Maxim Integrated Products 10Q 2021 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	December 26, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ________ to ________.

Commission file number 1-34192

MAXIM INTEGRATED PRODUCTS, INC.

(Exact name of registrant as specified in its charter)


Delaware						94-2896096
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

160 Rio Robles

San Jose, CA 95134

(Address of Principal Executive Offices including Zip Code)

(408) 601-1000

(Registrant’s Telephone Number, including Area Code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.001 par value	MXIM	The NASDAQ Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of January 14, 2021, there were 268,041,067 shares of Common Stock, par value $.001 per share, of the registrant outstanding.

MAXIM INTEGRATED PRODUCTS, INC.

INDEX


PART I - FINANCIAL INFORMATION						Page

Item 1. Financial Statements (Unaudited)						3

Condensed Consolidated Balance Sheets as of December 26, 2020 and June 27, 2020						3

Condensed Consolidated Statements of Income for the Three and Six Months Ended December 26, 2020 and December 28, 2019						4

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 26, 2020 and December 28, 2019						5

Condensed Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended December 26, 2020 and December 28, 2019						6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 26, 2020 and December 28, 2019						8

Notes to Condensed Consolidated Financial Statements						9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						26

Item 3. Quantitative and Qualitative Disclosures About Market Risk						32

Item 4. Controls and Procedures						32

PART II - OTHER INFORMATION						33

Item 1. Legal Proceedings						33

Item 1A. Risk Factors						33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						33

Item 3. Defaults Upon Senior Securities						33

Item 4. Mine Safety Disclosures						33

Item 5. Other Information						34

Item 6. Exhibits						34

SIGNATURE						35

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 26, 2020		June 27, 2020
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,796,961	$	1,578,670
Short-term investments	8,879		35,536
Total cash, cash equivalents and short-term investments	1,805,840		1,614,206
Accounts receivable, net of allowances of $619 and $645	485,773		404,778
Inventories	261,476		259,626
Other current assets	36,004		39,219
Total current assets	2,589,093		2,317,829
Property, plant and equipment, net	541,013		550,406
Intangible assets, net	76,166		87,959
Goodwill	562,540		562,540
Other assets	114,058		110,569
TOTAL ASSETS	$	3,882,870	$	3,629,303

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	96,959	$	91,982
Price adjustment and other revenue reserves	180,215		148,916
Income taxes payable	35,197		43,457
Accrued salary and related expenses	99,057		126,751
Accrued expenses	44,969		42,228
Total current liabilities	456,397		453,334
Long-term debt	994,741		994,022
Income taxes payable	362,214		385,072
Other liabilities	143,457		139,418
Total liabilities	1,956,809		1,971,846

Commitments and contingencies (Note 12)	0		0

Stockholders’ equity:
Common stock and capital in excess of par value	43,231		266
Retained earnings	1,897,098		1,671,786
Accumulated other comprehensive loss	(14,268)		(14,595)
Total stockholders’ equity	1,926,061		1,657,457
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	3,882,870	$	3,629,303

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
	(in thousands, except per share data)

Net revenues	$	628,288	$	551,070	$	1,247,645	$	1,084,110
Cost of goods sold	211,866		190,546		414,209		380,263
Gross margin	416,422		360,524		833,436		703,847
Operating expenses:
Research and development	114,802		111,914		230,268		220,903
Selling, general and administrative	80,153		76,071		163,107		152,186
Intangible asset amortization	943		756		1,862		1,512

Severance and restructuring expenses	3,327		2,728		12,140		4,162
Other operating expenses (income), net	3,532		(1)		10,960		24
Total operating expenses	202,757		191,468		418,337		378,787
Operating income	213,665		169,056		415,099		325,060
Interest and other income (expense), net	(3,202)		(17)		(10,239)		1,812
Income before provision for income taxes	210,463		169,039		404,860		326,872
Income tax provision	26,518		22,989		51,401		40,666
Net income	$	183,945	$	146,050	$	353,459	$	286,206

Earnings per share:
Basic	$	0.69	$	0.54	$	1.32	$	1.06
Diluted	$	0.68	$	0.53	$	1.31	$	1.04

Shares used in the calculation of earnings per share:
Basic	267,299		270,330		267,131		270,859
Diluted	270,792		273,269		270,485		273,884

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
	(in thousands)
Net income	$	183,945	$	146,050	$	353,459	$	286,206
Other comprehensive income (loss), net of tax:
Change in net unrealized gains and losses on available-for-sale securities, net of tax benefit (expense) of $7, $(3), $16 and $(17) respectively	(35)		0		(115)		118
Change in net unrealized gains and losses on cash flow hedges, net of tax benefit (expense) of $(71), $(117), $(94) and $48 respectively	343		610		406		(249)
Change in net unrealized gains and losses on post-retirement benefits, net of tax benefit (expense) of $14, $(20), $25 and $(42), respectively	19		98		36		196
Other comprehensive income (loss), net	327		708		327		65
Total comprehensive income	$	184,272	$	146,758	$	353,786	$	286,271

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


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

Balance, September 26, 2020	267,304	$	267	$	12,194	$	1,713,153	$	(14,595)	$	1,711,019
Net income	—	—		—		183,945		—		183,945
Other comprehensive income (loss), net	—	—		—		—		327		327

Net issuance of restricted stock units and awards	331	—		(18,966)		—		—		(18,966)
Stock options exercised	6	—		176		—		—		176
Stock-based compensation	—	—		31,063		—		—		31,063
Common stock issued under Employee Stock Purchase Plan	391	1		18,496		—		—		18,497

Balance, December 26, 2020	268,032	$	268	$	42,963	$	1,897,098	$	(14,268)	$	1,926,061


	Six Months Ended December 26, 2020
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Par Value
	(in thousands)

Balance, June 27, 2020	266,797	$	266	$	0	$	1,671,786	$	(14,595)	$	1,657,457
Net income	—	—		—		353,459		—		353,459
Other comprehensive income (loss), net	—	—		—		—		327		327
Repurchase of common stock	(150)	—		(9,201)		0		—		(9,201)
Net issuance of restricted stock units and awards	894	—		(35,984)		—		—		(35,984)
Stock options exercised	100	—		2,807		—		—		2,807
Stock-based compensation	—	—		66,845		—		—		66,845
Common stock issued under Employee Stock Purchase Plan	391	2		18,496		—		—		18,498
Dividends paid, $0.48 per common share	—	—		—		(128,147)		—		(128,147)
Balance, December 26, 2020	268,032	$	268	$	42,963	$	1,897,098	$	(14,268)	$	1,926,061


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

Balance, September 28, 2019	270,883	$	271	$	0	$	1,793,012	$	(11,997)	$	1,781,286
Net income	—	—		—		146,050		—		146,050
Other comprehensive income (loss), net	—	—		—		—		708		708
Repurchase of common stock	(1,862)	(1)		(36,321)		(71,635)		—		(107,957)
Cumulative-effect adjustment for adoption of ASU 2016-02	—	—		—		(89)		—		(89)
Net issuance of restricted stock units	270	—		(7,623)		—		—		(7,623)
Stock options exercised	50	—		1,338		—		—		1,338
Stock-based compensation	—	—		24,071		—		—		24,071
Common stock issued under Employee Stock Purchase Plan	402	—		18,535		—		—		18,535
Dividends paid, $0.48 per common share	—	—		—		(129,810)		—		(129,810)
Balance, December 28, 2019	269,743	$	270	$	0	$	1,737,528	$	(11,289)	$	1,726,509


	Six Months Ended December 28, 2019
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Par Value
	(in thousands)

Balance, June 29, 2019	271,852	$	272	$	0	$	1,856,358	$	(11,354)	$	1,845,276
Net income	—	—		—		286,206		—		286,206
Other comprehensive income (loss), net	—	—		—		—		65		65
Repurchase of common stock	(3,484)	(2)		(58,556)		(142,951)		—		(201,509)
Cumulative-effect adjustment for adoption of ASU 2016-02	—	—		—		(2,053)		—		(2,053)
Net issuance of restricted stock units	657	—		(17,566)		—		—		(17,566)
Stock options exercised	316	—		8,820		—		—		8,820
Stock-based compensation	—	—		48,767		—		—		48,767
Common stock issued under Employee Stock Purchase Plan	402	—		18,535		—		—		18,535
Dividends paid, $0.96 per common share	—	—		—		(260,032)		—		(260,032)
Balance, December 28, 2019	269,743	$	270	$	0	$	1,737,528	$	(11,289)	$	1,726,509

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	December 26, 2020		December 28, 2019
	(in thousands)
Cash flows from operating activities:
Net income	$	353,459	$	286,206
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	66,939		48,738
Depreciation and amortization	48,340		48,008
Deferred taxes	(2,885)		(2,231)
Loss on disposal of property, plant and equipment	227		489
Other adjustments	647		5,961
Changes in assets and liabilities:
Accounts receivable	(81,199)		11,674
Inventories	(1,944)		22,583
Other assets	(5,709)		(55,820)
Accounts payable	5,522		4,844
Price adjustment and other revenue reserves	31,503		4,747
Income taxes payable	(31,118)		(31,133)
All other accrued liabilities	(10,772)		34,669
Net cash provided by (used in) operating activities	373,010		378,735
Cash flows from investing activities:
Purchases of property, plant and equipment	(29,213)		(34,301)
Proceeds from sale of property, plant and equipment	67		171
Proceeds from sale of available-for-sale securities	1,500		0
Proceeds from maturity of available-for-sale securities	25,025		78,067


Purchases of investments in privately-held companies	(110)		0
Proceeds from sale of investments in privately-held companies	39		0
Other investing activities	0		(68)
Net cash provided by (used in) investing activities	(2,692)		43,869
Cash flows from financing activities:
Contingent consideration paid	0		(8,000)
Net issuance of restricted stock units and awards	(35,984)		(17,566)
Proceeds from stock options exercised	2,807		8,820
Issuance of common stock under employee stock purchase program	18,498		18,535
Repurchase of common stock	(9,201)		(201,509)
Dividends paid	(128,147)		(260,032)
Net cash provided by (used in) financing activities	(152,027)		(459,752)
Net increase (decrease) in cash, cash equivalents and restricted cash	218,291		(37,148)
Cash, cash equivalents and restricted cash:
Beginning of period	1,585,428		1,757,342
End of period	$	1,803,719	$	1,720,194

Supplemental disclosures of cash flow information:
Cash paid, net, during the period for income taxes	$	81,464	$	63,692
Cash paid for interest	$	17,063	$	17,063
Noncash financing and investing activities:
Accounts payable related to property, plant and equipment purchases	$	11,041	$	12,360

Cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,796,961	$	1,720,194
Restricted cash in Other assets	6,758		0
Total cash, cash equivalents and restricted cash	$	1,803,719	$	1,720,194

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

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

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

Merger with Analog Devices

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

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

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

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

The ongoing novel coronavirus ("COVID-19") pandemic and the mitigation efforts by governments to attempt to control its spread created uncertainties and disruptions in the economic and financial markets. The Company is not aware of events or circumstances that would require an update to its estimates, judgments, or adjustments to the carrying values of its assets or liabilities as of January 27, 2021, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as developments occur and as the Company obtains additional information. These future developments are highly uncertain, and the outcomes, unpredictable. Actual results may differ from those estimates, and such differences may be material to the financial statements.

Reclassification

Certain items in prior financial statements were reclassified to conform to the current year presentation.

(i) New Accounting Update Recently Adopted

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

NOTE 3: BALANCE SHEET COMPONENTS

Inventories consist of:


	December 26, 2020		June 27, 2020
	(in thousands)
Raw materials	$	21,864	$	18,287
Work-in-process	153,768		164,061
Finished goods	85,844		77,278
Total inventories	$	261,476	$	259,626

Property, plant and equipment, net, consist of:


	December 26, 2020		June 27, 2020
	(in thousands)
Land	$	17,720	$	17,720
Buildings and building improvements	314,833		312,999
Machinery, equipment and software	1,344,749		1,323,791
Total	1,677,302		1,654,510
Less: accumulated depreciation	(1,136,289)		(1,104,104)
Total property, plant and equipment, net	$	541,013	$	550,406

Accrued salary and related expenses consist of:


	December 26, 2020		June 27, 2020
	(in thousands)
Accrued bonus	$	38,063	$	66,662
Accrued vacation	37,666		33,992
Accrued salaries	10,552		12,153
ESPP withholding	0		5,986
Accrued fringe benefits	4,588		4,077
Other	8,188		3,881
Total accrued salary and related expenses	$	99,057	$	126,751

NOTE 4: DISAGGREGATION OF REVENUE

The following table summarizes net revenue disaggregated by end market. The Company classifies end market revenue by using estimates and assumptions based on historical experience and knowledge of current conditions, given available information.


	Three Months Ended								Six Months Ended
	December 26, 2020				December 28, 2019				December 26, 2020				December 28, 2019
	Revenue		% of Total		Revenue		% of Total		Revenue		% of Total		Revenue		% of Total
	(in thousands, except percentages)								(in thousands, except percentages)
Automotive	$	190,048	30	%	$	146,067	27	%	$	347,989	28	%	$	285,689	26	%
Communications and Data Center	105,392		17	%	118,819		22	%	236,643		19	%	214,845		20	%
Consumer	127,851		20	%	113,496		20	%	261,870		21	%	246,683		23	%
Industrial	204,997		33	%	172,688		31	%	401,143		32	%	336,893		31	%
	$	628,288			$	551,070			$	1,247,645			$	1,084,110

The following table summarizes net revenue disaggregated by sales channel:


	Three Months Ended								Six Months Ended
	December 26, 2020				December 28, 2019				December 26, 2020				December 28, 2019
	Revenue		% of Total		Revenue		% of Total		Revenue		% of Total		Revenue		% of Total
	(in thousands, except percentages)								(in thousands, except percentages)
Distributors	$	327,397	52	%	$	281,319	51	%	$	651,949	52	%	$	547,905	51	%
Direct customers	300,891		48	%	269,751		49	%	595,696		48	%	536,205		49	%
	$	628,288			$	551,070			$	1,247,645			$	1,084,110

NOTE 5: FAIR VALUE MEASUREMENTS

The FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company’s Level 1 assets consist of money market funds.

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

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

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

The Company's Level 3 assets and liabilities consist of acquisition-related contingent consideration liabilities.

Assets and liabilities measured at fair value on a recurring basis were as follows:


	As of December 26, 2020								As of June 27, 2020
	Fair Value Measurements Using						Total		Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash and cash equivalents




Money market funds	$	22,089	$	—	$	—	$	22,089	$	61,814	$	0	$	0	$	61,814

Short-term investments


Corporate debt securities	—		8,879		—		8,879		—		35,536		—		35,536

Other current assets
Foreign currency forward contracts	—		1,447		—		1,447		0		1,151		0		1,151
Total assets	$	22,089	$	10,326	$	0	$	32,415	$	61,814	$	36,687	$	0	$	98,501

Liabilities
Accrued expenses
Foreign currency forward contracts	$	0	$	265	$	0	$	265	$	0	$	341	$	0	$	341
Contingent consideration	—		—		10,000		10,000		—		—		10,000		10,000
Other liabilities
Contingent consideration	—		—		4,165		4,165		—		—		4,165		4,165
Total Liabilities	$	0	$	265	$	14,165	$	14,430	$	0	$	341	$	14,165	$	14,506

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

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

As of December 26, 2020 and June 27, 2020, the fair value of private company investments amounted to $26.2 million and $20.6 million, respectively. The aggregate amount of unrealized gains (losses) recognized from these investments were $1.2 million and $(4.3) million, respectively, as of December 26, 2020 and June 27, 2020.

The Company recorded $4.9 million and $5.5 million of unrealized gains on private company investments during the three and six months ended December 26, 2020, respectively. Unrealized gains on private company investments was $0.6 million during the three and six months ended December 28, 2019. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Condensed Consolidated Statements of Income.

NOTE 6: FINANCIAL INSTRUMENTS

Short-term investments

Fair values were as follows:


	December 26, 2020								June 27, 2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Available-for-sale investments


Corporate debt securities	$	8,875	$	4	$	0	$	8,879	$	35,417	$	137	$	(18)	$	35,536

Total available-for-sale investments	$	8,875	$	4	$	0	$	8,879	$	35,417	$	137	$	(18)	$	35,536

In the six months ended December 26, 2020 and December 28, 2019, the Company did not recognize impairment charges on short-term investments. All available-for-sale investments have maturity dates between January 8, 2021 and March 12, 2021.

Derivative instruments and hedging activities

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

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

Derivatives designated as cash flow hedging instruments

The Company designates certain forward contracts as hedging instruments pursuant to Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). As of December 26, 2020 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $66.0 million and $61.6 million, respectively.

Derivatives not designated as hedging instruments

As of December 26, 2020 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $47.7 million and $32.3 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $11.3 million and $12.0 million, respectively.

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

Effect of hedge accounting on the Condensed Consolidated Statements of Income

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


	Three Months Ended
	December 26, 2020						December 28, 2019
	Net Revenue		Cost of Goods Sold		Operating Expenses			Net Revenue		Cost of Goods Sold		Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	628,288	$	211,866	$	202,757		$	551,070	$	190,546	$	191,468

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	0	$	350	$	698		$	0	$	10	$	(404)


	Six Months Ended
	December 26, 2020						December 28, 2019
	Net Revenue		Cost of Goods Sold		Operating Expenses			Net Revenue		Cost of Goods Sold		Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	1,247,645	$	414,209	$	418,337		$	1,084,110	$	380,263	$	378,787

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	0	$	784	$	1,368		$	0	$	130	$	(774)

Outstanding debt obligations

The following table summarizes the Company’s outstanding debt obligations:


	December 26, 2020		June 27, 2020
	(in thousands)
3.375% fixed rate notes due March 2023	$	500,000	$	500,000
3.45% fixed rate notes due June 2027	500,000		500,000
Total outstanding debt	1,000,000		1,000,000

Less: Reduction for unamortized discount and debt issuance costs	(5,259)		(5,978)
Total long-term debt	$	994,741	$	994,022

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

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

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

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net in the Condensed Consolidated Statements of Income over the life of the notes. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes, were $8.9 million and $8.9 million during the three months ended December 26, 2020 and December 28, 2019, respectively. Amortized discount and expenses, as well as interest expense associated with the notes, were $17.8 million and $17.8 million during the six months ended December 26, 2020 and December 28, 2019, respectively.

The estimated fair value of the Company’s outstanding debt obligations was approximately $1.1 billion as of December 26, 2020. The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.

The Company recorded interest expense of $9.4 million and $9.3 million during the three months ended December 26, 2020, and December 28, 2019, respectively. The Company recorded interest expense of $18.8 million and $18.6 million during the six months ended December 26, 2020, and December 28, 2019, respectively.

Other Financial Instruments

For the Company’s other financial instruments consisting of accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.

NOTE 7: STOCK-BASED COMPENSATION

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

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

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

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

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

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


	Three Months Ended								Three Months Ended
	December 26, 2020								December 28, 2019
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	13	$	3,502	$	585	$	4,100	$	5	$	2,269	$	699	$	2,973
Research and development	3		10,880		1,048		11,931		4		9,918		1,514		11,436
Selling, general and administrative	73		14,559		546		15,178		55		8,753		849		9,657
Pre-tax stock-based compensation expense	$	89	$	28,941	$	2,179	$	31,209	$	64	$	20,940	$	3,062	$	24,066
Less: income tax effect							3,030								2,193
Net stock-based compensation expense							$	28,179							$	21,873


	Six Months Ended								Six Months Ended
	December 26, 2020								December 28, 2019
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	24	$	7,295	$	1,449	$	8,768	$	14	$	4,549	$	1,368	$	5,931
Research and development	6		23,147		3,155		26,308		8		19,403		2,909		22,320
Selling, general and administrative	148		30,042		1,673		31,863		122		18,706		1,659		20,487
Pre-tax stock-based compensation expense	$	178	$	60,484	$	6,277	$	66,939	$	144	$	42,658	$	5,936	$	48,738
Less: income tax effect							5,561								5,081
Net stock-based compensation expense							$	61,378							$	43,657

The expense included in the Condensed Consolidated Statements of Income for RSUs and other awards include expenses related to MSUs of $2.5 million and $2.4 million for the three months ended December 26, 2020 and December 28, 2019, respectively, and $6.1 million and $6.8 million for the six months ended December 26, 2020 and December 28, 2019, respectively.

In connection with the proposed ADI Merger, on September 1, 2020, the Company’s Board of Directors granted RSAs to certain employees. For employees who made IRS Section 83(b) elections, Maxim accelerated a portion of the RSAs to satisfy tax withholding requirements. The Company recorded $0.7 million and $8.7 million of stock-based compensation expense related to the accelerated RSAs during the three and six months ended December 26, 2020, respectively. Additionally, in connection with the proposed ADI Merger, the Company modified equity awards held by certain executives by accelerating the vesting of 0.2 million outstanding RSU awards that otherwise would have vested at various dates through calendar year 2023. The Company recognized an additional $5.1 million of stock-based compensation expense related to these RSU modifications during the three and six months ended December 26, 2020.

Stock Options

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

There were 0 stock options granted in the six months ended December 26, 2020 and December 28, 2019.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 26, 2020 and related activity for the six months ended December 26, 2020:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value(1)
Balance at June 27, 2020	104,447	$	28.76
Options Granted	0	0
Options Exercised	(99,819)	28.50
Options Cancelled	0	0
Balance at December 26, 2020	4,628	$	34.20	0.4	$	242,414
Exercisable, December 26, 2020	4,628	$	34.20	0.4	$	242,414
Vested and expected to vest, December 26, 2020	4,628	$	34.20	0.4	$	242,414
(1)Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of December 26, 2020.

As of December 26, 2020, there was 0 unrecognized stock compensation from unvested stock options.

Restricted Stock Units and Restricted Stock Awards

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

The weighted-average fair value of RSUs and RSAs granted was $69.32 and $56.21 per share for the six months ended December 26, 2020 and December 28, 2019, respectively.

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


	Number of Shares	Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value(1)
Balance at June 27, 2020	4,606,592
Restricted stock units and restricted stock awards granted	1,377,171
Restricted stock units and restricted stock awards released	(949,534)
Restricted stock units and restricted stock awards cancelled	(246,848)
Balance at December 26, 2020	4,787,381	1.9	$	414,491,447
Outstanding and expected to vest, December 26, 2020	3,928,669	1.6	$	340,144,241
(1)Aggregate intrinsic value for RSUs and RSAs represents the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs and RSAs outstanding or expected to vest as of December 26, 2020.

The Company withheld shares totaling $36.0 million in value as a result of employee withholding taxes based on the value of RSUs and RSAs on their vesting date for the six months ended December 26, 2020. Total payments for employees’ tax obligations to taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of December 26, 2020, there was $183.3 million of unrecognized compensation expense related to 4.8 million unvested RSUs and RSAs, which is expected to be recognized over a weighted average period of approximately 1.9 years.

Market Stock Units (MSUs)

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

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

The following table summarizes the number of MSUs outstanding and expected to vest as of December 26, 2020 and their activity during the six months ended December 26, 2020:


	Number of Shares	Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value(1)
Balance at June 27, 2020	971,220
Market stock units granted	0
Market stock units released	0
Market stock units cancelled	(237,576)
Balance at December 26, 2020	733,644	1.5	$	63,518,898
Outstanding and expected to vest, December 26, 2020	1,062,016	1.1	$	91,949.385
(1)Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of December 26, 2020.

As of December 26, 2020, there was $19.3 million of unrecognized compensation expense related to 0.7 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 1.5 years.

Employee Stock Purchase Plan

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

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods:


	Three Months Ended		Six Months Ended
	December 26, 2020	December 28, 2019	December 26, 2020	December 28, 2019
Expected holding period (in years)	0.5 years	0.5 years	0.5 years	0.5 years
Risk-free interest rate	0.2% - 1.6%	1.6% - 2.7%	0.2% - 1.6%	1.6% - 2.7%
Expected stock price volatility	29.2% - 55.2%	28.4% - 31.3%	29.2% - 55.2%	28.4% - 31.3%
Dividend yield	3.3% - 3.3%	3.1% - 3.4%	3.3% - 3.3%	3.1% - 3.4%

As of December 26, 2020 and December 28, 2019, there was $0 and $10.1 million, respectively, of unrecognized compensation expense related to the 2008 ESPP. At the end of the current offering period in November 2020, the Company suspended the 2008 ESPP program pursuant to the terms of the ADI Merger Agreement.

NOTE 8: EARNINGS PER SHARE

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

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
	(in thousands, except per share data)
Numerator for basic earnings per share and diluted earnings per share
Net income	$	183,945	$	146,050	$	353,459	$	286,206

Denominator for basic earnings per share	267,299		270,330		267,131		270,859
Effect of dilutive securities:
Stock options, ESPP, RSUs, RSAs and MSUs	3,493		2,939		3,354		3,025
Denominator for diluted earnings per share	270,792		273,269		270,485		273,884

Earnings per share
Basic	$	0.69	$	0.54	$	1.32	$	1.06
Diluted	$	0.68	$	0.53	$	1.31	$	1.04

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

NOTE 9: SEGMENT INFORMATION

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

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

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

Net revenues from unaffiliated customers by geographic region were as follows:


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
	(in thousands)
United States	$	65,040	$	58,909	$	125,176	$	114,707
China	252,388		217,099		498,193		414,398
Rest of Asia	185,922		163,563		384,386		333,478
Europe	111,800		98,254		211,305		194,194
Rest of World	13,138		13,245		28,585		27,333
	$	628,288	$	551,070	$	1,247,645	$	1,084,110

Net long-lived assets by geographic region were as follows:


	December 26, 2020		June 27, 2020
	(in thousands)
United States	$	352,149	$	362,093
Philippines	81,039		88,660
Rest of World	107,825		99,653
	$	541,013	$	550,406

NOTE 10: COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component and related tax effects in the six months ended December 26, 2020 and December 28, 2019 were as follows:


(in thousands)	Unrealized Gains and (Losses) on Intercompany Receivables		Unrealized Gains and (Losses) on Post-Retirement Benefits		Cumulative Translation Adjustment		Unrealized Gains and (Losses) on Cash Flow Hedges		Unrealized Gains and (Losses) on Available-For-Sale Securities		Total
June 27, 2020	$	(6,280)	$	(7,988)	$	(1,136)	$	690	$	119	$	(14,595)
Other comprehensive income (loss) before reclassifications	0		0		0		2,652		(131)		2,521
Amounts reclassified out of accumulated other comprehensive (income) loss	0		11		0		(2,152)		0		(2,141)
Tax effects	0		25		0		(94)		16		(53)
Other comprehensive income (loss), net	0		36		0		406		(115)		327
December 26, 2020	$	(6,280)	$	(7,952)	$	(1,136)	$	1,096	$	4	$	(14,268)


(in thousands)	Unrealized Gains and (Losses) on Intercompany Receivables		Unrealized Gains and (Losses) on Post-Retirement Benefits		Cumulative Translation Adjustment		Unrealized Gains and (Losses) on Cash Flow Hedges		Unrealized Gains and (Losses) on Available-For-Sale Securities		Total
June 29, 2019	$	(6,280)	$	(4,322)	$	(1,136)	$	425	$	(41)	$	(11,354)
Other comprehensive income (loss) before reclassifications	0		0		0		(941)		135		(806)
Amounts reclassified out of accumulated other comprehensive (income) loss	0		238		0		644		0		882
Tax effects	0		(42)		0		48		(17)		(11)
Other comprehensive income (loss), net	0		196		0		(249)		118		65
December 28, 2019	$	(6,280)	$	(4,126)	$	(1,136)	$	176	$	77	$	(11,289)

NOTE 11: INCOME TAXES

In the three and six months ended December 26, 2020 the Company recorded an income tax provision of $26.5 million and $51.4 million, respectively, compared to $23.0 million and $40.7 million, for the three and six months ended December 28, 2019, respectively. The Company’s effective tax rate for the three and six months ended December 26, 2020 was 12.6% and 12.7%, respectively, compared to 13.6% and 12.4% for the three and six months ended December 28, 2019, respectively.

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

On June 18, 2019, the U.S. Treasury and Internal Revenue Service (“IRS”) released temporary regulations under Internal Revenue Code (“IRC”) Sections 245A and 954(c)(6) (the “Temporary Regulations”), which applied retroactively to intercompany dividends occurring after December 31, 2017. The Temporary Regulations limit the applicability of the foreign personal holding company income (“FPHCI”) look-through exception for certain intercompany dividends received by a controlled foreign corporation. Before application of the retroactive Temporary Regulations, the Company benefited in fiscal years 2018 and 2019 from the FPHCI look-through exception. On August 21, 2020, the U.S. Treasury and IRS released final regulations under IRC Sections 245A and 954(c)(6) (the “Final Regulations”), which generally apply to years ending on or after

June 14, 2019. The relevant sections of the Final Regulations are virtually the same as the Temporary Regulations. The Temporary Regulations apply to fiscal year 2018 and the Final Regulations apply to fiscal year 2019 intercompany dividends. The Company does not have any intercompany dividends after fiscal year 2019 that are impacted by relevant sections of the Temporary Regulations or Final Regulations.

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

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

NOTE 12: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Indemnification

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

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

NOTE 13: COMMON STOCK REPURCHASES

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

Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date the Company announced its planned merger with ADI. Prior to such announcement and during the fiscal year 2021, the Company repurchased approximately 149.8 thousand shares of its common stock for $9.2 million. As of December 26, 2020, the Company had remaining authorization of $0.7 billion for future share repurchases.

NOTE 14: LEASES

The Company's lease obligations consist of operating leases for domestic and international office facilities, data centers, and equipment. These leases expire at various dates through fiscal year 2031. For the three and six months ended December 26, 2020, the Company recorded operating lease expense of $2.5 million and $4.9 million, respectively. For the three and six

months ended December 28, 2019, the Company recorded operating lease expense of $2.9 million and $5.9 million, respectively.

Leases are included in the following Condensed Consolidated Balance Sheet lines:


	December 26, 2020		June 27, 2020
	(in thousands)
Other assets	$	49,653	$	54,610

Accrued expenses	$	10,860	$	10,445
Other liabilities	$	44,224	$	48,314

Future minimum lease payments under non-cancelable operating leases as of December 26, 2020 are as follows:


	Operating Lease Obligations
Fiscal Year	(in thousands)
Remainder of 2021	$	6,443
2022	11,784
2023	9,777
2024	8,555
2025	6,874
Thereafter	17,567
Total	61,000
Less imputed interest	5,916
Total	$	55,084

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


	Operating Lease Obligations
Fiscal Year	(in thousands)
Remainder of 2020	$	5,969
2021	11,818
2022	10,847
2023	9,599
2024	8,202
Thereafter	21,904
Total	68,339
Less imputed interest	7,657
Total	$	60,682

Other information related to leases as of December 26, 2020 are as follows:


	Six Months Ended
	December 26, 2020			December 28, 2019
Supplemental cash flow information:
Operating cash flows used for operating leases (in thousands)	$	6,094		$	5,911

Weighted-average remaining lease term - operating leases (in years)	6			7
Weighted-average discount rate - operating leases	3.29		%	3.45		%

NOTE 15: GOODWILL AND INTANGIBLE ASSETS

Goodwill

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

There were no changes to goodwill during the six months ended December 26, 2020.

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

Intangible Assets

Intangible assets consisted of the following:


	December 26, 2020						June 27, 2020
	Original Cost		Accumulated Amortization		Net		Original Cost		Accumulated Amortization		Net
	(in thousands)
Intellectual property	$	525,816	$	467,130	$	58,686	$	525,196	$	458,418	$	66,778
Customer relationships	118,335		110,038		8,297		118,335		108,603		9,732
Trade name	11,374		9,521		1,853		11,374		9,265		2,109
Backlog	170		170		0		170		25		145
Patents	2,500		2,500		0		2,500		2,500		0
Total amortizable purchased intangible assets	658,195		589,359		68,836		657,575		578,811		78,764
In-process research & development (IPR&D)	7,330		—		7,330		9,195		—		9,195
Total purchased intangible assets	$	665,525	$	589,359	$	76,166	$	666,770	$	578,811	$	87,959

During the three months ended December 26, 2020, the Company placed in service and reclassified $0.6 million of IPR&D to intellectual property intangible assets and wrote-off $1.2 million of IPR&D due to impairment.

The following table presents the amortization expense of intangible assets and its presentation in the Condensed Consolidated Statements of Income:


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
	(in thousands)
Cost of goods sold	$	4,349	$	3,111	$	8,711	$	6,221
Intangible asset amortization	943		756		1,862		1,512
Total intangible asset amortization expenses	$	5,292	$	3,867	$	10,573	$	7,733

The following table represents the estimated future amortization expense of intangible assets as of December 26, 2020:


	Amount
Fiscal Year	(in thousands)
Remainder of 2021	$	8,790
2022	13,543
2023	13,059
2024	10,083
2025	9,805
Thereafter	13,556
Total intangible assets	$	68,836

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

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

Overview of Business

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

Recent Developments

The Linear and Mixed-Signal Analog Integrated Circuit Market

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

Three general classes of semiconductor products arise from this distinction between linear and digital signals:

•digital devices, such as memories and microprocessors that operate primarily in the digital domain;

•linear devices, such as amplifiers, references, analog multiplexers and switches that operate primarily in the analog domain; and

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

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

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


MAJOR END-MARKET						MARKET

AUTOMOTIVE						Infotainment
						Powertrain
						Body Electronics
						Safety & Security

COMMUNICATIONS & DATA CENTER						Base Stations
						Data Center
						Data Storage
						Desktop Computers
						Network & Datacom
						Notebook Computers
						Peripherals & Other Computer
						Server
						Telecom
						Other Communications

CONSUMER						Smartphones
						Digital Cameras
						Handheld Computers
						Home Entertainment & Appliances
						Wearables
						Other Consumer

INDUSTRIAL						Automatic Test Equipment
						Control & Automation
						Electrical Instrumentation
						Financial Terminals
						Medical
						Security
						USB Extension
						Other Industrial

CRITICAL ACCOUNTING POLICIES

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

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

Impact of COVID-19 on Our Business

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

Employee Health and Safety

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

Focus on Customers

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

Manufacturing and Operations

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

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

RESULTS OF OPERATIONS

The following table sets forth certain Condensed Consolidated Statements of Income data expressed as a percentage of net revenues for the periods indicated:


	Three Months Ended				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019

Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	33.7	%	34.6	%	33.2	%	35.1	%
Gross margin	66.3	%	65.4	%	66.8	%	64.9	%
Operating expenses:
Research and development	18.3	%	20.3	%	18.5	%	20.4	%
Selling, general and administrative	12.8	%	13.8	%	13.1	%	14.0	%
Intangible asset amortization	0.2	%	0.1	%	0.1	%	0.1	%

Severance and restructuring expenses	0.5	%	0.5	%	1.0	%	0.4	%
Other operating expenses (income), net	0.6	%	—	%	0.9	%	—	%
Total operating expenses	32.3	%	34.7	%	33.5	%	34.9	%
Operating income	34.0	%	30.7	%	33.3	%	30.0	%
Interest and other income (expense), net	(0.5)	%	—	%	(0.8)	%	0.2	%
Income before provision for income taxes	33.5	%	30.7	%	32.4	%	30.2	%
Income tax provision (benefit)	4.2	%	4.2	%	4.1	%	3.8	%
Net income	29.3	%	26.5	%	28.3	%	26.4	%

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				Six Months Ended
	December 26, 2020		December 28, 2019		December 26, 2020		December 28, 2019
Cost of goods sold	0.7	%	0.5	%	0.7	%	0.5	%
Research and development	1.9	%	2.1	%	2.1	%	2.1	%
Selling, general and administrative	2.4	%	1.8	%	2.6	%	1.9	%
	5.0	%	4.4	%	5.4	%	4.5	%

Net Revenues

Net revenues were $628.3 million and $551.1 million for the three months ended December 26, 2020 and December 28, 2019, respectively. Revenue from automotive products was up 30% driven by an increased demand for infotainment, safety and security, and powertrain products. Revenue from industrial products was up 19% driven by an increased demand for medical, and control and automation products. Revenue from consumer products was up 13% driven by an increased demand for handheld and other consumer products, partially offset by a decrease in wearable products.

Net revenues were $1.2 billion and $1.1 billion for the six months ended December 26, 2020 and December 28, 2019, respectively. Revenue from automotive products was up 22% driven by increased demand for powertrain, safety and security, and infotainment products. Revenue from industrial products was up 19% driven by increased demand for control and automation, automatic test equipment and medical products. Revenue from communications and data products was up 10% due to increased demand for notebook computers and data center products.

During each of the six months ended December 26, 2020 and December 28, 2019, approximately 90% of net revenues were derived from customers outside of the United States. While less than 2% of our sales are denominated in currencies other than U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary

assets denominated in foreign currencies. The impact of changes in foreign exchange rates on our revenue and results of operations for the six months ended December 26, 2020 and December 28, 2019 was immaterial.

Gross Margin

Our gross margin percentages were 66.3% and 65.4% for the three months ended December 26, 2020 and December 28, 2019, respectively. Our gross margin increased by 0.9 percentage points, due to higher revenues, increased factory utilization and lower inventory reserves.

Our gross margin percentages were 66.8% and 64.9% for the six months ended December 26, 2020 and December 28, 2019, respectively. Our gross margin increased by 1.9 percentage points, due to higher revenues, increased factory utilization and lower inventory reserves.

Research and Development

Research and development expenses were $114.8 million and $111.9 million for the three months ended December 26, 2020 and December 28, 2019, respectively, which represented 18.3% and 20.3% of net revenues for each respective period. The $2.9 million increase was primarily due to higher salaries and related personnel costs.

Research and development expenses were $230.3 million and $220.9 million for the six months ended December 26, 2020 and December 28, 2019, respectively, which represented 18.5% and 20.4% of net revenues for each respective period. The $9.4 million increase was primarily due to higher salaries and related personnel costs.

Selling, General and Administrative

Selling, general and administrative expenses were $80.2 million and $76.1 million for the three months ended December 26, 2020 and December 28, 2019, respectively, which represented 12.8% and 13.8% of net revenues for each respective period. The $4.1 million increase was mainly due to higher salaries and related personnel costs, including increased stock-based compensation for accelerated vesting of certain RSAs and RSUs.

Selling, general and administrative expenses were $163.1 million and $152.2 million for the six months ended December 26, 2020 and December 28, 2019, respectively, which represented 13.1% and 14.0% of net revenues for each respective period. The $10.9 million increase was mainly due to higher salaries and related personnel costs, including increased stock-based compensation for accelerated vesting of certain RSAs and RSUs. This was partially offset by lower depreciation expense.

Severance and restructuring

Severance and restructuring expenses were $3.3 million and $2.7 million for the three months ended December 26, 2020 and December 28, 2019, respectively, which represented 0.5% of net revenues for each respective period. The $0.6 million increase was due to increased restructuring activities which, as a result of the pending ADI merger, now include change in control related benefits.

Severance and restructuring expenses were $12.1 million and $4.2 million for the six months ended December 26, 2020 and December 28, 2019, respectively, which represented 1.0% and 0.4% of net revenues for each respective period. The $8.0 million increase was due to increased restructuring activities which, as a result of the pending ADI merger, now include change in control related benefits.

Other operating expenses (income), net

Other operating expenses (income), net were $3.5 million and $(1) thousand for the three months ended December 26, 2020 and December 28, 2019, respectively, which represented 0.6% and less than 0.1% of net revenues for each respective period. The $3.5 million increase was primarily due to expenses such as legal and professional services related to the pending ADI merger.

Other operating expenses (income), net were $11.0 million and less than $0.1 million for the six months ended December 26, 2020 and December 28, 2019, respectively, which represented 0.9% and less than 0.1% of net revenues for each respective period. The $10.9 million increase was primarily due to expenses such as legal and professional services related to the pending ADI merger. We expect to incur additional merger-related expenses as we approach the expected transaction close date.

Provision for Income Taxes

In the three and six months ended December 26, 2020 the Company recorded an income tax provision of $26.5 million and $51.4 million, respectively, compared to $23.0 million and $40.7 million for the three and six months ended December 28, 2019, respectively. The Company’s effective tax rate for the three and six months ended December 26, 2020 was 12.6% and 12.7%, respectively, compared to 13.6% and 12.4% for the three and six months ended December 28, 2019, respectively.

BACKLOG

As of December 26, 2020 and June 27, 2020, our current quarter backlog was approximately $584.3 million and $496.4 million, respectively. Our current quarter backlog includes customer request dates to be filled within the next three months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to customers. Accordingly, we believe that our backlog is not a reliable measure for predicting future revenues. All backlog amounts have been adjusted for estimated future distribution ship and debit pricing adjustments.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

Cash flows were as follows:


	Six Months Ended
	December 26, 2020		December 28, 2019
	(in thousands)
Net cash provided by (used in) operating activities	$	373,010	$	378,735
Net cash provided by (used in) investing activities	(2,692)		43,869
Net cash provided by (used in) financing activities	(152,027)		(459,752)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	218,291	$	(37,148)

Operating activities

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

Cash provided by operating activities decreased by $5.7 million for the six months ended December 26, 2020 compared with the six months ended December 28, 2019 primarily due to changes in working capital. Changes in working capital were driven by increases in accounts receivable and inventories, partially offset by increases in accounts payable.

Investing activities

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

Cash provided by investing activities decreased by $46.6 million for the six months ended December 26, 2020 compared with the six months ended December 28, 2019. The decrease was due to less proceeds from maturity of available-for-sale securities partially offset by less purchases of property, plant and equipment.

Financing activities

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

Cash used in financing activities decreased by $307.7 million for the six months ended December 26, 2020 compared with the six months ended December 28, 2019. The decrease was due to less repurchases of common stock and dividend payments.

Liquidity and Capital Resources

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

As of December 26, 2020, our available funds consisted of $1.8 billion in cash, cash equivalents and short-term investments.

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

During the six months ended December 26, 2020, we paid cash dividends of $0.48 per common share totaling $128.1 million. The Company discontinued its dividend program effective during the first quarter of fiscal year 2021, as provided in the ADI Merger Agreement.

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

Off-Balance-Sheet Arrangements

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

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

Inherent Limitations on the Effectiveness of Internal Controls

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

PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

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

ITEM 1A: RISK FACTORS

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

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

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

The following table summarizes the activity related to stock repurchases for the six months ended December 26, 2020:


	Issuer Repurchases of Equity Securities
	(in thousands, except per share amounts)
	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Jun 28, 2020 - Sep 26, 2020	150	$	61.41	150	$	664,970


Sep 27, 2020 - Dec 26, 2020	—			—	$	664,970
Total	150	$	61.41	150	$	664,970

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

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on July 13, 2020 contained a typographical error. A corrected copy of the exhibit is filed as Exhibit 10.1 hereto.

ITEM 6: EXHIBITS

(a) Exhibits


10.1			Maxim Integrated Products, Inc. Amended and Restated Change in Control Employee Severance Plan for U.S. Employees
31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act (1)
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act (1)
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 (1)
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (1)
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
101.SCH			Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)

(1) Filed or furnished herewith.

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

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


January 27, 2021						MAXIM INTEGRATED PRODUCTS, INC.

						By:/s/ Brian C. White
						Brian C. White
						Senior Vice President, Chief Financial Officer

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Maxim Integrated Products (MXIM) 10-Q2021 Q2 Quarterly report

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