MAXIM INTEGRATED PRODUCTS INC
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|
FORM 10-Q
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(Mark One)
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[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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For the quarterly period ended September 27, 2014
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|
OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________ to ________.
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Commission file number 1-34192
MAXIM INTEGRATED PRODUCTS, INC.
(Exact name of Registrant as Specified in its Charter)
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Delaware
(State or Other Jurisdiction of Incorporation or Organization)
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94-2896096
(I.R.S. Employer I. D. No.)
|
|
160 Rio Robles
San Jose, California 95134
(Address of Principal Executive Offices including Zip Code)
(408) 601-1000
(Registrant’s Telephone Number, Including Area Code)
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 [x] 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):
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Large accelerated filer [x]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
(Do not check if a smaller reporting company) |
Smaller reporting company [ ]
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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 [x]
As of
October 17, 2014
there were
282,920,517
shares of Common Stock, par value $.001 per share, of the registrant outstanding.
MAXIM INTEGRATED PRODUCTS, INC.
INDEX
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PART I - FINANCIAL INFORMATION
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Page
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Item 1. Financial Statements (Unaudited)
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||
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Condensed Consolidated Balance Sheets as of September 27, 2014 and June 28, 2014
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||
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Condensed Consolidated Statements of Income for the Three Months Ended September 27, 2014 and September 28, 2013
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||
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Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 27, 2014 and September 28, 2013
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||
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 27, 2014 and September 28, 2013
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Notes to Condensed Consolidated Financial Statements
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||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4. Controls and Procedures
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||
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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||
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Item 1A. Risk Factors
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||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3. Defaults Upon Senior Securities
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Item 4. Mine Safety Disclosures
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||
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Item 5. Other Information
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Item 6. Exhibits
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SIGNATURES
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||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
September 27,
2014 |
June 28,
2014 |
||||||
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(in thousands)
|
|||||||
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ASSETS
|
|||||||
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Current assets:
|
|||||||
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Cash and cash equivalents
|
$
|
1,243,883
|
|
$
|
1,322,472
|
|
|
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Short-term investments
|
75,094
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|
49,953
|
|
|||
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Total cash, cash equivalents and short-term investments
|
1,318,977
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1,372,425
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|
|||
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Accounts receivable, net
|
281,932
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|
295,828
|
|
|||
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Inventories
|
305,108
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|
289,292
|
|
|||
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Deferred tax assets
|
54,379
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|
74,597
|
|
|||
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Other current assets
|
67,383
|
|
54,560
|
|
|||
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Total current assets
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2,027,779
|
|
2,086,702
|
|
|||
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Property, plant and equipment, net
|
1,303,861
|
|
1,331,519
|
|
|||
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Intangible assets, net
|
337,917
|
|
360,994
|
|
|||
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Goodwill
|
595,441
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|
596,637
|
|
|||
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Other assets
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40,127
|
|
29,766
|
|
|||
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TOTAL ASSETS
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$
|
4,305,125
|
|
$
|
4,405,618
|
|
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
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Current liabilities:
|
|||||||
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Accounts payable
|
$
|
96,347
|
|
$
|
102,076
|
|
|
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Income taxes payable
|
20,122
|
|
20,065
|
|
|||
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Accrued salary and related expenses
|
126,624
|
|
186,732
|
|
|||
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Accrued expenses
|
65,216
|
|
64,028
|
|
|||
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Deferred revenue on shipments to distributors
|
26,821
|
|
25,734
|
|
|||
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Total current liabilities
|
335,130
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|
398,635
|
|
|||
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Long-term debt
|
1,001,026
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1,001,026
|
|
|||
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Income taxes payable
|
350,396
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|
362,802
|
|
|||
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Deferred tax liabilities
|
145,597
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|
159,879
|
|
|||
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Other liabilities
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61,572
|
|
53,365
|
|
|||
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Total liabilities
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1,893,721
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|
1,975,707
|
|
|||
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Commitments and contingencies (Note 11)
|
|
|
|
|
|||
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Stockholders’ equity:
|
|||||||
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Common stock and capital in excess of par value
|
284
|
|
23,290
|
|
|||
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Retained earnings
|
2,430,194
|
|
2,423,794
|
|
|||
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Accumulated other comprehensive loss
|
(19,074
|
)
|
(17,173
|
)
|
|||
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Total stockholders’ equity
|
2,411,404
|
|
2,429,911
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|
|||
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TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
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$
|
4,305,125
|
|
$
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4,405,618
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
3
MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
|
|||||||
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September 27,
2014 |
September 28,
2013 |
||||||
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(in thousands, except per share data)
|
|||||||
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Net revenues
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$
|
580,275
|
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$
|
585,241
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|
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Cost of goods sold
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241,454
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238,045
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|||
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Gross margin
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338,821
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|
347,196
|
|
|||
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Operating expenses:
|
|||||||
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Research and development
|
140,362
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129,902
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|
|||
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Selling, general and administrative
|
79,989
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|
77,430
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|
|||
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Intangible asset amortization
|
4,327
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|
3,436
|
|
|||
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Impairment of long-lived assets
|
10,226
|
|
—
|
|
|||
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Severance and restructuring expenses
|
1,385
|
|
5,547
|
|
|||
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Other operating expenses (income), net
|
1,574
|
|
2,272
|
|
|||
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Total operating expenses
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237,863
|
|
218,587
|
|
|||
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Operating income
|
100,958
|
|
128,609
|
|
|||
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Interest and other income (expense), net
|
(6,477
|
)
|
(3,463
|
)
|
|||
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Income before provision for income taxes
|
94,481
|
|
125,146
|
|
|||
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Income tax provision (benefit)
|
(5,499
|
)
|
22,026
|
|
|||
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Net income
|
$
|
99,980
|
|
$
|
103,120
|
|
|
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Earnings per share:
|
|||||||
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Basic
|
$
|
0.35
|
|
$
|
0.36
|
|
|
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Diluted
|
$
|
0.35
|
|
$
|
0.36
|
|
|
|
Shares used in the calculation of earnings per share:
|
|||||||
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Basic
|
284,086
|
|
284,654
|
|
|||
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Diluted
|
289,430
|
|
290,260
|
|
|||
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Dividends declared and paid per share
|
$
|
0.28
|
|
$
|
0.26
|
|
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
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(in thousands)
|
|||||||
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Net income
|
$
|
99,980
|
|
$
|
103,120
|
|
|
|
Other comprehensive income, net of tax:
|
|||||||
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Change in net unrealized gains and losses on available-for-sale securities, net of tax benefit (expense) of $0 and $4, respectively
|
(25
|
)
|
(8
|
)
|
|||
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Change in net unrealized gains and losses on cash flow hedges, net of tax benefit (expense) of $470 and $(290), respectively
|
(1,575
|
)
|
1,224
|
|
|||
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Change in net unrealized gains and losses on post-retirement benefits, net of tax benefit (expense) of $(121) and $(75), respectively
|
239
|
|
284
|
|
|||
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Tax effect of the unrealized exchange gains and losses on long-term intercompany receivables
|
(540
|
)
|
138
|
|
|||
|
Other comprehensive income (loss), net
|
(1,901
|
)
|
1,638
|
|
|||
|
Total comprehensive income
|
$
|
98,079
|
|
$
|
104,758
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
5
MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
|
(in thousands)
|
|||||||
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Cash flows from operating activities:
|
|||||||
|
Net income
|
$
|
99,980
|
|
$
|
103,120
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||
|
Stock-based compensation
|
22,420
|
|
18,740
|
|
|||
|
Depreciation and amortization
|
63,693
|
|
51,133
|
|
|||
|
Deferred taxes
|
6,207
|
|
25,529
|
|
|||
|
Loss (gain) from sale of property, plant and equipment
|
244
|
|
36
|
|
|||
|
Tax benefit (shortfall) related to stock-based compensation
|
1,610
|
|
(3,488
|
)
|
|||
|
Impairment of long-lived assets
|
10,226
|
|
—
|
|
|||
|
Excess tax benefit from stock-based compensation
|
(2,249
|
)
|
(1,697
|
)
|
|||
|
Changes in assets and liabilities:
|
|||||||
|
Accounts receivable
|
13,896
|
|
(12,450
|
)
|
|||
|
Inventories
|
(15,650
|
)
|
(2,301
|
)
|
|||
|
Other current assets
|
(24,974
|
)
|
(18,546
|
)
|
|||
|
Accounts payable
|
4,455
|
|
(9,162
|
)
|
|||
|
Income taxes payable
|
(12,289
|
)
|
11,393
|
|
|||
|
Deferred revenue on shipments to distributors
|
1,087
|
|
622
|
|
|||
|
All other accrued liabilities
|
(51,659
|
)
|
(67,035
|
)
|
|||
|
Net cash provided by (used in) operating activities
|
116,997
|
|
95,894
|
|
|||
|
Cash flows from investing activities:
|
|||||||
|
Purchase of property, plant and equipment
|
(31,686
|
)
|
(36,329
|
)
|
|||
|
Proceeds from sale of property, plant and equipment
|
212
|
|
3,048
|
|
|||
|
Purchases of available-for-sale securities
|
(25,142
|
)
|
—
|
|
|||
|
Net cash provided by (used in) investing activities
|
(56,616
|
)
|
(33,281
|
)
|
|||
|
Cash flows from financing activities:
|
|||||||
|
Excess tax benefit from stock-based compensation
|
2,249
|
|
1,697
|
|
|||
|
Repayment of notes payable
|
(437
|
)
|
—
|
|
|||
|
Issuance of debt
|
—
|
|
100
|
|
|||
|
Net issuance of restricted stock units
|
(8,038
|
)
|
(6,966
|
)
|
|||
|
Proceeds from stock options exercised
|
9,704
|
|
5,247
|
|
|||
|
Repurchase of common stock
|
(62,685
|
)
|
(154,386
|
)
|
|||
|
Dividends paid
|
(79,763
|
)
|
(73,744
|
)
|
|||
|
Net cash provided by (used in) financing activities
|
(138,970
|
)
|
(228,052
|
)
|
|||
|
Net increase (decrease) in cash and cash equivalents
|
(78,589
|
)
|
(165,439
|
)
|
|||
|
Cash and cash equivalents:
|
|||||||
|
Beginning of period
|
1,322,472
|
|
1,174,986
|
|
|||
|
End of period
|
$
|
1,243,883
|
|
$
|
1,009,547
|
|
|
|
Supplemental disclosures of cash flow information:
|
|||||||
|
Cash paid (refunded), net during the period for income taxes
|
$
|
8,581
|
|
$
|
433
|
|
|
|
Cash paid for interest
|
$
|
8,452
|
|
$
|
8,302
|
|
|
|
Noncash financing and investing activities:
|
|||||||
|
Accounts payable related to property, plant and equipment purchases
|
$
|
4,290
|
|
$
|
21,725
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
6
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 presentation have been included. The year-end condensed consolidated balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the
three
months ended
September 27, 2014
are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated interim 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 28, 2014
. The Condensed Consolidated Financial Statements included in this Quarterly Report include the financial results of Volterra Semiconductor Corporation (“Volterra”) prospectively from the date of acquisition. Refer to Note 13: “Acquisitions” of these Notes to Condensed Consolidated Interim Financial Statements for further discussion in relation to Volterra.
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 2014 and 2013 were 52-week fiscal years
while fiscal year 2015 will be a 52-week fiscal year.
NOTE 2: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(i) New Accounting Updates Recently Adopted
In the first quarter of fiscal year 2015, the Company adopted Accounting Standards Update (“ASU”) No. 2013-11,
Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
, which requires certain unrecognized tax benefits to be presented as reductions to deferred tax assets instead of liabilities on the Condensed Consolidated Balance Sheets. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Balance Sheets.
(ii) Recent Accounting Updates Not Yet Effective
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606).
ASU 2014-09 uses a five-step model to determine revenue recognition in contracts with customers. The Company is currently evaluating the potential impact of this standard on its financial statements. ASU 2014-09 is effective for the Company in our first quarter of fiscal year 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09.
In April 2014, the FASB issued ASU No. 2014-08,
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
ASU 2014-08 redefines discontinued operations as disposals representing a strategic shift in operations and having a major effect on the organization’s operations and financial results. The Company is currently evaluating the potential impact of this standard on its financial statements. The Company will be required to adopt ASU 2014-08 on a prospective basis starting in fiscal year 2016.
7
NOTE 3: BALANCE SHEET COMPONENTS
Accounts receivable, net consists of:
|
September 27,
2014 |
June 28,
2014 |
||||||
|
Accounts Receivable:
|
(in thousands)
|
||||||
|
Accounts receivable
|
$
|
302,111
|
|
$
|
313,578
|
|
|
|
Returns and allowances
|
(20,179
|
)
|
(17,750
|
)
|
|||
|
$
|
281,932
|
|
$
|
295,828
|
|
||
Inventories consist of:
|
September 27,
2014 |
June 28,
2014 |
||||||
|
Inventories:
|
(in thousands)
|
||||||
|
Raw materials
|
$
|
11,639
|
|
$
|
14,774
|
|
|
|
Work-in-process
|
200,659
|
|
188,198
|
|
|||
|
Finished goods
|
92,810
|
|
86,320
|
|
|||
|
$
|
305,108
|
|
$
|
289,292
|
|
||
Property, plant and equipment, net consists of:
|
|
September 27,
2014 |
June 28,
2014 |
|||||
|
Property, plant and equipment:
|
(in thousands)
|
||||||
|
Land
|
$
|
62,093
|
|
$
|
62,093
|
|
|
|
Buildings and building improvements
|
384,468
|
|
378,477
|
|
|||
|
Machinery and equipment
|
2,144,586
|
|
2,134,813
|
|
|||
|
|
2,591,147
|
|
2,575,383
|
|
|||
|
Less: accumulated depreciation and amortization
|
(1,287,286
|
)
|
(1,243,864
|
)
|
|||
|
|
$
|
1,303,861
|
|
$
|
1,331,519
|
|
|
Accrued salary and related expenses consist of:
|
September 27,
2014 |
June 28,
2014 |
||||||
|
Accrued salary and related expenses:
|
(in thousands)
|
||||||
|
Accrued bonus
|
$
|
24,029
|
|
$
|
88,192
|
|
|
|
Accrued vacation
|
43,130
|
|
43,528
|
|
|||
|
Accrued salaries
|
11,665
|
|
18,242
|
|
|||
|
Other
|
47,800
|
|
36,770
|
|
|||
|
$
|
126,624
|
|
$
|
186,732
|
|
||
NOTE 4: 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:
8
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 U.S. treasury bills 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. As a result, the Company has classified these investments as Level 2 in the fair value hierarchy.
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 consists of contingent consideration liability related to certain prior years’ acquisitions
Assets and liabilities measured at fair value on a recurring basis were as follows:
|
As of September 27, 2014
|
As of June 28, 2014
|
||||||||||||||||||||||||||||||
|
Fair Value
Measurements Using
|
Total
Balance
|
Fair Value
Measurements Using
|
Total
Balance |
||||||||||||||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||||||||||
|
Assets
|
|||||||||||||||||||||||||||||||
|
Money market funds (1)
|
$
|
891,158
|
|
$
|
—
|
|
$
|
—
|
|
$
|
891,158
|
|
$
|
971,868
|
|
$
|
—
|
|
$
|
—
|
|
$
|
971,868
|
|
|||||||
|
U.S. treasury bills (2)
|
—
|
|
75,094
|
|
—
|
|
75,094
|
|
—
|
|
49,953
|
|
—
|
|
49,953
|
|
|||||||||||||||
|
Foreign currency forward contracts (3)
|
—
|
|
259
|
|
—
|
|
259
|
|
—
|
|
316
|
|
—
|
|
316
|
|
|||||||||||||||
|
Total Assets
|
$
|
891,158
|
|
$
|
75,353
|
|
$
|
—
|
|
$
|
966,511
|
|
$
|
971,868
|
|
$
|
50,269
|
|
$
|
—
|
|
$
|
1,022,137
|
|
|||||||
|
Liabilities
|
|||||||||||||||||||||||||||||||
|
Foreign currency forward contracts (4)
|
$
|
—
|
|
$
|
2,366
|
|
$
|
—
|
|
$
|
2,366
|
|
$
|
—
|
|
$
|
438
|
|
$
|
—
|
|
$
|
438
|
|
|||||||
|
Contingent Consideration (4)
|
—
|
|
—
|
|
1,000
|
|
1,000
|
|
—
|
|
—
|
|
3,215
|
|
3,215
|
|
|||||||||||||||
|
Total Liabilities
|
$
|
—
|
|
$
|
2,366
|
|
$
|
1,000
|
|
$
|
3,366
|
|
$
|
—
|
|
$
|
438
|
|
$
|
3,215
|
|
$
|
3,653
|
|
|||||||
(1) Included in Cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets.
(2) Included in Short-term investments in the accompanying Condensed Consolidated Balance Sheets.
(3) Included in Other current assets in the accompanying Condensed Consolidated Balance Sheets.
(4) Included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets.
The tables below present reconciliations for liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the
three
months ended
September 27, 2014
and
September 28, 2013
:
9
|
Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3)
|
||||||||
|
September 27,
2014 |
September 28,
2013 |
|||||||
|
Contingent Consideration
|
(in thousands)
|
|||||||
|
Beginning balance
|
$
|
3,215
|
|
$
|
8,577
|
|
||
|
Total gains or losses (realized and unrealized):
|
||||||||
|
Included in earnings
|
384
|
|
208
|
|
||||
|
Payments
|
(2,599
|
)
|
—
|
|
||||
|
Ending balance
|
$
|
1,000
|
|
$
|
8,785
|
|
||
|
Changes in unrealized losses (gains) included in earnings related to liabilities still held as of period end
|
$
|
384
|
|
$
|
208
|
|
||
The valuation of contingent consideration is based on a probability weighted earnout model which relies primarily on estimates of milestone achievements and discount rates applicable for the period expected payout. The most significant unobservable input used in the determination of estimated fair value of contingent consideration is the estimates on the likelihood of milestone achievements, which directly correlates to the fair value recognized in the Condensed Consolidated Balance Sheets.
The fair value of this liability is estimated quarterly by management based on inputs received from the Company’s engineering and finance personnel. The determination of the milestone achievement is performed by the Company’s business units and reviewed by the accounting department. Potential valuation adjustments are made as the progress toward achieving milestones becomes determinable, with the impact of such adjustments being recorded to other operating expenses (income), net in our Condensed Consolidated Statements of Income.
During the
three
months ended
September 27, 2014
and the year ended
June 28, 2014
, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.
There were
no
assets or liabilities measured at fair value on a non-recurring basis as of
September 27, 2014
and
June 28, 2014
.
NOTE 5: FINANCIAL INSTRUMENTS
Short-term investments
Fair values were as follows:
|
September 27, 2014
|
June 28, 2014
|
||||||||||||||||||||||||||||||
|
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
|
|||||||||||||||||||||||||||||||
|
Government agency securities
|
$
|
75,020
|
|
$
|
86
|
|
$
|
(12
|
)
|
$
|
75,094
|
|
$
|
49,853
|
|
$
|
100
|
|
$
|
—
|
|
$
|
49,953
|
|
|||||||
|
Total available-for-sale investments
|
$
|
75,020
|
|
$
|
86
|
|
$
|
(12
|
)
|
$
|
75,094
|
|
$
|
49,853
|
|
$
|
100
|
|
$
|
—
|
|
$
|
49,953
|
|
|||||||
In the
three
months ended
September 27, 2014
and the year ended
June 28, 2014
, the Company did not recognize any impairment charges on short-term investments.
Derivative instruments and hedging activities
The Company generates revenues in various global markets based on orders obtained in non-U.S. currencies, primarily the Japanese Yen, the Euro and the British Pound. The Company incurs expenditures denominated in non-U.S. currencies, including the Philippine Peso and Thai Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and expenditures for sales offices and research and development activities undertaken outside of the U.S.
10
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”)
No. 815-Derivatives and Hedging (“ASC 815”). As of
September 27, 2014
and
June 28, 2014
, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other international currencies were
$70.1 million
and
$60.6 million
, respectively, and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other international currencies were
$1.5 million
and
$0.8 million
, respectively.
Derivatives not designated as hedging instruments
As of
September 27, 2014
and
June 28, 2014
, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other international currencies were
$35.7 million
and
$31.4 million
, respectively, and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other international currencies were
$38.9 million
and
$48.9 million
, respectively. The fair values of our outstanding foreign currency forward contracts and amounts included in the condensed consolidated statement of income were not material for
three
months ended
September 27, 2014
and year ended
June 28, 2014
.
Long-term debt
The following table summarizes the Company’s long-term debt:
|
September 27,
2014 |
June 28,
2014 |
||||||
|
(in thousands)
|
|||||||
|
2.5% fixed rate notes due November 2018
|
$
|
500,000
|
|
$
|
500,000
|
|
|
|
3.375% fixed rate notes due March 2023
|
500,000
|
|
500,000
|
|
|||
|
Notes denominated in Euro
|
|||||||
|
Amortizing floating rate notes (EURIBOR plus 1.5%) due up to June 30, 2014
|
—
|
|
372
|
|
|||
|
Term fixed rate notes (2.0%) due on September 30, 2015
|
1,026
|
|
1,026
|
|
|||
|
Total
|
1,001,026
|
|
1,001,398
|
|
|||
|
Less: Current portion
|
—
|
|
(372
|
)
|
|||
|
Total long-term debt
|
$
|
1,001,026
|
|
$
|
1,001,026
|
|
|
On November 21, 2013, the Company completed a public offering of
$500 million
aggregate principal amount of the Company’s
2.5%
coupon senior unsecured and unsubordinated notes due in November 2018 (“2018 Notes”), with an effective interest rate of
2.6%
. Interest on the 2018 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2014. The net proceeds of this offering were approximately
$494.5 million
, after issuing at a discount and deducting paid expenses, and are included in the financing activities in the Condensed Consolidated Statements of Cash Flows.
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, and are included in the financing activities in the Condensed Consolidated Statements of Cash Flows.
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. Interest expense associated with the notes was
$7.4 million
and
$4.3 million
during the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income.
The estimated fair value of the Company’s debt was approximately
$999 million
as of
September 27, 2014
. The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.
11
Credit Facility
The Company has access to a
$350 million
senior unsecured revolving credit facility with certain institutional lenders that expires on June 27, 2019. The facility fee is at a rate per annum that varies based on the Company's index debt rating and any advances under the credit agreement will accrue interest at a base rate plus a margin based on the Company's index debt rating. The credit agreement requires the Company to comply with certain covenants, including a requirement that the Company maintain a ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of not more than
3
to
1
and a minimum interest coverage ratio (EBITDA divided by interest expense) greater than
3.5
to
1
. As of
September 27, 2014
, the Company had not borrowed any amounts from this credit facility and was in compliance with all debt covenants.
Other Financial Instruments
For the balance of the Company’s financial instruments, cash equivalents, accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.
NOTE 6: STOCK-BASED COMPENSATION
The following table shows total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the
three
months ended
September 27, 2014
and
September 28, 2013
:
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
|
September 27, 2014
|
|
September 28, 2013
|
||||||||||||||||||||||||||||
|
|
Stock Options
|
|
Restricted Stock Units
|
|
Employee Stock Purchase Plan
|
|
Total
|
|
Stock Options
|
|
Restricted Stock Units
|
|
Employee Stock Purchase Plan
|
|
Total
|
||||||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||||||||||
|
Cost of goods sold
|
$
|
339
|
|
|
$
|
1,974
|
|
|
$
|
524
|
|
|
$
|
2,837
|
|
|
$
|
349
|
|
|
$
|
1,918
|
|
|
$
|
475
|
|
|
$
|
2,742
|
|
|
Research and development
|
2,147
|
|
|
8,832
|
|
|
1,343
|
|
|
12,322
|
|
|
1,836
|
|
|
6,440
|
|
|
1,322
|
|
|
9,598
|
|
||||||||
|
Selling, general and administrative
|
1,429
|
|
|
5,224
|
|
|
608
|
|
|
7,261
|
|
|
1,264
|
|
|
4,527
|
|
|
609
|
|
|
6,400
|
|
||||||||
|
Pre-tax stock-based compensation expense
|
$
|
3,915
|
|
|
$
|
16,030
|
|
|
$
|
2,475
|
|
|
$
|
22,420
|
|
|
$
|
3,449
|
|
|
$
|
12,885
|
|
|
$
|
2,406
|
|
|
$
|
18,740
|
|
|
Less: income tax effect
|
|
|
|
|
|
|
3,272
|
|
|
|
|
|
|
|
|
2,729
|
|
||||||||||||||
|
Net stock-based compensation expense
|
|
|
|
|
|
|
|
|
$
|
19,148
|
|
|
|
|
|
|
|
|
$
|
16,011
|
|
||||||||||
Stock Options
The fair value of options granted to employees under the Company’s Amended and Restated 1996 Stock Incentive Plan is estimated on the date of grant using the Black-Scholes option valuation model.
Expected volatilities are based on the historical volatilities from the Company’s traded common stock over a period equal to the expected term. The Company is utilizing the simplified method to estimate expected holding periods. 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 Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.
The fair value of options granted to employees has been estimated using the following weighted-average assumptions:
12
|
Stock Options
|
|||||
|
Three Months Ended
|
|||||
|
September 27,
2014 |
September 28,
2013 |
||||
|
Expected holding period (in years)
|
4.8
|
|
5.4
|
|
|
|
Risk-free interest rate
|
1.6
|
%
|
1.4
|
%
|
|
|
Expected stock price volatility
|
26.7
|
%
|
35.0
|
%
|
|
|
Dividend yield
|
3.1
|
%
|
3.1
|
%
|
|
The weighted-average fair value of stock options granted was
$5.67
and
$6.74
per share for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively.
The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of
September 27, 2014
and their activity for the
three
months ended
September 27, 2014
:
|
Number of
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Term (in Years)
|
Aggregate Intrinsic Value (1)
|
|||||||||
|
Balance at June 28, 2014
|
16,163,644
|
|
$
|
25.74
|
|
|||||||
|
Options Granted
|
55,576
|
|
32.76
|
|
||||||||
|
Options Exercised
|
(524,614
|
)
|
16.91
|
|
||||||||
|
Options Cancelled
|
(391,851
|
)
|
36.80
|
|
||||||||
|
Balance at September 27, 2014
|
15,302,755
|
|
$
|
25.78
|
|
3.5
|
$
|
99,141,987
|
|
|||
|
Exercisable, September 27, 2014
|
7,068,084
|
|
$
|
25.79
|
|
1.8
|
$
|
56,266,217
|
|
|||
|
Vested and expected to vest, September 27, 2014
|
14,551,614
|
|
$
|
25.70
|
|
3.4
|
$
|
96,124,051
|
|
|||
|
(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 26, 2014, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of September 27, 2014.
|
As of
September 27, 2014
, there was
$32.3 million
of total unrecognized stock compensation cost related to
8.2 million
unvested stock options, which is expected to be recognized over a weighted average period of approximately
2.5
years.
As of
September 28, 2013
, there was
$44.2 million
of total unrecognized stock compensation cost related to
11.1 million
unvested stock options, which is expected to be recognized over a weighted average period of approximately
3.1
years.
Restricted Stock Units
The fair value of Restricted Stock Units (“RSUs”) under the Company’s Amended and Restated 1996 Stock Incentive 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 granted was
$25.48
and
$24.75
per share for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively.
The following table summarizes outstanding and expected to vest RSUs as of
September 27, 2014
and their activity during the
three
months ended
September 27, 2014
:
13
|
Number of
Shares
|
Weighted Average
Remaining Contractual Term (in Years) |
Aggregate Intrinsic
Value (1)
|
||||||
|
Balance at June 28, 2014
|
7,695,131
|
|
||||||
|
Restricted stock units granted
|
2,462,214
|
|
||||||
|
Restricted stock units released
|
(675,621
|
)
|
||||||
|
Restricted stock units cancelled
|
(216,225
|
)
|
||||||
|
Balance at September 27, 2014
|
9,265,499
|
|
3.1
|
$
|
308,410,676
|
|
||
|
Outstanding and expected to vest, September 27, 2014
|
8,602,824
|
|
3.0
|
$
|
265,913,281
|
|
||
|
(1)
|
Aggregate intrinsic value for RSUs represents the closing price per share of the Company’s common stock on September 26, 2014, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of September 27, 2014.
|
The Company withheld shares totaling
$8.0 million
in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the
three
months ended
September 27, 2014
. 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 27, 2014
, there was
$187.8 million
of unrecognized compensation expense related to
9.3 million
unvested RSUs, which is expected to be recognized over a weighted average period of approximately
3.1
years.
As of
September 28, 2013
, there was
$152.1 million
of unrecognized compensation expense related to
9.1 million
unvested RSUs, which is expected to be recognized over a weighted average period of approximately
3.0
years.
Employee Stock Purchase Plan
The fair value of rights to acquire common stock under the Company’s 2008 Employee Stock Purchase Plan (the “ESPP”) is estimated on the date of grant using the Black-Scholes option valuation model.
As of
September 27, 2014
, there was
$3.1 million
of unrecognized compensation expense related to the ESPP.
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 following table sets forth the computation of basic and diluted earnings per share:
14
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
|
(in thousands, except per share data)
|
|||||||
|
Numerator for basic earnings per share and diluted earnings per share
|
|||||||
|
Net income
|
$
|
99,980
|
|
$
|
103,120
|
|
|
|
Denominator for basic earnings per share
|
284,086
|
|
284,654
|
|
|||
|
Effect of dilutive securities:
|
|||||||
|
Stock options, ESPP and RSUs
|
5,344
|
|
5,606
|
|
|||
|
Denominator for diluted earnings per share
|
289,430
|
|
290,260
|
|
|||
|
Earnings per share: basic
|
|||||||
|
Basic
|
$
|
0.35
|
|
$
|
0.36
|
|
|
|
Diluted
|
$
|
0.35
|
|
$
|
0.36
|
|
|
Approximately
5.9 million
and
8.9 million
stock options were excluded from the calculation of diluted earnings per share for the
three
months ended
September 27, 2014
and
September 28, 2013
, 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 in one reportable segment. The Company designs, develops, manufactures and markets a broad range of linear and mixed signal integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by ASC No. 280,
Segment Reporting
(“ASC 280”).
The Company has three operating segments that aggregate into one reportable segment. Under ASC 280, 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 basic principles of ASC 280, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:
|
•
|
the nature of products and services;
|
|
•
|
the nature of the production processes;
|
|
•
|
the type or class of customer for their products and services; and
|
|
•
|
the methods used to distribute their products or provide their services.
|
The Company meets each of the aggregation criteria for the following reasons:
|
•
|
the sale of analog and mixed signal integrated circuits is the primary source of revenue for each of the Company’s three operating segments;
|
|
•
|
the integrated circuits sold by each of the Company’s operating segments are manufactured using similar semiconductor manufacturing processes;
|
|
•
|
the integrated circuits marketed by each of the Company’s operating segments are sold to the same types of customers; and
|
|
•
|
all of the Company’s integrated circuits are sold through a centralized sales force and common wholesale distributors.
|
All of the Company’s operating segments share similar long-term financial performance as they have similar economic characteristics, including gross margins. 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 the Company’s 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.
15
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 reporting period.
Net revenues from unaffiliated customers by geographic region were as follows:
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
|
(in thousands)
|
|||||||
|
United States
|
$
|
74,595
|
|
$
|
89,099
|
|
|
|
China
|
240,016
|
|
233,898
|
|
|||
|
Rest of Asia
|
165,433
|
|
173,382
|
|
|||
|
Europe
|
83,965
|
|
72,626
|
|
|||
|
Rest of World
|
16,266
|
|
16,236
|
|
|||
|
$
|
580,275
|
|
$
|
585,241
|
|
||
Net long-lived assets by geographic region were as follows:
|
September 27,
2014 |
June 28,
2014 |
||||||
|
(in thousands)
|
|||||||
|
United States
|
$
|
973,939
|
|
$
|
1,035,699
|
|
|
|
Philippines
|
178,352
|
|
172,823
|
|
|||
|
Rest of World
|
151,570
|
|
122,997
|
|
|||
|
$
|
1,303,861
|
|
$
|
1,331,519
|
|
||
NOTE 9: COMPREHENSIVE INCOME
The changes in accumulated other comprehensive loss by component and related tax effects in the
three
months ended
September 27, 2014
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 28, 2014
|
$
|
(5,753
|
)
|
$
|
(10,373
|
)
|
$
|
(1,136
|
)
|
$
|
(11
|
)
|
$
|
100
|
|
$
|
(17,173
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
—
|
|
—
|
|
(1,874
|
)
|
(25
|
)
|
(1,899
|
)
|
|||||||||||
|
Amounts reclassified out of accumulated other comprehensive loss (income)
|
—
|
|
360
|
|
—
|
|
(171
|
)
|
—
|
|
189
|
|
|||||||||||
|
Tax effects
|
(540
|
)
|
(121
|
)
|
—
|
|
470
|
|
—
|
|
(191
|
)
|
|||||||||||
|
Other comprehensive income (loss)
|
(540
|
)
|
239
|
|
—
|
|
(1,575
|
)
|
(25
|
)
|
(1,901
|
)
|
|||||||||||
|
September 27, 2014
|
$
|
(6,293
|
)
|
$
|
(10,134
|
)
|
$
|
(1,136
|
)
|
$
|
(1,586
|
)
|
$
|
75
|
|
$
|
(19,074
|
)
|
|||||
16
NOTE 10: INCOME TAXES
In the
three
months ended
September 27, 2014
and
September 28, 2013
, the Company recorded an income tax provision (benefit) of
$(5.5) million
and
$22.0 million
, respectively. The Company’s effective tax rate for the
three
months ended
September 27, 2014
and
September 28, 2013
was
(5.8)%
and
17.6%
, respectively.
The Company's federal statutory tax rate is
35%
. The Company's effective tax rate for the
three
months ended
September 27, 2014
was lower than the statutory tax rate primarily because earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, were taxed at lower rates, and a
$24.8 million
discrete benefit for the favorable settlement of a Singapore tax issue, partially offset by stock-based compensation for which no tax benefit is expected.
The Company’s effective tax rate for the
three
months ended
September 28, 2013
was lower than the statutory tax rate primarily because earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, were taxed at lower rates, partially offset by stock-based compensation for which no tax benefit is expected.
The Company’s federal corporate income tax returns are audited on a recurring basis by the IRS. In fiscal year 2012 the U.S. Internal Revenue Service commenced an audit of the Company's federal corporate income tax returns for fiscal years 2009 through 2011, which is still ongoing.
NOTE 11: COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is a 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, we do 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 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.
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.
Product Warranty
The Company generally warrants its products for one year from the date of shipment against defects in materials, workmanship and material non-conformance to the Company’s specifications. The general warranty policy provides for the repair or replacement of defective products or a credit to the customer’s account. In addition, the Company may consider its relationship with the customer when reviewing product warranty claims. In limited circumstances and for strategic customers in certain unique industries and applications, our product warranty may extend for up to five years, and may also include financial responsibility, such as the payment of monetary compensation to reimburse a customer for its financial losses above and beyond repairing or replacing the product or crediting the customer’s account should the product not meet the Company’s specifications and losses and /or damages results from the defective product.
Accruals are based on specifically identified claims and on the estimated, undiscounted cost of incurred-but-not-reported claims. If there is a material increase in the rate of customer claims compared with our historical experience or if the Company's estimates of probable losses relating to specifically identified warranty exposures require revision, the Company may record a charge against future cost of sales. Product warranty liability is included within the balance sheet captions “Accrued Expenses” and “Other liabilities” in the accompanying Condensed Consolidated Balance Sheets.
The changes in the Company's aggregate product warranty liabilities for the
three
months ended
September 27, 2014
and
September 28, 2013
were as follows:
17
|
September 27,
2014 |
September 28,
2013 |
||||||
|
Product warranty liability
|
(in thousands)
|
||||||
|
Beginning balance
|
$
|
21,296
|
|
$
|
3,075
|
|
|
|
Accruals for warranties
|
57
|
|
498
|
|
|||
|
Payments
|
(1,617
|
)
|
(843
|
)
|
|||
|
Changes in estimate
|
81
|
|
(378
|
)
|
|||
|
Ending balance
|
$
|
19,817
|
|
$
|
2,352
|
|
|
|
Less: Current portion
|
11,217
|
|
2,352
|
|
|||
|
Non-current portion
|
$
|
8,600
|
|
$
|
—
|
|
|
NOTE 12: COMMON STOCK REPURCHASES
In July 2013, the Board of Directors authorized the Company to repurchase up to
$1 billion
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 superseded by this authorization.
During the
three
months ended
September 27, 2014
, the Company repurchased approximately
2.0 million
shares of its common stock for
$62.7 million
. As of
September 27, 2014
, the Company had remaining authorization of
$699.2 million
for future share repurchases. 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: ACQUISITIONS
Acquisitions completed in fiscal year 2015
None
.
Acquisitions completed in fiscal year 2014
The Company completed
two
acquisitions during fiscal year 2014.
VOLTERRA SEMICONDUCTOR CORPORATION
On
October 1, 2013
, the Company completed its acquisition of Volterra Semiconductor Corporation ("Volterra"), formerly a publicly traded company that develops power management solutions. The primary reason for this acquisition was to expand the Company's available market across a wide range of end markets, including enterprise server, cloud computing, communications and energy. The results of operations of Volterra are included in the Company’s Condensed Consolidated Statements of Income, beginning in the second quarter of fiscal year 2014. Acquisition-related costs for the twelve months ended
June 28, 2014
were
$7.0 million
.
The total purchase price for Volterra was approximately
$615 million
and was comprised of:
|
(in thousands)
|
||||
|
Cash consideration for 100% of outstanding common stock of Volterra at $23 per share
|
$
|
593,250
|
|
|
|
Cash consideration for vested options settlement
|
21,756
|
|
||
|
Total preliminary purchase price
|
$
|
615,006
|
|
|
The preliminary purchase price allocation as of the date of the acquisition is set forth in the table below and reflects various fair value estimates and analysis. These estimates were determined through established and generally accepted valuation techniques, including preliminary work performed by third-party valuation specialists, and are subject to change during the purchase price allocation period (up to one year from the acquisition date) as valuations are finalized.
18
|
Volterra
|
|||
|
|
(in thousands)
|
||
|
Cash and cash equivalents and short-term investments
|
$
|
163,500
|
|
|
Accounts receivable
|
23,453
|
|
|
|
Inventories
|
33,339
|
|
|
|
Other tangible assets
|
17,151
|
|
|
|
Accrued expenses
|
(35,343
|
)
|
|
|
Income taxes payable
|
(23,241
|
)
|
|
|
Other liabilities assumed
|
(20,149
|
)
|
|
|
Net tangible assets
|
158,710
|
|
|
|
Amortizable intangible assets
|
226,900
|
|
|
|
In-process research and development ("IPR&D")
|
56,200
|
|
|
|
Goodwill
|
174,894
|
|
|
|
Substitution of stock-based compensation awards
|
(1,698
|
)
|
|
|
Total purchase price
|
$
|
615,006
|
|
The Company has evaluated and continues to evaluate certain pre-acquisition contingencies, including corporate income tax related payables, uncertain tax positions and certain legal contingencies, relating to Volterra that existed as of the acquisition date. Additional information, which existed as of the acquisition date but was at that time unknown to the Company, may become known to the Company during the remainder of the purchase price allocation period.
IPR&D assets relate to future technology, is capitalized until the technology is ready for its intended use and then amortized over the technology useful life. IPR&D costs incurred by the Company subsequent to the acquisition are expensed.
Goodwill was primarily attributable to the opportunities from the addition of Volterra's product portfolio which complements the Company’s suite of products, including providing integrated process solutions to customers. The goodwill is not deductible for tax purposes.
The amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives as follows:
|
Volterra acquisition
|
|||||
|
Fair value
(in thousands)
|
Weighted average useful life (in years)
|
||||
|
Intellectual property
|
$
|
192,500
|
|
4.9
|
|
|
Customer relationships
|
24,600
|
|
9.6
|
||
|
Trade name
|
6,400
|
|
4.0
|
||
|
Backlog
|
900
|
|
0.4
|
||
|
Patents
|
2,500
|
|
4.8
|
||
|
Total amortizable intangible assets
|
$
|
226,900
|
|
||
Pro forma results of operations for this acquisition have not been presented because it is not material to the Company's Condensed Consolidated Statements of Income.
OTHER ACQUISITION
The Company acquired another company during the fiscal year ended
June 28, 2014
, which develops low power high performance analog circuits. The total cash consideration paid to acquire this company was approximately
$6.1 million
for which the purchase price was largely attributable to the developed intellectual property. Goodwill associated with this acquisition was
$0.5 million
. Acquisition related costs were not material for this transaction.
NOTE 14: GOODWILL AND INTANGIBLE ASSETS
19
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. The Company performed the annual goodwill impairment analysis during the first quarter of fiscal year 2015 and concluded that goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value.
Activity and goodwill balances for the
three
months ended
September 27, 2014
were as follows:
|
Goodwill
|
|||
|
(in thousands)
|
|||
|
Balance at June 28, 2014
|
$
|
596,637
|
|
|
Adjustments
|
(1,196
|
)
|
|
|
Balance at September 27, 2014
|
$
|
595,441
|
|
Intangible Assets
The useful lives of amortizable intangible assets are as follows:
|
Asset
|
Life
|
|
|
Intellectual property
|
3 months-10 years
|
|
|
Customer relationships
|
5-10 years
|
|
|
Trade name
|
3-4 years
|
|
|
Backlog
|
4 months
|
|
|
Patents
|
5 years
|
|
Intangible assets consisted of the following:
|
September 27,
2014 |
June 28,
2014 |
||||||||||||||||||||||
|
Original
Cost
|
Accumulated
Amortization
|
Net
|
Original
Cost
|
Accumulated
Amortization
|
Net
|
||||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
|
Intellectual property
|
$
|
435,962
|
|
$
|
220,389
|
|
$
|
215,573
|
|
$
|
435,962
|
|
$
|
201,581
|
|
$
|
234,381
|
|
|||||
|
Customer relationships
|
120,230
|
|
72,786
|
|
47,444
|
|
120,230
|
|
69,064
|
|
51,166
|
|
|||||||||||
|
Tradename
|
8,500
|
|
3,686
|
|
4,814
|
|
8,500
|
|
3,269
|
|
5,231
|
|
|||||||||||
|
Backlog
|
—
|
|
—
|
|
—
|
|
1,000
|
|
1,000
|
|
—
|
|
|||||||||||
|
Patent
|
2,500
|
|
516
|
|
1,984
|
|
2,500
|
|
386
|
|
2,114
|
|
|||||||||||
|
Total amortizable purchased intangible assets
|
567,192
|
|
297,377
|
|
269,815
|
|
568,192
|
|
275,300
|
|
292,892
|
|
|||||||||||
|
IPR&D
|
68,102
|
|
—
|
|
68,102
|
|
68,102
|
|
—
|
|
68,102
|
|
|||||||||||
|
Total purchased intangible assets
|
$
|
635,294
|
|
$
|
297,377
|
|
$
|
337,917
|
|
$
|
636,294
|
|
$
|
275,300
|
|
$
|
360,994
|
|
|||||
The following table presents the amortization expense of intangible assets and its presentation in the Condensed Consolidated Statements of Income:
20
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
|
(in thousands)
|
|||||||
|
Cost of goods sold
|
$
|
18,750
|
|
$
|
8,092
|
|
|
|
Intangible asset amortization
|
4,327
|
|
3,436
|
|
|||
|
Total intangible asset amortization expenses
|
$
|
23,077
|
|
$
|
11,528
|
|
|
The following table represents the estimated future amortization expense of intangible assets as of
September 27, 2014
:
|
Fiscal Year
|
Amount
|
|||
|
(in thousands)
|
||||
|
Remaining nine months of 2015
|
$
|
67,366
|
|
|
|
2016
|
74,454
|
|
||
|
2017
|
61,782
|
|
||
|
2018
|
41,927
|
|
||
|
2019
|
13,278
|
|
||
|
2020
|
3,358
|
|
||
|
Thereafter
|
7,650
|
|
||
|
Total intangible assets
|
$
|
269,815
|
|
|
NOTE 15: IMPAIRMENT OF LONG-LIVED ASSETS
Fiscal year 2015:
During the first quarter of fiscal year 2015, the Company recorded
$10.2 million
in impairment of long-lived assets in the Company's Condensed Consolidated Statements of Income.
The impairment was primarily related to used fabrication tools identified by the Company as obsolete in the three months ended
September 27, 2014
due to the transition to newer technologies. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of alternative use, the condition of the assets and current market demand.
Fiscal year 2014:
None
.
NOTE 16: SUBSEQUENT EVENT
In October 2014, the Company announced plans to permanently lower its cost structure through a combination of operating spending reductions and the closure of the Company’s San Jose wafer manufacturing facility.
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 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, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.
Overview of Business
21
Maxim Integrated is incorporated in the state of Delaware. Maxim Integrated 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 U.S., 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 Automotive, Communications and Data Center, Computing, Consumer and Industrial markets.
On October 1, 2013, the Company completed the acquisition of Volterra Semiconductor Corporation (“Volterra”), a company that develops power management solutions, for approximately
$615.0 million
. The acquisition of Volterra expands our serviceable available market across a wide range of end markets, including enterprise server, cloud computing and communications.
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 condensed consolidated interim 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, intangible assets, and goodwill; 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 do 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.
There have been no material changes during the
three
months ended
September 27, 2014
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 28, 2014
.
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 27,
2014 |
September 28,
2013 |
||||
|
Net revenues
|
100.0
|
%
|
100.0
|
%
|
|
|
Cost of goods sold
|
41.6
|
%
|
40.7
|
%
|
|
|
Gross margin
|
58.4
|
%
|
59.3
|
%
|
|
|
Operating expenses:
|
|||||
|
Research and development
|
24.2
|
%
|
22.2
|
%
|
|
|
Selling, general and administrative
|
13.8
|
%
|
13.2
|
%
|
|
|
Intangible asset amortization
|
0.7
|
%
|
0.6
|
%
|
|
|
Impairment of long-lived assets
|
1.8
|
%
|
—
|
%
|
|
|
Severance and restructuring expenses
|
0.2
|
%
|
0.9
|
%
|
|
|
Other operating expenses (income), net
|
0.3
|
%
|
0.5
|
%
|
|
|
Total operating expenses
|
41.0
|
%
|
37.4
|
%
|
|
|
Operating income
|
17.4
|
%
|
21.9
|
%
|
|
|
Interest and other income (expense), net
|
(1.1
|
)%
|
(0.6
|
)%
|
|
|
Income before provision for income taxes
|
16.3
|
%
|
21.3
|
%
|
|
|
Income tax provision (benefit)
|
(0.9
|
)%
|
3.8
|
%
|
|
|
Net income
|
17.2
|
%
|
17.5
|
%
|
|
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 27,
2014 |
September 28,
2013 |
||||
|
Cost of goods sold
|
0.5
|
%
|
0.5
|
%
|
|
|
Research and development
|
2.1
|
%
|
1.6
|
%
|
|
|
Selling, general and administrative
|
1.3
|
%
|
1.1
|
%
|
|
|
3.9
|
%
|
3.2
|
%
|
||
Net Revenues
Net revenues were
$580.3 million
and
$585.2 million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively, a decrease of less than
1%
. We classify our shipments by five major end markets: Automotive, Communications and Data Center, Computing, Consumer and Industrial. Net shipments decreased during the
three
months ended
September 27, 2014
as compared to the
three
months ended
September 28, 2013
due to a decrease in shipments of our consumer products driven primarily by lower demand from smartphones. This decrease was offset primarily by an increase in server revenues, driven by the Volterra acquisition, in the communications and data center end market, and products offered in the automotive end market with new design win ramps across multiple applications and customers.
During the
three
months ended
September 27, 2014
and
September 28, 2013
, approximately
87%
and
85%
of net revenues were derived from customers outside of the United States. While more than 95% 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 and liabilities
23
denominated in foreign currencies. The impact of changes in foreign exchange rates on our revenue and results of operations for the
three
months ended
September 27, 2014
and
September 28, 2013
was immaterial.
Gross Margin
Our gross margin percentages were
58.4%
and
59.3%
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively. Gross margin decreased by
$8.4 million
primarily due to a
$10.7 million
increase in incremental amortization related to Volterra intangible assets.
Research and Development
Research and development expenses were
$140.4 million
and
$129.9 million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively, which represented
24.2%
and
22.2%
of net revenues for each respective period. The
$10.5 million
increase was primarily attributable to an
$8.5 million
increase in salaries, fringe, and stock-based compensation expenses primarily resulting from the Volterra acquisition.
Selling, General and Administrative
Selling, general and administrative expenses were
$80.0 million
and
$77.4 million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively, which represented
13.8%
and
13.2%
of net revenues for each respective period. The
$2.6 million
increase was primarily attributable to a
$2.4 million
increase in salaries and stock-based compensation expenses primarily resulting from the Volterra acquisition.
Impairment of Long-Lived Assets
Impairment of long-lived assets were
$10.2 million
and
$0 million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively, which represented
1.8%
and
0%
of net revenues for each respective period. The
$10.2 million
increase was primarily due to a transition to newer, more efficient fabrication tools and a charge to a software tool that is no longer being utilized.
Severance and Restructuring Expenses
Severance and restructuring expenses were
$1.4 million
and
$5.5 million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively, which represented
0.2%
and
0.9%
of net revenues for each respective period. The
$4.1 million
decrease was primarily due to lower restructuring costs associated with the reorganization of certain business units. The reorganizations were driven by the desire to focus on specific investment areas and simplify business processes.
In October 2014, the Company announced plans to permanently lower its cost structure through a combination of operating spending reductions and the closure of the Company’s San Jose wafer manufacturing facility.
Interest and Other Income (Expense), net
Interest and other income (expense), net were
$(6.5) million
and
$(3.5) million
for the
three
months ended
September 27, 2014
and
September 28, 2013
, respectively. This net increase in interest and other expense of
$3.0 million
was primarily driven by an increase in interest expense relating to long-term notes issued in November 2013.
Provision for Income Taxes
In the
three
months ended
September 27, 2014
and
September 28, 2013
, the Company recorded an income tax provision (benefit) of
$(5.5) million
and
$22.0 million
, respectively. The Company’s effective tax rate for the
three
months ended
September 27, 2014
and
September 28, 2013
was
(5.8)%
and
17.6%
, respectively.
The Company's federal statutory tax rate is
35%
. The Company's effective tax rate for the
three
months ended
September 27, 2014
was lower than the statutory tax rate primarily because earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, were taxed at lower rates, and a
$24.8 million
discrete benefit for the favorable settlement of a Singapore tax issue, partially offset by stock-based compensation for which no tax benefit is expected.
24
The Company’s effective tax rate for the
three
months ended
September 28, 2013
was lower than the statutory tax rate primarily because earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, were taxed at lower rates, partially offset by stock-based compensation for which no tax benefit is expected.
BACKLOG
At
September 27, 2014
and
June 28, 2014
, our current quarter backlog was approximately
$379 million
and
$377 million
, respectively. We include in backlog orders with customer request dates within the next three months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to customers. In addition, backlog includes orders from domestic distributors for which revenues are not recognized until the products are sold by the distributors. Accordingly, we believe that our backlog is not a reliable measure of future revenues. All backlog numbers have been adjusted for estimated future distribution ship and debit pricing adjustments.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
Cash flows were as follows:
|
Three Months Ended
|
|||||||
|
September 27,
2014 |
September 28,
2013 |
||||||
|
(in thousands)
|
|||||||
|
Net cash provided by (used in) operating activities
|
$
|
116,997
|
|
$
|
95,894
|
|
|
|
Net cash provided by (used in) investing activities
|
(56,616
|
)
|
(33,281
|
)
|
|||
|
Net cash provided by (used in) financing activities
|
(138,970
|
)
|
(228,052
|
)
|
|||
|
Net increase (decrease) in cash and cash equivalents
|
$
|
(78,589
|
)
|
$
|
(165,439
|
)
|
|
Operating activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.
During the three months ended
September 27, 2014
, cash provided by operating activities of
$117.0 million
was a result of
$100.0 million
of net income, non-cash adjustments to net income of
$102.2 million
and a decrease in net change in assets and liabilities of
$85.1 million
. During the three months ended
September 28, 2013
, cash provided by operating activities of
$95.9 million
was a result of
$103.1 million
of net income, non-cash adjustments to net income of
$90.3 million
and a decrease in net change in assets and liabilities of
$97.5 million
.
Investing activities
Investing cash flows consist primarily of capital expenditures, net investment purchases and maturities and acquisitions.
Cash used in investing activities increased by
$23.3 million
for the
three
months ended
September 27, 2014
compared with the
three
months ended
September 28, 2013
. The increase was primarily due to the payment of
$25 million
for the purchase of available-for-sale securities in the three months ended
September 27, 2014
.
Financing activities
Financing cash flows consist primarily of debt issuance, repurchases of common stock and payment of dividends to stockholders.
Net cash used in financing activities decreased by approximately
$89.1 million
for the
three
months ended
September 27, 2014
compared to the
three
months ended
September 28, 2013
. The decrease was primarily due to
$91.7 million
in lower repurchases of our common stock.
Liquidity and Capital Resources
Debt Levels
25
On November 21, 2013, the Company completed a public offering of
$500 million
aggregate principal amount of the Company’s
2.5%
senior unsecured and unsubordinated notes due on November 15, 2018.
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 on March 15, 2023.
Outstanding debt is unchanged at
$1,001 million
as of
September 27, 2014
and
June 28, 2014
, respectively.
Available Financing Resources
As of
September 27, 2014
, the Company had the capacity to issue an unspecified amount of additional debt securities, common stock, preferred stock, warrants, rights and units under an automatic shelf registration statement filed with the SEC on August 13, 2013.
The Company has access to a
$350 million
senior unsecured revolving credit facility with certain institutional lenders that expires on June 27, 2019. The facility fee is at a rate per annum that varies based on the Company's index debt rating and any advances under the credit agreement will accrue interest at a base rate plus a margin based on the Company's index debt rating. The credit agreement requires the Company to comply with certain covenants, including a requirement that the Company maintain a ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of not more than
3
to
1
and a minimum interest coverage ratio (EBITDA divided by interest expense) greater than
3.5
to
1
. As of
September 27, 2014
, the Company had not borrowed any amounts from this credit facility and was in compliance with all debt covenants.
As of
September 27, 2014
, our available funds consisted of
$1,319.0 million
in cash and cash equivalents and short-term investments.
The Company believes that its existing sources of liquidity and cash expected to be generated from future operations, together with existing and available borrowing resources if needed, will be sufficient to fund operations, capital expenditures, research and development efforts, dividend payments, common stock repurchases, debt repayments and acquisitions for at least the next twelve months.
Off-Balance-Sheet Arrangements
As of
September 27, 2014
, the Company 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 28, 2014
.
The impact of inflation and changing prices on the Company’s net revenues and on operating income during the
three
months ended
September 27, 2014
and
September 28, 2013
was not material.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer (“CEO”) and our chief financial officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act") as of
September 27, 2014
. Our management, including the CEO and the CFO, has concluded that the Company’s disclosure controls and procedures were effective as of
September 27, 2014
. 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
26
There were no changes in our internal control over financial reporting during the quarter ended
September 27, 2014
that have 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 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.
27
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The information set forth above under Part I, Item 1, Note 11 “Commitment 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 28, 2014
, which is incorporated herein by reference.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 25, 2013, the Board of Directors authorized the Company to repurchase up to
$1 billion
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 superseded by this authorization.
The following table summarizes the activity related to stock repurchases for the
three
months ended
September 27, 2014
:
|
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. 29, 2014 - Jul 26, 2014
|
323
|
|
$
|
33.97
|
|
323
|
|
$
|
750,871
|
|
|||
|
Jul 27, 2014 - Aug. 23, 2014
|
589
|
|
30.34
|
|
589
|
|
733,006
|
|
|||||
|
Aug. 24, 2014 - Sep. 27, 2014
|
1,093
|
|
30.95
|
|
1,093
|
|
699,183
|
|
|||||
|
Total for the quarter
|
2,005
|
|
$
|
31.26
|
|
2,005
|
|
$
|
699,183
|
|
|||
In the fiscal quarter ended
September 27, 2014
, the Company repurchased approximately
2.0 million
shares of its common stock for approximately
$62.7 million
. As of
September 27, 2014
, the Company had remaining authorization of
$699.2 million
for future share repurchases. 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: MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION
None
28
ITEM 6: EXHIBITS
(a) Exhibits
|
3.4
|
Amended and Restated Bylaws
(1)
|
|
10.3
|
Performance Share Agreement
(2)
|
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act
|
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act
|
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
(3)
|
|
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
(3)
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 12, 2014.
|
||||
|
(2) Management contract or compensatory plan or arrangement.
|
||||
|
(3) This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
|
||||
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the
three
months ended
September 27, 2014
, (ii) Condensed Consolidated Balance Sheets at
September 27, 2014
and
June 28, 2014
, (iii) Condensed Consolidated Statement of Comprehensive Income for the
three
months ended
September 27, 2014
, (iv) Condensed Consolidated Statements of Cash Flows for the
three
months ended
September 27, 2014
and (v) Notes to Condensed Consolidated Financial Statements.
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.
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following person on behalf of the registrant and in the capacity indicated.
|
October 24, 2014
|
MAXIM INTEGRATED PRODUCTS, INC.
|
|
|
By:/s/ David A. Caron
|
||
|
David A. Caron
|
||
|
|
Vice President and Principal Accounting Officer
|
|
|
(Chief Accounting Officer and Duly Authorized Officer)
|
||
30
TABLE OF CONTENTS
Part I. Financial InformationprintItem 1. Financial Statements (unaudited)printNote 1: Basis Of PresentationprintNote 2: Recently Issued Accounting PronouncementsprintNote 3: Balance Sheet ComponentsprintNote 4: Fair Value MeasurementsprintNote 5: Financial InstrumentsprintNote 6: Stock-based CompensationprintNote 7: Earnings Per ShareprintNote 8: Segment InformationprintNote 9: Comprehensive IncomeprintNote 10: Income TaxesprintNote 11: Commitments and ContingenciesprintNote 12: Common Stock RepurchasesprintNote 13: AcquisitionsprintNote 14: Goodwill and Intangible AssetsprintNote 15: Impairment Of Long-lived AssetsprintNote 16: Subsequent EventprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3: Quantitative and Qualitative Disclosures About Market RiskprintItem 4: Controls and ProceduresprintPart II. Other InformationprintItem 1: Legal ProceedingsprintItem 1A: Risk FactorsprintItem 2: Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 3: Defaults Upon Senior SecuritiesprintItem 4: Mine Safety DisclosuresprintItem 5: Other InformationprintItem 6: Exhibitsprint