchases of available-for-sale securities
-
(1,370)
Proceeds from sales/maturities of available-for-sale securities
100,233
2,438
Net cash provided by (used in) investing activities
71,063
(39,811)
Cash flows from financing activities:
Excess tax benefit related to stock-based compensation
1,983
52
Mortgage liability
(10)
(10)
Goodwill payment on expiring options
-
(4,997)
Repurchase of options
(209)
-
Cash settlement of vested restricted stock units
-
(1,910)
Payouts under the RSU loan program
-
(8,202)
Proceeds from derivative litigation settlement
2,460
-
Issuance of common stock
(8,175)
-
Repurchase of common stock
(17,569)
-
Dividends paid
(61,377)
(64,111)
Net cash used in financing activities
(82,897)
(79,178)
Net increase in cash and cash equivalents
126,681
38,075
Cash and cash equivalents:
Beginning of period
709,348
1,013,119
End of period
$ 836,029
$ 1,051,194
Supplemental disclosures of cash flow information:
Cash paid, net during the period for income taxes
$ 281
$ 128
Noncash investing and financing activities:
Accounts payable related to property, plant and equipment purchases
$ 18,482
$ 12,386
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 26,
June 27,
2009
2009
Inventories:
(In thousands)
Raw materials
$ 14,017
$ 14,235
Work-in-process
140,878
166,970
Finished goods
37,382
36,642
$ 192,277
$ 217,847
September 26,
June 27,
2009
2009
Other Assets:
(In thousands)
Deferred tax assets
$ 5,914
$ 5,914
Intangible assets, net (Note 16)
73,205
76,295
Goodwill (Note 16)
29,596
26,710
Other
21,324
21,853
$ 130,039
$ 130,772
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Fair Value Measurements Using
Balance as of
September 26,
2009
Quoted Prices in
Active Markets for
Identical Instruments
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in thousands)
Assets:
Money market funds (1)
$ 786,722
$ 784,604
$ 2,118
$ -
U.S. Treasury Notes (2)
101,551
101,551
-
-
Foreign currency derivative contracts, (net)
(278)
-
(278)
-
Total assets measured at fair value
$ 887,995
$ 886,155
$ 1,840
$ -
(1) |
Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets as of September 26, 2009 |
(2) |
Included in short-term investments in the accompanying Condensed Consolidated Balance Sheets as of September 26, 2009 |
Assets and liabilities measured at fair value on a non-recurring basis as of September 26, 2009 were as follows:
Fair Value Measurements Using
|
|||||||
Balance as of September 26, 2009 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||
(in thousands) | |||||||
Assets: | |||||||
Assets Held for Sale (1) |
$ 4,645
|
$ -
|
$ -
|
$ 4,645
|
|||
Total assets measured at fair value |
$ 4,645
|
$ -
|
$ -
|
$ 4,645
|
(1) |
Included in Other Assets in the accompanying Condensed Consolidated Balance Sheets as of September 26, 2009 |
8
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The losses recorded during the three months ended September 26, 2009 were as follows:
Total Losses for Three Months ended September 26, 2009 |
|
(in thousands) | |
Impairment of long-lived assets designated as held for sale during the period |
$ (8,291)
|
Total losses recorded for non-recurring measurements |
$ (8,291)
|
Our non-financial assets were measured and recorded at fair value during the three months ended September 26, 2009 due to previously disclosed events and circumstances, that indicated that the carrying value of the assets or the asset grouping was not recoverable and our decision to hold these assets for sale, resulting in other-than-temporary impairment charges. Most of these asset impairments relate to fab and end-of-line manufacturing assets.
NOTE 5: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investment portfolio, which includes U.S. Treasury securities. The Company limits portfolio duration to reduce default risk, market risk and reinvestment risk. The Company does not use derivative financial instruments to hedge the risk of interest rate volatility. At September 26, 2009, the Company investment portfolio had an expected weighted average return of 2.9% (2.9% at June 27, 2009) and a weighted maturity of 247 days (170 days at June 27, 2009). In addition at September 26, 2009, the Company maintained a significant portfolio of money market fund investments, which are included in cash and cash equivalents. These money market funds are all available on a daily basis.
Foreign Currency Risk
The Company generates revenues outside the United States based on orders obtained in various non-U.S. currencies, primarily Japanese Yen, British Pound and Euro. Maxim incurs expenditures denominated in various non-US currencies, principally Philippine Pesos and Thailand Baht associated with the Company end-of-line manufacturing activities in the Philippines and Thailand, respectively. Maxim is exposed to fluctuations in foreign currency exchange rates primarily on orders and accounts receivable from sales in these foreign currencies and cash flows for expenditures in the foreign currencies. Maxim has established risk management strategies designed to reduce the impact of reductions in value and volatility of future cash flows caused by changes in the exchange rates for these currencies. These strategies reduce, but do not entirely eliminate, the impact of currency exchange fluctuations.
Currency forward contracts are used to offset the currency risk of non-U.S. dollar-denominated assets and liabilities. The Company typically enters into currency forward contracts quarterly to hedge exposures associated with the Company expenditures denominated in Philippine Pesos and Thailand Baht. Maxim enters into contracts each quarter for the Company accounts receivable and for backlog denominated in Japanese Yen, British Pound and Euro. These instruments generally have a maturity of less than one year. Changes in fair value of the underlying assets and liabilities are generally offset by the changes in fair value of the related currency forward contract. The net realized and unrealized gains or losses from hedging non-U.S. dollar denominated assets and liabilities are recognized in Interest income and other, net in the Condensed Consolidated Statements of Income.
Foreign exchange contracts
The net unrealized gain or loss, if any, is potentially subject to market and credit risk as it represents appreciation (decline) of the hedge position against the spot exchange rates. The net realized and unrealized gains or losses from hedging foreign currency denominated assets and liabilities were immaterial in the three months ended September 26, 2009 and September 27, 2008.
9
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The fair values and effect of derivative instruments not designated as hedging instruments under generally accepted accounting principles on the consolidated financial statements was as follows:
Fair Value of Derivative Instrument
|
||||
Derivatives not designated as hedging instruments under generally accepted accounting principles |
Balance sheet location
|
Fair Value | Fair Value | |
September 26, 2009
|
June 27,2009
|
|||
(in thousands) | ||||
Foreign exchange contracts | Accounts receivable, net |
$ (278)
|
$ (480)
|
|
Total |
$ (278)
|
$ (480)
|
Derivatives not designated as hedging instruments under generally accepted accounting principles |
Location of gain or (loss) recognized in income on derivative |
Amount of gain or (loss) recognized in income on derivative |
||
Three Months Ended | Three Months Ended | |||
September 26, 2009
|
September 27, 2008
|
|||
(in thousands) | ||||
Foreign exchange contracts | Interest income and other, net |
$ (1,550)
|
$ 425
|
|
Total |
$ (1,550)
|
$ 425
|
Volume of Derivative Activity
The total gross notional amount for foreign currency forward contracts, recorded at fair value, was $45.8 million and $77.3 million as of September 26, 2009 and June 27, 2009, respectively. All of the Company's currency forward contracts are single delivery, which are settled at maturity involving one cash payment exchange.
Total gross U.S. Dollar notional amounts for foreign currency forward contract, presented by currency, are as follows:
In United States Dollars
|
September 26, 2009
|
June 27, 2009
|
||
(in thousands) | ||||
Euro | $ 13,679 | $ 28,054 | ||
Japanese Yen | 17,650 | 36,533 | ||
British Pound | 5,772 | 6,045 | ||
Other |
8,663
|
6,703
|
||
Total |
$ 45,764
|
$ 77,335
|
10
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 6: STOCK-BASED COMPENSATION
The following table shows total stock-based compensation expense by type of award, and resulting tax effect, included in the Condensed Consolidated Statements of Income for the three months ended September 26, 2009 and September 27, 2008:
Three Months Ended
|
|||
Sept. 26, | Sept. 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Cost of goods sold | |||
Stock options | $ 2,015 | $ 6,115 | |
Restricted stock units | 3,078 | 5,805 | |
Employee stock purchase plan |
368
|
-
|
|
$ 5,461
|
$ 11,920
|
||
Research and development expense | |||
Stock options | $ 4,131 | $ 7,735 | |
Restricted stock units | 11,197 | 11,684 | |
Employee stock purchase plan |
1,413
|
-
|
|
$ 16,741
|
$ 19,419
|
||
Selling, general and administrative expense | |||
Stock options | $ 1,749 | $ 2,410 | |
Restricted stock units | 2,378 | 3,812 | |
Employee stock purchase plan |
136
|
-
|
|
$ 4,263
|
$ 6,222
|
||
Total stock-based compensation expense | |||
Stock options | $ 7,895 | $ 16,260 | |
Restricted stock units | 16,653 | 21,301 | |
Employee stock purchase plan |
1,917
|
-
|
|
Pre-tax stock-based compensation expense | 26,465 | 37,561 | |
Less: income tax effect |
8,017
|
12,799
|
|
Net stock-based compensation expense |
$ 18,448
|
$ 24,762
|
Compensation cost capitalized as part of inventory as of September 26, 2009 and June 27, 2009 was $4.5 million and $5.6 million, respectively.
Modifications and Settlements
2009 Goodwill Program
In January 2009, as a result of the inability of employees to trade in the Company's stock resulting from the restatement ("Blackout Period"), the Company's Board of Directors approved a program ("Goodwill Program"), wherein non-officer employees holding options that were outstanding as of November 1, 2008 which reached or would have reached their contractual 10-year expiration term between November 2008 and December 2009 would be eligible for a payment in the form of cash or restricted stock units ("RSUs"). Under the Goodwill Program payments exceeding $5,000 would be settled in restricted stock units that vest over three quarters, contingent upon continued employment, while amounts below $5,000 would be settled in cash in a lump-sum payment. The program was extended to officers in May 2009 with substantially similar terms, except that payments exceeding $5,000 to officers were settled in restricted stock units vesting over six quarters.
11
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company recorded a liability for the options settling in cash under the Goodwill Program. Options associated with payments being made in the form of restricted stock units under the Goodwill Program, which contain market and service conditions. The Company recognized $3.3 million in stock based compensation expense related to this program during the three months ended September 26, 2009.
Fair Value
The fair value of options granted to employees under the Company's 1996 Plan and rights to acquire common stock under our 2008 ESPP is estimated on the date of grant using the Black-Scholes option valuation model. The fair value of restricted stock units is estimated using the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting.
Expected volatilities are based on the historical volatilities from its traded common stock over a period equal to the expected term. The Company analyzed historical exercise patterns of relatively homogeneous groups of employees to estimate the expected holding period for options granted through December 29, 2008. Subsequent to the end of the second quarter of fiscal year 2009, the Company began utilizing a simplified method, to estimate expected holding periods. This change was attributable to the significant impact resulting from the completion of the tender offer and the Company reducing the contractual term associated with new option grants from ten years to seven years. The risk-free interest rate is based on the U.S. Treasury yield. The Company determines the dividend yield by dividing the annualized dividends per share by the prior quarter's average stock price. The result is analyzed by the Company to decide whether it represents expected future dividend yield. The Company also estimates forfeitures at the time of grant and makes revisions if the estimates change or the actual forfeitures differ from those estimates.
The fair value of share-based awards granted to employees has been estimated at the date of grant using a Black-Scholes option valuation model and the following weighted-average assumptions:
Stock Option Plan
|
|||
Three Months Ended
|
|||
September 26, 2009
|
September 27, 2008
|
||
Expected holding period (in years) | 4.6 | 5.9 | |
Risk-free interest rate | 2.6% | 3.4% | |
Expected stock price volatility | 38.3% | 38.1% | |
Dividend yield | 5.4% | 3.6% | |
ESP Plan
|
|||
Three Months Ended
|
|||
September 26, 2009
|
September 27, 2008
|
||
Expected holding period (in years) | - - | - - | |
Risk-free interest rate | - - | - - | |
Expected stock price volatility | - - | - - | |
Dividend yield | - - | - - |
12
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The weighted-average fair value of stock options granted during the first quarter of fiscal years 2010 and 2009 was $3.52 and $5.82 per share, respectively. The weighted-average fair value of restricted stock units granted during the first quarter of fiscal years 2010 and 2009 was $15.86 and $20.24 per share, respectively.
Stock Option Plans
Stock Options
The following table summarizes stock options outstanding, exercisable and vested and expected to vest as of September 26, 2009 and their activity during fiscal year 2010:
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (in Years) |
Aggregate Intrinsic Value(1) |
||||
Balance at June 28, 2009 | 29,599,916 | $ 28.83 | |||||
Options Granted | 219,336 | $ 16.35 | |||||
Options Exercised | - | $ - | |||||
Options Cancelled |
(1,271,009)
|
$ 28.42 | |||||
Balance at September 26, 2009 |
28,548,243
|
$ 28.80 | 4.4 | $ 42,855,718 | |||
Exercisable, September 26, 2009 |
16,400,006
|
$ 35.08
|
3.2
|
$ 40,432
|
|||
Vested and Expected to vest, September 26, 2009 |
27,753,112
|
$ 29.13
|
4.3
|
$ 39,610,330
|
(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, 2009, the last business day proceeding the fiscal quarter-end multiplied by the number of options outstanding, exercisable or vested and expected to vest as of September 26, 2009. |
As of September 26, 2009, there was $72.8 million of total unrecognized compensation costs related to 12.1 million unvested stock options, expected to be recognized over a weighted average period of approximately 2.6 years.
Restricted Stock Units
The following table summarizes outstanding and expected to vest RSUs as of September 26, 2009 and their activity during fiscal year 2010:
Number of Shares |
Weighted Average Remaining Contractual Term (in Years) |
Aggregate Intrinsic Value(1) |
|||
Balance at June 28, 2009 | 11,867,329 | ||||
Restricted stock units granted | 216,347 | ||||
Restricted stock units released | (1,301,938) | ||||
Restricted stock units cancelled |
(126,772)
|
||||
Balance at September 26, 2009 |
10,654,966
|
1.4
|
$ 196,051,374
|
||
Vested and Expected to vest, September 26, 2009 |
9,884,733
|
1.4
|
$ 181,879,103
|
(1) |
Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on September 25, 2009, the last business day preceding the fiscal quarter-end multiplied by the number of RSUs outstanding or expected to vest as of September 26, 2009. |
The Company withheld shares totaling $8.2 million related to employee withholding taxes based on the value of the RSUs on their vesting date as determined by the Company's closing stock price for three months ended September 26, 2009. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.
As of September 26, 2009, there was $244.1 million of unrecognized compensation expense related to 10.7 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.8 years.
13
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2008 Employee Stock Purchase Plan:
As of September 26, 2009, there was $1.4 million of unrecognized compensation expense related to our ESPP plan.
NOTE 7: 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. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options, assumed release of unvested RSUs and assumed issuance of common stock under the employee stock purchase plans using the treasury stock method. The Company cash-settled options that expired (reached the ten year contractual term) during the blackout period and cash-settled vested RSUs during the three months ended September 27, 2008. These options and RSUs are considered liability instruments and as such are excluded from the diluted earnings per share calculation for the three months ended September 27, 2008.
The following table sets forth the computation of basic and diluted (loss) earnings per share.
Three Months Ended
|
|||
September 26, | September 27, | ||
(Amounts in thousands, except per share data) |
2009
|
2008
|
|
Numerator for basic earnings per share and | |||
diluted earnings per share | |||
Net income |
$ 41,952
|
$ 67,567
|
|
Denominator for basic earnings per share | 306,276 | 320,553 | |
Effect of dilutive securities: | |||
Stock options, RSUs, and ESPP |
5,886
|
3,262
|
|
Denominator for diluted earnings per share |
312,162
|
323,815
|
|
Earnings per share: | |||
Basic |
$ 0.14
|
$ 0.21
|
|
Diluted |
$ 0.13
|
$ 0.21
|
Approximately 20.1 million and 74.6 million of the Company's stock options were excluded from the calculation of diluted earnings per share for the three months ended September 26, 2009 and September 27, 2008, respectively. These options were excluded because they were determined to be antidilutive. However, such options could be dilutive in the future and, under those circumstances, would be included in the calculation of diluted earnings per share.
NOTE 8: SEGMENT INFORMATION
The Company operates and tracks its results as one reportable segment. The Company designs, develops, manufactures and markets a broad range of analog integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker.
The Company has fourteen operating segments which aggregate into one reportable segment. Two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and GAAP, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:
14
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company meets each of the aggregation criteria for the following reasons:
All of the Company's operating segments share similar economic characteristics as they have a similar long term business model. The causes for variation among the Company's operating segments are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amounts and types of tools and materials required are similar for each operating segment. Finally, even though the Company periodically reorganizes its operating segments based upon changes in customers, end markets or products, acquisitions, long-term growth strategies and the experience and bandwidth of the senior executives in charge, the common financial goals for each operating segment remain constant.
Enterprise-wide information is provided in accordance with GAAP. 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 reporting period.
Net revenues from unaffiliated customers by geographic region were as follows:
Three Months Ended
|
|||
September 26, | September 27, | ||
2009
|
2008 (1)
|
||
(in thousands) | |||
United States | $ 68,967 | $ 87,675 | |
China | 141,421 | 163,966 | |
Japan | 34,410 | 37,859 | |
Korea | 82,515 | 54,515 | |
Rest of Asia | 51,729 | 55,414 | |
Europe | 60,888 | 90,655 | |
Rest of World |
9,316
|
11,120
|
|
$ 449,246
|
$ 501,204
|
(1) |
The Company previously included $23.2 million of Korean revenues in United States revenues during the three months ended September 27, 2008. |
15
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Net long-lived assets by geographic region were as follows:
September 26, | June 27, | ||
2009
|
2009
|
||
(in thousands) | |||
United States | $ 1,000,222 | $ 1,016,116 | |
Philippines | 237,762 | 234,004 | |
Thailand | 107,942 | 108,898 | |
Rest of World |
6,931
|
7,034
|
|
$ 1,352,857
|
$ 1,366,052
|
NOTE 9: COMPREHENSIVE INCOME
Comprehensive income consists of net income and net unrealized (losses) gains on available-for-sale investments and forward exchange contracts, and deferred income taxes on unrealized exchange (losses) gains on intercompany receivables. The components of comprehensive income and related tax effects were as follows:
Three Months Ended
|
|||
September 26, | September 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Net income, as reported | $ 41,952 | $ 67,567 | |
Change in unrealized gains (losses) on investments, | |||
net of tax benefit (expense) of $213 and $(530), respectively | (371) | 923 | |
Deferred tax on unrealized exchange gains (losses) on intercompany receivables | (428) | 380 | |
Actuarial loss on post-retirement benefits, | |||
net of tax benefit (expense) of $(29) and $0, respectively |
52
|
-
|
|
Total comprehensive income |
$ 41,205
|
$ 68,870
|
Accumulated other comprehensive income presented in the Condensed Consolidated Balance Sheets at September 26, 2009 and June 27, 2009 consist of net unrealized (losses) gains on available-for-sale investments of $1.2 million and $1.6 million, respectively, net foreign currency translation loss adjustments of $(1.5) million and $(1.5) million, respectively, actuarial gains (losses) on post-retirement benefits of $(3.7) million and $(3.8) million, respectively, and deferred income tax of $(4.3) million and $(4.0) million, respectively, on unrealized exchange gains related to an intercompany receivable that is of a long-term investment nature.
NOTE 10: INCOME TAXES
In the three months ended September 26, 2009, the Company recorded an income tax provision of $50.0 million, compared to an income tax provision of $35.1 million for the three months ended September 27, 2008.
The Company's federal statutory tax rate is 35%. The Company's effective tax rate of 54.4% for the three months ended September 26, 2009 was higher than the statutory tax rate primarily because of losses of a foreign subsidiary for which no tax benefit is available. These foreign losses represent costs of ongoing research and developmental efforts.
The Company's effective tax rate of 34.2% for the three months ended September 27, 2008 was lower than the statutory tax rate primarily because of benefits from the domestic production activities deduction.
In the third quarter of fiscal year 2008, the Internal Revenue Service ("IRS") commenced an examination of the Company's federal corporate income tax returns for fiscal years 2005 and 2006, which is still ongoing. As part of this audit the IRS has requested information related to the Company's stock option investigation and subsequently expanded the audit to review stock option transactions in fiscal year 2004. The Company also has ongoing audits by various state and foreign taxing jurisdictions. Management believes that it has adequately provided for any adjustments that may result from these examinations, however, the outcome of tax audits cannot be predicted with
16
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
certainty. Should any issues addressed in the Company's tax audits be resolved in a manner not consistent with management's expectations, the Company will be required to adjust its provision for income tax in the period such resolution occurs.
NOTE 11: COMMITMENTS AND CONTINGENCIES
Stock Option Litigation
Beginning on or about May 22, 2006, several derivative actions were filed against certain current and former executive officers and directors of the Company. These derivative lawsuits were filed in: (1) the U.S. District Court for the Northern District of California, as In re Maxim Integrated Products, Inc. Derivative Litigation, Lead Case No. 5:06-cv-03344-JW, which consolidates McKinney v. Beck, et al. (Case No. 06-3344) and Horkay v. Beck, et al. (Case No. 06-3395), City of Pontiac Policemen's and Firemen's Retirement System v. Hood, et al. (Case No. 06-03754) and Corey v. Gifford, et al. (Case No. 06-03755); (2) the California Superior Court, Santa Clara County, as Louisiana Sheriffs' Pension & Relief Fund v. Gifford et al. (Case No. 1-06-CV-065626); and (3) the Delaware Court of Chancery, as Ryan v. Gifford, et al. (Case No. Civ 2213-N). The complaints alleged, among other things, that certain of the Company's current and former executive officers and directors breached their fiduciary duties to the Company by engaging in alleged wrongful conduct of back-dating stock options as well as violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company was named solely as a nominal defendant against whom the plaintiffs seek no recovery.
On January 2, 2009, the Delaware Court of Chancery issued a Memorandum Opinion approving the settlement in the Ryan, et al. vs. Gifford, et al. action and entered a Final Order and Judgment. The time for appeal of the Final Order and Judgment expired on February 2, 2009, with no party appealing any aspect of the Delaware Final Order and Judgment. All derivative actions pending in the California Superior Court have since been dismissed, with prejudice. All preconditions to distribution of the Delaware settlement proceeds in escrow on behalf of Maxim were met and the net settlement proceeds of $18.9 million were received on September 10, 2009. The Company recognized an increase to additional paid in capital of $2.5 million related to excess gains while the remainder of the proceeds of $16.4 million was recorded as a reduction in Other Operating Expenses, net.
On February 6, 2008, a putative class action complaint was filed against the Company, its former chief executive officer, now deceased, and its former chief financial officer in the United States District Court for the Northern District of California. The complaint, brought on behalf of a putative class of Maxim stockholders who purchased or otherwise acquired their shares between April 29, 2003 and January 17, 2008, asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with alleged misrepresentations and omissions concerning the Company's stock option accounting practices. On May 15, 2008, the Court appointed the Cobb County Government Employees Pension Plan, the DeKalb County Pension Plan and the Mississippi Public Employees Retirement System as co-lead plaintiffs (collectively, "Lead Plaintiffs") and Bernstein Litowitz Berger & Grossman LLP and Chitwood Harley Harnes LLP as co-lead counsel.
On November 14, 2008, Lead Plaintiffs filed a Consolidated Class Action Complaint, which continues to assert claims under Sections 10(b) and 20(a) of the Exchange Act and names the Company, its former chief executive officer, its former chief financial officer and its former treasurer as defendants. The Consolidated Class Action Complaint seeks damages in an unspecified amount, as well as interest, costs and expenses, including attorneys' fees. On January 30, 2009, the Company moved to dismiss the Consolidated Class Action Complaint, which motion, on July 16, 2009, was granted in part and denied in part by the Court. On August 28, 2009, the Company answered the Consolidated Class Action Complaint, and the parties currently are engaged in discovery. This lawsuit is still in its preliminary stages and any potential loss is not reasonably estimable at this time. The Company is defending the action vigorously. The Company cannot provide any assurance that the ultimate outcome of the action will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows for a particular period or on the trading price of our Common Stock.
17
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Other Legal Proceedings
In addition to the above proceedings, the Company is subject to other legal proceedings and claims that arise in the normal course of the Company's business. The Company does not believe that the ultimate outcome of such matters arising in the normal course of business will have a material adverse effect on the financial position, results of operations or cash flows of the Company.
Indemnifications
The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees and 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.
Legal fees associated with indemnification obligations, defense and other related costs
Pursuant to the Company's charter documents and indemnification agreements, the Company has certain indemnification obligations to its officers, directors and certain former officers and directors. More specifically, we have separate written indemnification agreements with our current and former executive officers and directors as well as with our director of internal audit. Pursuant to such obligations, the Company has incurred expenses related to legal fees and expenses advanced to certain former officers of the Company who are subject to pending civil charges by the SEC and other governmental agencies in connection with Maxim's historical stock option granting practices. The Company expenses such amounts as incurred.
NOTE 12: COMMON STOCK REPURCHASES
In October 2008, the Board of Directors authorized the Company to repurchase up to $750 million of the Company's common stock from time to time at the discretion of the Company's management. This stock repurchase authorization has no expiration date. All prior authorizations by the Company's Board of Directors for the repurchase of common stock were canceled and superseded by this authorization.
In the first quarter of fiscal year 2010, the Company repurchased approximately 0.9 million shares of its common stock for $16.8 million. As of the end of the first quarter of fiscal year 2010, the Company had repurchased a total of 19.o million shares totaling $251.9 million related to the $750 million Board of Director authorization. The Company was authorized to repurchase up to an additional $498.1 million of the Company's common stock. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company's common stock and general market and business conditions.
NOTE 13: IMPAIRMENT OF LONG-LIVED ASSETS
Test Facilities
During the first quarter of fiscal year 2010, the Company identified certain assets as excess primarily attributable to changes in certain manufacturing technology. In connection with these circumstances, the Company recorded a charge for the write down of equipment to its estimated fair value. The total charge of $5.0 million was included in impairment of long lived assets in the Company's Condensed Consolidated Statements of Income. The Company has ceased depreciation and classified these assets as held for sale based on its intentions to sell the assets and has included $0.6 million in Other assets in the Condensed Consolidated Balance Sheet as of September 26, 2009.
18
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Fabrication Facility, Oregon
During the first quarter of fiscal year 2010, as a result of reduced future wafer output requirements associated with equipment utilizing certain process technologies the Company recorded a write down of equipment to be sold to the equipment's estimated fair value. This charge of $3.3 million was included in impairment of long lived assets in the Company's Condensed Consolidated Statements of Income. The Company has ceased depreciation and classified these assets as held for sale based on its intentions to sell the assets and has included $0.5 million in Other assets in the Condensed Consolidated Balance Sheet as of September 26, 2009.
Fabrication Facility, San Jose
During the first quarter of fiscal year 2009, the Company recorded a $7.3 million asset impairment charge as a result of transferring certain wafer manufacturing production from its San Jose, California, wafer manufacturing facility to an outsourced Japanese manufacturing facility, Epson's Sakata, Japan, facility, and reductions in demand and reduced future capacity requirements.
The Company reached its conclusions regarding the asset impairments after conducting evaluations of the recoverability of the related manufacturing assets. The fair value of the equipment was determined after consideration of equipment specifications, quoted market prices of similar equipment and management's perception of demand for the equipment. The Company applied present value techniques to estimate fair value for certain of the equipment which they believe has limited marketability.
NOTE 14: RESTRUCTURING ACTIVITIES
Shutdown of Dallas fab
During the first quarter of fiscal year 2010, the Company recorded approximately $1.6 million in restructuring costs associated with the closure of the Dallas, Texas wafer manufacturing facility. These costs consisted of decommissioning of equipment at the facility and estimated severance and benefits associated with employees of the facility.
Change in Estimate
During the first quarter of fiscal year 2010, the Company recognized a reversal of expense of approximately $3.2 million related to a reduction in estimated benefits costs for employees terminated during prior quarters.
Activity and liability balances related to the restructuring activity for the three months ended September 26, 2009 were as follows:
Three Months Ended | |||||
September 26, 2009
|
|||||
(in thousands) | |||||
Severance and Benefits |
Other Exit Costs |
Total
|
|||
Balance, June 27, 2009 | $ 7,694 | $ - | $ 7,694 | ||
Restructuring accrual | 319 | 1,321 | 1,640 | ||
Cash payments | (2,343) | (1,321) | (3,664) | ||
Changes in estimates |
(3,201)
|
-
|
(3,201)
|
||
Balance, September 26, 2009 |
$ 2,469
|
$ -
|
$ 2,469
|
The Company has included this amount in accrued salary and related expenses in the Condensed Consolidated Balance Sheets.
19
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 15: ACQUISITIONS
L&L ENGINEERING
During the first quarter 2010, the Company acquired L&L Engineering, a company developing digital power converter technology for approximately $4.0 million in cash. The Company may pay up to an additional $5.5 million based on the achievement of certain product development and product release milestones and continued employment of certain key employees assumed from L&L Engineering. The Company preliminarily allocated $1.1 million to IPR&D and $2.9 million to goodwill. The Company will amortize the in-process research and development over the estimated life of the technology upon completion of its development. The Company expects that all of the goodwill will be deductible for tax purposes.
NOTE 16: GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or sooner if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company performed the annual impairment analysis during the first quarter 2010 and concluded that goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value, including goodwill.
Activity and goodwill balances for the three months ended September 26, 2009 were as follows:
Goodwill
|
|
Balance at June 27, 2009 | $ 26,710 |
New Acquisitions | 2,900 |
Adjustments |
(14)
|
Balance at September 26, 2009 |
$ 29,596
|
Intangible Assets
The useful lives of the significant amortizable intangible assets are as follows:
Asset
|
Life
|
Intellectual Property | 5-10 years |
Customer Relationships | 5-10 years |
Tradename | 3 years |
Backlog | 1 year |
Intangible assets consisted of the following:
September 26, 2009
|
|||||
Original Cost |
Accumulated Amortization |
Net
|
|||
(in thousands) | |||||
Intellectual property* | $ 63,526 | $ 26,372 | $ 37,153 | ||
Customer relationships | 42,330 | 6,606 | 35,724 | ||
Tradename | 400 | 122 | 278 | ||
Backlog |
200
|
150
|
50
|
||
Total intangible assets |
$ 106,456
|
$ 33,250
|
$ 73,205
|
* Original cost includes $1.1 million of In-process research and development acquired from L&L Engineering.
20
MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Amortization expense of $2.7 million associated with intellectual property was recorded in cost of goods sold for the three months ended September 26, 2009 while amortization expense of $1.4 million associated with customer relationships was recorded in selling, general and administrative expenses for the three months ended September 26, 2009, respectively.
The following table presents the amortization expense of intangible assets:
Three Months Ended
|
|||
September 26, | September 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Intellectual property | $ 2,696 | $ 1,771 | |
Customer relationships | 1,410 | 556 | |
Tradename | 34 | - | |
Backlog |
50
|
-
|
|
Total amortization expense |
$ 4,190
|
$ 2,327
|
The following table represents the estimated future amortization expense of intangible assets as of September 26, 2009:
Fiscal Year
|
Amount
|
||
(in thousands) | |||
Remaining nine months of 2010 | $ 12,468 | ||
2011 | 15,893 | ||
2012 | 15,069 | ||
2013 | 11,234 | ||
2014 | 6,819 | ||
Thereafter |
10,622
|
||
Total |
$ 72,105
|
* The total above excludes $1.1M of in-process research and development which will be amortized upon completion of development over the estimated useful life of the technology.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company 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 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, 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 (particularly Management's Discussion and Analysis of Financial Condition and Results of Operations), its Quarterly Reports on Form 10-Q (particularly Management's Discussion and Analysis of Financial Condition and Results of Operations) and any Current Reports on Form 8-K.
Overview of Business
Maxim Integrated Products, Inc. ("Maxim" or "the Company" and also referred to as "we," "our" or "us") is incorporated in the state of Delaware. Maxim 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 geographically diverse customers. The Company also provides a range of high-frequency process technologies and capabilities that can be used in custom designs. 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. The Company is a global company with wafer manufacturing facilities in the United States, testing facilities in the Philippines and Thailand and sales and circuit design offices throughout the world. The major end-markets in which the Company's products are sold are the communications, computing, consumer and industrial markets.
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 SEC has defined the most critical accounting policies as the ones that are most important to the portrayal 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 revenue recognition and related allowances, which impact the recording of revenues; valuation of inventories, which impacts costs of goods sold and gross margins; the assessment of recoverability of long-lived assets, which impacts write-offs of fixed assets; accounting for stock-based compensation, which impacts cost of goods sold, gross margins and operating expenses; accounting for income taxes, which impacts the income tax provision; and assessment of contingencies, which impacts charges recorded in cost of goods sold and operating expenses. We have other significant accounting policies that either does not generally require estimates and judgments that are as difficult or subjective, or are less likely to have a material impact on our reported results of operations for a given period.
22
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, | September 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Net revenues | 100.0% | 100.0% | |
Cost of goods sold |
44.0%
|
41.8%
|
|
Gross margin | 56.0% | 58.2% | |
Operating expenses: | |||
Research and development | 26.0% | 27.7% | |
Selling, general and administrative | 12.2% | 8.0% | |
Impairment of long-lived assets | 1.8% | 1.5% | |
Severance and restructing expenses (recoveries) | - -0.3% | 0.8% | |
Other operating expenses, net |
- -3.8%
|
1.5%
|
|
Total operating expenses |
35.9%
|
39.5%
|
|
Operating income | 20.1% | 18.7% | |
Interest income and other, net |
0.4%
|
1.8%
|
|
Income before provision for income taxes | 20.5% | 20.5% | |
Provision for income taxes |
11.1%
|
7.0%
|
|
Net income |
9.4%
|
13.5%
|
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, | September 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Cost of goods sold | 1.2% | 2.4% | |
Research and development | 3.7% | 3.9% | |
Selling, general and administrative |
0.9%
|
1.2%
|
|
5.9%
|
7.5%
|
Net Revenues
Net revenues were $449.2 million and $501.2 million for the three months ended September 26, 2009 and September 27, 2008, respectively, a decrease of 10.4%. We classify our net revenue by four major end market categories: Communications, Computing, Consumer, and Industrial. In the three months ended September 26, 2009, net revenues decreased in the Communications, Computing and Industrial end markets. Net shipments to Communications, Computing, and Industrial markets decreased by approximately 19%, 20%, and 10% for the three months ended September 26, 2009 as compared to September 27, 2008, respectively. The decline in each of the markets was primarily attributable to a reduction in demand associated with the current economic environment. Net shipments from Consumer markets increased by approximately 6% for three months ended September 26, 2009 as compared to September 27, 2008 driven primarily by increased shipments in the cell phone market.
During the three months ended September 26, 2009 and September 27, 2008, approximately 85% and 83% of net revenues, respectively, were derived from customers outside of the United States. While the majority of these sales are denominated in 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 revenue and our results of operations for the three months ended September 26, 2009 and September 27, 2008 was immaterial.
23
Gross Margin
Our gross margin percentage was 56.0% and 58.2% for the three months ended September 26, 2009 and September 27, 2008, respectively. The gross margin percentage for the three months ended September 26, 2009, as compared to the three months ended September 27, 2008, decreased primarily due to a decline in utilization associated with our manufacturing facilities attributable to a decline in overall demand caused by a slowdown in the global economy. These decreases in margin percentage as noted above were partially offset by an $11.3 million reduction in depreciation expense from the completion of the closure of our Dallas facility at the end of the fiscal year 2009. Inventory write-downs decreased by approximately $5.0 million, from $8.4 million during the three months ended September 27, 2008 to $3.4 million during the three months ended September 26, 2009 due to improvements in management of our inventory levels. In addition stock-based compensation expense declined by $6.5 million.
Research and Development
Research and development expenses were $116.7 million and $138.9 million for the three months ended September 26, 2009 and September 27, 2008, respectively, which represented 26.0% and 27.7% of net revenues, respectively. The decrease in research and development expenses as a percentage of revenue was partially attributable to the transition of our field applications engineers and our business managers from research and development to selling, general and administrative functions subsequent to the first quarter of fiscal year 2009. The total impact of the transition was approximately $13.8 million during the three months ended September 26, 2009. In addition salaries, bonuses and benefits declined by $7.8 million due to reduced headcount attributable to the restructuring actions implemented by the Company during the second half of fiscal year 2009.
Selling, General and Administrative
Selling, general and administrative expenses were $55.0 million and $40.2 million for the three months ended September 26, 2009 and September 27, 2008, respectively, which represented 12.2% and 8.0% of net revenues, respectively. The increase in selling, general and administrative expenses is partially attributable to the transition of our field applications engineers and our business managers from research and development to selling, general and administrative functions subsequent to the first quarter of fiscal year 2009. The total impact of the transition was approximately $13.8 million during the three months ended September 26, 2009.
24
Stock-based Compensation
The following table shows total stock-based compensation expense by type of award, and resulting tax effect, included in the Condensed Consolidated Statements of Income for the three months ended September 26, 2009 and September 27, 2008:
Three Months Ended
|
|||
Sept. 26, | Sept. 27, | ||
2009
|
2008
|
||
(in thousands) | |||
Cost of goods sold | |||
Stock options | $ 2,015 | $ 6,115 | |
Restricted stock units | 3,078 | 5,805 | |
Employee stock purchase plan |
368
|
-
|
|
$ 5,461
|
$ 11,920
|
||
Research and development expense | |||
Stock options | $ 4,131 | $ 7,735 | |
Restricted stock units | 11,197 | 11,684 | |
Employee stock purchase plan |
1,413
|
-
|
|
$ 16,741
|
$ 19,419
|
||
Selling, general and administrative expense | |||
Stock options | $ 1,749 | $ 2,410 | |
Restricted stock units | 2,378 | 3,812 | |
Employee stock purchase plan |
136
|
-
|
|
$ 4,263
|
$ 6,222
|
||
Total stock-based compensation expense | |||
Stock options | $ 7,895 | $ 16,260 | |
Restricted stock units | 16,653 | 21,301 | |
Employee stock purchase plan |
1,917
|
-
|
|
Pre-tax stock-based compensation expense | 26,465 | 37,561 | |
Less: income tax effect |
8,017
|
12,799
|
|
Net stock-based compensation expense |
$ 18,448
|
$ 24,762
|
Pre-tax stock based compensation decreased to $26.5 million during the three months ended September 26, 2009 from $37.6 million during the three months ended September 27 , 2008, which represented 5.9% and 7.5% of net revenues, respectively. The decrease in expenses is attributable to lower charges for stock options in connection with the tender offer to cash settle certain under water stock options completed in December 2008 and the completion of vesting of restricted stock units previously issued. These decreases were partially offset by expenses associated with the Company's annual grant of stock options and restricted stock units which occurred in December 2008.
25
Impairment of Long-lived Assets
Test Facilities
During the first quarter of fiscal year 2010, the Company identified certain assets as excess primarily attributable to changes in certain manufacturing technology. In connection with these circumstances, the Company recorded a charge for the write down of equipment to its estimated fair value. The total charge of $5.0 million was included in impairment of long lived assets in the Company's Condensed Consolidated Statements of Income. The Company has ceased depreciation and classified these assets as held for sale based on its intentions to sell the assets and has included $0.6 million in Other assets in the Condensed Consolidated Balance Sheet as of September 26, 2009.
Fabrication Facility, Oregon
During the first quarter of fiscal year 2010, as a result of reduced future wafer output requirements associated with equipment utilizing certain process technologies the Company recorded a write down of equipment to be sold to the equipment's estimated fair value. This charge of $3.3 millionwas included in impairment of long lived assets in the Company's Condensed Consolidated Statements of Income. The Company has ceased depreciation and classified these assets as held for sale based on its intentions to sell the assets and has included $0.5 million in Other assets in the Condensed Consolidated Balance Sheet as of September 26, 2009.
Fabrication Facility, San Jose
During the first quarter of fiscal year 2009, the Company recorded a $7.3 million asset impairment charge as a result of transferring certain wafer manufacturing production from its San Jose, California, wafer manufacturing facility to an outsourced Japanese manufacturing facility, Epson's Sakata, Japan, facility, and reductions in demand and reduced future capacity requirements.
Severance and Restructuring Expenses
Shutdown of Dallas fab
During the first quarter of fiscal year 2010, the Company recorded approximately $1.6 million in restructuring costs associated with the closure of the Dallas, Texas wafer manufacturing facility. These costs consisted of decommissioning of equipment at the facility and estimated severance and benefits associated with employees of the facility.
Change in Estimate
During the first quarter of fiscal year 2010, the Company recognized a reversal of expense of approximately $3.2 million related to a reduction in estimated benefits costs for employees terminated during prior fiscal quarters.
Other Operating Expenses, Net
Other operating expenses, net primarily consists of expense items related to the restatement of previously reported financial statements and associated litigation.
The following table summarizes activities for the three months ended September 26, 2009 and September 27, 2008:
Three Months Ended
|
|||
September 26, 2009
|
September 27, 2008
|
||
(in thousands) | |||
Legal and accounting expenses | $ 5,742 | $ 11,289 | |
Payroll tax and related adjustments | (6,229) | (5,381) | |
Derivative litigation settlement | (16,419) | - | |
Other |
21
|
1,450
|
|
Total |
$ (16,885)
|
$ 7,358
|
26
The Company incurred $5.7 million and $11.3 million in legal and accounting expenses associated
with the restatement of certain of its previously filed financial statements during the three months ended September 26, 2009 and September
27, 2008, respectively. The decline of $5.6 million in restatement related legal and accounting fees is primarily due to the completion of the
restatement on September 30, 2008 offset by increased indemnification related legal fees associated with our former chief financial officer
during the three months ended September 26, 2009. The Company also recognized $16.4 million in income attributable to gains directly
related to proceeds received associated with the settlement of the derivative litigation during the first quarter of fiscal year 2010. See Note 11
"Commitments and Contingencies". As a result of the Company's investigation into equity awards, the Company recorded certain U.S. and foreign payroll
tax, interest and penalty accruals in prior years. The Company reversed $6.2 million and $5.4 million of these accruals during the three months
ended September 26, 2009 and September 27, 2008, respectively, due primarily to the expiration of the tax statutes of limitations in various
foreign jurisdictions. Interest Income and Other (Expense) Income, Net Interest income and other income, net, was $1.9 million and $9.1 million for the three months ended September
26, 2009 and September 27, 2008, respectively. This decrease was primarily driven by a decline of $6.0 million in interest income due to lower
average interest rates and lower invested cash, cash equivalents and short-term investments. In the three months ended September 26, 2009, the Company recorded an income tax provision of $50.0 million,
compared to an income tax provision of $35.1 million for the three months ended September 27, 2008. The Company's statutory federal tax rate is 35%. The Company's effective tax rate of 54.4% for the three months
ended September 26, 2009 was higher than the statutory tax rate primarily because of losses of a foreign subsidiary for which no tax benefit is
available. These foreign losses represent costs of ongoing research and developmental efforts. We expect that our effective tax rate for the
remainder of the fiscal year 2010 will be materially higher than 35% and that in subsequent years the effective tax rate will begin to decline as
our new global structure becomes fully operational, however, the effective tax rate could be adversely impacted should the expected tax
benefits from the new global structure occur later than expected or be lower than expected, which could have a material adverse impact on our
results of operations. The Company's effective tax rate of 34.2% for the three months ended September 27, 2008 was lower than the statutory tax rate primarily
because of benefits from the domestic production activities deduction. In the third quarter of fiscal year 2008, the Internal Revenue Service ("IRS") commenced an examination of the
Company's federal corporate income tax returns for fiscal years 2005 and 2006, which is still ongoing. As part of this audit the IRS has
requested information related to the Company's stock option investigation and subsequently expanded the audit to review stock option
transactions in fiscal year 2004. The Company also has ongoing audits by various state and foreign taxing jurisdictions. Management believes
that it has adequately provided for any adjustments that may result from these examinations, however, the outcome of tax audits cannot be
predicted with certainty. Should any issues addressed in the Company's tax audits be resolved in a manner not consistent with management's
expectations, the Company will be required to adjust its provision for income tax in the period such resolution occurs. Recently Issued Accounting Pronouncements In
February 2008, the FASB issued new accounting guidance related to all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of the new guidance did
not have a material effect on the Company's consolidated financial condition and results of operations. In December 2007, the FASB issued new accounting guidance related to the
accounting and reporting for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. The guidance improves the relevance, comparability and transparency of financial statements and eliminates diversity in practice
that currently exists in accounting for transactions between an entity and noncontrolling interests. This guidance is effective for annual periods
beginning after December 15, 2008.
27
Earlier adoption is prohibited. The adoption of the new guidance did not have a material effect on
the Company's consolidated financial position, results of operations and cash flows. In December 2007, the FASB issued new accounting guidance related to business
combinations. The new accounting guidance requires the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to
evaluate and understand the nature and financial effect of the business combination. This guidance is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company adopted the new accounting guidance during the first quarter of fiscal year 2010. See Note 15
"Acquisitions." During the first quarter of fiscal year 2010, we adopted three related sets of accounting guidance as issued by the
FASB. The accounting guidance sets forth (i) rules related to determining the fair value of financial assets and financial liabilities when the
activity levels have significantly decreased in relation to the normal market, (ii) guidance related to the determination of other-than-temporary
impairments to include the intent and (iii) ability of the holder as an indicator in the determination of whether an other-than-temporary
impairment exists and interim disclosure requirements for the fair value of financial instruments. The adoption of the three sets of accounting
guidance did not have a material impact on our consolidated financial statements. During the first quarter of fiscal year 2010, we adopted new accounting guidance for the determination of the useful life
of intangible assets as issued by the FASB. The new guidance amends the factors that should be considered in developing the renewal or
extension assumptions used to determine the useful life of a recognized intangible asset. The new guidance also requires expanded disclosure
regarding the determination of intangible asset useful lives. The adoption of this accounting guidance did not have a material impact on our
consolidated financial statements. During the first quarter of fiscal year 2010, we adopted the new Accounting Standards Codification (ASC) as issued by
the FASB. The ASC has become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. The
ASC is not intended to change or alter existing GAAP. The adoption of the ASC did not have a material impact on our consolidated financial
statements. BACKLOG At September 26, 2009, backlog shippable within the next quarter was approximately $288.4 million. The
Company's backlog shippable within the next quarter at the end of the quarter ended June 27, 2009 was approximately $278.4 million.
Our backlog is subject to revisions, cancellations and rescheduling which could have a material impact on the timing and extent of our
revenues. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalent and short-term investments were as follows: 28
Cash flows were as follows: Operating activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain
assets and liabilities. Cash from operations for the three months ended September 26, 2009 decreased by approximately $18.5 million
compared with the three months ended September September 27, 2008 while net income declined by $25.6 million. Non-cash adjustments
decreased by approximately $8.9 million for the three months ended September 26, 2009 compared with the three months ended September
September 27, 2008 while working capital reductions of $16.0 million provided cash to offset the net income decline. Investing activities Investing cash flows consist primarily of capital expenditures, net investment purchases, maturities and
acquisitions. The decrease in cash used in investing activities is primarily due to an increase in net maturities on short-term
investments of $99.2 million as the Company shifted its investment portfolio maturing during the three months ended September 26, 2009 to
money market funds. Cash used in investing activities included $26.5 million and $38.0 million in capital expenditures during the three months
ended September 26, 2009 and September 27, 2008, respectively. Financing activities Financing cash flows consist primarily of repurchases of common stock, payment of dividends to stockholders,
cash settlements associated with restricted stock units, expiring options, tender offer payments and withholding tax payments associated with
net share settlements of equity awards. Net cash used in financing activities increased by approximately $3.7 million for the three months ended September
26, 2009 compared with the three months ended September September 27, 2008. This increase was primarily due an increase in repurchases
of common stock of $17.6 million under a repurchase program commenced in October 2008 and an increase in withholding tax payments of
$8.2 million made upon share settlements of restricted stock units during the three months ended September 26, 2009. These increased cash
payments were offset by reduced payments associated with restricted stock units under the RSU loan program of $8.2 million as a result of
payments associated with the final settlement occurring under the program during the second quarter of 2009. The Company also decreased
cash payments by $5.0 million related to settlements of options under the goodwill and tender offer programs. In addition, we received
additional proceeds of $2.5 million related to excess gains associated with the derivative settlement and $1.9 million in additional excess tax
benefits attributable to increased intrinsic value associated with restricted stock units upon release. The Company anticipates that the available funds and cash generated from operations will be sufficient to meet cash
and working capital requirements, including its anticipated level of capital expenditures, share repurchase and dividend payments for at least
the next twelve months. Off-Balance-Sheet Arrangements As of September 26, 2009, the Company did not have any material off-balance-sheet arrangements, as defined in
Item 303 (a)(4)(ii) of SEC Regulation S-K. 29
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, 2009. 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 Exchange
Act as of September 26, 2009. Our management, including the CEO and the CFO, has concluded that the Company's disclosure controls and
procedures were effective as of September 26, 2009. 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
September 26,
September 27,
2009
2008
(in thousands)
Cash and cash equivalents
$ 836,029
$ 1,051,194
Short-term investments
101,551
205,262
Total cash, cash equivalents and investments
$ 937,580
$ 1,256,456
Three Months Ended
September 26,
September 27,
2009
2008
(in thousands)
Net cash provided by operating activities
$ 138,515
$ 157,064
Net cash provided by investing activities
71,063
(39,811)
Net cash used in financing activities
(82,897)
(79,178)
Net increase in cash and cash equivalents
$ 126,681
$ 38,075
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended September 26, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 financial statements in accordance with GAAP and no control system, no matter 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.
The information set forth above under Note 11 in the Notes to Condensed Consolidated Financial Statements is incorporated herein by reference.
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, 2009, which is herein incorporated by reference. Below is a description of additional risks associated with our business, financial condition and results of operations.
We may have difficulties in operating our new enterprise resource planning system, which may adversely affect our operations and financial reporting
Subsequent to September 26, 2009, we implemented a new enterprise resource planning ("ERP") system as part of our ongoing efforts to improve and strengthen our operational and financial processes and our reporting systems. Any difficulties encountered in the operation of our new ERP system or any difficulties in the conversion of information from our old ERP system could cause us to fail to meet customer demand for our product or could delay our ability to meet our financial reporting obligations which, in turn, could materially adversely affect our results of operations.
30
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes the activity related to stock repurchases for the three months ended September 26, 2009:
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 |
Maximum Amount That May Yet Be Purchased Under the Plans or Programs |
||||
Jul.26,2009-Aug.22,2009 | 180 | $ 18.47 | 180 | $ 511,545 | |||
Aug.23,2009-Sep.26,2009 |
720
|
18.66 |
720
|
498,109 | |||
Total for the Quarter |
900
|
$ 18.62 |
900
|
$ 498,109 |
In October 2008, the Board of Directors authorized the Company to repurchase up to $750 million of the Company's common stock from time to time at the discretion of the Company's management. This stock repurchase authorization has no expiration date. All prior authorizations by the Company's Board of Directors for the repurchase of common stock were canceled and superseded by this authorization.
In the first quarter of fiscal year 2010, the Company repurchased approximately 0.9 million shares of its common stock for $16.8 million. As of the end of the first quarter of fiscal year 2010, the Company was authorized to repurchase up to $498.1 million of the Company's common stock. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company's common stock and general market and business conditions.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Not applicable.
(a) Exhibits
10.30 |
Form of Non-Statutory Option Agreement, as amended and restated, under the Company's 1996 Stock Incentive Plan, for U.S. Option Optionees |
10.31 |
Form of Restricted Stock Unit Agreement under the Company's 1996 Stock Incentive Plan, for U.S. Holders |
31.1 |
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
31
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.
Date: November 4, 2009 |
MAXIM INTEGRATED PRODUCTS, INC. |
|
By: |
/s/ Bruce E. Kiddoo Vice President, Chief Financial Officer and Principal Accounting Officer |
32
EXHIBIT INDEX
33
Exhibit 10.30 MAXIM INTEGRATED PRODUCTS INC. Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), pursuant to its 1996 Stock Incentive Plan
(the "Plan") has granted to Grantee, the Grantee named on the Notice of Grant of Stock Options (the "Grant Notice"),
which has been delivered to Grantee separately, an option (the "Option") to purchase shares of the common stock of the Company
("Common Stock"). The Option will not be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Unless otherwise defined herein, capitalized
terms shall have the meaning ascribed to such terms in the Plan. The legal provisions governing the Option (referred to herein as the "Agreement") are as follows:
1996 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
(LEGAL PROVISIONS GOVERNING THE OPTION)
(a) Exercise Price. The exercise price of the Option is set forth on the Grant Notice, being not less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the Grant Date of the Option.
(b) Method of Payment. Payment of the exercise price per Share is due in full upon exercise of all or any part of each installment which has become exercisable by Grantee by any of the following, or a combination thereof, at Grantee's election:
(i) cash; or
(ii) check; or
(iii)surrender of Shares which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or
(iv)delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the exercise price.
(a) such termination is due to Grantee's permanent and total disability (within the meaning of Section 422(c)(6) of the Code), in which event the Option shall terminate on the earlier of the termination date set forth above or three hundred and sixty-five (365) days following termination of Grantee's Continuous Status as an Employee, Director or Consultant; or
(b) such termination is due to Grantee's death, in which event the Option shall terminate on the earlier of the termination date set forth above or five hundred and forty-seven (547) days after Grantee's death; or
(c) during any part of such ninety (90) day period the Option is not exercisable solely because of the condition set forth in paragraph 5 above, in which event the Option shall not terminate until the earlier of the termination date set forth above or until it shall have been exercisable for an aggregate period of ninety (90) days after the termination of Grantee's Continuous Status as an Employee, Director or Consultant.
(d) exercise of the Option within ninety (90) days after Grantee's termination from Continuous Status as an Employee, Director or Consultant would result in liability under Section 16(b) of the Securities Exchange Act of 1934, in which case the Option will terminate on the earlier of (i) the termination date set forth above, (ii) the tenth (10th) day after the last date upon which exercise would result in such liability, or (iii) six (6) months and ten (10) days after the termination of Grantee's Continuous Status as an Employee, Director or Consultant.
However, the Option may be exercised following Grantee's termination from Continuous Status as an Employee, Director or Consultant only as to that number of Shares as to which it was exercisable on the date such termination under the provisions of paragraph 2 of this Agreement.
Prior to the relevant taxable event, Grantee shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Grantee hereby authorizes the Company and/or the Employer, in their sole discretion, pursuant to such procedures as they may specify from time to time and without any notice to or authorization by Grantee, to withhold all applicable Tax-Related Items legally payable by Grantee in whole or in part by means of one or a combination of the following (without limitation): (1) withholding from Grantee's wages or other cash compensation paid to Grantee by the Company and/or the Employer; (2) withholding from proceeds of the sale of Shares acquired upon exercise of the Option; (3) selling or arranging for the sale of Shares acquired upon exercise of the Option (on Grantee's behalf and at Grantee's discretion pursuant to this authorization) through such means as the Company may determine in its sole discretion (whether through a broker or otherwise); or (4) withholding in Shares, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amount or such other amount as may be necessary to avoid adverse accounting treatment. If the Company satisfies the withholding obligation for Tax-Related Items by withholding in Shares, as described above, Grantee hereby acknowledges that Grantee is deemed to have been issued the full number of Shares subject to the Option, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Option. Grantee hereby acknowledges that Grantee is required to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of Grantee's participation in the Plan, or the purchase of Common Stock at exercise that cannot be satisfied by the means previously described. Grantee hereby acknowledges that the Company may refuse to honor the exercise of the Option if Grantee fails to comply with Grantee's obligations in connection with the Tax-Related Items as described in this paragraph 8.
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan;
(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options, even if Options have been granted repeatedly in the past;
(c) all decisions with respect to future awards of Options, if any, will be at the sole discretion of the Company;
(d) Grantee's participation in the Plan is voluntary;
(e) this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of Grantee's Continuous Status as an Employee, Director or Consultant for the vesting period, for any period, or at all, and will not interfere with Grantee's right or the right of the Company or the Employer to terminate Grantee's Continuous Status as an Employee, Director or Consultant at any time;
(f) in the event that Grantee is not an Employee, Director or Consultant of the Company, the Option and Grantee's participation in the Plan shall not be interpreted to form an employment or service contract or relationship with the Company; and furthermore, the Option and Grantee's participation in the Plan will not be interpreted to form an employment contract with any Subsidiary or affiliate of the Company;
(g) the future value of the underlying Shares is unknown and cannot be predicted with certainty;
(h) if the underlying Shares do not increase in value, the Option will have no value;
(i) if Grantee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the exercise price;
(j) in consideration of the grant of the Option, no claim or entitlement to compensation or damages shall arise from termination of the Option or diminution in value of the Option or Shares purchased through exercise of the Option resulting from termination of Grantee's Continuous Status as an Employee, Director or Consultant (for any reason whatsoever and whether or not in breach of local labor laws) and Grantee irrevocably releases the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the Option, Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim;
(k) in the event of termination of Grantee's Continuous Status as an Employee, Director or Consultant (whether or not in breach of local labor laws), Grantee's right to receive the Option and vest in the Option under the Plan, if any, will terminate effective as of the date that Grantee is no longer actively employed or actively rendering services and will not be extended by any notice period mandated under local law (e.g., active employment or service would not include a period of "garden leave" or similar period pursuant to local law); furthermore, in the event of termination of Grantee's Continuous Status as an Employee, Director or Consultant (whether or not in breach of local labor laws), Grantee's right to exercise the Option after termination of Grantee's Continuous Status as an Employee, Director or Consultant, if any, will be measured by the date of termination of active employment and will not be extended by any notice period mandated under local law; the Administrator shall have the exclusive discretion to determine when Grantee is no longer actively employed or actively rendering services for purposes of the Option;
(l) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding participation in the Plan; and
(m) Grantee is hereby advised to consult with his or her personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
Grantee understands that the Company and the Employer may hold certain personal information about Grantee, including, but not limited to, Grantee's name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or its Subsidiaries and affiliates, details of all stock options or any other entitlement to shares of stock awarded, canceled, vested, unvested or outstanding in Grantee's favor, for the purpose of implementing, administering and managing the Plan ("Data"). Grantee understands that Data may be transferred to any third parties assisting in the
implementation, administration and management of the Plan, that these recipients may be located in Grantee's country, or elsewhere, and that the recipient's country may have different data privacy laws and protections than Grantee's country. Grantee understands that Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting Grantee's local human resources representative. Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the exclusive purpose of implementing, administering and managing Grantee's participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the Shares received upon exercise of the Option may be deposited. Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee's participation in the Plan.
Grantee understands that Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Grantee's local human resource representative. Grantee understands that refusal or withdrawal of consent may affect Grantee's ability to realize benefits under the Option or otherwise participate in the Plan. For more information on the consequences of Grantee's refusal to consent or withdrawal of consent, Grantee understands that Grantee may contact Grantee's local human resources representative.
For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Option or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
By electronically approving the Option through the Smith Barney website, Grantee agrees to all of the terms and conditions described in this Agreement and in the Plan.
Exhibit 10.31
MAXIM INTEGRATED PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
U.S. GRANTEES
Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), pursuant to its 1996 Stock Incentive Plan (the "Plan") has granted to Grantee, the Grantee named on the Notice of Grant of Restricted Stock Unit (the "Grant Notice"), which has been delivered to Grantee separately, an award of restricted stock units (the "Restricted Stock Units"), subject to all of the terms and conditions in the Grant Notice, this Agreement and the Plan. Unless otherwise defined herein, capitalized terms shall have the meaning ascribed to such terms in the Plan.
1. Company's Obligation to Pay. Each Restricted Stock Unit represents a value equal to the Fair Market Value of a Share on the date it becomes vested. Unless and until the Restricted Stock Units will have vested in the manner set forth in Sections 2 and 3, Grantee will have no right to payment of any such Restricted Stock Units. Prior to actual payment of any vested Restricted Stock Units, such Restricted Stock Unit will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
2. Vesting Schedule. Subject to Section 3, the Restricted Stock Units awarded by this Agreement will vest in Grantee according to the vesting schedule set forth on the Grant Notice, subject to Grantee's Continuous Status as an Employee, Director or Consultant through each such date. Vesting may be suspended during any unpaid leave of absence, unless continued vesting is required by Applicable Laws or unless continued vesting was approved by the Company in writing.
3. Forfeiture upon Termination of Continuous Status as an Employee, Director or Consultant. Notwithstanding any contrary provision of this Agreement, if Grantee's Continuous Status as an Employee, Director or Consultant ceases for any or no reason, the then-unvested Restricted Stock Units awarded by this Agreement will thereupon be forfeited at no cost to the Company and Grantee will have no further rights thereunder.
4. Payment after Vesting. Any Restricted Stock Units that vest in accordance with Section 2 will be paid to Grantee (or in the event of Grantee's death, to his or her estate) in whole Shares, subject to Grantee satisfying any applicable Tax-Related Items as set forth in Section 6.
5. Payments after Death. Any distribution or delivery to be made to Grantee under this Agreement will, if Grantee is then deceased, be made to Grantee's legal heirs. Any such transferee must furnish the Company with (a) written notice of his or her status as legal heir, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
6. Withholding of Taxes. Regardless of any action the Company and/or the Subsidiary or affiliate employing Grantee (the "Employer") take with respect to any or all income tax (including federal, state, and/or local taxes), social insurance, payroll tax, payment on account or other tax-related withholding ("Tax-Related Items"), Grantee acknowledges that the ultimate liability for all Tax-Related Items legally due by Grantee is and remains Grantee's responsibility and that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including the grant of the Restricted Stock Units, the vesting of Restricted Stock Units, the payment of the Restricted Stock Units in Shares or in cash, the subsequent sale of any Shares acquired at vesting and the receipt of any dividends; and (ii) do
not commit to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate the Grantee's liability for Tax-Related Items.
Notwithstanding any contrary provision of this Agreement, no certificate representing the Shares will be issued to Grantee, unless and until satisfactory arrangements (as determined by the Administrator) will have been made by Grantee with respect to the payment of all Tax-Related Items which the Company determines must be withheld with respect to such Shares so issuable. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit Grantee to satisfy Tax-Related Items, in whole or in part by one or more of the following (without limitation): (a) paying cash, (b) withholding from the Grantee's wages or other cash compensation paid to Grantee by the Company and/or the Employer, (c) have the Company withhold otherwise deliverable Shares, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amount or such other amount as may be necessary to avoid adverse accounting treatment, or (d) selling a sufficient number of such Shares otherwise deliverable to Grantee (on Grantee's behalf and at his or her direction pursuant to this authorization) through such means as the Company may determine in its sole discretion (whether through a broker or otherwise). If the obligation for Tax-Related Items is satisfied by withholding in Shares, Grantee is deemed to have been issued the full number of Shares subject to the vested Restricted Stock Units, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Restricted Stock Units.
If Grantee fails to make satisfactory arrangements for the payment of any Tax-Related Items hereunder at the time any applicable Shares otherwise are scheduled to vest pursuant to Section 2, Grantee will permanently forfeit such Shares and the Shares will be returned to the Company at no cost to the Company.
7. Acknowledgment of Nature of Plan and Restricted Stock Units. In accepting the Award, Grantee acknowledges that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan;
(b) the Award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future Awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units even if Restricted Stock Units have been awarded repeatedly in the past;
(c) all decisions with respect to future Awards, if any, will be at the sole discretion of the Company;
(d) Grantee's participation in the Plan is voluntary;
(e) this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of Grantee's Continuous Status as an Employee, Director or Consultant for the vesting period, for any period, or at all, and will not interfere with the Grantee's right or the right of the Company or the Employer to terminate Grantee's Continuous Status as an Employee, Director or Consultant at any time;
(f) in the event that Grantee is not an Employee, Director or Consultant of the Company, the Award and Grantee's participation in the Plan shall not be interpreted to form an employment contract or relationship with the Company; and furthermore, the Award of Restricted Stock Units and Grantee's participation in the Plan will not be interpreted to form an employment contract with any Subsidiary or affiliate of the Company;
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(g) the future value of the underlying Shares is unknown and cannot be predicted with certainty;
(h) in consideration of the Award, no claim or entitlement to compensation or damages arises from termination of the Award, and no claim or entitlement to compensation or damages shall arise from any diminution in value of the Award of Restricted Stock Units or Shares received upon vesting of Restricted Stock Units resulting from termination of the Grantee's Continuous Status as an Employee, Director or Consultant by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and Grantee irrevocably releases the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting this Agreement, Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim;
(i) in the event of termination of Grantee's Continuous Status as an Employee, Director or Consultant (whether or not in breach of local labor laws), Grantee's right to receive Restricted Stock Units and vest under the Plan, if any, will terminate effective as of the date that Grantee is no longer actively employed or actively rendering services and will not be extended by any notice period mandated under local law (e.g., active employment or service would not include a period of "garden leave" or similar period pursuant to local law); the Administrator shall have the exclusive discretion to determine when Grantee is no longer actively employed or actively rendering services for purposes of the Award of Restricted Stock Units;
(k) Grantee is hereby advised to consult with his or her personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
8. Rights as Stockholder. Neither Grantee nor any person claiming under or through Grantee will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Grantee.
9. Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company, in care of Stock Administration at Maxim Integrated Products, Inc., 4401 South Beltwood Parkway, Dallas, TX 75244, with a copy to the Corporate Secretary at 120 San Gabriel Drive, Sunnyvale, CA 94086, United States of America, or at such other address as the Company may hereafter designate in writing. Any notices provided for in this Agreement or the Plan shall be given in writing (including electronic mail) and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to Grantee, five (5) days after deposit in the United States mail, postage prepaid, addressed to Grantee at the address specified above or at such other address as Grantee hereafter designate by written notice to the Company.
10. Grant is Not Transferable. Except to the limited extent provided in Section 5, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.
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11. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
12. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of the Shares upon any securities exchange or under any U.S. state, U.S. federal, or local law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Grantee (or Grantee's estate), such issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. The Company will make all reasonable efforts to meet the requirements of any such U.S. state, U.S. federal, or any local law or securities exchange and to obtain any such consent or approval of any such governmental authority.
13. Plan Governs. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern.
14. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Grantee, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.
15. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request Grantee's consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
16. Data Privacy Notice and Consent. Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Grantee's personal data as described in this Agreement and any other documents related to the Award by and among, as applicable, the Employer, the Company, its Subsidiaries and affiliates for the exclusive purpose of implementing, administering and managing Grantee's participation in the Plan.
Grantee understands that the Company and the Employer may hold certain personal information about Grantee, including, but not limited to, Grantee's name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or its Subsidiaries and affiliates, details of all Restricted Stock Units or any other entitlement to shares of stock awarded, canceled, vested, unvested or outstanding in Grantee's favor, for the purpose of implementing, administering and managing the Plan ("Data"). Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in Grantee's country or elsewhere, and that the recipient's country may have different data privacy laws and protections than Grantee's country. Grantee understands that Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting Grantee's local human resources representative. Grantee authorizes the recipients to
4
receive, possess, use, retain and transfer the Data, in electronic or other form, for the exclusive purpose of implementing, administering and managing Grantee's participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the Shares received upon vesting of the Restricted Stock Units may be deposited. Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee's participation in the Plan.
Grantee understands that Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Grantee's local human resource representative. Grantee understands that refusal or withdrawal of consent may affect Grantee's ability to realize benefits under the Restricted Stock Units or otherwise participate in the Plan. For more information on the consequences of Grantee's refusal to consent or withdrawal of consent, Grantee understands that Grantee may contact Grantee's local human resources representative.
17. Section 409A. Notwithstanding any other provision of the Plan and this Agreement, for Grantees who are U.S. taxpayers, it is intended that the vesting and the payments of Restricted Stock Units shall qualify for exemption from the application of Section 409A of the Code, and any ambiguities herein will be interpreted to so comply. The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify this Agreement as may be necessary to ensure that all vesting and/or payments provided under this Agreement are made in a manner that qualifies for exemption from or complies with Section 409A of the Code; provided, however, that the Company makes no representation that the vesting or payments of Restricted Stock Units provided under this Agreement will be exempt from Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the vesting and/or payment of Restricted Stock Units provided under this Agreement.
18. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
19. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.
20. Governing Law/Choice of Venue. This Agreement and the Award of Restricted Stock Units granted hereunder shall be governed by, and construed in accordance with, the laws of the State of California, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this Award of Restricted Stock Units or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Award of Restricted Stock Units is made and/or to be performed.
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21. Relocation Outside the United States. If the Grantee relocates to a country outside the United States, the Company reserves the right to impose other requirements on the Grantee's participation in the Plan, on the Restricted Stock Units and on any Shares acquired under the Plan, to the extent the Company determines necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
By electronically approving the Award of Restricted Stock Units through the Smith Barney website, Grantee agrees to all of the terms and conditions described in this Agreement (including any Appendix) and in the Plan.
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Exhibit 31.1
CERTIFICATION
I, Tunc Doluca, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 4, 2009 |
/s/ Tunc Doluca Tunc Doluca President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Bruce E Kiddoo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 4, 2009 |
/s/ Bruce E. Kiddoo Bruce E. Kiddoo Vice President, Chief Financial Officer and Principal Accounting Officer |
Exhibit 32.1
CERTIFICATE OF CHIEF EXECUTIVE OFFICER
In connection with the periodic report of Maxim Integrated Products, Inc. (the "Company") on Form 10-Q for the period ended September 26, 2009 as filed with the Securities and Exchange Commission (the "Report"), I, Tunc Doluca, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.
November 4, 2009
By: |
/s/ Tunc Doluca |
This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.
Exhibit 32.2
CERTIFICATE OF CHIEF FINANCIAL OFFICER
In connection with the periodic report of Maxim Integrated Products, Inc. (the "Company") on Form 10-Q for the period ended September 26, 2009 as filed with the Securities and Exchange Commission (the "Report"), I, Bruce E. Kiddoo, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.
November 4, 2009
By: |
/s/ Bruce E. Kiddoo |
This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.
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