UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Amendment No. 1)
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 27, 202026, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File
Number 001-34192
logo10k2016a06.jpg
MAXIM INTEGRATED PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
 
94-2896096
(State or other jurisdiction of

incorporation or organization)
 
(I.R.S. Employer

Identification No.)

160 Rio Robles
San Jose,, California95134
(Address of Principal Executive Offices) (Zip Code)
Registrant's
Registrant’s telephone number, including area code:(408)
(408) 601-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, $0.001 par value
MXIM
MXIM
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes☒    No  ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2
of the Exchange Act.:
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. ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    Yes☒    No  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒
The aggregate market value of the voting stock held by
non-affiliates
of the Registrant based upon the closing price of the common stock on December 28, 201926, 2020 as reported by The NASDAQ Global Select Market was $11,337,494,384.$15,055,411,611. Shares of voting stock held by executive officers, directors, and holders of more than 5% of the outstanding voting stock have been excluded from this calculation because such persons may be deemed to be affiliates. Exclusion of such shares should not be construed to indicate that any of such persons possesses the power, direct or indirect, to control the Registrant, or that any such person is controlled by or under common control with the Registrant.
Number of shares outstanding of the Registrant'sRegistrant’s Common Stock, $0.001 par value, as of August 10, 2020: 266,695,209.25, 2021: 268,910,713.
Documents Incorporated By Reference:
Portions of the Registrant's Proxy Statement for its 2020 Annual Meeting of Stockholders, to be filed subsequently, are incorporated by reference into Part III of this report.



None.


MAXIM INTEGRATED PRODUCTS, INC.

INDEX

Forward-Looking Statements
3
Part I
4
Item 1.
Business
4
Item 1A.
Risk Factors
10
Item 1B.
Unresolved Staff Comments
22
Item 2.
Properties
22
Item 3.
Legal Proceedings
22
Item 4.
Mine Safety Disclosures
22
Part II
23
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
23
Item 6.
Selected Financial Data
24
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
26
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
32
Item 8.
Financial Statements and Supplementary Data
33
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
33
Item 9A.
Controls and Procedures
33
Item 9B.
Other Information
35
Part III
35
Item 10.
Directors, Executive Officers, and Corporate Governance
35
Item 11.
Executive Compensation
36
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
36
Item 13.
Certain Relationships and Related Transactions, and Director Independence
36
Item 14.
Principal Accountant Fees and Services
36
Part IV
37
Item 15.
Exhibits and Financial Statement Schedules
37
Item 16.
Form 10-K Summary
80
Signatures
81

FORM
10-K/A
(AMENDMENT NO. 1)

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in Part I, Item I - Business, Part I, Item 1A - Risk Factors and Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. These statements relate to, among other things, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, asset dispositions, product development and R&D efforts, potential growth opportunities, manufacturing plans, pending litigation, effective tax rates and tax reserves for uncertain tax positions, 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, and are indicated by words or phrases such as “anticipate,” “expect,” “outlook,” “foresee,” “forecast,” “estimate,” “believe,” “should,” “could,” “intend,” “potential,” “will,” “may,” “might,” “plan,” “seek,” “predict,” “project” and variations of such words and similar words or expressions and the negatives of those terms. These statements involve known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. For a discussion of some of the factors that could cause actual results to differ materially from our forward-looking statements, see the discussion on “Risk Factors” that appears in Part I, Item 1A of this Annual Report and other risks and uncertainties detailed in this and our other reports and filings with the Securities and Exchange Commission (“SEC”). Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our beliefs and assumptions only as of the date of this Annual Report. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so except as required by applicable laws.




Explanatory Note

PART I


ITEM 1. BUSINESS

Overview

Maxim Integrated Products, Inc. (“Maxim Integrated” or the “Company” and also referred) is filing this Amendment No. 1 on Form
10-K/A
(the “Amendment”) 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, its Annual Report on Form
10-K
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. The major end-markets in which our products are sold are the Automotive, Communications & Data Center, Consumer, and Industrial markets.

We are a Delaware corporation originally incorporated in California in 1983. The mailing address for our headquarters is 160 Rio Robles, San Jose, California 95134, and our telephone number is (408) 601-1000. Additional information about us is available on our website at www.maximintegrated.com. The contents of our website are not incorporated into this Annual Report.

We have 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 2020 and 2019 were 52-week fiscal years. Fiscal year 2018ended June 26, 2021 (the “Form
10-K”),
which was a 53-week fiscal year. Fiscal year 2021 will be a 52-week fiscal year.

We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and any amendments to those reports or statementsoriginally filed or furnished pursuant to the Exchange Act, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The SEC also maintains an internet site at www.sec.gov that contains such reports and statements filed electronically with the SEC on August 20, 2021. We are filing the Amendment solely to set forth information required by Items 10, 11, 12, 13, and 14 of Part III of Form
10-K
as we will not file our definitive proxy statement within 120 days of the Company. We also useend of our Investor Relations website at investor.maximintegrated.comfiscal year ended June 26, 2021. This Amendment amends and restates in its entirely Items 10, 11, 12, 13, and 14 of Part III. In addition, new certifications of our principal executive officer and principal financial officer are listed in Item 15 and attached as a routine channel for distributionexhibits, each as of other important information, such as news releases, analyst presentations and financial information. We assume no obligation to update or revise any forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, unless we are required to do so by applicable laws. A copythe filing date of this Annual Report is available without charge and can be accessed at our website at investor.maximintegrated.com.

Impact of COVID-19

The ongoing novel coronavirus ("COVID-19") pandemic andAmendment. This Amendment does not change the mitigation efforts by governments to attempt to control its spread are impacting and will likely continue to impact our operations, customers, and suppliers for an indefinite period of time. While we have implemented safeguards and procedures to counter the impact of the COVID-19 pandemic, the full extent to which the COVID-19 pandemic has and will directlypreviously reported financial statements or indirectly impact us, including our business, financial condition, and results of operations, will depend on future developments that are highly uncertain and cannot be accurately predicted, including the further mitigation efforts taken to contain itany other disclosure contained in Part I or treat its impact and the economic impact on local, regional, national and international markets. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities or that we determine arePart II in the best interests of our employees, customers, suppliers, and stockholders.Form
10-K.

For additional information regarding the impact of COVID-19 on the Company’s business, results of operations, financial condition and other associated risks and uncertainties see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part I, Item 1A - Risk Factors in this Annual Report.

Recent Developments

On July 13, 2020,August 26, 2021, the Company completed its previously 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”)combination with Analog Devices, Inc., a Massachusetts corporation (“Analog Devices” or "ADI"). Pursuant to the Agreement and Plan of Merger, dated as of July 12, 2020 (the “Merger Agreement”), by and among the Company, Analog Devices and Magneto Corp., a wholly-ownedDelaware corporation and a wholly owned subsidiary of Analog Devices (“AcquisitionMerger Sub”), under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, AcquisitionMerger Sub will mergewas merged with and into the Company and(the “Merger”), with the Company will survivesurviving the merger asMerger and becoming a wholly-ownedwholly owned subsidiary of Analog Devices (the “ADI Merger”). Under the terms of the ADI Merger Agreement, atDevices.
At the effective time of the ADI Merger (the “Effective Time”), pursuant to the Merger Agreement, 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 directly by Analog Devices or AcquisitionMerger Sub) will bewas converted into the right to receive 0.6300 (the “Exchange Ratio”) of a fully paid and
non-assessable
share of common stock, par value $0.16 2/3 per share, of Analog Devices (with(the “Analog Devices Common Stock”), and, if applicable, cash being paid (without interest and less applicable withholding taxes) in lieu of fractional shares, subject to any fractionapplicable tax withholding. In addition, at the Effective Time, (i) all Company restricted stock units and Company restricted shares (excluding any Company restricted stock units and Company restricted shares that by their terms become vested and settled upon the Effective Time) outstanding as of a shareimmediately prior to the Effective Time were automatically converted into restricted stock units or restricted shares, as applicable, denominated in shares of Analog Devices common stock).Common Stock based on the Exchange Ratio and (ii) all Company performance-based market stock units (“Company MSUs”) outstanding as of immediately prior to the Effective Time (other than any Company MSUs that by their terms vested and settled immediately prior to the Effective Time) were automatically converted into time-based restricted stock unit awards denominated in shares of Analog Devices shareholdersCommon Stock based on (x) the number of shares of Company Common Stock subject to each Company MSU after giving effect to any applicable provisions in the award agreement governing the Company MSU with respect to a “change in control” and (y) the Exchange Ratio. Other than the foregoing adjustments, the awards governing such converted restricted stock units or restricted shares, as applicable, will continuegenerally remain subject to own their existing Analog Devices shares,the same vesting and other terms and conditions that applied to the combined company will be named Analog Devices.

The ADI Merger has been approved by bothawards immediately prior to the Effective Time (including the terms and conditions of the Company’s Boardapplicable change in control plans).
2
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Part IV
Item 15.
Exhibits, Financial Statement Schedules
PART III
Item 10. Directors, Executive Officers 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. For additional information on the ADI Merger Agreement and the ADI Merger, please refer to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 13, 2020. 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.Corporate Governance

For additional information regarding the ADI Merger, including associated risks and uncertainties, see Part I, Item 1A - Risk Factors, Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 20 “Subsequent Events” in in the Notes to Consolidated Financial Statements in Part IV, Item 15(a) this Annual Report.

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.

At the beginning of fiscal year 2020, we combined our Computing Major End-Market category with our Communications and Data Center Major End-Market category. Our former Computing Major End-Market category focused on Desktop Computers, Notebook Computers, and Peripherals and Other Computer markets.



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

MAJOR END-MARKETMARKET
AUTOMOTIVEInfotainment
Powertrain
Body Electronics
Safety and Security
COMMUNICATIONS & DATA CENTERBase Stations
Data Center
Data Storage
Desktop Computers
Network & Datacom
Notebook Computers
Peripherals & Other Computer
Server
Telecom
Other Communications
CONSUMERSmartphones
Digital Cameras
Handheld Computers
Home Entertainment & Appliances
Wearables
Other Consumer
INDUSTRIALAutomatic Test Equipment
Control & Automation
Electrical Instrumentation
Financial Terminals
Medical
Security
USB Extension
Other Industrial

Product Quality

We employ a system addressing quality and reliability of our products from initial design through wafer fabrication, assembly, testing and final shipment. We have received ISO 9001, IATF16949 and ISO 14001 certifications for all wafer fabrication, assembly, final test and shipping facilities. Based on industry standard requirements, we conduct reliability stress testing on the products we manufacture and sell. Through this testing, we can detect and accelerate the presence of defects that may arise over the life of a product.

Manufacturing

We primarily utilize third party foundries as well as our own wafer fabrication facility for the production of our wafers. The broad range of products demanded by the analog integrated circuit market requires multiple manufacturing process technologies. As a


result, many different process technologies are currently used for wafer fabrication of our products. The majority of processed wafers are also subject to parametric and functional testing at either our facilities or third-party vendors.
In fiscal year 2007, we entered into a supply agreement with Seiko Epson Corporation (“Epson”). In fiscal year 2010, we entered into a supply agreement with Powerchip Semiconductor Manufacturing Corp. (“Powerchip”) to provide 300mm wafer capacity. In fiscal year 2014, we entered into a supply agreement with UMC Corporation (“UMC”). In fiscal year 2016, we entered into a supply agreement with TowerJazz Texas, Inc. (formerly known as TJ Texas, Inc.) ("TowerJazz"), an indirect wholly-owned subsidiary of Tower Semiconductor Ltd. In fiscal year 2018, we ramped production at our most recently added partner foundry, Mie Fujitsu Semiconductor Limited (“MIFS”). MIFS was a joint venture between Fujitsu Semiconductor Ltd. and UMC that was wholly acquired by UMC and renamed United Semiconductor Japan Co., Ltd. (“USJC”) in 2019. Epson and USJC in Japan and UMC and Powerchip in Taiwan manufacture products for us under rights and licenses using our proprietary technology. In fiscal years 2020, 2019 and 2018, wafers manufactured by our partner foundries and merchant foundries (e.g., Taiwan Semiconductor Manufacturing Company Limited) represented 70%, 65% and 73% respectively, of our total wafer manufacturing.

Once wafer manufacturing has been completed, wafers are sorted in order to determine which integrated circuits on each wafer are functional and which are defective. We currently perform the majority of wafer sorting, final testing and shipping activities at two company-owned facilities, located in Cavite, the Philippines and Chonburi Province, Thailand, although we also utilize independent subcontractors for some wafer sorting.

We process wafers for products that utilize chip scale packaging (“CSP”), also known as wafer level packaging (“WLP”). CSP, or WLP, enables integrated circuits to be attached directly to a printed circuit board without the use of a traditional plastic package. Currently, all WLP processes are done externally.
Integrated circuit assembly is performed by foreign assembly subcontractors, located in China, Japan, Malaysia, the Philippines, Taiwan, Thailand, Singapore, and South Korea, where wafers are separated into individual integrated circuits and assembled into a variety of packages.

After assembly has been completed, a majority of the assembled products are shipped to our facilities located in Cavite, the Philippines or Chonburi Province, Thailand, where the packaged integrated circuits undergo final testing and preparation for customer shipment. In addition, we also utilize independent subcontractors to perform final testing.

The majority of our finished products ship directly from either Cavite, the Philippines or Chonburi Province, Thailand to customers worldwide or to other Company locations for sale to end-customers or distributors.

Customers, Sales and Marketing

We market our products worldwide through a direct-sales and applications organization and through our own and other unaffiliated distribution channels to a broad range of customers in diverse industries. Our products typically require a sophisticated technical sales and marketing effort. Our sales organization is divided into domestic and international regions. Distributors and direct customers generally buy on an individual purchase order basis, rather than pursuant to long-term agreements.

Certain distributors have agreements with us which allow for certain sales price rebates or price adjustments on certain inventory if we change the price of those products. Certain distributor agreements also permit distributors to exchange a portion of certain purchases on a periodic basis. As is customary in the semiconductor industry, our distributors may also market other products that compete with our products.

We derived approximately 52% of our fiscal year 2020 revenue from sales made through distributors which includes distribution sales to Samsung and catalog distributors. Our primary distributor is Avnet Electronics ("Avnet") which accounted for 22%, 22% and 25% of our revenues in fiscal years 2020, 2019 and 2018, respectively. Avnet, like our other distributors, is not an end customer, but rather serves as a channel of sale to many end users of our products. Sales to Samsung, our largest single end customer (through direct sales and distributors), accounted for approximately 10% of net revenues in fiscal years 2019 and 2018. No single customer (other than Avnet and Samsung) nor single product accounted for 10% or more of net revenues in fiscal years 2020, 2019 and 2018. Based on customers’ ship-to locations, international sales accounted for approximately 89%, 89% and 88% of our net revenues in fiscal years 2020, 2019 and 2018, respectively. See Note 12: “Segment Information” in the Notes to Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report.



Seasonality

Our revenue is generally influenced on a quarterly basis by customer demand patterns and new product introductions. A large number of our products have been incorporated into consumer electronic products, which are subject to seasonality and fluctuations in demand.

Foreign Operations

We conduct business in numerous countries outside of the United States (“U.S.”). Our international business is subject to numerous risks, including fluctuations in foreign currency exchange rates and controls, import and export controls, and other laws, policies, and regulations of foreign governments. Refer to our discussion of risks related to our foreign operations as included in Item 1A, Risk Factors and our discussion of foreign income included in Item 7 under “Results of Operations” included in this Annual Report. Refer to net revenues from unaffiliated customers by geographic region included in Note 12: “Segment Information” in the Notes to Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report.
Backlog

On June 27, 2020 and June 29, 2019, our current quarter backlog was approximately $496.4 million and $391.3 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.

Research and Development

We believe that research and development is critical to our future competitiveness. Objectives for the research and development function include:

new product definition and development of differentiated products;
design of products with performance differentiation that achieve high manufacturing yield and reliability;
development of, and access to, manufacturing processes and advanced packaging;
development of hardware, software, and algorithms to support the acceptance and design-in of our products in the end customer's system; and
development of high-integration products across multiple end markets.

Our research and development plans require engineering talent and tools for product definition, electronic design automation (“EDA”), circuit design, process technologies, test development, test technology, packaging development, software development and applications support. Research and development expenses were $440.2 million, $435.2 million and $450.9 million in fiscal years 2020, 2019 and 2018, respectively.See “Research and Development” under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for more information.

Competition

The linear and mixed-signal analog integrated circuit industry is intensely competitive, and virtually all major semiconductor companies presently compete with, or conceivably could compete with, some portion of our business.

We believe the principal elements of competition include:
technical innovation;
service and support;
time to market;
business, operational, marketing, and financial strategy;
differentiated product performance and features;
quality and reliability;
product pricing and delivery capabilities;
customized design and applications;
business relationship with customers;
experience, skill and productivity of employees and management; and
manufacturing competence and inventory management.



Our principal competitors include, but are not limited to, Analog Devices, Inc., Cirrus Logic, Inc., Monolithic Power Systems, Inc., NXP Semiconductors N.V., Semtech Corporation, Silicon Laboratories, and Texas Instruments Inc. We expect increased competition in the future from other emerging and established companies as well as through consolidation of our competitors within the semiconductor industry.

Patents, Licenses and Other Intellectual Property Rights

We rely upon both know-how and patents to develop and maintain our competitive position.

It is our policy to seek patent protection for significant inventions that may be patented, though we may elect, in certain cases, not to seek patent protection even for significant inventions if other protection, such as maintaining the invention as a trade secret, is considered by us to be more advantageous. We hold a number of patents worldwide with expiration dates ranging from calendar year 2020 to 2039. We have also registered several of our trademarks and copyrights in the United States and other countries.

Employees

As of June 27, 2020, we employed 7,115 persons.

Environmental Regulations

Our compliance with foreign, federal, state, and local laws and regulations that have been enacted to regulate the environment has not had a material adverse effect on our capital expenditures, earnings, or competitive or financial position.

Executive Officers

For information regarding our current executive officers, see Part III, Item 10 of this Annual Report.




ITEM 1A. RISK FACTORS

The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business.

The announcement and pending agreement to merge with Analog Devices may adversely affect our business, financial condition, results of operations, and stock price.

Uncertainty relating to the pending ADI Merger could have an adverse effect on our employees, customers, partners, and other third parties that may materially disrupt key business activities and may adversely impact our financial condition, results of operations, and stock price. Moreover, we are subject to various additional risks in connection with the announcement and pendency of the ADI Merger, including:

the fact that the conditions to the closing of the ADI Merger may not be satisfied or waived, including that the required approval of Maxim stockholders or ADI shareholders may not be obtained;
uncertainty relating to the pending Merger may cause current and prospective customers to consider alternatives, and potentially change suppliers;
potential adverse effects on our ability to attract, recruit, retain, and motivate current and prospective employees who may be uncertain about their future roles following the ADI Merger;
the significant diversion of internal resources and key employees’ and management’s attention due to the pending ADI Merger;
legal proceedings that may arise challenging the ADI Merger and the related transactions contemplated by the ADI Merger Agreement may require us to incur significant legal fees and expenses, and may result in unfavorable outcomes that could delay or prevent the completion of the Merger;
the restrictions imposed on our business and operations under the ADI Merger Agreement may prevent us from pursuing opportunities without Analog Devices’ approval or taking other actions that we might have undertaken in the absence of the proposed ADI Merger, such as dividend payments, stock repurchases, and restructurings, which may interfere with our ability to effectively respond to competitive pressures, execute business strategies, and meet financial goals;
the ADI Merger Agreement contains customary provisions that restrict our ability to pursue alternative transaction to the ADI Merger and that may discourage potential competing acquirers from considering or proposing an alternative transaction that may provide a higher value to our stockholders; and
the required regulatory approvals from governmental entities (U.S. and non-U.S.) may delay the completion of the ADI Merger or result in the imposition of conditions that would allow Analog Devices to terminate the ADI Merger Agreement in certain circumstances and be obligated to pay us the termination fee specified in the ADI Merger Agreement.

Any failure of the pending ADI Merger to be completed may adversely affect our business, financial condition, results of operations, and stock price.

Each of our and Analog Devices’ obligations to complete the ADI Merger is subject to a number of conditions specified in the ADI Merger Agreement, including, among others: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock; (ii) the approval by Analog Devices shareholders of the issuance of ADI common stock to Maxim Integrated stockholders in the ADI Merger; (iii) the absence of certain laws, orders, judgments, and injunctions that restrain, enjoin, or otherwise prohibit the completion of the Merger; (iv) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of specified non-U.S. regulatory approvals; and (v) subject to certain materiality standards, the accuracy of representations and warranties with respect to the Company and Analog Devices and compliance in all material respects by the Company and Analog Devices with their respective covenants contained in the ADI Merger Agreement. There can be no assurance that these conditions to the completion of the Merger will be satisfied within the timeframe specified in the Merger Agreement or at all.

Regulatory and governmental authorities may impose conditions on the granting of the required regulatory approvals, including divestitures of certain assets or businesses, which may result in extended negotiations among these entities, Analog Devices and us, which may delay the completion of the ADI Merger and increase the risk that the ADI Merger may not be completed.

If the ADI Merger is not completed, our stock price could decline to the extent that our current share price reflects an assumption that the ADI Merger will be completed. Furthermore, if the ADI Merger is not completed, we may suffer other consequences that could adversely affect our business, financial condition, results of operations, and stock price, including the following:



we have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs in connection with the ADI Merger, and many of these fees and costs are payable by us regardless of whether the ADI Merger is completed;
we could be required to pay a termination fee of up to $725 million to Analog Devices under circumstances as described in the ADI Merger Agreement, including a circumstance in which our Board of Directors changes its recommendation concerning the approval of the ADI Merger or if the Company were to receive an alternative proposal;
the failure to complete the ADI Merger may result in adverse publicity, negatively impact the reputation of the Company in the capital markets and investment community, and result in critical responses from our customers, partners, and other third parties;
legal proceedings may be instituted against us, our directors and others relating to the ADI Merger and related transactions;
any disruptions to our business resulting from the announcement and pendency of the ADI Merger, including any adverse changes to our relationships with customers, vendors, and employees, may continue or intensify in the event the ADI Merger is not completed;
we may experience employee departures; and
we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures.


The ongoing novel coronavirus ("COVID-19") pandemic and the mitigation efforts by governments to attempt to control its spread have negatively impacted and could have a material adverse effect on our business, financial condition, and results of operations.

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, shelter-in-place orders, quarantines, and business limitations and shutdowns. The COVID-19 pandemic and resulting mitigation efforts have impacted and will likely continue to impact our business, results of operations, and financial condition for an indefinite period of time. While we are unable to accurately predict the full extent to which the COVID-19 pandemic and the mitigation efforts by governments to attempt to control its spread will have on our results from operations and financial condition due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our customers and suppliers for an indefinite period of time.

We operate our business in worldwide locations. The potential risks and effects of this pandemic and economic crisis, including potential global or regional recessions or depressions, that could have a material adverse effect on our business, financial condition, and results of operations include, but not limited to:

Adverse impact on our customers and supply channels;
Decrease in product demand and pricing as a result of this pandemic and unfavorable economic and market conditions;
Disruption in our global operations, including our internal and compliance processes;
Restrictions on our manufacturing, support operations or workforce, or similar limitations for our customers, vendors, and suppliers, could limit our ability to meet customer demand;
Potential increased credit risk if customers, distributors, and resellers are unable to pay us, or must delay paying their obligations to us;
Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures could result in delays;
Impact on our workforce/employees due to the ease with which the virus spreads; and
Potential failure of our computer systems or communication systems as well as increased cyber-related risks due to our employees working from home.

Any or all of these items may occur, which individually or in the aggregate, may have a material adverse effect on our business, financial condition, and results of operations. These risks could accelerate or intensify depending on the severity and length of the pandemic. The COVID-19 pandemic has in the short-term, and may in the long-term, adversely impact the global economy, potentially leading to an economic downturn and increased unemployment. Moreover, even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business due to its global economic impact.

The COVID-19 pandemic, and the various responses to it, may also have the effect of heightening many of the other risks disclosed herein.



The sale of our products and our results of operations are dependent upon demand from the end markets of our customers, which is cyclical.

Our products are sold in the following major end-markets: (i) Automotive, (ii) Communications & Data Center, (iii) Consumer, and (iv) Industrial. The demand for our products is subject to the strength of these four major end-markets that we serve and to some extent the overall economic climate. We often experience decreases and increases in demand for our products primarily due to the end-market demand of our customers. Our business and results of operations may be adversely affected if demand for our products decreases or if we are unable to meet an increase in demand without significantly increasing the lead-time for the delivery of our products. The semiconductor market historically has been cyclical with periods of increased demand and rapid growth followed by periods of oversupply and subsequent contraction and subject to significant and often rapid increases and decreases in product demand. As a result, changes could have adverse effects on our results of operation.

Our operating results may be adversely affected by unfavorable economic and market conditions.

The global economic environment could subject us to increased credit risk should customers be unable to pay us, or delay paying us, for previously purchased products. Accordingly, reserves for doubtful accounts and write-offs of accounts receivable may increase. In addition, weakness in the market for end users of our products could harm the cash flow of certain of our distributors and resellers who could then delay paying their obligations to us or experience other financial difficulties. This would further increase our credit risk exposure and potentially cause delays in our recognition of revenue on sales to these customers.

If economic or market conditions deteriorate globally, in the United States or in other key markets, our business, operating results, and financial condition may be materially and adversely affected.

Incorrect forecasts, reductions, cancellations or delays in orders for our products and volatility in customer demand could adversely affect our results of operations.

As is customary in the semiconductor industry, customer orders may be canceled in most cases without penalty to the customers. Some customers place orders that require us to manufacture products and have them available for shipment, even though the customer may be unwilling to make a binding commitment to purchase all, or even any, of the products. In other cases, we manufacture products based on forecasts of customer demands. As a result, we may incur inventory and manufacturing costs in advance of anticipated sales and are subject to the risk of cancellations of orders, potentially leading to an initial inflation of backlog followed by a sharp reduction. Because of the possibility of order cancellation, backlog should not be used as a measure of future revenues. Furthermore, canceled or unrealized orders, especially for products meeting unique customer requirements, may also result in an inventory of unsaleable products, causing potential inventory write-downs, some of which could be substantial and could have a material adverse effect on our gross margins and results of operations.

We may experience difficulties implementing our new global execution system, which may adversely affect our ability to effectively supply products to our customers.

We have been implementing a new global execution system (“GES”) as part of our efforts to integrate inventory movement with our financial reporting system. This implementation is a major undertaking and requires significant employee time and financial resources. While we have invested significant resources in planning and project management, implementation issues may arise. For example, we may experience staff turnover, which may delay the implementation of GES. Additionally, unforeseen issues may arise, which could disrupt the implementation of GES. Any disruptions, delays or deficiencies in the design and the implementation or operation of GES could disrupt or reduce our supply chain execution and operational efficiency which may lead to our inability to effectively supply products to our customers and may impact the accuracy of our financial reporting. Our inability to successfully manage the implementation of GES could materially adversely affect our business, results of operations and financial condition.

Our global operations subject us to risks associated with changes in trade policies, including international trade disputes, and domestic or international political, social, economic or other conditions.

We are subject to the political and legal risks inherent in international operations. Exposure to political instabilities, different business policies and varying legal or regulatory standards, including, but not limited to, international trade disputes, could result in the imposition of tariffs, sanctions, restrictions on the U.S. import and export controls and other trade restrictions or barriers, which could negatively impact economic activity and lead to a contraction of customer demand. For example, in 2018, the U.S. and China began to impose partial tariffs on each other's products, and the trade tension between the two countries has escalated in 2019 through 2020. In addition, the U.S. has and may continue to focus on the business practices of specific foreign companies,


including large technology companies based in China, which may result in future U.S. government actions impacting our ability to do business with such companies. The possibility of a deteriorating trade relationship may put us at a disadvantage in competition with non-U.S. companies and lead to a decreased customer demand for our products in the long-term due to the growing economic risks and geopolitical uncertainty between the U.S. and China. International trade disputes could also result in various forms of protectionist trade legislation and other protectionist measures that could limit the Company’s ability to operate its business and have a negative effect on end-market demand, which could have a material adverse impact on our results of operations and financial condition. Additionally, political and economic changes or volatility, political unrest, civil strife, public corruption and other economic or political uncertainties in certain countries, such as the Philippines, could interrupt and negatively affect our business operations. We have been impacted by these problems in the past, but none have materially affected our results of operations. Problems in the future or not-yet-materialized consequences of past problems could affect deliveries of our products to our customers, possibly resulting in business interruptions, substantially delayed or lost sales and/or increased expenses that cannot be passed on to our customers, any of which could ultimately have a material adverse effect on our business.

Our manufacturing operations may be interrupted or suffer yield problems.

The manufacture and design of integrated circuits is highly complex. We may experience a disruption in factory operations, manufacturing problems in achieving acceptable yields, or product delivery delays in the future as a result of, among other things, outdated infrastructure, upgrading or expanding existing facilities, equipment malfunctioning, construction delays, changing our process technologies, capacity constraints, or new technology qualification delays, particularly in our internal fabrication facilities. For example, our internal fabrication facility at Beaverton, Oregon requires additional investment to, among other things, upgrade its infrastructure and manufacturing equipment. In connection with the upgrading of our facilities, we may experience a disruption in factory operations, which could result in damages to the facilities and stoppages to the operations of the facilities. Additionally, our internal fabrication facilities may be harmed or rendered inoperable due to damages resulting from fire, natural disaster, unavailability of electric power or other causes, which may render it difficult or impossible for us to manufacture our products for some period of time.

If our internal fabrication facilities become unavailable to us, it would be time consuming, difficult, and costly to arrange for new manufacturing facilities to supply our products given the nature of our products. In addition, our third parties' manufacturing facilities may not be available to us due to natural or man-made disasters, labor unrest, political conditions, social unrest, civil strife, or other causes. To the extent we experience disruptions at our wafer fabrication facilities, or we do not achieve acceptable manufacturing yields, our results of operations could be adversely affected.

Our operating results may be adversely affected by our inability to timely develop new products through our research and development efforts. We may be unsuccessful in developing and selling new products necessary to maintain or expand our business.

The marketplace for our products is constantly changing and we are required to make substantial ongoing investments in our research and development. The semiconductor industry is characterized by rapid technological change, variations in manufacturing efficiencies of new products, and significant expenditures for capital equipment and product development. New product introductions are a critical factor for maintaining or increasing future revenue growth and sustained or increased profitability. However, they can present significant business challenges because product development commitments and expenditures must be made well in advance of the related revenues. The success of a new product depends on a variety of factors including accurate forecasts of long-term market demand and future technological developments, accurate anticipation of competitors' actions and offerings, timely and efficient completion of process design and development, timely and efficient implementation of manufacturing and assembly processes, product performance, quality and reliability of the product, and effective marketing, revenue and service.

The loss of, or substantial reduction in sales to, any of our large customers could have a material adverse effect on our business, financial condition, and results of operations.

A reduction in demand or loss of one or more of our large customers may adversely affect our business. The delay, significant reduction in, or loss of, orders from any one or more of our large customers (including curtailments of purchases due to a change in the design, manufacturing or sourcing policies or practices of these customers or the timing of customer inventory adjustments) or demands of price concessions from any one or more of our large customers could have a material adverse effect on our net revenues and results of operations.

Our critical information systems are subject to cyber-attacks, data breaches, interruptions, and failures.



We rely on several information technology systems to provide products and services, process orders, manage inventory, process shipments to customers, keep financial, employee, and other records, and operate other critical functions. Maintaining the security of our information technology systems is important to our business and reputation. These information technology systems are subject to damage or interruption from a number of potential sources. Security breaches, including cyber-attacks, phishing attacks, denial-of-service attacks, or attempts to misappropriate or compromise confidential or proprietary information or sabotage enterprise information technology systems, are becoming increasingly frequent and more sophisticated. We currently have developed, and are in the process of developing more systems and procedures that include, among other things, ongoing internal risk assessments to identify vulnerabilities, an internal group dedicated to reviewing cybersecurity threats, and the adoption of an information security policy. Due to the evolving threat landscape, cyber-based attacks will continue and we may experience them going forward, potentially with more frequency. We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our intellectual property, technology, operations, customer data and proprietary information from potential cyber-attacks. However, although we take steps to detect and investigate security incidents and implement protections to prevent their recurrence, in some cases, we might be unable to anticipate or prevent all attacks because the techniques used to obtain unauthorized access to or sabotage networks and systems are constantly evolving. There can be no assurance that any future system improvements will be effective in preventing attacks or limiting the damage from any future cyber-attacks or disruptions.

Despite our efforts to mitigate risks associated with cybersecurity events, our information technology systems may still be susceptible to adaptive persistent threats, catastrophic cybersecurity attacks, damage, disruptions, or shutdowns due to power outages, hardware failures, computer malware and viruses, telecommunication failures, user errors, or other events. Risks associated with these threats include, but are not limited to, loss of intellectual property, impairment of our ability to conduct our operations, disruption of our customers’ operations, loss or damage to our customer data delivery systems, and increased costs to prevent, respond to or mitigate catastrophic cybersecurity events. A prolonged systemic disruption in the information technology systems could result in the loss of sales and customers and significant consequential costs, which could adversely affect our business. In addition, cybersecurity breaches of our information technology systems could result in the misappropriation or unauthorized disclosure of sensitive or confidential information belonging to us or to our customers, partners, suppliers, or employees. Our business and reputation could be harmed, and we could be subject to legal and regulatory claims which could result in significant financial or reputational damage.

Our dependence on subcontractors for assembly, test, freight, wafer fabrication and logistic services and certain manufacturing services may cause delays beyond our control in delivering products to our customers.

We rely on subcontractors located in various parts of the world for assembly and CSP packaging services, freight and logistic services, wafer fabrication, and sorting and testing services. For example, in connection with the sale of our semiconductor wafer fabrication facility in San Antonio, Texas to TowerJazz Texas, Inc. (formerly known as TJ Texas, Inc.) ("TowerJazz"), an indirect wholly-owned subsidiary of Tower Semiconductor Ltd. (“Tower”), we entered into a long-term supply agreement with TowerJazz, pursuant to which we procure from TowerJazz certain quantities of silicon wafers upon which integrated circuits are made that are designed by us. None of the subcontractors we currently use is affiliated with us. Reliability problems experienced by our subcontractors or the inability to promptly replace any subcontractor could cause serious problems in delivery and quality resulting in potential product liability to us. Such problems could impair our ability to meet our revenue plan in the fiscal year period impacted by the disruption. Failure to meet the revenue plan may materially adversely impact our results of operations.

Any disruptions in our sort, assembly, test, freight, and logistic operations or in the operations of our subcontractors, including, but not limited to, the inability or unwillingness of any of our subcontractors to produce or timely deliver adequate supplies of processed wafers, integrated circuit packages, or tested products conforming to our quality standards, or other required products or services could damage our reputation, relationships, and goodwill with customers. Furthermore, finding alternate sources of supply or initiating internal wafer processing for these products may not be economically feasible.

Our financial results may be adversely affected by increased tax rates and exposure to additional tax liabilities.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service released temporary regulations under Internal Revenue Code (“IRC”) Section 245A (“Section 245A”), as enacted by the Tax Cuts and Jobs Act, and IRC Section 954(c)(6) (the “Temporary Regulations”), which apply 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. The Company has analyzed the relevant Temporary Regulations and concluded that they were not validly issued. Therefore, the Company has not accounted for the effects of the retroactive Temporary Regulations in its results of operations for fiscal year 2019 or fiscal year 2020. 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 the validity of regulations as well as a potential litigation process, there can be no assurance that the relevant Temporary Regulations will be invalidated, modified or 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 our results of operations and financial condition.

We are subject to taxation in various countries and jurisdictions. Significant judgment is required to determine tax liabilities on a worldwide basis. Any significant increase in our future effective tax rates could reduce net income for future periods and may have a material adverse impact on our results of operations. A number of factors may increase our future effective tax rates, including, but not limited to:

the jurisdictions in which profits are determined to be earned and taxed;
changes in our global structure that involve changes to investment in technology outside of the United States;
the resolution of issues arising from tax audits with various tax authorities,
changes in the valuation of our deferred tax assets and liabilities;
adjustments to estimated taxes upon finalization of various tax returns;
increases in expenses not deductible for tax purposes, including impairments of goodwill in connection with acquisitions;
changes in available tax credits;
changes in share-based compensation;
changes in tax laws or the interpretation of such tax laws, including laws or rules enacted by countries in response to the Base Erosion and Profit Shifting (“BEPS”) project conducted by the Organization for Economic Co-operation and Development (“OECD”); and
changes in generally accepted accounting principles.

Our independent distributors and sales representatives may underperform relative to our expectations, terminate their relationship with us or fail to make payments on outstanding accounts receivable to us, which would adversely affect our financial results.

A portion of our sales is realized through independent electronics distributors that are not under our direct control. These independent sales organizations generally represent product lines offered by several companies and thus could underperform for various reasons, including as a result of reducing their sales efforts applied to our products, or terminating their distribution relationship with us. In fiscal 2020, 52% of our revenues were generated from distributors, the largest of which was Avnet, our primary world-wide distributor, which accounted for 22% of our revenues. We require certain foreign distributors to provide a letter of credit to us in an amount up to the credit limit set for accounts receivable from such foreign distributors. The letter of credit provides for collection on accounts receivable from the foreign distributor should the foreign distributor default on their accounts receivable to us. Where credit limits have been established above the amount of the letter of credit, we are exposed for the difference. We do not require letters of credit from any of our domestic distributors and are not contractually protected against accounts receivable default or bankruptcy by these distributors. The inability to collect open accounts receivable could adversely affect our results of operations and financial condition. Termination of a significant distributor, whether at our or the distributor's initiative, or the general underperformance of a significant distributor could be disruptive and harmful to our current business. Additional factors that could adversely affect us include the difficulties of managing independent sales organizations due to any matter involving fraud or dishonesty on the part of the independent distributors and sales representatives. It is often difficult to anticipate or immediately detect such misconduct of an independent third party.

We may be liable for additional production costs and lost revenues to certain customers with whom we have entered into customer supply agreements if we are unable to meet certain product quantity and quality requirements.

We enter into contracts with certain customers whereby we commit to supply quantities of specified parts at a predetermined scheduled delivery date. The number of such arrangements continues to increase as this practice becomes more commonplace. Should we be unable to supply the customer with the specific part at the quantity and product quality desired and on the scheduled delivery date, the customer may incur additional production costs. In addition, the customer may lose revenues due to a delay in receiving the parts necessary to have the end-product ready for sale to its customers or due to product quality issues. Under certain customer supply agreements, we may be liable for direct additional production costs or lost revenues. If products are not shipped on time or are quality deficient, we may be liable for penalties and resulting damages. Such liability, should it arise, and/or our inability to meet these commitments to our customers may have a material adverse impact on our results of operations and financial condition and could damage our relationships with the affected customers, reputation and goodwill.

Our results of operations could be adversely affected by warranty claims and product liability.



We face an inherent risk of exposure to product liability suits in connection with reliability problems or other product defects that may affect our customers. Our products are used by a variety of industries, including the automotive and medical industries. Failure of our products to perform to specifications, or other product defects, could lead to substantial damage to both the end product in which our device has been placed and to the user of such end product. Although we take measures to protect against product defects, if a product liability claim is brought against us, the cost of defending the claim could be significant and any adverse determination could have a material adverse effect on our results of operations.

If we fail to attract and retain qualified personnel, our business may be harmed.

Our success depends to a significant extent upon the continued service of our chief executive officer, our other executive officers, and key management and technical personnel, particularly our experienced engineers and business unit managers, and on our ability to continue to attract, retain, and motivate qualified personnel. The loss of the services of one or several of our executive officers could have a material adverse effect on our Company. In addition, we could be materially adversely affected if the turnover rates for engineers and other key personnel increases significantly or we are unsuccessful in attracting, motivating and retaining qualified personnel. Should we lose one or more engineers who are key to a project's completion during the course of a particular project, the completion of such project may be delayed which could negatively affect customer relationships and goodwill and have a material adverse effect on our results of operations.

If we fail to enter into future vendor managed inventory arrangements or fail to supply the specific product or quantity under such arrangements, the results of our operations and financial condition may be materially adversely impacted.

We enter into arrangements with certain original equipment manufacturers (“OEMs”) and electronic manufacturing services (“EMS”) partners to consign quantities of certain products within proximity of the OEMs and EMS partners' manufacturing location. The inventory is physically segregated at these locations and we retain title and risk of loss related to this inventory until such time as the OEM or EMS partner pulls the inventory for use in its manufacturing process. Once the inventory is pulled by the OEM or EMS partner, title and risk of loss pass to the customer, at which point we relieve inventory and recognize revenue and the related cost of goods sold. The specific quantities to be consigned are based on a forecast provided by the OEM or EMS partner. Generally, the arrangements with the OEMs and EMS partners provide for transfer of title and risk of loss once product has been consigned for a certain length of time.

We believe these arrangements will continue to grow in terms of number of customers and products and will increase in proportion to consolidated net revenues. Should we be unable or unwilling to enter into such agreements as requested by OEMs or EMS partners, our results of operations may be materially adversely impacted. In addition, should we be unable to supply the specific product in the quantity needed by the OEM or EMS partner as reflected in their forecast, we may be liable for damages, including, but not limited to, lost revenues and increased production costs which could have a material adverse impact on our results of operations and financial condition. Should we supply product in excess of the OEM or EMS partners' actual usage, any inventory not consumed may become excess or obsolete, which would result in an inventory write-down that could materially adversely affect our results of operations.

We may be unable to adequately protect our proprietary rights, which may impact our ability to compete effectively.

We rely upon know-how, trade secrets, and patents to develop and maintain our competitive position. There can be no assurance that others will not develop or patent similar technology or reverse engineer our products or that the confidentiality agreements upon which we rely will be adequate to protect our interests. Moreover, the laws of some foreign countries generally do not protect proprietary rights to the same extent as the United States, and we may encounter problems in protecting our proprietary rights in those foreign countries. Periodically, we have been asked by certain prospective customers to provide them with broad licenses to our intellectual property rights in connection with the sale of our products to them. Such licenses, if granted, may have a negative impact on the value of our intellectual property portfolio. Other companies have obtained patents covering a variety of semiconductor designs and processes, and we could be required to obtain licenses under some of these patents or be precluded from making and selling products that are alleged to be infringing, if such patents are valid and other design and manufacturing solutions are not available. There can be no assurance that we would be able to obtain licenses, if required, upon commercially reasonable terms or at all.



We may suffer losses and business interruption if our products infringe the intellectual property rights of others.

In the past, it has been common in the semiconductor industry for patent holders to offer licenses on reasonable terms and rates. Although the practice of offering licenses appears to be generally continuing, in some situations, typically where the patent directly relates to a specific product or family of products, patent holders have refused to grant licenses. In any of those cases, there can be no assurance that we would be able to obtain any necessary license on terms acceptable to us, if at all, or that we would be able to re-engineer our products or processes in a cost-effective manner to avoid claims of infringement. Any litigation in such a situation could involve an injunction to prevent the sales of a material portion of our products, the reduction or elimination of the value of related inventories and the assessment of a substantial monetary award for damages related to past sales, all of which could have a material adverse effect on our results of operations and financial condition.

We may experience losses related to intellectual property indemnity claims.

We provide intellectual property indemnification for certain customers, distributors, suppliers and subcontractors for attorney fees and damages and costs awarded against these parties in certain circumstances in which our products are alleged to infringe third party intellectual property rights, including patents, registered trademarks and copyrights. In certain cases, there are limits on and exceptions to our potential liability for indemnification relating to intellectual property infringement claims. We cannot estimate the amount of potential future payments, if any, that we might be required to make as a result of these agreements. To date, we have not been required to pay significant amounts for intellectual property indemnification claims. However, there can be no assurance that we will not have significant financial exposure under those intellectual property indemnification obligations in the future.
Shortage of raw materials or supply disruption of such raw materials could harm our business

The semiconductor industry has experienced a large expansion of fabrication capacity and production worldwide over time. As a result of increasing demand from semiconductor, solar and other manufacturers, availability of certain basic materials and supplies, and of subcontract services, has been limited from time to time over the past several years, and could come into short supply again if overall industry demand exceeds the supply of these materials and services in the future.

We purchase materials and supplies from many suppliers, some of which are sole-sourced. If the availability of these materials and supplies is interrupted, we may not be able to find suitable replacements. In addition, from time to time natural disasters can lead to a shortage of some materials due to disruption of the manufacturer's production. We continually strive to maintain availability of all required materials, supplies and subcontract services. However, we do not have long-term agreements providing for all of these materials, supplies and services, and shortages could occur as a result of capacity limitations or production constraints on suppliers that could have a material adverse effect on our ability to achieve our production requirements.

Our products may fail to meet new industry standards or requirements and the efforts to meet such industry standards or requirements could be costly.

Many of our products are based on industry standards that are continually evolving. Our ability to compete in the future will depend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by major systems manufacturers. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards or requirements, we could miss opportunities to achieve crucial design wins which in turn could have a material adverse effect on our business, operations and financial results.

We may pursue acquisitions and investments that could harm our operating results and may disrupt our business.

We have made and will continue to consider making strategic business investments, alliances, and acquisitions we consider necessary or desirable to gain access to key technologies that we believe will complement our existing technical capability and support our business model objectives. Investments, alliances, and acquisitions involve risks and uncertainties that may negatively impact our future financial performance and result in an impairment of goodwill. If integration of our acquired businesses is not successful, we may not realize the potential benefits of an acquisition or suffer other adverse effects that we currently do not foresee. We may also need to enter new markets in which we have no or limited experience and where competitors in such markets have stronger market positions.



We also invest in early-to-late stage private companies to further our strategic objectives and support key business initiatives. These strategic investments may not perform as expected. We cannot provide assurance that these companies will operate in a manner that will increase or maintain the value of our investment. If these private companies fail, we may not realize a return on our investments. Thus, all of our investments are subject to a risk of a partial or total loss of investment capital.

Any of the foregoing, and other factors, could harm our ability to achieve anticipated levels of profitability from acquired businesses or to realize other anticipated benefits of acquisitions. In addition, because acquisitions of high technology companies are inherently risky, no assurance can be given that our previous or future acquisitions will be successful and will not adversely affect our business, operating results, or financial condition.

Our operating results may be adversely affected by increased competition and consolidation of competitors in our market.

The semiconductor industry has experienced significant consolidation in recent years. As a result, we experience intense competition from a number of companies, some of which have significantly greater financial, manufacturing and marketing resources than us, as well as greater technical resources and proprietary intellectual property rights than us.The principal elements of competition include product performance, functional value, quality and reliability, technical service and support, price, diversity of product line, and sale of integrated system solutions which combine the functionality of multiple chips on one chip for a price as part of a complete system solution and delivery capabilities. We believe we compete favorably with respect to these factors, although we may be at a disadvantage in comparison to companies with broader product lines, greater technical service and support capabilities and larger research and development budgets. We may be unable to compete successfully in the future against existing or new competitors and our operating results may be adversely affected by increased competition or our inability to timely develop new products to meet the needs of our customers. In addition, our competitors may become more aggressive in their pricing practices which may adversely impact our gross margins and market share. For example, our competitors may offer lower prices than us, or they may price multiple products or services in a bundle to provide additional incentives that we may not be able to match. We may be unable to mitigate the negative effects of such price competition, which may adversely affect our operating results.

Extensions in lead-time for delivery of products could adversely affect our future growth opportunities and results of operations.

Supply constraints, which may include limitations in manufacturing capacity, could impede our ability to grow revenues and meet increased customer demands for our products. Our results of operations may be adversely affected if we fail to meet such increase in demand for our products without significantly increasing the lead-time required for our delivery of such products. Any significant increase in the lead-time for delivery of products may negatively affect our customer relationships, reputation as a dependable supplier of products and ability to obtain future design wins, while potentially increasing order cancellations, aged, unsaleable or otherwise unrealized backlog, and the likelihood of our breach of supply agreement terms. Any of the foregoing factors could negatively affect our future revenue growth and results of operations.

We are subject to a variety of domestic and international laws and regulations that could impose substantial costs on us and may adversely affect our business.

We are subject to numerous U.S. and international laws, rules and regulations covering a wide variety of subject matters, including, but not limited to, data privacy and protection, environment, safety and health, exports and imports, bribery and corruption, tax, labor and employment, competition, market access, and intellectual property ownership and infringement. Compliance with these laws, rules and regulations may be onerous and expensive and could restrict our ability to operate our business. If we fail to comply or if we become subject to enforcement activity, we could be subject to fines, penalties or other legal liability. Furthermore, should these laws, rules and regulations be amended or expanded, or new ones enacted, we could incur materially greater compliance costs or restrictions on our ability to operate our business.

Among other laws and regulations, we are subject to the General Data Protection Regulation (“GDPR”) effective in the European Union (“EU”), which created a data protection compliance regime that imposed substantial obligations on companies collecting, processing and transferring personal data and may impose significant penalties for non-compliance. Similarly, certain jurisdictions in the United States and some countries in which we operate may consider or have passed legislation implementing data protection requirements that could require us to change our business practices and increase the cost and complexity of compliance. In addition to GDPR, we are subject to the U.S. Customs and Export Regulations, including U.S. International Traffic and Arms Regulations and similar laws, which collectively control import, export and sale of technologies by companies and various other aspects of the operation of our business, and the Foreign Corrupt Practices Act and similar anti-bribery laws, which prohibit companies from making improper payments to government officials for the purposes of obtaining or retaining business.



While our Company’s policies and procedures mandate compliance with such laws and regulations, there can be no assurance that our employees and agents will always act in strict compliance. If we fail to comply or if we become subject to enforcement activity, we could be subject to fines, penalties or other legal liability. Furthermore, should these laws, rules and regulations be amended or expanded, or new ones enacted, we could incur materially greater compliance costs or restrictions on our ability to operate our business, which could have a material adverse impact on our results of operations and financial condition. Our failure or inability to comply with existing or future laws, rules or regulations, or changes to existing laws, rules or regulations could subject us to fines, penalties or other legal liability.

Our stock price may be volatile.

The market price of our common stock may be volatile and subject to wide fluctuations. Fluctuations have occurred and may continue to occur in response to various factors, including the pending ADI Merger, many of which are beyond our control.

In addition, the market prices of securities of technology companies, including those in the semiconductor industry, generally have been and remain volatile. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies. If our actual operating results or future forecasted results do not meet the expectations of securities analysts or investors, who may derive their expectations by extrapolating data from recent historical operating results, the market price of our common stock may decline. Accordingly, you may not be able to resell shares of our common stock at a price equal to or higher than the price you paid for them.

Due to the nature of our compensation programs, some of our executive officers sell shares of our common stock each quarter or otherwise periodically, including pursuant to trading plans established under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Regardless of the reasons for such sales, analysts and investors could view such actions in a negative light and the market price of our common stock could be adversely affected as a result of such periodic sales.

Our quarterly operating results may fluctuate, which could adversely impact our common stock price.

We believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of future performance. Our operating results have in the past been, and will continue to be, subject to quarterly fluctuations as a result of numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global economic environment. These factors include, but are not limited to, the following:

Fluctuations in demand for our products and services;
Loss of a significant customer or significant customers electing to purchase from another supplier;
Reduced visibility into our customers' spending plans and associated revenue;
The level of price and competition in our product markets;
Our pricing practices, including our use of available information to maximize pricing potential;
The impact of the uncertain economic and credit environment on our customers, channel partners, and suppliers, including their ability to obtain financing or to fund capital expenditures;
The overall movement toward industry consolidations among our customers and competitors;
Below industry-average growth of the non-consumer segments of our business;
Announcements and introductions of new products by our competitors;
Our ability to generate sufficient earnings and cash flow to pay dividends to our stockholders;
Deferrals of customer orders in anticipation of new products or product enhancements (introduced by us or our competitors);
Our ability to meet increases in customer orders in a timely manner;
Striking an appropriate balance between short-term execution and long-term innovation;
Our ability to develop, introduce, and market new products and enhancements and market acceptance of such new products and enhancements; and
Our levels of operating expenses.

Environmental, safety and health laws and regulations could force us to expend significant capital and incur substantial costs.

Various foreign and domestic federal, state, and local government agencies impose a variety of environmental, safety and health laws and regulations on the storage, handling, use, discharge and disposal of certain chemicals, gases and other substances used or produced in the semiconductor manufacturing process as well as the health and safety regulations related to our employees. Historically, compliance with these regulations has not had a material adverse effect on our capital expenditures, earnings, or competitive or financial position. There can be no assurance, however, that interpretation and enforcement of current or future


environmental, safety and health laws and regulations will not impose costly requirements upon us. Any failure by us to adequately control the storage, handling, use, discharge or disposal of regulated substances could result in fines, sales limitations, suspension of production, alteration of wafer fabrication processes and legal liability, which may materially adversely impact our financial condition, results of operations or liquidity.

In addition, some of our customers and potential customers may require that we implement operating practices that are more stringent than applicable legal requirements with respect to health regulations, environmental matters or other items. As a result, these requirements may increase our own costs regarding developing, administering, monitoring and auditing these customer-requested practices at our own sites and those in our supply chain.

Material impairments of our goodwill and intangible assets could adversely affect our results of operations.

We have a significant amount of goodwill and intangible assets on our balance sheet. We test goodwill and intangible assets for impairment annually or more frequently if certain impairment indicators arise or circumstances change that indicate fair value of a reporting unit or intangible asset may be below its carrying amount. Determination of fair values require considerable judgment and is sensitive to inherent uncertainties and changes in estimates and assumptions. Declines in market conditions, weak trends in anticipated financial performance of reporting units or declines in revenue projections are examples of indicators that carrying values of goodwill or intangible assets may not be recoverable. We may be required to record an impairment that, when incurred, could have a material adverse effect on our financial statements.

Business interruptions from natural disasters could harm our ability to produce products.

We operate our business in worldwide locations. Some of our facilities and those of our subcontractors are located in areas of the world that are susceptible to damage from natural disasters and other significant disruptions, including earthquakes, typhoons, hurricanes, tsunamis, volcano eruptions, floods, fires, water shortages, and other natural or man-made catastrophic events. In the event of a natural disaster, we may suffer a disruption in our operations that could adversely affect our results of operations.

Our financial condition, operations and liquidity may be materially adversely affected in the event of a catastrophic loss for which we are self-insured.

We are primarily self-insured with respect to many of our commercial risks and exposures. Based on management's assessment and judgment, we have determined that it is generally more cost effective to self-insure these risks. The risks and exposures we self-insure include, but are not limited to, fire, property and casualty, natural disasters, product defects, political risk, social unrest, general liability, theft, counterfeits, patent infringement, certain employment practice matters and medical benefits for many of our U.S. employees. Should there be catastrophic loss from events such as fires, explosions, volcano eruptions, earthquakes, or man-made and other natural disasters, among many other risks, or adverse court or similar decisions in any area in which we are self-insured, our financial condition, results of operations, and liquidity may be materially adversely affected.

We may be materially adversely affected by currency fluctuations.

We conduct our manufacturing and other operations in various worldwide locations. A portion of our operating costs and expenses at foreign locations are paid in local currencies. Many of the materials used in our products and much of the manufacturing process for our products are supplied by foreign companies or by our foreign operations, such as our test operations in the Philippines and Thailand. Approximately 89%, 89% and 88% of our net revenues in fiscal years 2020, 2019 and 2018, respectively, were from shipments to customers located outside the United States. Currency exchange fluctuations could decrease revenue and increase our operating costs, the cost of components manufactured abroad, and the cost of our products to foreign customers, or decrease the costs of products produced by our foreign competitors.

Our debt covenants may limit us from engaging in certain transactions or other activities.

We have entered into debt arrangements that contain certain covenants which may limit the manner in which we conduct our business. For example, the debt indentures that govern our outstanding notes include covenants that, under certain circumstances, limit our ability to grant liens on our facilities and to enter into sale and leaseback transactions, which could limit our 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 notes, we would be required to make an offer to repurchase the affected notes at a purchase price greater than the aggregate principal amount of such notes, plus accrued and unpaid interest. Our ability to repurchase the notes in such events may be limited by our then-available financial resources or by the terms of other agreements to which we are a party.


Although we currently have the funds necessary to retire this debt, funds might not be available to repay the notes when they become due in the future.

We are required to comply with the covenants set forth in our debt indentures. If we breach any of the covenants and do not obtain a waiver from the note holders or lenders, then, subject to cure periods, any outstanding indebtedness may be declared immediately due and payable.

Exiting certain product lines or businesses, or restructuring our operations, may adversely affect certain customer relationships and produce results that differ from our intended outcomes.

The nature of our business requires strategic changes from time to time, including restructuring our operations and divesting and consolidating certain product lines and businesses. The sale of facilities, or the exiting of certain product lines or businesses, may adversely affect certain customer relationships, which may have a material adverse effect on our business, financial condition, and results of operations. Additionally, our ability to timely shut down our facilities or otherwise exit product lines and businesses, or to close or consolidate operations, depends on a number of factors, many of which are outside of our control. If we are unable to shut down a facility or exit a product line or business in a timely manner, or to restructure our operations in a manner we deem to be advantageous, this could have a material adverse effect on our business, financial condition, and results of operations. Even if the sale of a facility or divestment is successful, we may face indemnity and other liability claims by the acquirer or other parties.

Our certificate of incorporation contains certain anti-takeover provisions that may discourage, delay or prevent a hostile change in control of our Company.

Our certificate of incorporation permits our Board of Directors to authorize the issuance of up to 2,000,000 shares of preferred stock and to determine the rights, preferences and privileges and restrictions applicable to such shares without any further vote or action by our stockholders. Any such issuance might discourage, delay or prevent a hostile change in control of our Company, which may be considered beneficial to our stockholders.




ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our worldwide headquarters is in San Jose, California. Manufacturing and other operations are conducted in several locations worldwide. The following table provides certain information regarding our principal offices and manufacturing facilities as of June 27, 2020:
Principal PropertiesUse(s)
Approximate
Floor Space
(sq. ft.)
Cavite, the PhilippinesManufacturing, engineering, and administrative489,000
San Jose, CaliforniaCorporate headquarters, engineering, sales, and administrative435,000
Beaverton, OregonWafer fabrication, engineering, and administrative312,000
Chonburi Province, ThailandManufacturing, engineering, and administrative194,000
Dallas, Texas†Engineering, sales, and administrative82,000
Chandler, ArizonaEngineering, sales, and administrative65,000
Bangalore, India†Engineering and administrative49,000
Colorado Springs, Colorado†Engineering and administrative28,000
Hamburg, Germany†Engineering, sales, and administrative22,000
Dublin, Ireland†Engineering, administrative and sales20,000

† Leased.

In addition to the property listed in the above table, we also lease sales, engineering, administration and manufacturing offices and other premises at various locations in the United States and internationally under operating leases, none of which are material to our future cash flows. These leases expire at various dates through fiscal year 2031. We anticipate no difficulty in retaining occupancy of any of our other manufacturing, office, or sales facilities through lease renewals prior to expiration or through month-to-month occupancy or in replacing them with equivalent facilities.

We expect these facilities to be adequate for our business purposes through at least the next 12 months.

ITEM 3. LEGAL PROCEEDINGS

Legal Proceedings

We are 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.

Indemnifications

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

Pursuant to our charter documents and separate written indemnification agreements, we have certain indemnification obligations to our current officers, employees, and directors, as well as certain former officers and directors.

ITEM 4. MINE SAFETY DISCLOSURES



Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol MXIM. As of August 10, 2020, there were approximately 600 stockholders of record of our common stock.

Issuer Purchases of Equity Securities

The following table summarizes the activity related to stock repurchases for the three months ended June 27, 2020:
 Issuer Purchases of Equity Securities
 (in thousands, except per share amounts)
 Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Amount That May Yet Be Purchased Under the Plans or Programs
Mar 29, 2020 - Apr. 25, 20201,216
 $50.45
 1,216
 $695,134
Apr. 26, 2020 - May 23, 2020339
 $54.63
 339
 $676,571
May 24, 2020 - Jun. 27, 202041
 $59.16
 41
 $674,171
Total1,596
 $51.56
 1,596
 $674,171

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 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 liquidity and general market and business conditions.

During fiscal year 2020, we repurchased approximately 7.9 million shares of our common stock for $440.8 million. As of June 27, 2020, we had a remaining authorization of $0.7 billion for future share repurchases. Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date we announced our planned merger with ADI.

Dividend Policy

A cash dividend of $0.48 per share will be paid on September 11, 2020, to stockholders of record on August 27, 2020. The Company will neither declare nor pay a dividend in any of the next succeeding four fiscal quarters as the ADI Merger Agreement restricts the Company's ability to declare or pay dividends during that period.

Stock Performance Graph

The line graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the NASDAQ Composite Index, the Standard & Poor's ("S&P") 500 Index, and the Philadelphia Semiconductor Index for the five years ended June 27, 2020. The graph and table assume that $100 was invested on June 26, 2015 (the last day of trading for the fiscal year ended June 27, 2015) in each of our common stock, the NASDAQ Composite Index, the S&P 500 Index, and the Philadelphia Semiconductor Index, and that all dividends were reinvested. Cumulative returns shown on the graph are based on our fiscal year.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. The returns shown are based on historical results and are not intended to suggest or predict future performance.



chart-a9fdce74350b53a0820.jpg
 Base Year Fiscal Year Ended
 June 27,
2015		 June 25,
2016		 June 24,
2017		 June 30,
2018		 June 29,
2019		 June 27,
2020
Maxim Integrated Products, Inc.$100.00
 $104.51
 $141.00
 $185.39
 $195.34
 $200.01
NASDAQ Composite$100.00
 $93.82
 $126.32
 $153.05
 $164.96
 $203.10
S&P 500$100.00
 $99.09
 $121.09
 $137.69
 $152.03
 $158.60
Philadelphia Semiconductor$100.00
 $98.69
 $161.85
 $198.98
 $225.47
 $302.42

ITEM 6. SELECTED FINANCIAL DATA

Set forth below is a summary of certain consolidated financial information with respect to the Company as of the dates and for the periods indicated. The following selected financial data as of June 27, 2020 and June 29, 2019 and for the years ended June 27, 2020, June 29, 2019 and June 30, 2018 are derived from and should be read in conjunction with, and are qualified by reference to, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 8 - Financial Statements and Supplementary Data, and notes thereto included elsewhere in Part IV, Item 15(a) of this Annual Report. The following selected financial data as of June 30, 2018, June 24, 2017, and June 25, 2016 and for the years ended June 24, 2017 and June 25, 2016 have been derived from our consolidated financial statements not included herein. The historical results are not necessarily indicative of the results to be expected in any future period. We adopted Accounting Standards Codification Topic 606 (Topic 606), effective July 1, 2018, using the modified retrospective method. The reported results for fiscal years starting 2019 reflect the application of Topic 606, while the reported results for prior fiscal years are not adjusted and continue to be reported under Topic 605. We adopted Accounting Standards Codification Topic 842 (Topic 842), effective June 30, 2019, using the modified retrospective method. The reported consolidated balance sheet data for fiscal year 2020 reflects the application of Topic 842, while the consolidated balance sheet data for prior fiscal years are not adjusted and continue to be reported under Topic 840.


 Fiscal Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018		 June 24,
2017		 June 25,
2016
 (in thousands, except percentages and per share data)
Consolidated Statements of Income Data: 
  
  
  
  
Net revenues $2,191,395
 $2,314,329
 $2,480,066
 $2,295,615
 $2,194,719
Cost of goods sold 758,743
 813,823
 853,945
 849,135
 950,331
Gross margin $1,432,652
 $1,500,506
 $1,626,121
 $1,446,480
 $1,244,388
Gross margin %65.4% 64.8% 65.6% 63.0% 56.7%
          
Operating income $686,394
 $747,098
 $833,448
 $694,777
 $313,849
% of net revenues 31.3% 32.3% 33.6% 30.3% 14.3%
          
Net income$654,694
 $827,486
 $467,318
 $571,613
 $227,475
          
Earnings per share 
  
  
  
  
Basic net income per share$2.43
 $3.01
 $1.66
 $2.02
 $0.80
Diluted net income per share$2.41
 $2.97
 $1.64
 $1.98
 $0.79
          
Weighted-average shares used in the calculation of earnings per share: 
  
  
  
  
Basic 269,341
 274,966
 280,979
 283,147
 285,081
Diluted 272,028
 278,777
 285,674
 287,974
 289,479
  
  
  
  
  
Dividends declared and paid per share $1.92
 $1.84
 $1.56
 $1.32
 $1.20
          
 As of
 June 27,
2020		 June 29,
2019		 June 30,
2018		 June 24,
2017		 June 25,
2016
 (in thousands)
Consolidated Balance Sheet Data: 
  
  
  
  
Cash, cash equivalents and short-term investments$1,614,206
 $1,898,332
 $2,626,399
 $2,744,839
 $2,230,668
Working capital $1,864,495
 $2,168,333
 $2,413,014
 $3,026,597
 $2,197,645
Total assets $3,629,303
 $3,743,982
 $4,451,561
 $4,570,233
 $4,234,616
Long-term debt, excluding current portion$994,022
 $992,584
 $991,147
 $1,487,678
 $990,090
Total stockholders' equity$1,657,457
 $1,845,276
 $1,930,940
 $2,202,694
 $2,107,814



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes thereto included in Part IV, Item 15(a), the risk factors included in Part I, Item 1A, and the “forward-looking statements” and other risks described herein and elsewhere in this Annual Report.

The ADI Merger

The completion of the ADI Merger under the ADI Merger Agreement is subject to customary closing conditions, including, among others, the approval of Maxim Integrated’s stockholders, the approval of Analog Devices’ shareholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the ADI Merger is expected to close in the summer of 2021. For additional information on the ADI Merger Agreement and the ADI Merger, please refer to the Company’s Current Report on Form 8-K, filed with the SEC on July 13, 2020. 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.

Overview

We are a global company with manufacturing facilities in the United States, the Philippines and Thailand, and sales offices and design centers throughout the world. We design, develop, manufacture and market 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 diverse applications, a great number of product variations and, with respect to many circuit types, relatively long product life cycles. The major end-markets in which we sell our products are the automotive, communications and data center, consumer, and industrial markets. We are incorporated in the State of Delaware.

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 below. 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. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in this Annual Report.

Inventories

Inventories are stated at the lower of (i) standard cost, which approximates actual cost on a first-in-first-out basis, or (ii) net realizable value. Our standard cost revision policy is to monitor manufacturing variances and revise standard costs on a periodic basis. At each reporting period, we assess our ending inventories for excess quantities and obsolescence based on our projected sales outlook. This assessment includes analysis of projections of future demand. Because of the cyclical nature of the market, inventory levels, obsolescence of technology, and product life cycles, we generally write-down inventories to net realizable value based on this forecasted product demand analysis. Actual demand and market conditions may be lower than those projected by us. This difference could have a material adverse effect on our gross margin should inventory write-downs beyond those initially recorded become necessary. Alternatively, should actual demand and market conditions be more favorable than those estimated by us, gross margin could be favorably impacted as we release these reserves upon the ultimate product shipment. During fiscal years 2020 and 2019, we had net inventory write-downs of $16.5 million and $36.1 million, respectively.

Accounting for Income Taxes

We must make certain estimates and judgments in the calculation of income tax expense, determination of uncertain tax positions, and in the determination of whether deferred tax assets are more likely than not to be realized. The calculation of our income tax expense and income tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations.



ASC No. 740-10, Income Taxes (“ASC 740-10”), prescribes a recognition threshold and measurement framework for financial statement reporting and disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, a tax position is recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that meets the recognition threshold is then measured to determine the largest amount of the benefit that has a greater than 50% likelihood of being realized upon settlement. Although we believe that our computation of tax benefits to be recognized and realized are reasonable, no assurance can be given that the final outcome will not be different from what was reflected in our income tax provisions and accruals. Such differences could have a material impact on our net income and operating results in the period in which such determination is made. See Note 17: "Income Taxes" in the Notes to Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report for further information related to ASC 740-10.

We evaluate our deferred tax asset balance and record a valuation allowance to reduce the net deferred tax assets to the amount that is more likely than not to be realized. In the event it is determined that the deferred tax assets to be realized in the future would be in excess of the net recorded amount, an adjustment to the deferred tax asset valuation allowance would be recorded. This adjustment would increase income in the period such determination was made. Likewise, should it be determined that all or part of the net deferred tax asset would not be realized in the future, an adjustment to increase the deferred tax asset valuation allowance would be charged to income in the period such determination is made. In assessing the need for a valuation allowance, historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered. Realization of our deferred tax asset is dependent primarily upon future taxable income in the U.S. and certain foreign jurisdictions. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the net deferred tax asset and an accompanying reduction or increase in net income in the period in which such determinations are made.

Litigation and Contingencies

From time to time, we receive notices that our products or manufacturing processes may be infringing the patent or other intellectual property rights of others, notices of stockholder litigation or other lawsuits or claims against us. We periodically assess each matter in order to determine if a contingent liability in accordance with ASC No. 450, Contingencies (“ASC 450”), should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. We expense legal fees associated with consultations and defense of lawsuits as incurred. Based on the information obtained, combined with management's judgment regarding all of the facts and circumstances of each matter, we determine whether a contingent loss is probable and whether the amount of such loss can be estimated. Should a loss be probable and estimable, we record a contingent loss. In determining the amount of a contingent loss, we take into consideration advice received from experts in the specific matter, the current status of legal proceedings, settlement negotiations which may be ongoing, prior case history and other factors. Should the judgments and estimates made by management be incorrect, we may need to record additional contingent losses that could materially adversely impact our results of operations. Alternatively, if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss recorded would be reversed, thereby favorably impacting our results of operations.

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 first 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, 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.
For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part I, Item 1A - Risk Factors of this Annual Report.
Results of Operations
The following table sets forth certain Consolidated Statements of Income data expressed as a percentage of net revenues for the periods indicated:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
Net revenues100.0 % 100.0 % 100.0 %
Cost of goods sold 34.6 % 35.2 % 34.4 %
Gross margin 65.4 % 64.8 % 65.6 %
Operating expenses: 
  
  
Research and development 20.1 % 18.8 % 18.2 %
Selling, general and administrative 13.5 % 13.3 % 13.0 %
Intangible asset amortization0.1 % 0.1 % 0.2 %
Impairment of long-lived assets— % —%
 — %
Severance and restructuring expenses 0.2 % 0.2 % 0.6 %
Other operating expenses (income), net— % —%
 (0.1)%
Total operating expenses 34.1 % 32.6 % 32.0 %
Operating income31.3 % 32.3 % 33.6 %
Interest and other income (expense), net(0.4)% 0.3 % (0.3)%
Income before taxes30.9 % 32.6 % 33.3 %
Provision (benefit) for income taxes1.1 % (3.2)% 14.4 %
Net income 29.9 % 35.8 % 18.8 %

The following table shows pre-tax stock-based compensation included in the components of the Consolidated Statements of Income reported above as a percentage of net revenues for the periods indicated:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
Cost of goods sold0.6% 0.4% 0.4%
Research and development2.0% 1.8% 1.5%
Selling, general and administrative1.8% 1.5% 1.3%
 4.3% 3.7% 3.2%

A review of our fiscal year 2020 performance compared to fiscal year 2019 performance appears below. A review of our fiscal year 2019 performance compared to fiscal year 2018 performance is set forth in Part II, Item 7 of the Form 10-K for the fiscal year ended June 29, 2019 under the caption "Results of Operations".

Net Revenues

We reported net revenues of $2.2 billion and $2.3 billion in fiscal years 2020 and 2019, respectively. Our net revenues in fiscal year 2020 decreased by 5% compared to our net revenues in fiscal year 2019.

Revenue from consumer products was down 21% due to lower demand in cell phone products, partially offset by a higher demand in wearable products. Revenue from communications and data center products was up 11% due to higher demand for base station


and data center products, partially offset by lower demand in network and datacom products. Revenue from automotive products was down 5% due to lower demand in auto body electronics and infotainment products, partially offset by higher demand in safety and security products. These results include net revenues for the fiscal year 2019 that align with our revised end-market categories.

Approximately 89% of our net revenues in fiscal years 2020 and 2019, were derived from shipments to customers located outside the United States, primarily in Asia and Europe. Less than 1% of our sales are denominated in currencies other than U.S. dollars. The impact of changes in foreign exchange rates on net revenues and our results of operations for fiscal years 2020 and 2019 were immaterial.

Gross Margin

Our gross margin as a percentage of net revenue was 65.4% in fiscal year 2020 compared to 64.8% in fiscal year 2019. Despite the decrease in net revenue in fiscal year 2020 compared to fiscal year 2019, gross margins as a percentage of net revenue was higher due to lower inventory reserves and lower amortization expenses recognized in cost of goods sold in fiscal year 2020 compared to fiscal year 2019.

Research and Development

Research and development expenses were $440.2 million and $435.2 million for fiscal years 2020 and 2019, respectively, which represented 20.1% and 18.8% of net revenues, respectively. The $4.9 million increase in research and development expenses was due to higher salaries and other personnel related costs.

The level of research and development expenditures as a percentage of net revenues will vary from period to period depending, in part, on the level of net revenues and on our success in recruiting the technical personnel needed for our new product introductions and process development. We view research and development expenditures as critical to maintaining a high level of new product introductions, which in turn are critical to our plans for future growth.

Selling, General and Administrative

Selling, general and administrative expenses were $296.7 million and $308.6 million in fiscal years 2020 and 2019, respectively, which represented 13.5% and 13.3% of net revenues, respectively. The $11.9 million decrease in selling, general and administrative expenses was due to lower depreciation and travel expenses.

The level of selling, general and administrative expenditures as a percentage of net revenues will vary from period to period, depending on the level of net revenues and our success in recruiting sales and administrative personnel needed to support our operations.

Interest and Other Income (Expense), Net

Interest and other income (expense), net was $(8.3) million in fiscal year 2020 and $7.3 million in fiscal year 2019, which represented (0.4)% and 0.3% of net revenues, respectively. The change in interest income (expense) is due to lower interest income, partially offset by lower interest expense. Interest income is lower by $17.6 million due to lower investment yields from cash equivalents and short-term investments. Interest expense is lower by $7.7 million due to repayment of $500.0 million of notes in November 2018.

Provision (Benefit) for Income Taxes

Our annual income tax expense (benefit) was $23.4 million and ($73.1) million for fiscal years 2020 and 2019, respectively. The effective tax rate was 3.5% and (9.7)% for fiscal years 2020 and 2019, respectively.

On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act included a one-time tax on accumulated unremitted earnings of our foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allowed the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act was not completed. Provisional amounts must be adjusted within a one-year measurement period from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a $236.9 million provisional Transition Tax charge. During the measurement period we gathered information and analyzed available guidance and in the second quarter of fiscal year 2019 recorded a $22.1 million Transition Tax charge, which increased the Company’s fiscal year 2019 tax rate by 2.9%. As of the end of the second quarter of fiscal year 2019 accounting for income tax effects of the Act was completed.



The Act included Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impact us in fiscal year 2019. The GILTI provisions effectively subject income earned by our foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits. We elected to treat tax generated by the GILTI provisions as a period expense.

In fiscal year 2019, we reversed $221.5 million of uncertain tax position reserves and $30.1 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of our fiscal year 2009 through fiscal year 2011 federal corporate income tax returns, which also settled intercompany buy-in license payment issues for fiscal year 2012 through fiscal year 2019. Fiscal year 2009 through fiscal year 2018 advance tax payments made in June 2018 of $140.7 million were applied to additional federal tax liabilities generated by the settlement. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $47.7 million in the fiscal fourth quarter.

In fiscal year 2020, we reversed $40.5 million of uncertain tax position reserves and $10.7 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of our fiscal year 2012 through fiscal year 2014 federal corporate income tax returns. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $6.5 million in the fiscal fourth quarter.

Our federal statutory tax rate is 21%. Our fiscal year 2020 effective tax rate was lower than the statutory tax rate primarily due to the $51.2 million reversal of uncertain tax position and related interest reserves, and earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, that were taxed at lower rates. These impacts were partially offset by tax generated by GILTI provisions and a $6.5 million Transition Tax charge.

Our fiscal year 2019 effective tax rate was lower than the statutory tax rate primarily due to the $251.6 million reversal of uncertain tax position and related interest reserves, and earnings of foreign subsidiaries, generated primarily by our international operations managed in Ireland, that were taxed at lower rates. These impacts were partially offset by tax generated by GILTI provisions and a $68.7 million Transition Tax charge.

We have various entities domiciled within and outside the United States. The following is a breakout of our U.S. and foreign income (loss) before income taxes:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Domestic pre-tax income$72,854
 $103,016
 $149,056
Foreign pre-tax income605,242
 651,405
 675,829
Total$678,096
 $754,421
 $824,885

A relative increase in earnings in lower tax jurisdictions, such as Ireland, may lower our consolidated effective tax rate, while a relative increase in earnings in higher tax jurisdictions, such as the United States, may increase our consolidated effective tax rate. However, after fiscal year 2018 the consolidated effective tax rate impact of earnings changes in various tax jurisdictions is not as significant due to the reduction of the federal statutory tax rate from 35% to 21% by the Act and the GILTI provisions, which effectively subject income earned by our foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits.

Recently Issued Accounting Pronouncements

Refer to our discussion of recently issued accounting pronouncements as included in Part IV, Item 15. Exhibits and financial statement schedules, Note 2: “Summary of Significant Accounting Policies”.

Financial Condition, Liquidity and Capital Resources

Financial Condition



Cash flows were as follows:

 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Net cash provided by operating activities$800,855
 $875,840
 $819,464
Net cash provided by (used in) investing activities(32,049) 856,911
 (710,066)
Net cash provided by (used in) financing activities(940,720) (1,518,893) (812,035)
Net increase (decrease) in cash, cash equivalents and restricted cash$(171,914) $213,858
 $(702,637)

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 was $800.9 million in fiscal year 2020, a decrease of $75.0 million compared with fiscal year 2019. This decrease was primarily caused by a decrease in net income of $172.8 million and changes in working capital. Changes in working capital were driven by a decrease in changes in income tax payable, accrued salary and related expenses, and other liabilities, partially offset by a decrease in changes in accounts receivable, inventory and other assets.

Investing Activities

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

Cash used in investing activities was $32.0 million in fiscal year 2020, a decrease of $889.0 million compared with fiscal year 2019. The change was due to a $1.0 billion decrease in maturities of available-for-sale securities, partially offset by a $214.6 million decrease in purchases of available-for-sale securities. The Company also paid $69.3 million, net of cash acquired, for an acquisition during fiscal year 2020.

Financing Activities

Financing cash flows consist primarily of new borrowings, repurchases of common stock, issuance and repayment of notes payables, payment of dividends to stockholders, proceeds from stock option exercises and employee stock purchase plan and withholding tax payments associated with net share settlements of equity awards.

Net cash used in financing activities was $940.7 million in fiscal year 2020, a decrease of $578.2 million compared with fiscal year 2019. Cash used in financing activities was lower due to a payment of $500.0 million of debt in fiscal year 2019 and a decrease in repurchases of common stock of $98.3 million, partially offset by an increase in dividend payments of $11.6 million.

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 June 27, 2020, our available funds consisted of $1.6 billion in cash, cash equivalents and short-term investments.

In January 2019, the Company terminated its $350.0 million revolving credit facility with certain institutional lenders.

In November 2018, the Company repaid $500.0 million of principal and related outstanding interest of the Company's 2.5% coupon notes.

On October 30, 2018, we were authorized to repurchase up to $1.5 billion of the Company's common stock. During the years ended June 27, 2020 and June 29, 2019, we repurchased an aggregate of $440.8 million and $539.2 million, respectively, of the Company's common stock. Pursuant to the terms of the ADI Merger Agreement, the Company suspended its repurchase program on July 13, 2020, the date we announced our planned merger with ADI.



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 and debt repayments for at least the next twelve months.

A cash dividend of $0.48 per share will be paid on September 11, 2020, to stockholders of record on August 27, 2020. The Company will neither declare nor pay a dividend in any of the next succeeding four fiscal quarters, as provided in the ADI Merger Agreement..

Contractual Obligations

The following table summarizes our significant contractual obligations as of June 27, 2020, and the effect such obligations are expected to have on our liquidity and cash flows in future periods:
 Payment due by period
 Total Less than 1 year 1-3 years 4-5 years More than 5 years
 (in thousands)
Outstanding debt obligations (1)
$1,000,000
 $—
 $500,000
 $—
 $500,000
Inventory-related purchase obligations (2)
352,960
 54,206
 91,599
 83,152
 124,003
Transition tax (3)
264,088
 26,927
 53,855
 117,807
 65,499
Interest payments associated with debt obligations (4)
166,437
 34,125
 64,031
 34,500
 33,781
Operating lease obligations (5) 
65,545
 12,144
 20,730
 15,588
 17,083
Contingent liability14,165
 10,000
 4,165
 —
 —
Total $1,783,485
 $115,258
 $709,485
 $235,459
 $723,283

(1) Outstanding debt represents amounts due for our long-term notes.
(2) We order materials and supplies in advance or with minimum purchase quantities. We are obligated to pay for the materials and supplies when received.
(3) Transition tax on accumulated unremitted earnings of foreign subsidiaries at December 31, 2017, paid in eight interest-free installments beginning in September 2018.
(4) Interest payments calculated based on contractual payment requirements under the debt agreements.
(5) We lease facilities under non-cancelable operating lease agreements that expire at various dates through fiscal year 2031.

Purchase orders for the purchase of the majority of our raw materials and other goods and services are not included above. Our purchase orders generally allow for cancellation without significant penalties. We do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected short-term requirements.

As of June 27, 2020, our gross unrecognized income tax benefits were $174.3 million which excludes $24.6 million of accrued interest. We are unable to make a reasonably reliable estimate of the timing of payments of these amounts, if any, in individual years due to uncertainties in the timing or outcomes of either actual or anticipated tax audits. As a result, these amounts are not included in the table above.

Off-Balance-Sheet Arrangements

As of June 27, 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents, short-term investments and notes payable. See Note 6: “Financial Instruments” in the Notes to Consolidated Financial Statements included in this Annual Report. We do not use derivative financial instruments to hedge the ongoing risk of interest rate volatility. At June 27, 2020, we maintained a significant portfolio of money market fund investments, which are included in cash and cash equivalents. These money market funds are generally invested only in U.S. government or agency securities and are all available on a daily basis. Our short-term investments are in U.S. government, corporate and bank debt securities. Our long-term notes payable are all fixed rate securities and as such, we have no financial statement risk associated with changes in interest rates related to these notes.



To assess the interest rate risk associated with our outstanding long-term debt portfolio, we performed sensitivity analysis for our long-term notes as of June 27, 2020, using a modeling technique that measures the change in the fair values arising from a hypothetical 100 basis points increase in the levels of interest rates across the entire yield curve, with all other variables held constant. The discount rates used were based on the market interest rates in effect at June 27, 2020. The sensitivity analysis indicated that a hypothetical 100 basis points increase in interest rates would result in a reduction in the fair values of our long-term notes of $46.1 million.

Foreign Currency Risk

We generate less than 1.0% of our revenues in various global markets based on orders obtained in currencies other than the U.S. Dollar. We incur expenditures denominated in non-U.S. currencies, primarily the Philippine Peso and the Thai Baht associated with our manufacturing activities in the Philippines and Thailand, respectively, and expenditures for sales offices and research and development activities undertaken outside of the U.S. We are exposed to fluctuations in foreign currency exchange rates primarily on cash flows for expenditures, orders, and accounts receivable from sales in these foreign currencies. We have established risk management strategies designed to reduce the impact of volatility of future cash flows caused by changes in the exchange rate for these currencies. These strategies reduce, but do not entirely eliminate, the impact of currency exchange rate movements. We do not use derivative financial instruments for speculative or trading purposes. We routinely hedge our exposure to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience financial losses.

For derivative instruments that are designated and qualify as cash flow hedges under ASC No. 815, Derivatives and Hedging (“ASC 815”), the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income or loss and reclassified into earnings into the same financial statement line as the item being hedged, and in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized each period in interest and other income (expense), net.

For derivative instruments that are not designated as hedging instruments under ASC 815, gains and losses are recognized each period in interest and other income (expense), net. All derivatives are foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivatives largely offset the changes in the fair value of the assets or liabilities being hedged.

As of June 27, 2020, we had outstanding foreign currency derivative contracts with a total notional amount of $105.8 million. If overall foreign currency exchange rates appreciated (depreciated) uniformly by 10% against the U.S. dollar, our foreign currency derivative contracts outstanding as of June 27, 2020 would experience an approximately $8.2 million gain (loss).

Foreign Exchange Contracts

The net unrealized gain or loss, if any, is potentially subject to market and credit risk as it represents appreciation (decline) of the hedge position against the spot exchange rates. The net realized and unrealized gains or losses from hedging foreign currency denominated assets and liabilities were immaterial during the fiscal years ended June 27, 2020 and June 29, 2019.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this Item are set forth at the pages indicated in Part IV, Item 15(a) of this Annual Report and incorporated by reference herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer (“CEO”) and our chief financial officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as


of June 27, 2020. These disclosure controls and procedures are designed to provide reasonable assurance 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 rules and forms, and that such information is accumulated and communicated to our management, including our CEO and our CFO, to allow timely decisions regarding required disclosures. Based on the evaluation, our CEO and our CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 27, 2020.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CEO and CFO and effected by the Company's Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management, with the participation of our CEO and our CFO, assessed the effectiveness of our internal control over financial reporting as of June 27, 2020. Management's assessment of internal control over financial reporting was conducted using the criteria in the Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management has concluded that, as of June 27, 2020, our internal control over financial reporting was effective, based on these criteria. PricewaterhouseCoopers LLP, an independent registered public accounting firm, audited the effectiveness of the Company's internal control over financial reporting, as of June 27, 2020, as stated within their report which is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 27, 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 over Financial Reporting and Disclosure Controls and Procedures

A system of internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP and no control system, no matter how well designed and operated, can provide absolute assurance. The design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement errors and misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.


ITEM 9B. OTHER INFORMATION
None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Other than as follows, the information required by this Item is incorporated by reference from the Company's Proxy Statement for the 2020 Annual Meeting of Stockholders under the headings “Audit Committee and Audit Committee Financial Expert,” “Proposal No. 1 - Election of Directors” and “Delinquent Section 16(a) Reports.”

Information About Our Executive Officers

The following is information regarding our executive officers, including their positions and their ages as of July 27, 2020.June 26, 2021.
Name
  
Age
  
Position
Tunç Doluca
  6263  President and Chief Executive Officer
Brian C. White
  5556  Senior Vice President and Chief Financial Officer
Vivek Jain
Edwin B. Medlin
  6064Senior Vice President and Chief Legal, Administrative, and Compliance Officer
Vivek Jain
61  Senior Vice President, Technology and Manufacturing Group
Edwin B. Medlin
Jon Imperato
  6349  Senior Vice President, Chief Legal, Administrative and Compliance Officer
Jon Imperato48Vice President, Worldwide Sales and Marketing
Bryan J. Preeshl
59Senior Vice President, Quality

Tunç Doluca
has served as a director of Maxim Integrated as well as the President and Chief Executive Officer since January 2007. He joined Maxim Integrated in October 1984 and served as Vice President from 1994 to 2004. He was promoted to Senior Vice President in 2004 and Group President in May 2005. Prior to 1994, he served in a number of integrated circuit development positions. Mr. Doluca holds a BSEE degree from Iowa State University and an MSEE degree from the University of California, Santa Barbara.

Brian C. White
joined Maxim Integrated in August 2019 as Senior Vice President and Chief Financial Officer. Mr. White most recently served as Chief Financial Officer of Integrated Device Technology, Inc. ("IDT")(IDT) from September 2013 to March 2019. Mr. White joined IDT in February 2007, and prior to becoming Chief Financial Officer, Mr. White served as Vice President of Finance and Treasurer of IDT. Before joining IDT, Mr. White held a variety of financial and operational management positions at companies including Nvidia, Hitachi GST, IBM and Deloitte. Mr. White holds a BAB.A. in Business Administration from Seattle University and an MBAM.B.A. from the University of Notre Dame.

Vivek Jain joined Maxim Integrated in April 2007 as Vice President responsible for our wafer fabrication operations. In June 2009, Mr. Jain was promoted to Senior Vice President with expanded responsibility for managing test and assembly operations in addition to wafer fabrication operations. Prior to joining Maxim Integrated, Mr. Jain was with Intel Corporation as Plant Manager for Technology Development and Manufacturing Facility in Santa Clara, California from 2000. Mr. Jain holds a BS degree in Chemical Engineering from the Indian Institute of Technology at New Delhi, an MS degree in Chemical Engineering from Penn State University, and an MS degree in Electrical Engineering from Stanford University.
Edwin B. Medlin
joined Maxim Integrated in November 1999 as Director and Associate General Counsel. He was promoted to Vice President and Senior Counsel in April 2006, was appointed General Counsel in September 2010, and he was promoted to Senior Vice President and General Counsel in May 2015. In July 2019, Mr. Medlin was promoted to Chief Legal, Administrative, and Compliance Officer and remains a Senior Vice President of the Company. Prior to joining Maxim Integrated, he was with the law firm of Ropers, Majeski, Kohn and Bentley between 1987 and 1994 where he held various positions, including director. Between 1994 and 1997, he held the positions of General Counsel, and later, General Manager, at Fox Factory, Inc., a privately held manufacturing company. Between 1997 and 1999 he held the positions of General Counsel and later, Vice President of Global Sales and Marketing, at RockShox, Inc., a publicly traded corporation. Mr. Medlin holds a degree in Economics from the University of California, Santa Barbara, and a Juris Doctorate from Santa Clara University.

Vivek Jain
joined Maxim Integrated in April 2007 as Vice President responsible for our wafer fabrication operations. In June 2009, Mr. Jain was promoted to Senior Vice President with expanded responsibility for managing test and assembly operations in addition to wafer fabrication operations. Prior to joining Maxim Integrated, Mr. Jain was with Intel Corporation as Plant Manager for Technology Development and Manufacturing Facility in Santa Clara, California from 2000. Mr. Jain holds a BS degree in Chemical Engineering from the Indian Institute of Technology at New Delhi, an MS degree in Chemical Engineering from Penn State University, and an MS degree in Electrical Engineering from Stanford University.


3
Jon Imperato
joined Maxim Integrated in 1996 as an Account Manager and held various senior management roles in sales and marketing before being promoted to Vice President of Worldwide Sales and Marketing in October 2019.2019, then to Senior Vice President in September 2020. He is responsible for the Company’s customer-facing organizations, which include Sales, Customer Operations, Field Applications Engineering, Distribution and Marketing. Mr. Imperato has over 20 years of sales experience in the semiconductor industry and has held various positions including senior account executive, sales director for Maxim Integrated’sMaxim’s partner accounts, and vice president of North America sales. Mr. Imperato earned a bachelor'sbachelor’s degree in Business Administration from Texas Christian University.
Bryan J. Preeshl
joined Maxim Integrated in 1990 as a Senior Failure Analysis Engineer and held various senior management roles in the quality organization before being promoted to Vice President of Quality in 2010. Bryan manages manufacturing quality, reliability, failure analysis, document control, and our worldwide customer quality efforts. He has implemented world-class quality and reliability processes and is ultimately responsible for our continuous quality improvement efforts. Prior to joining Maxim Integrated, Bryan held numerous quality-related positions at National Semiconductor, ZyMOS, Monolithic Memories, and Advanced Micro Devices. He is a graduate in Electronics Engineering Technology from the DeVry Institute of Technology in Phoenix, Arizona.
Board of Directors
The following paragraphs provide information as of June 26, 2021 about each director. Such information includes the age, position, principal occupation, and business experience for at least the past five (5) years, and the names of other publicly held companies of which the director currently serves as a director or has served as a director during the past five (5) years. In addition, we are providing a description of each director’s specific experience, qualifications, attributes, and skills that led the board of directors to conclude that the individual should serve as a director.
Name
  
Age
  
    Director Since    
William P. Sullivan
  71  2015
Tunç Doluca
  63  2007
Tracy C. Accardi
  61  2016
James R. Bergman
  79  1988
Joseph R. Bronson
  72  2007
Robert E. Grady
  63  2008
Mercedes Johnson
  67  2019
William D. Watkins
  68  2008
MaryAnn Wright
  59  2016
4
William (Bill) P. Sullivan
Independent
Director Since: 2015
Age: 71
Mr. Sullivan has been a director of Maxim Integrated since December 2015 and has been Chairman of the board of directors since May 2016. Mr. Sullivan served as chief executive officer of Agilent Technologies, a global provider of scientific instruments, software, services and consumables in life sciences, diagnostics and applied chemical markets, from 2005 to March 2015. Mr. Sullivan was Agilent’s president from 2005 to 2012 and 2013 to 2014. Prior to that, he served as executive vice president and chief operating officer from 2002 to 2005 and senior vice president and general manager of Agilent’s Semiconductor Products Group from 1999 to 2002. Mr. Sullivan is currently on the board of directors for Edison International and was previously a director of Agilent, Avnet, Inc., and URS Corporation. He is a graduate of the University of California, Davis.
In nominating Mr. Sullivan to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Mr. Sullivan’s experience as president and chief executive officer of a large public company, significant operational experience, and his leadership skills.
Tunç Doluca
Director Since: 2007
Age: 63
Mr. Doluca has served as a director of Maxim Integrated, as well as the President and Chief Executive Officer, since January 2007. He joined Maxim Integrated in October 1984 and served as Vice President between 1994 and 2005. He was promoted to Senior Vice President in 2004 and Group President in May 2005. Prior to 1994, he served in a number of integrated circuit development positions. Mr. Doluca is currently on the board of directors of Western Digital Corp. and is a member of the compensation committee at Western Digital and has served on the Board of Trustees of the University of California Santa Barbara Foundation since July 2017.
In nominating Mr. Doluca to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Mr. Doluca’s experience in the semiconductor industry and over thirty-five (35) years of service at Maxim Integrated, including over twenty (20) years as an officer of the Company, including his current position as the Chief Executive Officer, his technical expertise, and his executive leadership and management skills.
5
Tracy C. Accardi
Independent
Director Since: 2016
Age: 61
Ms. Accardi has been a director of Maxim Integrated since August 2016. Ms. Accardi has served as Vice President of R&D, Surgical Robotics at Medtronic since April 2019. Previously, Ms. Accardi was Vice President of Global Research and Development, Breast and Skeletal Health Solutions at Hologic from September 2014 to April 2019. Ms. Accardi was Chief Technology Officer at Omniguide Surgical from 2012 to 2014, and Executive Consultant at Mednest Consulting from 2011 to 2012, after having held senior research and development positions at Covidien from 2007 to 2011, Johnson & Johnson Company from 2003 to 2007, and Philips Medical Systems from 2001 to 2003. In prior experience, she served in various managerial roles in Corporate Research and Development, Healthcare and Aerospace at General Electric from 1981 to 2001. She received a Master of Science in Mechanical Engineering from Rensselaer Polytechnic Institute and a Bachelor of Science in Mechanical Engineering from Carnegie Mellon University.
In nominating Ms. Accardi to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Ms. Accardi’s extensive experience and knowledge of the medical device industry and her demonstrated expertise in technology development, strategic technology planning, program management, licensing and acquisition integration, clinical relationship management and all phases of product commercialization.
James R. Bergman
Independent
Director Since: 1988
Age: 79
Mr. Bergman has served as a director of Maxim Integrated since 1988. Mr. Bergman was a founder and has been General Partner of DSV Associates since 1974 and a founder and General Partner of its successors, DSV Partners III and DSV Partners IV. These firms provide venture capital and management assistance to emerging companies, primarily in high technology. Since July 1997, he has also served as a Special Limited Partner of Cardinal Health Partners and Cardinal Partners II, which are private venture capital funds. Mr. Bergman attended UCLA where he graduated with honors with a BS in Engineering and later received an MBA with distinction.
In nominating Mr. Bergman to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Mr. Bergman’s experience as a venture capitalist in technology companies, his experience and familiarity with financial statements, and his deep and fundamental understanding of Maxim Integrated’s culture, employees and products as a result of service on the board of directors for over twenty-five (25) years.
6
Joseph R. Bronson
Independent
Director Since: 2007
Age: 72
Mr. Bronson has served as a director of Maxim Integrated since November 2007. From June 2014 to July 2021, he had been Managing Director, Strategic Advisor for Cowen & Co., a New York City based investment bank. From May 2011 to March 2014 he served as an Advisory Director at GCA Savvian, LLC, a financial advisory services firm. Mr. Bronson is Principal and Chief Executive Officer of The Bronson Group, LLC, which provides financial and operational consulting services. Mr. Bronson served as the Chief Executive Officer of Silicon Valley Technology Corporation, a private company that provides technical services to the semiconductor and solar industries from 2009 to March 2010. Mr. Bronson served as President and Chief Operating Officer of
Sanmina-SCI,
a worldwide contract manufacturer, between August 2007 and October 2008, and he also served on
Sanmina-SCI’s
board of directors between August 2007 and January 2009. Before joining
Sanmina-SCI,
Mr. Bronson served as President and
Co-Chief
Executive Officer of FormFactor, Inc., a manufacturer of advanced semiconductor wafer probe cards, between 2004 and 2007. Prior to 2004, Mr. Bronson spent
twenty-one
(21) years at Applied Materials in senior-level operations management, concluding with the positions of Executive Vice President and Chief Financial Officer. In addition to Maxim Integrated, Mr. Bronson currently serves on the board of directors of PDF Solutions, Inc. After 17 years of service, Mr. Bronson retired from the board of Jacobs in January 2021.
In nominating Mr. Bronson to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Mr. Bronson’s expertise and familiarity with financial statements, financial disclosures, auditing and internal controls, his senior management level experience at large publicly traded companies and understanding of board best practices.
7
Robert E. Grady
Independent
Director Since: 2008
Age: 63
Mr. Grady has served as a director of Maxim Integrated since August 2008. Since January 2021, Mr. Grady has been an Advisory Partner at Summit Partners, a leading growth equity and venture capital firm. From 2015 to 2020, Mr. Grady was a Partner and Member of the Investment Review Committee at Gryphon Investors, a middle market-focused private equity investment firm. From 2010 to 2014, Mr. Grady was a Managing Director and Member of the Investment Committee at Cheyenne Capital Fund, a private equity investment firm, and served as the volunteer Chairman of the New Jersey State Investment Council (which oversees the state’s $79 billion pension fund). From 2000 to 2009, Mr. Grady was a Managing Director at The Carlyle Group, one of the world’s largest alternative asset management firms, where he served as a member of the firm’s Management Committee as Chairman and Fund Head of Carlyle’s U.S. venture and growth capital group, Carlyle Venture Partners (CVP); on the investment committees of CVP, Carlyle Asia Growth Partners, and Carlyle Europe Technology Partners; and as a director of multiple Carlyle portfolio companies. Between 1993 and 2000, he was a Partner and Member of the Management Committee at Robertson Stephens & Company, an emerging growth-focused investment banking firm. Previously, Mr. Grady served in the White House as Deputy Assistant to the President of the United States of America, as Executive Associate Director of the Office of Management and Budget (“OMB”), and as Associate Director of OMB for Natural Resources, Energy and Science. Mr. Grady is a former director of the National Venture Capital Association (“NVCA”), and he served as Chairman of the NVCA in 2006 and 2007. From 1993 to 2004, Mr. Grady served on the faculty of the Stanford Graduate School of Business as a Lecturer in Public Management. In addition to Maxim Integrated, Mr. Grady currently serves on the board of directors of Stifel Financial Corp., a financial services firm focused on investment banking and wealth management, of the Jackson Hole Mountain Resort, and of Summit Partners portfolio company OTR Capital. From July 2004 to June 2010, Mr. Grady also served on the board of directors of AuthenTec, Inc., a maker of fingerprint identification semiconductors, and from September 2009 to July 2010, Mr. Grady served on the board of directors of Thomas Weisel Partners Group, Inc., which was acquired by Stifel Financial Corp. Mr. Grady has also been a director of multiple privately held companies and
non-profit
organizations over the past 25 years. Currently, Mr. Grady is a Trustee of the Hoover Institution at Stanford University, and of the St. John’s Hospital Foundation; a member of the Wyoming Business Alliance; a member of the Investment Committee of the Community Foundation of Jackson Hole and of the Daniels Fund, and a member of the Council on Foreign Relations. Mr. Grady holds an A.B. degree, cum laude, from Harvard College and an M.B.A. degree from the Stanford Graduate School of Business.
In nominating Mr. Grady to serve on the board of directors, the Governance Committee considered as important factors, among other items, Mr. Grady’s extensive experience in the financial services industry, including his leadership roles at several large financial services firms, his expertise with strategic business combinations and corporate strategy development, his corporate governance experience as the chairman of a large public pension fund, and his experience as a company director.
Mercedes Johnson
Independent
Director Since: 2019
Age: 67
Ms. Johnson has served as a director of Maxim Integrated since September 2019. Ms. Johnson served as interim Chief Financial Officer at Intersil Corporation in 2013. Prior to this, Ms. Johnson served as a Founding Executive, Senior Vice President of Finance, and Chief Financial Officer of Avago Technologies (now Broadcom) from December 2005 to August 2008. She also served as the Senior Vice President, Finance of Lam Research Corporation from June 2004 to January 2005 and as Lam’s Chief Financial Officer from May 1997 to May 2004. Ms. Johnson holds a degree in Accounting from the University of Buenos Aires, Argentina and currently serves on the Board of Directors for Teradyne, Inc., Synopsys, Inc., and Millicom International Cellular SA. She also served on the Board of Directors for Juniper Networks, Inc. from May 2011 to May 2019, Micron Technology, Inc. from June 2005 to January 2019, Intersil Corporation from August 2005 to February 2017, and Storage Technology Corporation from January 2004 to August 2005.
In nominating Ms. Johnson to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Ms. Johnson’s expertise in finance, corporate development, corporate governance, management, and operations.
8

William D. Watkins
Independent
Director Since: 2008
Age: 68
Mr. Watkins has served as a director of Maxim Integrated since August 2008. Since December 2013, Mr. Watkins has been the Chief Executive Officer of Imergy Power Systems (formerly Imergy Power Solutions), a leader in battery storage technology, and served as Chairman of the Board from December 2013 to December 2017. From February 2010 to April 2013, Mr. Watkins was the Chief Executive Officer and a member of the board of directors of Bridgelux, Inc., a leading light-emitting diode (LED) developer. Mr. Watkins was Seagate Technology’s Chief Executive Officer between July 2004 and January 2009 and was a member of its board of directors between 2000 and January 2009. Previously, Mr. Watkins was Seagate’s President and Chief Operating Officer, a position he had held since 2000, and in this capacity was responsible for the company’s global hard disc drive operations. Mr. Watkins joined Seagate in 1996 as part of the company’s merger with Conner Peripherals. In addition to Maxim Integrated, Mr. Watkins currently serves on the board of directors of Flextronics International Ltd., as the Chair of the board of directors of Avaya Holdings. Watkins holds a B.S. degree in political science from the University of Texas.
In nominating Mr. Watkins to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Mr. Watkins’ operational and management experience, his experience as Chief Executive Officer, President and Chief Operating Officer of Seagate, his understanding of the electronics and semiconductor industries, as well as his expertise and familiarity with financial statements.

MaryAnn Wright
Independent
Director Since: 2016
Age: 59
Ms. Wright has been a director of Maxim Integrated since August 2016. Ms. Wright served in senior executive roles at Johnson Controls from 2007-2017, including VP/GM and CEO of Johnson Controls-Saft, Group Vice President Engineering and Product Development and Group Vice President Technology and Industry Relations. Before joining Johnson Controls, Ms. Wright was Executive Vice President of Engineering, Product Development, Commercial and Program Management at Collins & Aikman Corporation from 2006 to 2007. Prior to that, she served in several executive management positions at Ford Motor Company during her tenure from 1988 to 2005. Ms. Wright has served as a director of Group 1 Automotive, Inc., Delphi Technologies PLC, Micron Inc., and Brunswick Corporation since 2014, 2017, 2019, and 2021 respectively. She received a Master of Science in Engineering from the University of Michigan, her Master of Business Administration from Wayne State University and a Bachelor of Arts in International Studies and Economics from the University of Michigan.
In nominating Ms. Wright to serve on the board of directors, the Governance and Corporate Responsibility Committee considered as important factors, among other items, Ms. Wright’s extensive experience and knowledge of the automotive industry, her work in the area of energy storage solutions and a variety of advanced powertrain technologies, and her deep technical background.
9
Board of Directors Leadership Structure and Committee Composition
Currently, there are nine (9) members of the board of directors, consisting of William (Bill) P. Sullivan, Tunç Doluca, Tracy C. Accardi, James R. Bergman, Joseph R. Bronson, Robert E. Grady, Mercedes Johnson, William D. Watkins, and MaryAnn Wright. Mr. Sullivan, an independent director, is the Chairman of the board of directors. The Company has no fixed policy on whether the roles of Chairman and Chief Executive Officer should be separate or combined. This decision is based on the best interests of the Company and its stockholders under the circumstances existing at the time. The board of directors currently believes that it is most appropriate to separate the roles of Chairman and Chief Executive Officer in recognition of the qualitative differences between the two roles as set forth below. The Chief Executive Officer is primarily responsible for setting the strategic direction for the Company and the day to day leadership of the Company, while the Chairman presides over meetings of the full board of directors and ensures that the board of directors’ time and attention are focused on the matters most critical to the Company.
Our board of directors has the following three (3) standing committees: (1) an Audit Committee, (2) a Compensation Committee, and (3) a Governance and Corporate Responsibility Committee (the “Governance Committee”). Each of the committees operates under a written charter adopted by the board of directors. All of the committee charters are available in the Corporate Governance section of our website at
http://investor.maximintegrated.com/corporate-governance
. During fiscal year 2021, the board of directors held eleven (11) meetings and acted by written consent one (1) time. During fiscal year 2021, each director who was a director during fiscal year 2021 attended at least seventy-five percent (75%) of all meetings of the board of directors and the board committees on which he or she served that were held during the time he or she was a director in fiscal year 2021. While not mandatory, we strongly encourage our directors to attend our annual meeting of stockholders.
Independence of the Board of Directors
Our board of directors has determined that, with the exception of Mr. Doluca, Maxim Integrated’s Chief Executive Officer, all of its current members are, “independent directors” as that term is defined in the Marketplace Rules of The NASDAQ Stock Market (“NASDAQ”), including for the purposes of the Audit Committee composition requirements. Such independence definition includes a series of objective tests, including that the director not be an employee of Maxim Integrated and not be engaged in certain types of business transactions or dealings with Maxim Integrated. In addition, as further required by the NASDAQ rules, the board of directors has made a subjective determination that no relationships exist between Maxim Integrated and each director which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. The independent directors meet regularly in executive session, without members of management present.
The Board’s Role in Risk Oversight
It is management’s responsibility to identify, assess and manage the material risks that the Company faces, and the board of directors oversees management in this effort. Specifically, the board of directors’ role in the Company’s risk oversight process includes receiving periodic reports at regularly scheduled board meetings from members of senior management on areas of material risk to the Company as they arise, including financial, operational, legal, regulatory, strategic and reputational risks. The full board of directors (or the appropriate committee in the case of risks that are under the purview of a particular committee) receives these reports from a member of senior management to enable it to understand our risk identification, risk management and risk mitigation strategies. Upon receiving such reports, the board of directors provides such guidance as it deems necessary.
In general, the entire board of directors has oversight responsibility for the Company’s strategic risks, such as growth, mergers and acquisitions, and divestitures, as well as reputational risks. The Audit Committee has oversight responsibility for financial and related legal risks (such as accounting, asset management, tax strategy and internal controls). The Governance Committee oversees compliance with the Company’s Corporate Governance Guidelines and governance related laws, the Audit Committee oversees compliance with the Company’s Code of Business Conduct and Ethics, and the Compensation Committee oversees compliance with the Company’s compensation plans and related laws and policies. The Company’s Internal Audit group performs a risk assessment as part of its annual audit process and its findings regarding this assessment are presented to the Audit Committee.
Audit Committee and Audit Committee Financial Expert
The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, is currently comprised of James R. Bergman, Joseph R. Bronson, Mercedes Johnson, and William D. Watkins, each of whom is independent within the meaning of the NASDAQ director independence standards, as currently in effect. Since October 2008, Mr. Bronson has been the Chair of the Audit Committee. The board of directors has determined that Mr. Bronson is an “audit committee financial expert” as defined under the rules of the SEC. The Audit Committee has a written charter that was amended and restated effective August 8, 2013. The Audit Committee held nine (9) meetings during fiscal year 2021 and did not act by written consent during fiscal year 2021. Each member of the Audit Committee who was a member during fiscal year 2021 attended all of the Audit Committee meetings, except for Mr. Bergman, who missed one (1) meeting.
The Audit Committee performs, among other tasks, the following primary functions:
oversees the accounting, financial reporting, and audit processes of Maxim Integrated’s financial statements;
appoints Maxim Integrated’s independent registered public accounting firm;
oversees the performance of Maxim Integrated’s independent auditor;
approves the services performed by Maxim Integrated’s independent auditors; and
reviews and evaluates Maxim Integrated’s accounting principles and its system of internal controls, including its internal audit function.
10
Compensation Committee and Management Committee
The Compensation Committee is currently comprised of Tracy C. Accardi, James R. Bergman, and Robert E. Grady, each of whom is independent within the meaning of the NASDAQ director independence standards, as currently in effect. Since November 2016, Mr. Bergman has been the Chair of the Compensation Committee. The Compensation Committee has a written charter that was amended and restated effective May 8, 2018.
The Compensation Committee performs, among other tasks, the following primary functions:
annually reviews and approves corporate goals and objectives relevant to the compensation of the Chief Executive Officer and annually reviews and evaluates Maxim Integrated’s Chief Executive Officer against such approved goals and objectives;
in consultation with the Chief Executive Officer, reviews and approves the compensation of our executive officers;
administers the 1996 Stock Incentive Plan (“1996 Equity Plan”) and 2008 ESP Plan;
makes recommendations to the board of directors with respect to compensation of our directors and committee members;
oversees the preparation of the Compensation Discussion and Analysis and issues the Compensation Committee Report in accordance with the regulations of the SEC to be included in Maxim Integrated’s proxy statement or Annual Report on Form
10-K;
annually conducts an independence assessment of all compensation consultants and other advisers to it; and
performs such functions regarding compensation as the board of directors may delegate.
With respect to its review of the compensation of the Chief Executive Officer and other executive officers, and to its oversight of the 1996 Equity Plan and 2008 ESP Plan, the Compensation Committee retains an independent consultant, Radford (“Radford”), to review both the effectiveness of such programs in retaining employees and their comparability to plans offered by other companies in the semiconductor industry and the technology industry broadly.
The Compensation Committee held six (6) meetings and acted by written consent three (3) times during fiscal year 2021. Each member of the Compensation Committee attended all of these meetings.
In June 2017, the Compensation Committee amended and restated the Equity Award Grant Policy and established a Management Committee. The Management Committee is comprised of Maxim Integrated’s (i) Vice President, General Counsel, (ii) Chief Human Resources Officer, and (iii) Vice President, Corporate Controller. The Management Committee’s purpose is to make equity awards under Maxim Integrated’s Equity Award Grant Policy to newly-hired employees who are neither executive officers nor members of the Management Committee, and to provide special recognition to continuing employees who are neither executive officers nor members of the Management Committee. The Management Committee held twelve (12) meetings during fiscal year 2021 and did not act by written consent during fiscal year 2021.
Governance and Corporate Responsibility Committee
The Governance and Corporate Responsibility Committee (the “Governance Committee”) is currently comprised of MaryAnn Wright, Bill Sullivan, and Robert E. Grady, each of whom is independent within the meaning of the NASDAQ director independence standards, as currently in effect. Since August 2019, Ms. Wright has been the Chair of the Governance Committee.
The Governance Committee performs, among other tasks, the following primary functions:
assists the board of directors by identifying and recommending prospective director candidates;
develops and recommends to the board of directors the governance principles applicable to Maxim Integrated;
oversees the evaluation of the board of directors and the board of directors’ evaluation of management;
oversees the process by which the board of directors, together with management, engages and communicates with stockholders in regard to governance matters;
reviews significant environmental and corporate social responsibility issues involving the Company;
reviews and monitors the Company’s Code of Business Conduct and Ethics;
reviews the Company’s succession planning process; and
encourages board members to participate in continuing education.
The Governance Committee is responsible for regularly assessing the appropriate size of the board of directors and whether any vacancies on the board of directors are expected, due to retirement or otherwise. In the event of any anticipated vacancy, the Governance Committee has the policy of considering all bona fide candidates from all relevant sources, including the contacts of current directors, professional search firms, stockholders, and other persons. The Governance Committee has a written charter that was amended effective February 12, 2020. The Governance Committee held four (4) formal meetings during fiscal year 2021 and each member of the Governance Committee attended of all these meetings. The Governance Committee also held “ad hoc” meetings throughout the year to discuss governance matters, and the Governance Committee Chair generally provides an update to the full board of directors on governance related matters during each regular board meeting.
Code of Business Conduct and Ethics

We have a Code of Business Conduct and Ethics (the “Code of Ethics”), which applies to all directors and employees, including, but not limited to, our principal executive officer, and principal financial officer and principal accounting officer. The Code of Ethics is designed to promote: (i)(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest arising from personal and professional relationships, (ii)(2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we are required to file with the SEC and in other public communications, (iii)(3) compliance with applicable governmental laws, rules and regulations, (iv)(4) the prompt internal reporting of violations of the Code of Ethics to an appropriate person or group,entity, and (v)(5) accountability for adherence to the Code of Ethics. A copy of the Code of Ethics is available on our website at
http://www.maximintegrated.com/en/aboutus/maxim-corporate-policies.htmlinvestor.maximintegrated.com/corporate-governance
. The Company intendsA hard copy of the Code of Ethics will be sent free of charge upon request. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the Code of Business Conduct and Ethics for the Company's principal executive officer, principal financial officer or principal accounting officer by posting such information on our website.
11
Item 11. Executive Compensation
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements of our Chief Executive Officer (“CEO”), current and former Chief Financial Officer, and other three (3) most highly compensated executive officers during fiscal year 2021 (the “Named Executive Officers”) should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from programs as summarized in this discussion.
Overview
The Compensation Committee is responsible for establishing, implementing, and monitoring adherence with our compensation philosophy. As of June 26, 2021, we have six (6) executive officers, five (5) of whom are our Named Executive Officers as listed below. Details of fiscal 2021 compensation for our Named Executive Officers can be found in the Summary Compensation Table.
Named Executive Officer
Title
Tunç Doluca
President and Chief Executive Officer
Brian C. White
Senior Vice President and Chief Financial Officer
Edwin B. Medlin
Senior Vice President and Chief Legal, Administrative, and Compliance Officer
Vivek Jain
Senior Vice President, Technology and Manufacturing Group
Jon Imperato
Senior Vice President of Worldwide Sales and Marketing
This Compensation Discussion and Analysis provides a review of our executive compensation philosophy, policies and practices for our executive officers and how it applies to our Named Executive Officers specifically. The discussion focuses on our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. In this Compensation Discussion and Analysis, we address why we believe our executive compensation program is appropriate for us and our stockholders and explain how executive compensation is determined.
Executive Compensation Philosophy and Components
The objectives of our executive compensation program are as follows:
to attract, retain, motivate, and reward the best and brightest executives who have the talent and experience required to achieve our goals;
to align the short-term and long-term interests and objectives of our executive officers with our stockholders;
to create a high-performance culture by linking total rewards to Company performance, including performance relative to our peers;
to recognize our executives for their contributions to our success by rewarding individual performance; and
to ensure that our executive compensation program is easily understood by program participants and our shareholders.
We accomplish these objectives by providing our executive officers with compensation components that are specifically linked to either short-term or long-term corporate and executive performance. The majority of our executive compensation is short-term or long-term variable compensation. The principal components of our executive compensation are:
base salary;
cash performance bonuses; and
equity awards (in the form of restricted stock units and market stock units).
Each of these components is intended to achieve one or more of our compensation objectives. The Compensation Committee relies on its website.judgment in determining the appropriate mix of cash and equity compensation for our executive officers. In general, to encourage a high-performance culture and to align the interests of our executive officers with those of our stockholders, the Compensation Committee makes a significant portion of each executive officer’s compensation performance-based with cash performance bonuses and equity awards, while generally keeping base salaries modest relative to competitive market norms. Our variable cash and equity programs are designed to reward recent performance with cash compensation and to motivate long-term performance and retention through equity awards. Both programs are also designed to reward our executive officers both for individual and overall corporate performance. Such a structure allows the Compensation Committee flexibility to reward outstanding individual performance and to recognize the contributions of our executive officers to the overall success of Maxim Integrated.
Best Practices Followed at Maxim Integrated
Tax Considerations
162(m) of the Code states that public companies cannot deduct compensation paid to certain of its top executive officers in excess of $1 million per officer per year. Historically, we have believed it was in our best interest, to the extent practical, to have executive officer compensation be
fully deductible under Section 162(m). The contentsTax Cuts and Jobs Act, which was signed into law in December of 2017 (the “Tax Act”), eliminated the performance-based compensation exception, effective for fiscal years beginning after December 31, 2017, such that compensation paid to our Named Executive Officers in excess of $1 million will be not deductible unless it qualifies for transition relief applicable to certain arrangements in effect on November 2, 2017. As a result, for fiscal years beginning after December 31, 2017, certain amounts of compensation may fail to be deductible under Section 162(m). However, the Compensation Committee also retains the discretion to provide compensation that may not be fully deductible. There is no guarantee that all compensation paid by the Company will be deductible for federal income tax purposes. The Compensation Committee may decide, in its discretion, to pay incentive-based compensation or grant equity awards that may not be deductible for purposes of Section 162(m) of the Code.
Stock Ownership Guidelines
We have stock ownership guidelines for our CEO and members of our board of directors. These guidelines require our CEO to own shares of our common stock with a value of at least five (5) times his annual base salary and our
non-employee
directors to own shares of common stock with a value of at least five (5) times the annual retainer paid to
non-employee
directors. Our stock ownership guidelines are available on the Investor Relations section of our website are not incorporated intoat
http://investor.maximintegrated.com/corporate-governance
.
   
Annual
Base Salary
   
5x Annual
Base Salary
 
Chief Executive Officer
  $825,000   $4,125,000 
   
Annual
Retainer
   
5x Annual
Retainer
 
Non-Employee
Directors
  $70,000   $350,000 
Executive Compensation Recoupment Policy
The Company has a policy that provides that in the event of a material restatement of its financial results due to misconduct, the Compensation Committee shall review the facts and circumstances and take actions it considers appropriate with respect to the compensation of any executive officer whose fraud or willful misconduct contributed to the need for such restatement. Such actions may include, without limitation, seeking reimbursement of any bonus paid to such executive officer exceeding the amount that, in the judgment of the Compensation Committee, would have been paid had the financial results been properly reported.
Hedging and Pledging Prohibition on Company Securities (No Exception)
The Company has a policy that prohibits all of its executive officers and members of the board of directors from engaging in hedging transactions involving the Company’s securities. The Company also prohibits any executive officer and member of the board of directors from any future pledging of their Company securities as a collateral for a loan or holding their Company securities in a margin account. This policy is described in the “Corporate Governance and Board of Directors Matters” section of this Annual Report.Proxy Statement above. Currently, no shares of the Company have been pledged by any of the Company’s executive officers or members of the board of directors.

Governance of Executive Officer Compensation Program
ITEM 11. EXECUTIVE COMPENSATION
Role and Members of the Compensation Committee

The information requiredmembers of our Compensation Committee are appointed by our board of directors. The Compensation Committee is responsible for determining executive officer compensation. As of the record date, the Compensation Committee was comprised of three (3) members of the board of directors, Tracy C. Accardi, James R. Bergman, and Robert E. Grady, each of whom is an independent,
non-employee
director. Since November 2016, Mr. Bergman has served as Chair of the Compensation Committee.
The primary purpose of the Compensation Committee is to:
review and approve corporate goals and objectives relevant to the compensation of our CEO and other executive officers, evaluate CEO performance, and determine CEO compensation based on this itemevaluation;
approve and oversee, in consultation with our CEO, the total compensation package for certain executive officers, including their base salaries, cash performance bonuses, equity awards, severance benefits and
change-in-control
benefits (if any);
oversee its compensation consultant;
review periodically and make recommendations to the board of directors regarding any equity or long-term compensation plans, and administer these plans; and
make recommendations to the board of directors with respect to compensation for members of the board of directors and its committees.
The Compensation Committee operates according to a charter that details its specific duties and responsibilities. The Compensation Committee periodically reviews the charter and recommends proposed changes to the board of directors for approval. The Compensation Committee charter is incorporatedavailable on our website in the Corporate Governance section at
http://investor.maximintegrated.com/corporate-governance.
The charter sets forth the membership requirements, authority and duties of the Compensation Committee, which shall consist of no fewer than two (2) members, all of whom (i) meet the independence requirements of the NASDAQ rules, (ii) are
“non-employee
directors” under the definition of Rule
16b-3
promulgated under Section 16 of the Exchange Act, and (iii) are “outside directors” for purposes of the regulations promulgated under Section 162(m) of the Code. During fiscal year 2021, and currently, all members of the Compensation Committee met these criteria.
Process for Evaluating Executive Officer Performance and Compensation
The Compensation Committee generally holds at least six (6) scheduled meetings during the year and holds additional meetings periodically to review and discuss executive compensation issues. The Compensation Committee Chair will also provide an update to the board of directors during a regularly scheduled meeting regarding Compensation Committee matters when appropriate. In addition, members of the Compensation Committee communicate on an informal basis concerning Compensation Committee matters throughout the fiscal year. The Compensation Committee may also consider and take certain actions by reference fromunanimous written consent. In fiscal year 2021, the Company's Proxy StatementCompensation Committee held six (6) meetings and acted by unanimous written consent three (3) times.
Our Chief Human Resources Officer and our Corporate Secretary support the Compensation Committee in its work. The Compensation Committee also has the authority to engage the services of outside advisors, experts and others for assistance.
Outside Compensation Consultant
For fiscal year 2021, the Compensation Committee retained Radford as its independent compensation consultant. The independent compensation consultant advises the Compensation Committee and the board of directors on executive cash and equity compensation matters as well as board and board committee compensation. Radford reports directly to the Compensation Committee, and the Compensation Committee has sole authority to hire, terminate and direct the work of Radford. The Compensation Committee has assessed the independence of Radford pursuant to the NASDAQ listing standards and SEC rules and concluded that Radford’s work for the Compensation Committee does not raise any conflicts of interest. For further discussion of the role of the Compensation Committee in the executive compensation decision-making process, and for a description of the nature and scope of Radford’s assignment, see “Executive Compensation Positioning” below.
Role of Management in Executive Compensation Process
The Compensation Committee seeks input from our CEO and the Chief Human Resources Officer to obtain recommendations with respect to our compensation programs, practices and policies for executive officers. Our CEO’s role in the compensation-setting process consists of (i) evaluating executive and employee performance; (ii) assisting in the establishment of business performance targets and objectives; and (iii) recommending base salary levels and equity awards. While the Compensation Committee may discuss our CEO’s compensation package with him, it meets in executive session in his absence to determine his compensation.
Executive Compensation Positioning
In March 2021, based on the recommendations of Radford, and in consultation with our executive management, the Compensation Committee approved a compensation peer group to be used to better understand the competitive market for purposes of setting executive compensation for fiscal year 2021. In determining the appropriate compensation peer group, the Compensation Committee considered companies within the semiconductor industry that have revenue, market capitalization, number of employees, and operations similar to our corresponding components. Many of the companies in this peer group compete with us for executive talent.
The compensation peer group members for fiscal year 2021 are as follows:
Advanced Micro Devices
Analog Devices
Cree
Cirrus Logic
First Solar
KLA
Marvell Technology Group
Microchip Technology
MKS Instruments
Monolithic Power Systems
ON Semiconductor
Qorvo
Semtech*
Silicon Laboratories*
Skyworks Solutions
Teradyne
Texas Instruments*
Xilinx
*
The Compensation Committee included Texas Instruments (a larger company), Semtech, and Silicon Laboratories in the peer group for reference purposes only as each compete with us for executive talent.
The Compensation Committee does not target pay at a specific target percentile. Rather, the Compensation Committee believes that fixed compensation (primarily base salary) should be relatively modest and that variable compensation (primarily annual performance bonus and long-term incentive opportunities) should provide meaningful upside opportunities tied to performance. In addition, the Compensation Committee believes compensation opportunities should reflect Company performance, individual roles and performance and retention factors. Consistent with the foregoing, when setting each compensation component and total compensation opportunities, the Compensation Committee considers the following factors in addition to competitive market data:
the Company’s overall performance relative to peers and established objectives;
each individual’s skills, job scope, experience, and qualifications relative to other similarly-situated executives at peer companies;
the Company’s internal value for a position relative to other positions or market practices;
a subjective assessment of each individual’s contributions to the Company’s overall performance, ability to lead his or her business unit or function, work as part of a team, and reflect the Company’s core values; and
the Company’s ability to retain “critical talent.”
These factors provide the framework for our Compensation Committee’s decision-making. No single factor above is determinative in setting pay levels, nor is the impact of any one factor on the determination of pay levels quantifiable.
Evaluation of Named Executive Officer Compensation
Fiscal 2021 Compensation Plan for Executive Officers—Advisory Vote on Executive Compensation
At each of our 2019 and 2020 Annual Meetings of Stockholders, approximately ninety-five (95%) of the votes with respect to the advisory proposal on the compensation of our named executive officers were voted in favor of our executive compensation program described in the applicable year’s proxy statement. The Compensation Committee considered these results and, in light of the strong support we received from our stockholders with respect to our fiscal 2019 and 2020 executive compensation programs, the Compensation Committee did not believe that any significant changes were necessary or advisable with respect to the fiscal 2021 executive compensation program, except as stated herein.
Consequently, the fiscal 2021 executive compensation program was substantially similar to the fiscal 2020 executive compensation program.
Base Salary
Base salaries are used to attract, motivate, and retain highly qualified executives. Base salary is the primary fixed component of compensation in the executive compensation program and, in addition to the broader principles summarized above, is determined by:
level of responsibility and Company impact;
pay levels of similar positions in our peer group;
expertise and experience of the executive; and
competitive conditions in the industry.
Annual base salary increases, if any, are, in addition to the broader principles summarized above, a reflection of:
the individual’s performance for the preceding year;
the Company’s performance;
the individual’s pay level relative to similar positions in our peer group;
anticipated future contributions of the executive; and
competitive conditions in the industry.
For the Named Executive Officers, base salaries are generally relatively modest compared to the base salaries paid to similarly situated executives in the compensation peer group companies.
Fiscal 2021 Base Salary Actions
The Compensation Committee, after a review of individual and overall performance, as well as market practices for executive compensation, approved base salary increases for our Named Executive Officers, as set forth in the table below:
Named Executive Officer
Title
Annualized Fiscal

2021 Base Salary ($)
Tunç DolucaPresident and Chief Executive Officer825,000
Brian WhiteSenior Vice President and Chief Financial Officer475,000
Edwin B. MedlinSenior Vice President and Chief Legal, Administrative, and Compliance Officer445,000
Vivek JainSenior Vice President, Technology and Manufacturing Group445,000
Jon ImperatoSenior Vice President, Worldwide Sales and Marketing400,000
Fiscal 2021 Annual Cash Performance Bonuses under 2021 Compensation Plan
In September 2020, the Compensation Committee approved a cash incentive compensation plan for our CEO and executive officers, including Messrs. White, Medlin, Jain, and Imperato (the “FY21 Bonus Pool Officers”), applicable to fiscal year 2021 performance. The following is a description of the fiscal year 2021 Annual bonus pool:
Target Bonus Pool Size
: The
target
aggregate cash bonus pool was an amount equal to 0.41% of the Company’s operating income as determined under GAAP, excluding the effect of special items.
Target Operating Income
: The target operating income at the beginning of fiscal year 2021 was approximately $780 million.
Total Funded Bonus Pool
: The aggregate cash bonus funded by the Company and available for distribution to our CEO and the FY21 Bonus Pool Officers was 0.492% of actual annual operating income as determined under GAAP, excluding the effect of special items, to accommodate above nominal individual performance.
Minimum Performance Bonus
: In the event actual fiscal year 2021 operating income (excluding the impact of special items) was less than fifty percent (50%) of target operating income (excluding the impact of special items) of $780 million, no annual cash bonus would have been payable to the executive officers.
Cap on Annual Cash Bonus
: In no event would the annual cash performance bonus payable to an executive officer exceed two hundred percent (200%) of an executive officer’s annual target performance bonus amount, determined based on total funded bonus pool.
The chart below depicts the calculation of the aggregate bonus pool to be distributed to our CEO and executive officers:
Selection of Operating Income and Modulators of Bonus Pool
We selected operating income as the primary program metric (as a basis to determine the overall size of the cash bonus pool) because we deem it to be an objective and clear measure of our operating performance. It demonstrates efficiency of Company performance and aligns financial reporting with compensation calculations and cannot be easily manipulated. We selected product development execution metrics to measure
top-line
growth and productivity.
Individual Performance Goal
Our Compensation Committee (with input from our full board) evaluates the performance of our CEO based on achieving fiscal year 2021 revenue plan, achieving fiscal year 2021 product development targets, and company performance along various vectors, including, but not limited to, new technology, growth, employee talent, and other business development objectives. The Compensation Committee together with our CEO evaluates the performance of our executive officers based on various performance factors, including, but not limited to, performance goals, leadership, sense of urgency, and collaboration.
Impact Points, Allocation of Bonus Pool to Executive Officers
Each executive officer’s share of the bonus pool is dependent upon his or her impact points, which are determined at the beginning of the fiscal year and subject to adjustment following the completion of the fiscal year. The number of impact points is based in part on the executive officer’s level of responsibility and relative value of the executive officer’s impact on Maxim Integrated’s performance as compared to the other executive officers for the fiscal year. Impact points are expressed as a percentage of the pool. Each participant’s share of the bonus pool equaled the product of (a) the percentage determined by taking his or her total impact points, as approved by the Compensation Committee at the end of the fiscal year, and dividing them by the total number of impact points allocated to all executive officers, (b) their individual performance, which is measured as a percentage of the executive officer’s performance goals met over the period, and (c) the bonus pool calculated as described above.
Formula to Calculate Individual Bonuses:
Individual Impact Points %
XIndividual Performance Goal %XPerformance Bonus Pool=Performance Bonus
Actual Results for Fiscal Year 2021 under Cash Bonus Pool and Bonus Payouts to Executive Officers
In September 2021, the Compensation Committee approved cash bonuses for our CEO and the FY21 Bonus Pool Officers for their performance during fiscal year 2021. The following are actual results for fiscal year 2021:
Fiscal Year 2021 Operating Income
: The Company’s fiscal year 2021 operating income as determined under GAAP, excluding the effect of special items, was $1,019 million compared to $712 million in fiscal year 2020, a forty-three (43%) increase.
Fiscal Year 2021 Total Bonus Payouts
: The total cash bonus funded by the Company and available for distribution to our CEO and the FY21 Bonus Pool Officers was $5.0 million, of which $4.98 million was distributed to our CEO and the FY21 Bonus Pool Officers.
Fiscal Year 2021 Performance Bonuses Paid to the Named Executive Officers
The table below sets forth each Named Executive Officer’s performance bonus as approved by the Compensation Committee for fiscal year 2021 performance:
Named Executive Officer
  
Impact Points

(As a %)
   
FY21 Target Performance

Bonus

($)
   
FY21

Performance Bonus

Payment ($)
   
FY21 Mid-Year

Performance
Bonus ($)
(1)
   
Amount of FY21
Performance
Bonus Paid ($)
 
Tunç Doluca   40    1,350,800    2,068,000    675,500    1,392,500 
Brian White   13    439,000    661,000    219,500    441,500 
Edwin B. Medlin   13    405,200    672,000    202,500    469,500 
Jon Imperato   12    405,200    610,000    202,500    407,500 
Vivek Jain   12    371,500    610,000    185,500    424,500 
(1)
The FY21
Mid-Year
Performance Bonus paid December 11, 2021 will be subtracted from the FY21 Performance Bonus Payment.
Equity Compensation under 2021 Compensation Program
We believe equity compensation is an effective way to align the interests of our executive officers with those of our stockholders in order to achieve long-term stock price growth. In designing our equity compensation program, we take into account stockholder concerns about stock usage and dilution. Equity awards are granted by the Compensation Committee or the Management Committee at duly noticed meetings. In fiscal 2021, we utilized a mix of restricted stock units and market stock units to compensate our executive officers. We believe that market stock units align our executive officers’ interests with those of our stockholders, as the executive officers benefit from future stock price appreciation relative to an index, while restricted stock units also align our executive officers’ interests with those of our shareholders while also promoting strong current retention incentives for Maxim Integrated’s executive officers.
We did not grant any stock options or market stock units in fiscal year 2021.
Equity Awards for Fiscal Year 2021
Restricted Stock Awards
Our Named Executive Officers were granted an aggregate of 174,624 restricted stock awards in September 2020. These restricted stock awards vest in equal amounts over four (4) quarters in 2024, subject to continued service through each such date and, for certain individuals satisfying specific eligibility requirements, continued vesting post-employment.
Although we believe that long-term equity incentives are an important part of our compensation program and that they align the interests of our executives with those of our stockholders, we also recognize the importance of limiting the stockholder dilution associated with our equity compensation programs.
The table below depicts the number of restricted stock awards granted to the Named Executive Officers in fiscal year 2021:
Name
# of Restricted Stock

Awards Granted in
Sept. 2020
Tunç Doluca
81,576
Brian White
22,764
Edwin B. Medlin
21,012
Vivek Jain
19,260
Jon Imperato30,012
Employee Stock Purchase Plan
Our stockholders approved the 2008 ESP Plan at the 2008 Annual Meeting of Stockholders and approved amendments to the 2008 ESP Plan to increase the number of shares available for issuance under the headings “Director2008 ESP Plan at each of the Annual Meetings of Stockholders held from 2009 to 2017. Pursuant to the 2008 ESP Plan, employees and officers who meet certain eligibility qualifications are able to purchase Maxim Integrated’s common stock at a discount of up to fifteen percent (15%) from the market price of such shares on the offer date or purchase date, whichever is lesser. Employee contributions are made through payroll deductions. In November 2020, the final purchase of shares was made under ESP Plan and no additional contributions or purchases were made thereafter in accordance with the terms of the Merger Agreement between the Company and Analog Devices.
Benefits and Perquisites
Maxim Integrated’s philosophy regarding benefits for our employees, including executive officers, is that they should be competitive with the market in order to attract and retain a high-quality workforce, meet the needs of our employees, encourage employee well-being, and provide protection from catastrophic events. We provide medical, dental and vision insurance coverage to executives that are generally available to other full-time employees, including basic group life insurance and disability insurance. We also offer a tax qualified 401(k) plan in which all U.S. based employees, including officers, are eligible to participate. All of our Named Executive Officers participated in our 401(k) plan during fiscal year 2021. In fiscal year 2021, employees were eligible to receive a matching contribution from Maxim Integrated equal to one hundred percent (100%) of the first three percent (3%) of
before-tax
contributions made by the employee, and fifty percent (50%) of the next two percent (2%) of
before-tax
contributions made by the employee subject to a maximum annual cap of $10,000.
The Compensation Committee reviews the perquisites provided to executive officers as part of its overall review of executive compensation. The Compensation Committee has determined the type and amount paid in perquisites to be within the appropriate range of competitive compensation practices. Details regarding the Named Executive Officer’s perquisites, including the fiscal year 2021 cost to Maxim Integrated, are shown in the Summary Compensation Table under the “All Other Compensation” column and the accompanying narrative.
Employment Agreements
Several years ago, we entered into an
at-will
employment agreement with Mr. Doluca. The agreement does not grant any right to be retained by us, and we may terminate the employment of Mr. Doluca either with or without cause at any time. In the event of any termination of employment by Maxim Integrated, all compensation and benefits, except benefits provided by law (e.g., COBRA health insurance continuation benefits) immediately cease to accrue. However, in the event of termination of employment by Maxim Integrated without cause, severance payments are to be made in accordance with our normal policy then in effect, if any, or as otherwise mutually agreed between Maxim Integrated and Mr. Doluca.
This agreement provides that if Mr. Doluca terminates his full-time employment with us and his written notice of termination provides that he is willing to provide certain consulting services to us, we will make health insurance coverage available to him and his family during the period of provision of such services (or willingness to provide services) by Mr. Doluca. The terms of his service, unless otherwise agreed, will provide for part-time services (up to one (1) day per month) and annual compensation equal to at least five percent (5%) of his base salary at the time of termination, provided that services are rendered. Health insurance coverage will be similar to that under the group health plan we maintain for our employees.
During the
ten-year
period following the notice of termination, Mr. Doluca will pay the same amount for health coverage as a similarly situated full-time employee is required to pay for coverage under our group health plan. After such
ten-year
period, he will pay us an amount equal to the cost to the Company of similar coverage under the Company’s group health plans. In the event of Mr. Doluca’s death while receiving health insurance coverage, his spouse is eligible for health insurance coverage until death so long as the surviving spouse pays for the coverage. In the event Mr. Doluca becomes disabled while receiving health insurance coverage, he is deemed to have met his service obligations to us during the disability period. Upon reaching age sixty-five (65), Medicare becomes the primary payer of medical expenses incurred by Mr. Doluca. All of such continued health insurance coverage terminates upon the occurrence of certain disqualifying events, including, but not limited to, if he competes with Maxim Integrated or becomes eligible for health insurance coverage elsewhere. In addition, Mr. Medlin is eligible to participate in our executive retiree medical benefit program.
Post-Employment Obligations
The
at-will
employment agreement with Mr. Doluca provides that in the event of termination of employment by Maxim Integrated without cause, severance payments are to be made in accordance with our normal policy then in effect, if any, or as otherwise mutually agreed between Maxim Integrated and Mr. Doluca. Maxim Integrated does not currently have any normal policy with respect to severance payments to former executives.
Reasonableness of Compensation
The Compensation Committee believes it is fulfilling our compensation objectives and in particular rewarding executive officers in a manner that supports our
pay-for-performance
philosophy. Executive compensation is tied to our performance and is structured to ensure that there is an appropriate balance between our long-term and short-term performance, and also a balance between our operational performance and stockholder return. The Compensation Committee believes the average target pay position relative to market and pay mix are reasonable and appropriate.
Compensation Committee Report
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management and, based on such review and discussions, our Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Form
10-K
for the fiscal year ended June 26, 2021.
Compensation Committee
James R. Bergman, Chair
Tracy C. Accardi
Robert E. Grady
Summary Compensation Table
The compensation for Maxim Integrated’s Named Executive Officers for all services rendered in all capacities to Maxim Integrated and its subsidiaries during the fiscal years ended June 26, 2021, June 27, 2020, and June 29, 2019 is set forth below.
               
Stock Awards
   
Non-Equity

Incentive
Plan
Compensation
($) 
(4)
         
Name and Principal Position
  
Year
   
Salary
($)
   
Bonus
($)
   
Restricted
Stock Unit
Awards
($) 
(1)(2)
   
Market
Share Unit
Awards
($) 
(3)
   
All Other
Compensation
($) 
(5)
   
Total

($)
 
Tunç Doluca
President and
Chief Executive Officer
   2021    825,000    —      5,656,888    —      2,068,000    10,000    8,559,888
   2020    825,000    —      1,842,173    3,390,306    1,263,000    10,000    7,330,479
   2019    800,000    —      2,777,905    4,226,880    1,329,000    10,000    9,143,785
Brian White
(6)
Senior Vice President
Chief Financial Officer
   2021    475,000    —      1,578,570    —      661,000    10,731    2,725,301 
   2020    475,000    —      5,488,565    983,068    447,000    8,769    7,402,422 
                
Edwin B. Medlin
Senior Vice President and
Chief Legal, Administrative,
and Compliance Officer
   2021    445,000    —      1,457,077    —      672,000    10,000    2,584,077 
   2020    445,000    —      899,124    842,599    453,000    8,900    2,648,623
   2019    420,000    —      449,954    996,336    471,000    7,754    2,345,044
Vivek Jain
Senior Vice President,
Technology and
Manufacturing Group
   2021    445,000    —      1,335,585    —      610,000    10,000    2,400,585
   2020    445,000    —      414,968    772,364    408,000    10,200    2,050,532
   2019    435,000    —      449,954    996,336    455,000    11,669    2,347,959
Jon Imperato
(7)
Senior Vice President
Worldwide Sales and
Marketing
   2021    400,000    —      2,081,182    —      610,000    6,769    3,097,951 
   2020    375,000    —      2,518,651    131,499    445,000    10,165    3,480,315 
                
(1)
The aggregate grant date fair value of restricted stock units awarded in fiscal years 2021, 2020, and 2019, respectively, computed in accordance with FASB ASC Topic 718. In each case, the aggregate grant date fair value disregards an estimate of forfeitures. The assumptions used in the valuation of these awards are set forth in Note 7, “Stock-Based Compensation,” of the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K
for the fiscal year ended June 26, 2021.
(2)
For fiscal year 2021, the Compensation Committee approved the grant of restricted stock awards (“RSAs”) to the executive officers pursuant to the standard form of restricted stock agreement. The RSAs vest in equal amounts over four (4) quarters in 2024, subject to continued service through each such date and, for certain individuals satisfying specific eligibility requirements, continued vesting post-employment. The data presented for fiscal years 2019 and 2020 concern restricted stock units (“RSUs”).
(3)
Represents the aggregate grant date fair value of MSUs awarded in fiscal years 2020 and 2019 computed in accordance with FASB ASC Topic 718. The aggregate grant date fair value disregards an estimate of forfeitures. The assumptions used in the valuation of these awards are set forth in Note 7, “Stock-Based Compensation,” of the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K
for the fiscal year ended June 26, 2021. No MSUs were awarded in fiscal year 2021.
(4)
Reflects payments earned under the
non-equity
incentive plan that were paid in the subsequent fiscal year. These payments are performance bonuses under Maxim Integrated’s bonus plan for officers.
(5)
2019, 2020 and 2021 include Company paid matching 401(k) contributions.
(6)
Mr. White was appointed Chief Financial Officer of the Company in August 2019 and was not a named executive officer for fiscal year 2019.
(7)
Mr. Imperato was not a named executive officer for fiscal year 2019.
Grants of Plan-Based Awards
The following table shows certain information regarding grants of plan-based awards to the Named Executive Officers for the fiscal year ended June 26, 2021, which includes estimated possible performance bonuses under our cash bonus plan and equity grants.
Grants of Plan-Based Awards in Fiscal Year 2021
   
Grant
Date
   
Estimated Possible Payouts under

Non-Equity Incentive Plan Awards
   

All Other Stock
Awards: Number
of Restricted
Stock & Market
Stock Units
(#)
   
Grant Date

Fair Value of

Stock Awards

($) 
(2)
 
 
 
 
Name
  
Target
($) 
(1)
 
Tunç Doluca
   9/1/2020    2,068,000    81,576    5,656,888
Brian White
   9/1/2020    661,000    22,764    1,578,570
Edwin B. Medlin
   9/1/2020    672,000    21,012    1,457,077
Vivek Jain
   9/1/2020    610,000    19,260    1,335,585
Jon Imperato
   9/1/2020    610,000    30,012    2,081,182 
(1)
An individual’s target is calculated based on such individual’s impact points and the target aggregate cash bonus pool equal to 0.41% of the target operating income at the beginning of fiscal year 2021, which was approximately $780 million. In the event actual fiscal year 2021 operating income (excluding the impact of special items) was less than fifty percent (50%) of target operating income (excluding the impact of special items) of $780 million, no annual cash bonus would have been payable to the executive officers. In no event would the annual cash performance bonus payable to an executive officer exceed two hundred percent (200%) of an executive officer’s annual target performance bonus amount, determined based on total funded bonus pool.
(2)
This column reflects the aggregate grant date fair value of all awards on the grant date computed in accordance with FASB ASC 718 and disregards an estimate of forfeitures related to service-based vesting conditions. The assumptions used in the valuation of these awards are set forth in Note 7, “Stock-Based Compensation,” of the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K
for the fiscal year ended June 26, 2021.
Outstanding Equity Awards at June 26, 2021
The following table provides certain information regarding outstanding equity awards as of June 26, 2021 held by the Named Executive Officers.
Outstanding Equity Awards at June 26, 2021
   
Option Awards
   
Restricted Stock Unit Awards
   
Market Stock Unit Awards
 
Name
  
Number of
securities
underlying
unexercised
options (#)
exercisable
   
Number of
securities
underlying
unexercised
options (#)
unexercisable
   
Option
exercise
price

($)
   
Option
expiration
date
   
Number of
shares or units
of stock that
have not vested
(#)
  
Market value
of shares or
units of stock
that have not
vested

($) 
(1)
   
Number of
shares or
units of stock
that have not
vested

(#)
  
Market value of

shares or units

of stock that

have not

vested

($) 
(2)
 
Tunç Doluca
   —      —      —      —      38,626(3)   3,965,345    181,980(4)   18,682,067
Brian White
   —      —      —      —      76,532(5)   7,856,775    17,972(6)   1,845,006
Edwin B. Medlin
     —          17,963(7)   1,844,082    46,204(8)   4,743,303
Vivek Jain
   —      —      —      —      9,119(9)   936,157    44,920(10)   4,611,487
Jon Imperato
   —      —      —      —      47,377(11)   4,863,723    7,356(12)   755,167
(1)
Market value is computed by multiplying the closing price ($102.66 per share) of Maxim Integrated’s common stock on the last trading day of the fiscal year (June 26, 2021) by the number of shares reported in the adjacent left column.
(2)
Market value is computed by multiplying the closing price ($102.66 per share) of Maxim Integrated’s common stock on the last trading day of the fiscal year (June 26, 2021) by the number of shares reported in the adjacent left column.
(3)
38,626 shares vest in quarterly installments during calendar year 2024.
(4)
64,000 shares vest on August 15, 2021 and 56,000 shares vest on August 15, 2022 and 61,980 shares vest on August 15, 2023, respectively, if specific performance metrics are met.
(5)
14,176 shares vest over two (2) consecutive quarters beginning on August 15, 2021. 28,352 shares vest in quarterly installments during calendar year 2022 and 11,240 shares vest in quarterly installments during calendar year 2023 and 22,764 shares vest in quarterly installments during calendar year 2024.
(6)
17,972 shares vest on August 15, 2023, if specific performance metrics are met.
(7)
1,993 shares vest over two (2) consecutive quarters beginning on August 15, 2021. 3,175 shares vest in quarterly installments during calendar year 2022 and 2,846 shares vest in quarterly installments during calendar year 2023 and 9,949 shares vest in quarterly installments during calendar year 2024.
(8)
17,600 shares vest on August 15, 2021 and 13,200 shares vest on August 15, 2022 and 15,404 shares vest on August 15, 2023, respectively, if specific performance metrics are met.
(9)
9,119 shares vest in quarterly installments during calendar year 2024.
(10)
17,600 shares vest on August 15, 2021 and 13,200 shares vest on August 15, 2022 and 14,120 shares vest on August 15, 2023, respectively, if specific performance metrics are met.
(11)
7,288 shares vest over two (2) consecutive quarters beginning on August 15, 2021. 15,216 shares vest in quarterly installments during calendar year 2022 and 14,925 shares vest in quarterly installments during calendar year 2023 and 9,948 shares vest in quarterly installments during calendar year 2024.
(12)
2,756 shares vest on August 15, 2021 and 2,196 shares vest on August 15, 2022 and 2,404 shares vest on August 15, 2023, respectively, if specific performance metrics are met.
Option Exercises and Stock Vested
The following table provides certain information regarding option exercises and vesting of restricted stock units and market stock units with respect to the Named Executive Officers during fiscal year 2021.
Option Exercises and Stock Vested in Fiscal Year 2021
   
Option Awards
   
Restricted Stock and Market Stock
Unit Awards
 
Name
  
Number of shares
acquired on
exercise (#)
   
Value realized on
exercise

($) 
(1)
   
Number of shares
acquired on
vesting (#)
   
Value realized on

vesting

($) 
(2)
 
Tunç Doluca
   —      —      141,458    11,572,467
Brian White
   —      —      28,352    2,401,769
Edwin B. Medlin
   12,830    522,610    33,004    2,786,904
Vivek Jain
   —      —      34,084    2,847,536
Jon Imperato
   —      —      13,959    1,170,672
(1)
The value realized on exercise is the number of shares acquired on exercise multiplied by the difference between the market price upon exercise and the exercise price.
(2)
The value realized is the number of shares vesting multiplied by the fair market value of Maxim Integrated’s common stock on the respective vesting date.
Non-Qualified
Deferred Compensation
We do not have any
non-qualified
deferred compensation agreements, plans or arrangements for and as of the year ended June 26, 2021 with respect to the Named Executive Officers.
Employment Contracts and Change in Control Arrangements
Mr. Doluca is a party to an agreement with us, pursuant to which he may be entitled to certain severance payments and benefits under the specified circumstances.
For further information and detail regarding the above-mentioned agreements and change in control arrangements, please see “Compensation Discussion and Analysis,” “CompensationAnalysis” contained in this proxy statement.
Change-of-Control,
No
Gross-Ups
We currently have a “double trigger”
change-of-control
plan (the “Severance Plan”) covering all of our full-time employees, including our Named Executive Officers. The Severance Plan provides for the payment of certain benefits in the event a Named Executive Officer is terminated without cause or resigns for good reason during the twenty-four (24) month period following a
change-of-control
of Maxim Integrated or within the period following the public announcement of, but prior to, the closing of a
change-of-control
event. In serving the interest of stockholders, the Severance Plan is designed to help retain the employees of the Company, help maintain a stable work environment and provide certain economic benefits to employees in the event their employment is terminated in the circumstances described below.
A
change-of-control
is defined as:
a merger or consolidation of Maxim Integrated in which more than fifty percent (50%) of the outstanding voting power changes hands;
a sale of all or substantially all of Maxim Integrated’s assets;
the acquisition of more than fifty percent (50%) of Maxim Integrated’s voting power by any person or group; or
a change in the composition of our board of directors, such that a majority of directors are no longer “Incumbent Directors” (Incumbent Directors are directors as of the date the
change-of-control
plan was implemented and directors elected other than in connection with an actual or threatened proxy contest).
If, during the twenty-four (24) month period following the
change-of-control
or within the period following the public announcement of, but prior to, the closing of a
change-of-control
event, the Named Executive Officer’s employment is terminated for reasons other than cause (as defined in the Severance Plan) or the individual terminates employment for good reason (as defined in the Severance Plan), then the Named Executive Officer will receive a lump sum cash payment consisting of:
base salary not yet paid through the date of termination and all unpaid vacation pay;
a severance payment equal to two (2) times the Named Executive Officer’s annual base salary in effect immediately prior to the date of termination; and
a severance payment equal to two (2) times the FY21 performance bonus target.
In addition, all unvested stock options, restricted stock units, and market stock units are accelerated and become fully vested upon a
change-of-control
and a termination without cause (or resignation for good reason) occurring within twenty-four (24) months following the
change-of-control
or within the period following the public announcement of, but prior to, the closing of a
change-of-control
event. Also, each Named Executive Officer is eligible to receive continued health insurance benefits at the Company’s cost for twenty-four (24) months. The Named Executive Officers are not entitled to receive a
gross-up
amount to compensate the officer for any golden parachute excise taxes imposed by the Code. Our board of directors retains the absolute right to modify and/or terminate the
change-of-control
plan and the benefits thereunder at any time before the occurrence of a
change-of-control.
If there had been a termination of employment without cause during the twenty-four (24) month period following a
change-of-control
of Maxim Integrated or within the period following the public announcement of, but prior to, the closing of a
change-in-control
event, then assuming such termination occurred at the end of fiscal year 2021, the amounts we estimate that would have been paid to the Named Executive Officers are set forth in the table below. The actual amounts that would be paid out can only be determined at the time the Named Executive Officer is terminated from employment.
Potential Payments upon Termination Related to a Change of Control
The amounts that could be potentially paid upon a termination related to a change of control event are estimated based on an assumed triggering date of June 25, 2021, and a price per share of $102.66 of Maxim Integrated’s common stock. The performance bonus payment is equal to two times the named executive officer’s target annual cash performance bonus for the year in which the termination occurs. The cost of health insurance benefits is the estimated value of the continuation of medical, vision, and dental benefits for up to twenty-four (24) months following the qualifying termination at Maxim Integrated’s sole expense, which are “double-trigger” benefits payable following a qualifying termination under the severance plan. For Messrs. Doluca and Medlin, the amounts in the table also include the estimated value of the continued health insurance coverage (after the twenty-four (24) month period provided under the Severance Plan) provided by Maxim Integrated under the terms of Mr. Doluca’s Employment Agreement dated September 30, 1993, with Maxim Integrated and Mr. Medlin’s Retiree Medical Agreement dated August 14, 2012 with Maxim Integrated, respectively, following a termination of employment.
The value of the accelerated vesting of market stock units is calculated by multiplying $102.66 per share of Maxim Integrated’s common stock by the number of outstanding market stock units at 100% of target on June 25, 2021. The equity and equity-based awards outstanding and unvested, such as restricted stock units and market stock units, will fully vest in the event a named executive officer experiences a qualifying termination under the severance plan. As previously noted, the assumed triggering date is June 25, 2021.
Name
  
Type of Payment
     
Payments Upon
Involuntary or Good
Reason Termination
related to a Change of
Control ($)
 
Tunç Doluca
  
Base salary
     1,650,000
  
Performance Bonus
     2,701,600
  
Health plan coverage
     147,984(1) 
  
Accelerated Vesting of Unvested Equity Awards:                
    
  
Restricted Shares
     3,965,345
  
Market Stock Units
     18,682,067
      
 
 
 
  
Total
    
 
27,146,996
 
      
 
 
 
Brian White
  
Base salary
     950,000
  
Performance Bonus
     878,000
  
Health plan coverage
     54,008(1) 
  
Accelerated Vesting of Unvested Equity Awards:
    
  
Restricted Shares
     2,336,952
  
Restricted Stock Units
     5,519,823
      
 
 
 
  
Total
    
 
9,738,783
 
      
 
 
 
Edwin B. Medlin
  
Base salary
     890,000
  
Performance Bonus
     810,400
  
Health plan coverage
     219,556(1) 
  
Accelerated Vesting of Unvested Equity Awards:
    
  
Restricted Shares
     1,021,364
  
Market Stock Units
     4,743,303
  
Restricted Stock Units
     822,717 
      
 
 
 
  
Total
    
 
8,506,940
 
      
 
 
 
Vivek Jain
  
Base salary
     890,000
  
Performance Bonus
     743,000
  
Health plan coverage
     29,944(1) 
  
Accelerated Vesting of Unvested Equity Awards:
    
  
Restricted Shares
     936,157
  
Market Stock Units
     4,611,487
      
 
 
 
  
Total
    
 
7,210,588
 
      
 
 
 
Jon Imperato
  
Base salary
     800,000 
  
Performance Bonus
     810,400 
  
Health plan coverage
     54,008(1) 
  
Accelerated Vesting of Unvested Equity Awards:
    
  
Restricted Shares
     1,385,807 
  
Market Stock Units
     755,167 
  
Restricted Stock Units
     3,477,915 
      
 
 
 
  
Total
    
 
7,283,297
 
      
 
 
 
(1)
Health plan coverage is an estimate based on 2020 data.
Director Compensation
Cash Compensation
The cash compensation structure for
non-employee
directors in fiscal year 2021 was as follows:
Director
  
Annual
Retainer ($)
  
Audit Committee

Retainer ($)
  
Compensation

Committee

Retainer ($)
  
Governance

and Corporate
Responsibility
Committee

Retainer ($)
  
Total

Retainer ($) 
(3)
 
Tracy C. Accardi
   70,000    10,000    80,000 
James R. Bergman
   70,000   12,000   20,000(2)    102,000 
Joseph R. Bronson
   70,000   33,000(2)     103,000 
Robert E. Grady
   70,000    10,000   5,000   85,000 
Mercedes Johnson
   70,000   12,000     82,000 
William P. Sullivan
   71,500(1)     5,000   76,500 
William D. Watkins
   70,000   12,000     82,000 
MaryAnn Wright
   70,000     15,000(2)   85,000 
(1)
Receives a higher retainer as a result of serving as Chairman of the board of directors.
(2)
Receives a higher retainer as a result of serving as Committee Chair.
(3)
All retainer fees are paid quarterly in arrears and Maxim Integrated reimburses each director for reasonable expenses incurred in attending meetings of the board of directors or its committees.
The compensation for services as directors is reviewed on an annual basis by the Compensation Committee Report” and “Executive Compensation.”the board of directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

Non-employee
directors participate in the 1996 Equity Plan. On November 5, 2020, the board of directors, based upon the recommendation of the Compensation Committee, determined that each
non-employee
director should be awarded 2,827 restricted stock units vesting in full on January 15, 2021. Restricted stock units are awarded on an annual basis and vest in full in January. Equity awards to
non-employee
directors are generally made at the meeting of the board of directors immediately following their
re-election
to the board of directors.
The following table shows certain information required by this item is incorporated by reference from the Company's Proxy Statementregarding
non-employee
director compensation for the 2020 Annual Meetingfiscal year ended June 26, 2021 (except as otherwise noted):
Director Compensation for Fiscal Year 2021
Name
  
Fees earned or paid in

cash ($)
   
Restricted Stock Unit

Awards ($) 
(1)
   
Total ($)
 
Tracy C. Accardi
   80,000    220,195    300,195 
James R. Bergman
   102,000    220,195    322,195 
Joseph R. Bronson
   103,000    220,195    323,195 
Robert E. Grady
   85,000    220,195    305,195 
Mercedes Johnson
   82,000    220,195    302,195 
William P. Sullivan
   76,500    220,195    296,695 
William D. Watkins
   82,000    220,195    302,195 
MaryAnn Wright
   85,000    220,195    305,195 
(1)
Represents the aggregate grant date fair value of grants of restricted stock units made in connection with fiscal year 2021, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718. Each of Mses. Accardi, Johnson, and Wright, and each of Messrs. Bergman, Bronson, Grady, Sullivan, and Watkins were awarded 2,827 restricted stock units on November 5, 2020 in connection with their service on the board of directors, and the aggregate grant date fair value of each of these awards was $220,195. The assumptions used in the valuation of these awards are set forth in Note 7, “Stock-Based Compensation” of the Notes to Consolidated Financial Statements in our Annual Report on Form
10-K
for the fiscal year ended June 26, 2021.
The following table sets forth certain information regarding the ownership of Stockholders underMaxim Integrated’s common stock as of June 26, 2021, the heading “Equity Compensation Plan Information”last day of fiscal year 2021, by each
non-employee
director:
Name
  
Number of Shares
(1)
 
Tracy C. Accardi
   18,731 
James R. Bergman
   66,162(2) 
Joseph Bronson
   19,874 
Robert E. Grady
   10,216 
Mercedes Johnson
   7,029 
William P. Sullivan
   25,795 
William D. Watkins
   11,689 
MaryAnn Wright
   14,641 
(1)
Includes shares held in custodian accounts and by trust, if any. See table titled “Security Ownership of Certain Beneficial Owners, Directors and Management” in this proxy statement for more detail and additional information.
(2)
This does not include 11,000 shares held by the Family Foundation.
Item 12. Security Ownership of Certain Beneficial Owners and “SecurityManagement and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners, Directors and Management.”Management

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The following table sets forth certain information regarding the ownership of Maxim Integrated’s common stock as of June 26, 2021, by: (1) each current director; (2) each current Named Executive Officer; (3) all current executive officers and directors as a group; and (4) all those known by Maxim Integrated to be beneficial owners of more than five percent (5%) of its common stock. The number of shares beneficially owned is determined under the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.
   
Beneficial Ownership 
(1)
 
Beneficial Owner
  
Number of

Shares
   
Percent of

Total (%)
 
5% Shareholders:
          
The Vanguard Group.
(2)
   30,044,172    11.24 
T. Rowe Price Associates, Inc.
(3)
   25,847,786    9.6 
BlackRock, Inc.
(4)
   21,653,203    8.1 
State Street Corporation
(5)
   14,771,016    5.53 
   
Directors:
          
Tracy C. Accardi, Director
   18,731    * 
James R. Bergman, Director
(6)
   77,162    * 
Joseph Bronson, Director
(7)
   19,874    * 
Robert E. Grady, Director
(8)
   10,216    * 
Mercedes Johnson, Director
   7,029    * 
William P. Sullivan, Director
(9)
   25,795    * 
William D. Watkins, Director
(10)
   11,689    * 
MaryAnn Wright, Director
   14,641    * 
Named Executive Officers:
          
Tunç Doluca, President, Chief Executive Officer and Director
(11)
   1,219,916    * 
Brian White, Senior Vice President and Chief Financial Officer
   111,699    * 
Edwin B. Medlin, Senior Vice President and Chief Legal, Administrative, and Compliance Officer
   66,088    * 
Vivek Jain, Senior Vice President, Technology and Manufacturing Group
   37,127    * 
Jon Imperato, Senior Vice President, Worldwide Sales and Marketing
   47,382    * 
Bryan Preeshl, Senior Vice President, Quality
   10,814      
All executive officers and directors as a group (14 persons)
(12)
   1,678,163    * 
*
Less than one percent (1%)
(1)
This table is based upon information supplied by officers, directors, principal stockholders and Maxim Integrated’s transfer agent, and contained in Schedules 13G filed with the SEC. Unless otherwise indicated, the address of each person or entity listed is c/o Maxim Integrated Products, Inc., 160 Rio Robles, San Jose, California 95134. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on shares outstanding on June 26, 2021 adjusted as required under rules promulgated by the SEC.
(2)
Based on information set forth in the Schedule 13G/A filed with the SEC by The Vanguard Group on February 10, 2021 relating to beneficial ownership of Maxim common stock as of December 31, 2020, and reporting shared voting power over 437,647 shares of Maxim common stock, sole dispositive power over 28,861,210 shares of Maxim common stock and shared dispositive power over 1,182,962 shares of Maxim common stock.
(3)
Based on information set forth in the Schedule 13G/A filed with the SEC by T. Rowe Price Associates, Inc. on February 16, 2021 relating to beneficial ownership of Maxim common stock as of December 31, 2020, and reporting sole voting power over 10,005,901 shares of Maxim common stock and sole dispositive power over 25,847,786 shares of Maxim common stock.
(4)
Based on information set forth in the Schedule 13G/A filed with the SEC by BlackRock, Inc. on February 5, 2021 relating to beneficial ownership of Maxim common stock as of December 31, 2020, and reporting sole voting power over 18,859,379 shares of Maxim common stock and sole dispositive power over 21,653,203 shares of Maxim common stock.
(5)
Based on information set forth in the Schedule 13G filed with the SEC by State Street Corporation on February 10, 2021 relating to beneficial ownership of Maxim common stock as of December 31, 2020, and reporting shared voting power over 12,971,059 shares of Maxim common stock and shared dispositive power over 14,733,322 shares of Maxim common stock.
(6)
Includes 11,000 shares held by the Bergman Family Foundation for which Mr. Bergman disclaims beneficial ownership.
(7)
Includes 400 shares held by custodian accounts.
(8)
Includes 4,027 shares held by trust.
(9)
Includes 25,795 shares held by living trust.
(10)
Includes 8,327 shares held by trust.
(11)
Includes 1,181,290 shares held by trust.
(12)
Includes 1,230,839 shares held by trust, custodian accounts and family foundations as set forth above.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent (10%) of a registered class of Maxim Integrated’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of Maxim Integrated. Executive officers, directors, and greater than ten percent (10%) stockholders are required by this item is incorporated by reference fromSEC regulation to furnish us with copies of all Section 16(a) forms they file.

To the Company’s Proxy Statement for the 2020 Annual Meetingbest of Stockholders under the headings “Corporate Governance and Board of Directors Matters” and “Certain Relationships and Related Transactions.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference from the Company's Proxy Statement for the 2020 Annual Meeting of Stockholders under the headings “Reportour knowledge, based solely on a review of the Audit Committeecopies of the Board of Directors” and “Independent Public Accountants.”



PART IV


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following are filed as part of this Report:

    Page
 (1)Financial Statements 
38
  Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019 
38
  Consolidated Statements of Income for each of the three years in the period ended June 27, 2020 
39
  Consolidated Statements of Comprehensive Income for each of the three years in the period ended June 27, 2020 
40
  Consolidated Statements of Stockholders' Equity for each of the three years in the period ended June 27, 2020 
41
  Consolidated Statements of Cash Flows for each of the three years in the period ended June 27, 2020 
42
  Notes to Consolidated Financial Statements 
43
  Report of Independent Registered Public Accounting Firm 
73
 (2)Financial Statement Schedule  
  The following financial statement schedule is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the financial statements.  
  Schedule II - Valuation and Qualifying Accounts 
75
  All other schedules are omitted because they are not applicable, or because the required information is included in the consolidated financial statements or notes thereto.  
 (3)The Exhibits filed as a part of this Report are listed in the attached Index to Exhibits.  

(b) Exhibits.
See attached Indexsuch reports furnished to Exhibits.




MAXIM INTEGRATED PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS

 June 27,
2020		 June 29,
2019
 (in thousands, except par value)
ASSETS
Current assets: 
  
Cash and cash equivalents$1,578,670
 $1,757,342
Short-term investments35,536
 140,990
Total cash, cash equivalents and short-term investments1,614,206
 1,898,332
Accounts receivable, net of allowances of $645 and $148404,778
 360,016
Inventories259,626
 246,512
Other current assets39,219
 34,640
Total current assets2,317,829
 2,539,500
Property, plant and equipment, net550,406
 577,722
Intangible assets, net87,959
 56,242
Goodwill562,540
 532,251
Other assets110,569
 38,267
TOTAL ASSETS$3,629,303
 $3,743,982
    
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:   
Accounts payable $91,982
 $84,335
Price adjustment and other revenue reserves148,916
 100,490
Income taxes payable43,457
 33,765
Accrued salary and related expenses126,751
 118,704
Accrued expenses 42,228
 33,873
          Total current liabilities453,334
 371,167
Long-term debt994,022
 992,584
Income taxes payable 385,072
 469,418
Other liabilities139,418
 65,537
Total liabilities 1,971,846
 1,898,706
    
Commitments and contingencies (Note 13)

 

    
Stockholders' equity:   
Preferred stock, $0.001 par value   
Authorized: 2,000 shares, issued and outstanding: none—
 —
Common stock, $0.001 par value   
Authorized: 960,000 shares    
Issued and outstanding: 266,797 in 2020 and 271,852 in 2019266
 272
Additional paid-in capital —
 —
Retained earnings 1,671,786
 1,856,358
Accumulated other comprehensive loss(14,595) (11,354)
Total stockholders' equity1,657,457
 1,845,276
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,629,303
 $3,743,982


See accompanying Notes to Consolidated Financial Statements.


MAXIM INTEGRATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME

 For the Years Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands, except per share data)
      
Net revenues$2,191,395
 $2,314,329
 $2,480,066
Cost of goods sold758,743
 813,823
 853,945
          Gross margin 1,432,652
 1,500,506
 1,626,121
Operating expenses: 
  
  
     Research and development440,166

435,222

450,943
     Selling, general and administrative296,722

308,617

322,918
     Intangible asset amortization3,078

3,041

4,467
     Impairment of long-lived assets—

753

892
     Severance and restructuring expenses 5,363

5,632

15,060
     Other operating expenses (income), net929

143

(1,607)
          Total operating expenses 746,258
 753,408
 792,673
               Operating income686,394
 747,098
 833,448
Interest and other income (expense), net(8,298) 7,323
 (8,563)
Income before taxes678,096
 754,421
 824,885
Provision (benefit) for income taxes23,402
 (73,065)
357,567
Net income $654,694
 $827,486
 $467,318
  
  
  
Earnings per share: 
  
  
     Basic$2.43
 $3.01
 $1.66
Diluted$2.41
 $2.97
 $1.64
      
Weighted-average shares used in the calculation of earnings per share:  
  
  
     Basic269,341

274,966

280,979
     Diluted 272,028

278,777

285,674
  
  
  
Dividends declared and paid per share $1.92

$1.84

$1.56



See accompanying Notes to Consolidated Financial Statements.


MAXIM INTEGRATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 For the Years Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Net income$654,694

$827,486
 $467,318
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 $(25) in 2020, $(175) in 2019, and $184 in 2018160

3,629
 (2,436)
Change in net unrealized gains and (losses) on cash flow hedges, net of tax benefit (expense) of $(51) in 2020, $(354) in 2019, and $291 in 2018265

1,808
 (1,401)
Change in net unrealized gains and (losses) on postretirement benefits, net of tax benefit (expense) of $284 in 2020, $42 in 2019, and $115 in 2018(3,666)
(1,806) (1,258)
Other comprehensive income (loss), net(3,241) 3,631
 (5,095)
Total comprehensive income$651,453
 $831,117
 $462,223



See accompanying Notes to Consolidated Financial Statements.




MAXIM INTEGRATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss 
Total
Stockholders' Equity
 Shares Par Value    
 (in thousands)
            
Balance, June 24, 2017282,912
 $283
 $—
 $2,212,301
 $(9,890) $2,202,694
Net income—
 —
 —
 467,318
 —
 467,318
Other comprehensive income (loss), net—
 —
 —
 —
 (5,095) (5,095)
Repurchase of common stock (7,487) (7) (112,075) (295,886) —
 (407,968)
Net issuance of restricted stock units1,241
 1
 (30,311) —
 —
 (30,310)
Stock options exercised1,090
 1
 28,008
 —
 —
 28,009
Stock-based compensation —
 —
 78,058
 —
 —
 78,058
Common stock issued under Employee Stock Purchase Plan908
 1
 36,320
 —
 —
 36,321
Dividends paid, $1.56 per common share—
 —
 —
 (438,087) —
 (438,087)
Balance, June 30, 2018278,664
 $279
 $—
 $1,945,646
 $(14,985) $1,930,940
Net income—
 —
 —
 827,486
 —
 827,486
Other comprehensive income (loss), net—
 —
 —
 —
 3,631
 3,631
Repurchase of common stock (9,839) (9) (125,457) (413,685) —
 (539,151)
Cumulative effect-adjustment for adoption of ASU 2016-01—
 —
 —
 2,487
 —
 2,487
Net issuance of restricted stock units1,259
 1
 (29,690) —
 —
 (29,689)
Stock options exercised893
 1
 24,399
 —
 —
 24,400
Stock-based compensation —
 —
 87,102
 —
 —
 87,102
Modification of liability to equity instruments(1)
—
 —
 3,471
 —
 —
 3,471
Common stock issued under Employee Stock Purchase Plan875
 —
 40,175
 —
 —
 40,175
Dividends paid, $1.84 per common share—
 —
 —
 (505,576) —
 (505,576)
Balance, June 29, 2019271,852
 $272
 $—
 $1,856,358
 $(11,354) $1,845,276
Net income—
 —
 —
 654,694
 —
 654,694
Other comprehensive income (loss), net—
 —
 —
 —
 (3,241) (3,241)
Repurchase of common stock (7,892) (6) (120,754) (320,051) —
 (440,811)
Cumulative effect-adjustment for adoption of ASU 2016-02—
 —
 —
 (2,053) —
 (2,053)
Net issuance of restricted stock units1,254
 —
 (35,877) —
 —
 (35,877)
Stock options exercised670
 —
 18,870
 —
 —
 18,870
Stock-based compensation —
 —
 95,501
 —
 —
 95,501
Common stock issued under Employee Stock Purchase Plan913
 —
 42,260
 —
 —
 42,260
Dividends paid, $1.92 per common share—
 —
 —
 (517,162) —
 (517,162)
Balance, June 27, 2020266,797
 $266
 $—
 $1,671,786
 $(14,595) $1,657,457

(1) In December 2018, $3.5 million was reclassified from accrued salaries to additional paid-in capital due to a settlement agreement relating to the expiration of stock options.




See accompanying Notes to Consolidated Financial Statements.


MAXIM INTEGRATED PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Cash flows from operating activities:     
Net income$654,694

$827,486
 $467,318
Adjustments to reconcile net income to net cash provided by operating activities: 
    
Stock-based compensation 95,431
 86,977
 78,685
Depreciation and amortization 108,533
 110,745
 144,974
Deferred taxes8,994
 13,957
 27,715
Loss on sale or disposal of property, plant and equipment1,191
 3,967
 995
Others11,353
 (3) 892
Changes in assets and liabilities:      
Accounts receivable(42,335) 62,252
 (19,714)
Inventories (8,671) 36,003
 (32,776)
Other assets (86,299) (14,901) 32,368
Accounts payable 7,594
 (10,272) 9,560
Price adjustment and other revenue reserves48,426
 (41,162) —
Income taxes payable (74,814) (176,114) 117,654
Deferred margin on shipments to distributors —
 —
 (14,974)
All other accrued liabilities 76,758
 (23,095) 6,767
Net cash provided by operating activities 800,855

875,840

819,464
 

    
Cash flows from investing activities: 
  
  
Purchases of property, plant and equipment(67,049) (82,823) (65,782)
Proceeds from sale of property, plant, and equipment392
 340
 5,823
Proceeds from sale of available-for-sale securities1,290
 30,192
 107,291
Proceeds from maturity of available-for-sale securities104,286
 1,130,514
 753,249
Payment in connection with business acquisition, net of cash acquired(69,270) (2,949) (57,773)
Purchases of available-for-sale securities—
 (214,587) (1,447,354)
Purchases of investments in privately-held companies(1,960) (3,176) (5,520)
Proceeds from sale of investments in privately-held companies378
 —
 —
Other investing activities(116) (600) —
Net cash provided by (used in) investing activities (32,049)
856,911

(710,066)
      
Cash flows from financing activities 
  
  
Contingent consideration paid(8,000) (9,052) —
Repayment of notes payable—
 (500,000) —
Net issuance of restricted stock units(35,877) (29,689) (30,310)
Proceeds from stock options exercised18,870
 24,400
 28,009
Issuance of common stock under employee stock purchase program42,260
 40,175
 36,321
Repurchase of common stock(440,811) (539,151) (407,968)
Dividends paid(517,162) (505,576) (438,087)
Net cash used in financing activities (940,720)
(1,518,893)
(812,035)
      
Net increase (decrease) in cash, cash equivalents and restricted cash(171,914) 213,858
 (702,637)
Cash, cash equivalents and restricted cash: 
  
  
Beginning of year1,757,342
 1,543,484
 2,246,121
End of year$1,585,428
 $1,757,342
 $1,543,484
  
  
  
Supplemental disclosures of cash flow information: 
  
  
Cash paid, net, for income taxes$98,211
 $98,104
 $189,100
Cash paid for interest$34,126
 $40,376
 $46,625
    
  
Noncash financing and investing activities:   
  
Accounts payable related to property, plant and equipment purchases$11,586
 $12,090
 $8,833
      
Cash, cash equivalents and restricted cash:     
Cash and cash equivalents$1,578,670
 $1,757,342
 $1,543,484
Restricted cash in Other assets6,758
 —
 —
Total cash, cash equivalents and restricted cash$1,585,428
 $1,757,342
 $1,543,484


See accompanying Notes to Consolidated Financial Statements.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: NATURE OF OPERATIONS

Maxim Integrated Products, Inc. (“Maxim Integrated,"and written representations that no other reports were required, during the “Company,” “we,” “us” or “our”), incorporated in Delaware, 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 Company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The analog market is fragmented and characterized by diverse applications and a great number of product variations with varying product life cycles. Maxim Integrated is a global company with a manufacturing facility in the United States, testing facilities in the Philippines and Thailand, and sales and circuit design offices throughout the world. Integrated circuit assembly is performed by foreign assembly subcontractors, located in countries throughout Asia, where wafers are separated into individual integrated circuits and assembled into a variety of packages. The major end-markets in which the Company's products are sold are the automotive, communications and data center, consumer, and industrial markets.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday of June. Accordingly, every fifth or sixth year will be a 53-week fiscal year. The fiscal year ended June 27, 2020 was26, 2021, except Mme. Wright and Messrs. Imperato and Bergman did not file a 52-week fiscal year. Fiscal years 2019timely Form 4, which were subsequently filed on February 10, 2021 and 2018August 18, 2021, all Section 16(a) filing requirements applicable to its executive officers, directors, and greater than ten percent (10%) beneficial owners were 52-week and 53-week fiscal years, respectively. Fiscal years 2019 and 2018 ended on June 29, 2019, and June 30, 2018, respectively.

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.complied with. The Company bases its estimatesfiles the Section 16 reports on behalf the Company’s directors and judgments on its historical experience, knowledgeexecutive officers.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Related Transactions
During the fiscal year ended June 26, 2021, Robert Bergman, the son of current conditions and its beliefsJames R. Bergman, a member 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 effortsour board of directors, was employed by governments to attempt to control its spread created uncertainties and disruptions in the economic and financial markets. The CompanyBedrock Automation Platforms, Inc. (“Bedrock”). Bedrock 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 August 19, 2020, the date of issuance of this Annual Report on Form 10-K. 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.

Basis of Presentation

The consolidated financial statements include the accountsindependent subsidiary of the Company engaged in a line of business separate and all of its majority-owned subsidiaries. Intercompany balances and transactions have been eliminateddistinct from the Company’s primary business. Robert Bergman received approximately $265,940 in consolidation.

Cash Equivalents and Investments

The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less at the date of purchase to beaggregate cash equivalents. Cash and cash equivalents may consist of demand accounts, money market funds, U.S. Treasury securities, agency securities, corporate debt securities, certificates of deposit, and commercial paper. Short-term investments may consist of U.S. treasury debt securities, agency securities, corporate debt securities, certificates of deposit, and commercial paper with original maturities beyond three months at the date of purchase.

The Company's short-term investments are considered available-for-sale and classified as short-term as these investments generally consist of highly marketable securitiescompensation from Bedrock in fiscal year 2021. We do not believe that are available to meet near-term cash requirements. Such securities are carried at fair market value based on market quotes and other observable inputs. Unrealized gains and losses, net of tax, on securities in this category are reportedtransaction constitutes a related party transaction. Maxim Integrated is not involved in the Consolidated Statements
day-to-day
operations of Comprehensive Income. Realized gains and losses on sales of investmentBedrock.

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

securities are determined based on the specific identification method and are included in Interest and other income (expense), net in the Consolidated Statements of Income.

The Company's long-term equity investments consist of investments in privately-held companies without readily determinable fair values and are included in Other assets on the Consolidated Balance Sheets. Equity investments are measured using the measurement alternative, which is defined as cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investmentsTwo (2) members of the same issuer. The Company uses various inputs to evaluate equity investments including valuations of recent financing events as well as other information regarding the issuer’s historical and forecasted performance.

Derivative Instruments

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 is exposed to fluctuations in foreign currency exchange rates for cash flows for expenditures and on orders and accounts receivable from sales in these foreign currencies. The Company has established risk management strategies designed to reduce the impact of volatility of future cash flows caused by changes in the exchange rate for these currencies. These strategies reduce, but do not entirely eliminate, the impact of currency exchange rates movements.

Currency forward contracts are used to offset the currency risk of non-U.S. dollar-denominated assets and liabilities. The Company typically enters into currency forward contracts to hedge exposures associated with its expenditures denominated in European Euro, Philippine Peso, Thai Baht and South Korean Won. The Company also hedges smaller expense exposures in several other foreign currencies. The Company enters into currency forward contracts to hedge its accounts receivable and backlog denominated in European Euro, Japanese Yen and British Pound. Changes in fair value of the underlying assets and liabilities are generally offset by the changes in fair value of the related currency forward contract.

The Company uses currency forward contracts to hedge exposure to variability in anticipated non-U.S. dollar-denominated cash flows. These contracts are designated as cash flow hedges and recorded on the Consolidated Balance Sheets at their fair market value. The maturities of these instruments are generally less than six months. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss) and reported within the Consolidated Statements of Comprehensive Income. These amounts have been reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments that are not designated as hedging instruments, gains and losses are recognized immediately in “Interest income (expense) and other, net” in the Consolidated Statements of Income.

Inventories

Inventories are stated at the lower of (i) standard cost, which approximates actual cost on a first-in-first-out basis, or (ii) net realizable value. The Company's standard cost revision policy is to monitor manufacturing variances and revise standard costs on a periodic basis. A write-down to net realizable value is recorded if excess quantities or obsolescence is identified. At each reporting period, we assess our ending inventories for excess quantities and obsolescence based on our projected sales outlook. This assessment, which requires significant judgment by management, includes analysis of projections of future demand. Because of the cyclical nature of the market, inventory levels, obsolescence of technology, and product life cycles, we generally write-down inventories to net realizable value based on forecasted product demand.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is primarily computed on the straight-line method over the estimated useful lives of the assets, which range from 2 to 15 years for machinery, equipment, and software and up to 40 years for buildings and building improvements. Leasehold improvements are amortized over the lesser of their useful lives or the remaining term of the related lease. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is reflected in the Consolidated Statements of Income. The classification is based mainly on whether the asset is operating or not.

Goodwill and Intangible Assets


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews goodwill and intangible assets for impairment annually in the fourth fiscal quarter and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable, such as when reductions in demand or significant economic slowdowns in the semiconductor industry are present.

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. The Company tests goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis or more frequently if the Company believes indicators of impairment exist. The Company performs a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, as a result of the qualitative assessment, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs the quantitative goodwill impairment test. This test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company determines the fair value of the Company's reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as the market approach which includes the guideline company method. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the Company recognizes an impairment of goodwill measured as the amount by which a reporting unit’s carrying value exceeds its fair value with the loss recognized not to exceed the total amount of goodwill allocated to the reporting unit.

Acquisition-related in-process research and development assets ("IPR&D") represent the fair value of incomplete projects that have not yet reached technological feasibility. IPR&D assets are subject to amortization when the research and development projects are completed. The Company amortizes all other intangible assets over their estimated useful lives.

Impairment of Long-lived Assets

The Company performs periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of long-lived assets are not recoverable and exceed their fair values. If facts and circumstances indicate that the carrying amounts of long-lived assets might not be fully recoverable, projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives are compared against their respective carrying amounts. In the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are written down to their estimated fair values based on their expected discounted future cash flows attributable to those assets.

Leases

The Company determines if an arrangement is, or contains, a lease at inception. Right-of-use ("ROU") assets are recorded as other assets, short-term lease obligations are recorded as accrued expenses and long-term lease obligations are recorded as other liabilities on the Company's Consolidated Balance Sheets. The Company’s classes of assets include real estate leases, equipment leases, and vehicle leases.

Lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When discount rates implicit in leases cannot be readily determined, the Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of future payments.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. Lease expense is recognized on a straight-line basis over the lease term. The Company elected to combine lease and non-lease components for all asset classes. In addition, the Company does not apply the recognition requirements to leases with lease terms of 12 months or less.

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 limited circumstances, the Company may consider extending its warranty for up to five years. It may also include limited financial responsibility, such as the payment of monetary compensation to reimburse a customer for its financial losses beyond repairing or replacing the product or crediting the customer’s account should the product not meet the Company’s specifications, or to reimburse a customer for losses or damages that result 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 the Company's historical experience or if the Company's

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates of probable losses relating to specifically identified warranty exposures require revision, the Company may record a charge against future cost of sales. The short-term and long-term portions of the product warranty liability are included within the balance sheet captions Accrued expenses and Other liabilities, respectively, in the accompanying Consolidated Balance Sheets.

Revenue Recognition

The Company recognizes revenue for sales to direct customers and distribution customers ("distributors") when a customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The transaction price is calculated as selling price net of variable considerations, such as distributor price adjustments. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration it is expected to realize. The transaction price does not include amounts collected on behalf of another party, such as sales taxes or value added taxes. The Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed. The Company estimates returns for sales to direct customers and distributors based on historical return rates applied against current period gross revenue. Specific customer returns and allowances are considered within this estimate.

Accounts receivable from direct customers and distributors are recognized and inventory is relieved upon shipment as title to inventories generally transfers upon shipment, at which point the Company has a legally enforceable right to collection under normal terms. Accounts receivable related to consigned inventory is recognized when the customer takes title to such inventory from its consigned location, at which point inventory is relieved, title transfers, and the Company has a legally enforceable right to collection under the terms of the agreement with the related customers. Customers are generally required to pay for products and services within the Company’s standard terms, which is net 30 days from the date of invoice.

The Company estimates potential future returns and sales allowances related to current period product revenue. Management analyzes historical returns, changes in customer demand and acceptance of products when evaluating the adequacy of returns and sales allowances. Estimates made may differ from actual returns and sales allowances. These differences may materially impact reported revenue and amounts ultimately collected on accounts receivable. Historically, such differences have not been material.

Distributor price adjustments are estimated based on the Company's historical experience rates and also considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the estimates that the Company has made based on its historical rates.

The Company's revenue arrangements do not contain significant financing components. Revenue is recognized at the time control of the products transfer to the customer or when it is assessed that performance obligations are satisfied. When any of the following criteria is fulfilled, revenue is recognized:

(a) The customer simultaneously receives and consumes the benefits provided by the performance completed. (b) Performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced. (c) Performance does not create an asset with an alternative use and has an enforceable right to payment for performance completed to date.

Related Party Transactions

A member of the Company's Board of Directors isare also a membermembers of the Board of Directors of customers of Maxim Integrated: Flextronics International Ltd. and Teradyne, Inc. During the fiscal years ended June 26, 2021, June 27, 2020, and June 29, 2019, and June 30, 2018, the Company sold approximately $74.8 million, $58.0 million, $44.7 million, and $61.6$44.7 million, respectively, in products to Flextronics International Ltd., a contract manufacturer, and approximately $59.1 million, $39.1 million, and $17.8 million, respectively, in products to Teradyne, Inc., a supplier of automation equipment for test and industrial applications, in the ordinary course of its business.

Research and Development Costs

Research and development costs are expensed as incurred. Such costs consist primarily of expenditures for labor and benefits, masks, prototype wafers and depreciation.

Shipping Costs

Shipping costs billed to customers are included in net revenues and the related shipping costs are included in cost of goods sold in the Consolidated Statements of Income.

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Stock-Based Compensation

Stock-based compensation cost is measured at the grant date, based on the fair valueMaxim Integrated has entered into indemnification agreements with certain of the awards ultimately expected to vest and is recognized as an expense, on a straight-line basis, over the requisite service period. ASC No. 718, Compensation-Stock Compensation, allows forfeitures to be either expensed as incurred or estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures or vesting differ from those estimates. The Company has elected to estimate forfeitures at the time of grant and update if necessary. Such updates could have a material effect on the Company's operating results.

Foreign Currency Translation and Remeasurement

The U.S. dollar is the functional currency for the Company's foreign operations. Using the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured at the year-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Consolidated Statements of Income are remeasured at the average exchange rates during the year. Foreign exchange gains and losses as recorded in the Consolidated Statements of Income for all periods presented were not material.

Income Taxes

The Company accounts for income taxes using an asset and liability approach as prescribed in ASC No. 740-10, Income Taxes (“ASC 740-10”). The Company records the amount of taxes payable or refundable for theits current and prior yearsformer directors and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

ASC 740-10 prescribes a recognition threshold and measurement framework for the financial statement reporting and disclosure of an income tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax position is recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that meets the recognition threshold is then measured to determine the largest amount of the benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes in the Consolidated Statements of Income.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws across multiple tax jurisdictions. Although ASC 740-10 provides clarification on the accounting for uncertainty in income taxes recognized in the financial statements, the recognition threshold and measurement framework will continue to require significant judgment by management. Resolution of these uncertainties in a manner inconsistent with the Company's expectations could have a material impact on the Company's results of operations.

Earnings Per Share

Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporate the potentially dilutive incremental shares issuable upon the assumed exercise of stock options, the assumed vesting of outstanding restricted stock units and market stock units, and the assumed issuance of common stock under the stock purchase plan. The number of incremental shares from the assumed issuance of common stock under the stock purchase plan is calculated by applying the treasury stock method.

Litigation and Contingencies

From time to time, the Company receives notices that its products or manufacturing processes may be infringing the patent or other intellectual property rights of others, notices of stockholder litigation or other lawsuits or claims against the Company. The Company periodically assesses each matter in order to determine if a contingent liability in accordance with ASC No. 450, Contingencies ("ASC 450") should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. The Company expenses legal fees associated with consultations and defense of lawsuits as incurred. Based on the information obtained, combined with management's judgment regarding all of the facts and circumstances of each matter, the Company determines whether a contingent loss is probable and whether the amount of such loss can be estimated. Should a loss be probable and estimable, the Company records a contingent loss in accordance with ASC 450. In determining the amount of a contingent loss, the Company takes into consideration advice

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

received from experts in the specific matter, current status of legal proceedings, settlement negotiations which may be ongoing, prior case history and other factors. Should the judgments and estimates made by management be incorrect, the Company may need to record additional contingent losses that could materially adversely impact its results of operations. Alternatively, if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss recorded would be reversed, thereby favorably impacting the Company's results of operations.

Pursuant to the Company's charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its current officers and directors, as well as certain former officers and directors.officers. The indemnification agreements provide, among other things, that the CompanyMaxim Integrated will indemnify each of its directors and officers, under the circumstances and to the extent provided therein, for expenses, damages, judgments, fines, and settlements each may be required to pay in actions or proceedings to which he or she may be made a party by reason of his or her position or positions as a director, officer or other agent of the Company,Maxim Integrated, and otherwise to the fullest extent permitted under Delaware law and Maxim Integrated’s Bylaws.
Review, Approval or Ratification of Related Party Transactions
The Audit Committee Charter provides for the Company’s bylaws.Audit Committee to review and approve all related party transactions for potential conflicts of interest on an ongoing basis (if such transactions are not approved by another independent body of the board of directors). Related party transactions include, for purposes of the Audit Committee review, without limitation, transactions involving Maxim Integrated and any director, executive officer, beneficial owner of more than five percent (5%) of Maxim Integrated common stock, any immediate family member of any such person, or any firm, corporation, partnership, or other entity in which any such person is employed or any such person has a five percent (5%) or greater beneficial ownership interest. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into account all relevant facts and circumstances it deems relevant, including, without limitation, the nature of the related party’s interest in the transaction, the benefits to Maxim Integrated of the transaction, whether the transaction would impair the judgment of a director or executive officer to act in the best interests of Maxim Integrated and its stockholders, the potential impact of such transaction on a director’s independence, and whether the transaction is on terms no less favorable than terms that may be available in a transaction with an unaffiliated third party under the same or similar circumstances.

ConcentrationAny member of Credit Risk

Due to the Company's credit evaluation and collection process, bad debt expenses have not been significant. Credit riskAudit Committee who is a related party with respect to trade receivables is limited because a large number of geographically diverse customers make uptransaction under review may not participate in the Company's customer base, thus spreadingdeliberations or vote on the credit risk. The Company derived approximately 52% of its fiscal year 2020 revenue from sales made through distributors which includes distribution sales to catalog distributors. The Company's primary distributor is Avnet Electronics (“Avnet”). Avnet, like the Company's other distributors, is not an end customer, but rather serves as a channel of sale to many end usersapproval of the Company's products. Avnet accounted for 22%, 22% and 25%transaction. Maxim Integrated will disclose the terms of revenuesrelated person transactions in fiscal years 2020, 2019 and 2018, respectively, and 28% and 21% of accounts receivable as of June 27, 2020 and June 29, 2019, respectively. Sales (through direct sales and distributors) to Samsung,its filings with the Company's largest single end customer in 2019 and 2018, accounted for 10% of net revenues in fiscal years 2019 and 2018, and 4% and 6% of accounts receivable as of June 27, 2020 and June 29, 2019, respectively. No other customer accounted for 10% or more of the Company's revenues in the fiscal years 2020, 2019, and 2018. One customer, WT Microelectronics, accounted for 22% and 11% of accounts receivable as of June 27, 2020 and June 29, 2019, respectively. No other customer accounted for 10% or more of the Company's accounts receivable as of June 27, 2020 and June 29, 2019.

The Company maintains cash, cash equivalents, and short-term investments with various high credit quality financial institutions, limits the amount of credit exposure to any one financial institution or instrument, and is exposed to credit risk in the event of default by these institutionsSEC to the extent of amounts recorded at the balance sheet date.required.

Reclassification

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

Recently Issued Accounting Pronouncements

(i) New Accounting Update Recently Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases (Topic 842). Topic 842 states that lessees will recognize a lease liability for the commitment to make lease payments and a right-of-use asset for the underlying asset, for the durationThe terms of the lease. The FASB also issued ASU 2018-10 and ASU 2018-11 which provide improvements to ASU 2016-02 and an additional transition method option, respectively. This transition method allows companies to apply the new lease accounting standard on adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted ASU 2016-02 in the first quarter of fiscal year 2020.

The Company adopted the new standard using the modified retrospective method and electing the optional transition method practical expedient. Under the optional transition method, the Company recognized a cumulative-effect adjustment to the consolidated balance sheet and did not adjust comparative prior period information.

The Company elected multiple practical expedients permitted:
the hindsight practical expedient, in which the Company elected to use hindsight up until the effective date in determining the lease term and assessing impairment of right-of-use assets;
the practical expedient package that allows the Company to carry forward its determination of whether a lease exists, the classification of a lease, and whether initial direct lease costs exist for purposes of transition to the new standard; and
the practical expedient to combine lease and non-lease components.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also elected an accounting policy in which it will not apply the recognition requirements to leases with an initial term of 12 months or less.

Effective June 30, 2019, the first day of adoption, the Company recognized $61.0 million of operating lease right-of-use assets and $65.2 million of operating lease liabilities on its Consolidated Balance Sheets. The difference of $4.2 million was primarily due to deferred rent, partially offset by prepaid rent for leases that existed asemployment of the date of adoption, which decreasedindividual described above under the opening balance of ROU assets.

(ii) Recent Accounting Update Not Yet Adopted

In June 2016,heading “Related Transactions” was not specifically approved by 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 measurementAudit Committee because such terms (including compensation terms) were, 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 securitiescontinue to be, recorded through an allowance for credit losses rather than as a reduction in the amortized cost basisconsistent and commensurate with those of the securities. These changes will result in earlier recognitionother similarly situated employees of credit losses. We will adopt ASU 2016-13 beginning in the first quarter of fiscal year 2021. The effect on our consolidated financial statementsMaxim Integrated and related disclosures is not expected to be material.its subsidiaries.

Item 14. Principal Accounting Fees and Services
NOTE 3: BALANCE SHEET COMPONENTS

Inventories consist of:
 June 27,
2020		 June 29,
2019
 (in thousands)
Raw materials$18,287
 $16,121
Work-in-process164,061
 160,273
Finished goods77,278
 70,118
Total inventories$259,626
 $246,512
Audit and
Non-Audit


Property, plant and equipment, net, consist of:
 June 27,
2020		 June 29,
2019
 (in thousands)
Land$17,720
 $17,720
Buildings and building improvements312,999
 265,191
Machinery, equipment and software1,323,791
 1,367,606
Total1,654,510
 1,650,517
Less: accumulated depreciation and amortization(1,104,104) (1,072,795)
Total property, plant and equipment, net$550,406
 $577,722


The Company recorded $92.6 million, $86.4 million and $94.4 million of depreciation expense in fiscal years 2020, 2019 and 2018, respectively.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFees

Accrued salary and related expenses consist of:
 June 27,
2020		 June 29,
2019

(in thousands)
Accrued bonus$66,662
 $71,466
Accrued vacation33,992
 30,251
Accrued salaries12,153
 10,667
Accrued fringe benefits4,077
 4,807
Other9,867
 1,513
Total accrued salary and related expenses$126,751
 $118,704


NOTE 4: DISAGGREGATION OF REVENUE

The following table summarizes net revenue disaggregatedpresents fees for professional services rendered by end market. The Company classifies end market revenue by using estimatesPricewaterhouseCoopers LLP and assumptions based on historical experience and knowledgeaffiliates for the audit of current conditions, given available information.
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 Revenue % of Total Revenue % of Total Revenue % of Total
 (in thousands, except percentages) 
Automotive$560,856
 26% $590,402
 25% $567,474
 23%
Communications and Data Center482,642
 22% 436,674
 19% 510,098
 21%
Consumer441,407
 20% 555,409
 24% 575,095
 23%
Industrial706,490
 32% 731,844
 32% 827,399
 33%
 $2,191,395
   $2,314,329
   $2,480,066
  


The following table summarizes net revenue disaggregated by sales channel:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 Revenue % of Total Revenue % of Total Revenue % of Total
 (in thousands, except percentages) 
Distributors$1,147,387
 52% $1,062,818
 46% $1,173,719
 47%
Direct customer1,044,008
 48% 1,251,511
 54% 1,306,347
 53%
 $2,191,395
   $2,314,329
   $2,480,066
  


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.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s Level 2 assets and liabilities consist of corporate debt securities, certificates of deposit, 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 contingent consideration liabilities related to acquisitions.

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

 As of June 27, 2020 As of June 29, 2019
 Fair Value   Fair Value  
 Measurements Using Total 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$61,814
 $—
 $—
 $61,814
 $186,819
 $—
 $—
 $186,819
Short term investments               
    Certificates of deposit—
 —
 —
 —
 —
 1,000
 —
 1,000
    Corporate debt securities—
 35,536
 —
 35,536
 —
 139,990
 —
 139,990
Other current assets               
    Foreign currency forward contracts—
 1,151
 —
 1,151
 —
 651
 —
 651
Total$61,814
 $36,687
 $—
 $98,501
 $186,819
 $141,641
 $—
 $328,460
                
Liabilities               
Accrued expenses               
    Foreign currency forward contracts$—
 $341
 $—
 $341
 $—
 $148
 $—
 $148
    Contingent consideration—
 —
 10,000
 10,000
 —
 —
 9,052
 9,052
Other liabilities               
    Contingent consideration—
 —
 4,165
 4,165
 —
 —
 —
 —
Total$—
 $341
 $14,165
 $14,506
 $—
 $148
 $9,052
 $9,200


Changes in contingent consideration liability:
  (in thousands)
Balance, June 30, 2018 $16,000
Addition 2,104
Payment (9,052)
Adjustment —
Balance, June 29, 2019 9,052
Addition 14,165
Payment (8,000)
Adjustment (1,052)
Balance, June 27, 2020 $14,165


During the fiscal years ended June 27, 2020and June 29, 2019, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

There were 0 assets or liabilities measured at fair value on a non-recurring basis as of June 27, 2020and June 29, 2019.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 27, 2020 and June 29, 2019, private company investments amounted to $20.6 million and $20.7 million, respectively. The aggregate amount of unrealized losses recognized from these investments were $4.9 million and $3.6 million, respectively, as of June 27, 2020 and June 29, 2019.

The Company recorded $(1.3) million, $0 million and $(0.9) million of unrealized gains (losses) on private company investments, during the fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018, respectively. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Consolidated Statements of Income.

NOTE 6: FINANCIAL INSTRUMENTS

Short-term investments
Fair values were as follows:
 June 27, 2020 June 29, 2019
 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:              
Certificates of deposit$—
 $—
 $—
 $—
 $1,000
 $—
 $—
 $1,000
Corporate debt securities35,417
 137
 (18) 35,536
 140,031
 68
 (109) 139,990
Total available-for-sale investments$35,417
 $137
 $(18) $35,536
 $141,031
 $68
 $(109) $140,990


In the fiscal years ended June 27, 2020 and June 29, 2019, the Company did not recognize any impairment charges on short-term investments. All available-for-sale investments have maturity dates between July 14, 2020 and March 12, 2021.
Derivative instruments and hedging activities

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

The Company has established a program that exclusively 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 ASC No. 815, Derivatives and Hedging (“ASC 815”). As of June 27, 2020 and June 29, 2019, respectively, the notional amounts of the forward contracts the Company held to purchase international currencies were $61.6 million and $48.5 million, respectively.

Derivatives not designated as hedging instruments

As of June 27, 2020 and June 29, 2019, respectively, the notional amounts of the forward contracts the Company held to purchase international currencies were $32.3 million and $19.6 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $12.0 million and $21.1 million, respectively. The fair values of outstanding foreign currency forward contracts and gain (loss) included in the Consolidated Statements of Income were not materialMaxim Integrated’s annual financial statements for the fiscal years ended June 27, 202026, 2021 and June 29, 2019.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effect of hedge accounting on the Consolidated Statements of Income

The following table summarizes the gains and (losses) from hedging activities recognized in the Company's Consolidated Statements of Income:
 June 27, 2020 June 29, 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$2,191,395
 $758,743
 $746,258
 $2,314,329
 $813,823
 $753,408
            
Gain (loss) on cash flow hedges:           
Foreign exchange contracts:           
Gain (loss) reclassified from accumulated other comprehensive income into income$—
 $(42) $(1,535) $49
 $(430) $(2,275)


Outstanding debt obligations
The following table summarizes the Company's outstanding debt obligations:
 June 27, 2020 June 29, 2019
 (in thousands)
3.375% fixed rate notes due March 2023$500,000
 $500,000
3.45% fixed rate notes due June 2027500,000
 500,000
    Total outstanding debt1,000,000
 1,000,000
Less: Reduction for unamortized discount and debt issuance costs(5,978) (7,416)
Total long-term debt$994,022
 $992,584


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 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. In November of 2018, the Company repaid the entire principal and any outstanding interest related to these outstanding notes.

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 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 Consolidated Statements of Income over the life of the notes. The interest expense

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

is recorded in Interest and other income (expense), net in the Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes was $35.6 million, $41.4 million and $49.5 million during the years ended June 27, 2020, June 29, 2019,respectively, and June 30, 2018, respectively.fees billed for other services rendered by PricewaterhouseCoopers LLP during such fiscal years. All fees set forth below are exclusive of any value-added tax (VAT) or goods and services tax (GST).

The estimated fair value of the Company's outstanding debt obligations was approximately $1.1 billion as of June 27, 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 $38.0 million, $43.5 million, and $50.2 million during the fiscal years ended June 27, 2020, June 29, 2019, and June 30, 2018, respectively.

Credit facilities
 
   
Fiscal 2021
   
Fiscal 2020
 
Audit Fees
(1)
  $2,778,379   $2,511,477 
Audit-Related Fees
(2)
   300,000    —   
Tax Fees
(3)
   126,523    172,093 
All Other Fees
(4)
   2,970    73,870 
   
 
 
   
 
 
 
Total
  $3,207,872   $2,757,440 
   
 
 
   
 
 
 
In January 2019, the Company terminated its $350 million revolving credit facility with certain institutional lenders. As of June 27, 2020, the Company does not have a credit facility in place.

Other financial instruments

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

NOTE 7: STOCK-BASED COMPENSATION

At June 27, 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”), 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 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.

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.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Consolidated Statements of Income for fiscal years 2020, 2019 and 2018:

 For the year ended June 27, 2020
 Stock Options Restricted Stock Units and Other Awards Employee Stock Purchase Plan Total
 (in thousands)
Cost of goods sold$31
 $9,295
 $2,851
 $12,177
Research and development14
 38,452
 6,236
 44,702
Selling, general and administrative254
 34,877
 3,421
 38,552
Pre-tax stock-based compensation expense$299
 $82,624
 $12,508
 $95,431
Less: income tax effect      9,415
Net stock-based compensation expense      $86,016


 For the year ended June 29, 2019
 Stock Options Restricted Stock Units and Other Awards Employee Stock Purchase Plan Total
 (in thousands)
Cost of goods sold$35
 $7,728
 $2,324
 $10,087
Research and development9
 36,182
 5,433
 41,624
Selling, general and administrative232
 32,078
 2,956
 35,266
Pre-tax stock-based compensation expense$276
 $75,988
 $10,713
 $86,977
Less: income tax effect      8,443
Net stock-based compensation expense      $78,534


 For the year ended June 30, 2018
 Stock Options Restricted Stock Units and Other Awards Employee Stock Purchase Plan Total
 (in thousands)
Cost of goods sold$212
 $8,131
 $2,098
 $10,441
Research and development518
 32,088
 4,442
 37,048
Selling, general and administrative700
 28,162
 2,334
 31,196
Pre-tax stock-based compensation expense$1,430
 $68,381
 $8,874
 $78,685
Less: income tax effect      9,342
Net stock-based compensation expense      $69,343


The expenses included in the Consolidated Statements of Income related to Restricted Stock Units and Other Awards include expenses related to MSUs of $12.7 million, $11.1 million and $7.8 million for fiscal years 2020, 2019 and 2018, respectively.

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.

The Company did not grant any stock options in fiscal years 2020, 2019 or 2018.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of June 27, 2020 and their activity during fiscal years 2020, 2019 and 2018:
 Options Weighted Average Remaining Contractual Term (in years) 
Aggregate Intrinsic Value (1) 
 Number of Shares Weighted Average Exercise Price 
Balance, June 24, 20172,800,007
 $26.92
    
Options Granted—
 —
    
Options Exercised(1,090,163) 25.69    
Options Cancelled(21,591) 26.47    
Balance, June 30, 20181,688,253
 27.72    
Options Granted—
 —
    
Options Exercised(907,401) 27.22    
Options Cancelled(3,439) 28.08    
Balance, June 29, 2019777,413
 28.30    
Options Granted—
 —
    
Options Exercised(656,391) 28.26    
Options Cancelled(16,575) 27.30    
Balance, June 27, 2020104,447
 $28.76
 0.4 $3,179,074
Exercisable as of June 27, 2020104,447
 $28.76
 0.4 $3,179,074
Vested and expected to vest, June 27, 2020104,447
 $28.76
 0.4 $3,179,074


(1)Aggregate intrinsic value represents
Audit Fees consist of fees billed for professional services rendered in connection with the difference between the exercise priceaudit of Maxim Integrated’s consolidated annual financial statements and the closing price per sharereview of the Company's common stock on June 26, 2020, the last business day preceding the fiscal year end, multipliedinterim consolidated financial statements included in quarterly reports and audit services that are normally provided by the number of options outstanding, exercisable or vestedPricewaterhouseCoopers LLP and expected to vest as of June 27, 2020.affiliates in connection with statutory and regulatory filings.

(2)
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Maxim Integrated’s consolidated financial statements and are not reported under “Audit Fees”. These services include merger and acquisition due diligence.
(3)
Tax Fees consist of fees billed for professional services rendered for federal, state and international tax compliance, tax advice and federal, state and international tax planning.
(4)
All Other Fees consist of fees for products and services other than the services reported above.
The total intrinsic value of options exercised during fiscal years 2020, 2019
Audit Committee
Pre-Approval
Policies and 2018 were $20.1 million, $27.5 million and $30.7 million, respectively.Procedures

Restricted Stock Units and Other Awards

The fair value of RSUsAudit Committee
pre-approves
all audit and permissible
non-audit
services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other awards underservices. The Audit Committee has adopted a policy for the Company’s 1996 Plan is estimated using the value
pre-approval
of the Company’s common stock on the date of grant, reducedservices provided by the present valueindependent auditors. Under the policy,
pre-approval
is generally provided for up to one (1) year and any
pre-approval
is detailed as to the particular service or category of dividends expectedservices and is subject to be paida specific budget. In addition, the Audit Committee may also provide
pre-approval
for particular services on a
case-by-case
basis. For each proposed service, the Company’s common stock priorindependent auditor is required to vesting. The Company also estimates forfeituresprovide detailed
back-up
documentation at the time of grantapproval. For fiscal year 2021, there were no audit-related fees, tax fees, or any other fees that were approved by the Audit Committee pursuant to the “de minimis” exception under Regulation
S-X
Rule
2-01(c)(7)(i)(C).
Report of the Audit Committee of the Board of Directors
The Audit Committee of the board of directors is comprised entirely of independent directors who meet the independence requirements of the Marketplace Rules of The NASDAQ Stock Market and makes revisionsthe SEC. The Audit Committee operates pursuant to forfeitures on a quarterly basis.

The weighted average fair value of RSUs and other awards granted was $49.57, $53.97 and $44.95 per share for fiscal years 2020, 2019 and 2018, respectively.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes outstanding and expected to vest RSUs and other awards as of June 27, 2020 and their activity during fiscal years 2020, 2019 and 2018:
 
Number of
Shares 
 Weighted Average Remaining Contractual Term
(in years)		 
Aggregate
Intrinsic
Value (1) 
Balance, June 24, 20175,942,123
    
Restricted stock units and other awards granted1,989,959
    
Restricted stock units and other awards released(1,794,029)    
Restricted stock units and other awards cancelled(613,621)    
Balance, June 30, 20185,524,432
    
Restricted stock units and other awards granted1,694,294
    
Restricted stock units and other awards released(1,779,317)    
Restricted stock units and other awards cancelled(521,103)    
Balance, June 29, 20194,918,306
    
Restricted stock units and other awards granted1,834,828
    
Restricted stock units and other awards released(1,700,518)    
Restricted stock units and other awards cancelled(446,024)    
Balance, June 27, 20204,606,592
 2.6 $272,710,246
Expected to vest as of June 27, 20203,918,834
 2.5 $231,994,987


(1)Aggregate intrinsic value for RSUs and other awards represents the closing price per share of the Company's common stock on June 26, 2020, the last business day preceding the fiscal year end, multiplied by the number of RSUs and other awards outstanding, or expected to vest as of June 27, 2020.

The Company withheld shares totaling $35.9 million in value as a result of employee withholding taxes basedcharter that is available on the valueInvestor Relations section of our website at
http://investor.maximintegrated.com/corporate-governance
.
The Audit Committee oversees Maxim Integrated’s financial reporting process on behalf of the RSUs on their vesting dateboard of directors. Management is responsible for the fiscal year ended June 27, 2020. The total paymentspreparation, presentation and integrity of the financial statements, including establishing accounting and financial reporting principles and designing systems of internal controls over financial reporting. Maxim Integrated’s independent auditors are responsible for the employees' tax obligationsexpressing an opinion as to the taxing authorities are reflected as financing activities withinconformity of Maxim Integrated’s consolidated financial statements with generally accepted accounting principles.
In performing its responsibilities, the Consolidated Statements of Cash Flows.

As of June 27, 2020, there was $148.8 million of unrecognized compensation cost related to 4.6 million unvested RSUsAudit Committee has reviewed and other awards, which is expected to be recognized over a weighted average period of approximately 2.6 years.

Market Stock Units

The Company grants MSUs to senior members ofdiscussed, with management and the independent auditors, the audited consolidated financial statements in lieu of granting stock options. For MSUs granted prior to September 2017,Maxim Integrated’s Annual Report on Form
10-K
for 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 will grant RSUs in lieu of MSUs (or restricted stock awards (“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.

The weighted-average fair value of MSUs granted was $54.70, $75.48 and $51.03 per share for fiscal years 2020, 2019 and 2018, respectively.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the number of MSUs outstanding and expected to vest as of June 27, 2020 and their activity during fiscal years 2020, 2019 and 2018:
 
Number of
Shares 
 Weighted Average Remaining Contractual Term
(in years)		 
Aggregate
Intrinsic
Value (1) 
Balance, June 24, 2017818,028
    
Market stock units granted292,336
    
Market stock units released—
    
Market stock units cancelled(31,300)    
Balance, June 30, 20181,079,064
    
Market stock units granted247,804
    
Market stock units released(13,594)    
Market stock units cancelled(264,742)    
Balance, June 29, 20191,048,532
    
Market stock units granted259,984
    
Market stock units released(183,974)    
Market stock units cancelled(153,322)    
Balance, June 27, 2020971,220
 2.6 $57,496,224
Expected to vest as of June 27, 2020383,568
 2.5 $22,707,207

(1)Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on June 26, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of June 27, 2020.

As of June 27, 2020, there was $29.0 million of unrecognized compensation cost related to 1.0 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.6 years.

At June 27, 2020, the Company had 16.8 million shares of its common stock available for issuance to employees and other recipients under the 1996 Plan.

Employee Stock Purchase Plan

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

The Company issued 0.9 million shares of its common stock for total consideration of $42.3 million related to the 2008 ESPP during the fiscal year ended June 27, 2020. As of June 27, 2020,26, 2021. The Audit Committee has also discussed with the Company had 5.4 million shares of its common stock reserved and available for future issuance under the 2008 ESPP.

The fair value of shares granted to employees under the 2008 ESPP in fiscal years 2020, 2019 and 2018 has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
Expected holding period (in years) 0.5 0.5 0.5
Risk-free interest rate0.2% - 2.7% 1.6% - 2.6% 0.8% - 2.1%
Expected stock price volatility 28.4% - 55.2% 19.6% - 32.7% 19.1% - 32.7%
Dividend yield 3.1% - 3.4% 2.8% - 3.4% 2.8% - 3.4%


As of June 27, 2020, there was $8.8 million of unrecognized compensation expense related to the 2008 ESPP. At the end of the current offering period in November 2020, the Company will suspend the 2008 ESPP program pursuant to the terms of the ADI Merger Agreement.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and other awards as well as MSUs. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options, assumed release of unvested RSUs and other awards as well as 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:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands, except per share data) 
Numerator for basic earnings per share and diluted earnings per share 
  
  
Net income$654,694
 $827,486
 $467,318
      
Denominator for basic earnings per share 269,341
 274,966
 280,979
     Effect of dilutive securities: 
  
  
          Stock options, ESPP, RSUs and MSUs2,687
 3,811
 4,695
Denominator for diluted earnings per share272,028
 278,777
 285,674
      
Earnings per share: 
  
  
Basic$2.43
 $3.01
 $1.66
Diluted $2.41
 $2.97
 $1.64


For the fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018, no stock awards were determinedindependent auditors matters required to be anti-dilutive. Securities which would have been anti-dilutive are insignificant and were excluded from the computation of diluted earnings per share in all periods.

NOTE 9: 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 year ended June 27, 2020, the Company recorded operating lease expense of $12.3 million. For each of the years ended June 29, 2019 and June 30, 2018, the Company recorded rent expense of $10.2 million.

Leases are included in the following Consolidated Balance Sheet lines:
  June 27, 2020
  (in thousands)
Other assets $54,610
   
Accrued expenses $10,445
Other liabilities $48,314


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Maturities of lease liabilities as of June 27, 2020 are as follows:
  Operating Lease Obligations
Fiscal Year

 
(in thousands)

2021 $12,144
2022 10,971
2023 9,759
2024 8,697
2025 6,891
Thereafter 17,083
Total 65,545
Less imputed interest 6,786
Total $58,759


Future minimum lease payments under non-cancelable operating leases as of June 29, 2019, based on the previous lease standard, are as follows:
  Operating Lease Obligations
Fiscal Year

 
(in thousands)

2021 $15,068
2022 13,368
2023 7,689
2024 7,205
2025 4,229
Thereafter 5,893
Total $53,452


Other information related to leases as of June 27, 2020 are as follows:
Supplemental cash flow information:  
Operating cash flows used for operating leases, in thousands $12,020
   
Weighted-average remaining lease term - operating leases, in years 7
Weighted-average discount rate - operating leases 3.36%


NOTE 10: GOODWILL AND INTANGIBLE ASSETS

Goodwill

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

In fiscal years 2020 and 2019, the Company elected to perform a qualitative analysis to assess impairment of goodwill rather than to perform the quantitative goodwill impairment test. The key qualitative factors considered in the assessment included the change in the industry and competitive environment, market capitalization, and overall financial performance. Based on the results of this qualitative analysis, the Company determined that it was more likely than not that the fair value of each reporting unit exceeded its carrying value. The Company concluded that goodwill was not impaired in fiscal years 2020 and 2019.

Activity and goodwill balances for the fiscal years ended June 27, 2020 and June 29, 2019 were as follows:

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Goodwill
 (in thousands)
Balance, June 30, 2018$532,251
Balance, June 29, 2019532,251
Acquisitions30,289
Balance, June 27, 2020$562,540


Intangible Assets

The useful lives of amortizing intangible assets are as follows:
AssetLife
Intellectual property1-10 years
Customer relationships3-10 years
Trade name1-4 years
Patents5 years


Intangible assets consisted of the following:
 June 27, 2020 June 29, 2019
 
Original
Cost 
 Accumulated Amortization Net 
Original
Cost
 Accumulated Amortization Net
 (in thousands)
Intellectual property$525,196
 $458,418
 $66,778
 $487,346
 $445,558
 $41,788
Customer relationships118,335
 108,603
 9,732
 116,505
 105,901
 10,604
Trade name11,374
 9,265
 2,109
 9,974
 8,914
 1,060
Backlogs170
 25
 145
 —
 —
 —
Patent2,500
 2,500
 —
 2,500
 2,500
 —
Total amortizable intangible assets657,575
 578,811
 78,764
 616,325
 562,873
 53,452
In-process Research and Development9,195
 —
 9,195
 2,790
 —
 2,790
Total intangible assets$666,770
 $578,811
 $87,959
 $619,115
 $562,873
 $56,242


During the fiscal year ended June 27, 2020, $2.8 million of IPR&D was completed and reclassified to amortizable Intellectual Property.

The following table presents the amortization expense of intangible assets and its presentation in the Consolidated Statements of Income:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Cost of goods sold$12,860
 $21,689
 $46,063
Intangible asset amortization3,078
 3,041
 4,467
Total intangible asset amortization expenses$15,938
 $24,730
 $50,530



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the estimated future amortization expense of intangible assets as of June 27, 2020:

  Amount
Fiscal Year (in thousands) 
2021 $19,279
2022 13,454
2023 12,970
2024 9,995
2025 9,716
Thereafter 13,350
Total amortizable intangible assets $78,764


NOTE 11: ACQUISITIONS

On May 11, 2020, the Company acquired a privately-held corporation specializing in motor and motion control technology. The aggregate purchase price of $87.0 million included cash consideration of $72.8 million and contingent consideration with an estimated fair value of $14.2 million. The contingent consideration is payable if the acquired company achieves certain financial milestones for the annual periods ending December 31, 2020 and December 31, 2021. The acquired assets included $2.7 million of cash, $35.1 million of developed technology, $12.6 million of other intangible assets, and $6.3 million of other net assets. In connection with this acquisition, the Company also recorded $30.3 million of goodwill, which is expected to be deductible for tax purposes.

There were no material acquisitions completed during the fiscal year 2019.

NOTE 12: SEGMENT INFORMATION

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

The Company currently has 1 operating segment. 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 ("CODM") in deciding how to allocate resources and in assessing performance. The CODM of the Company is the Chief Executive Officer ("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.

Geographical revenue information is based on customers’ ship-to location. 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:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands) 
United States$237,579
 $257,350
 $306,453
China 813,227
 812,686
 885,319
Rest of Asia698,175
 756,928
 786,814
Europe 387,368
 428,750
 440,658
Rest of World 55,046
 58,615
 60,822
Total$2,191,395
 $2,314,329
 $2,480,066


Net property, plant, and equipment by geographic region were as follows:

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Fiscal Year Ended
 June 27,
2020		 June 29,
2019
 (in thousands) 
United States $362,093
 $379,308
Philippines88,660
 102,634
Rest of World 99,653
 95,780
Total$550,406
 $577,722


NOTE 13: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is party or subject to various other 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.

Commitments

Future annual minimum payments for purchase commitments are as follows:
 Payment due by period
  Total 
Fiscal year
2021
 
Fiscal year
2022
 
Fiscal year
2023
 
Fiscal year
2024
 
Fiscal year
2025
 Thereafter
 (in thousands)
Inventory-related purchase obligations (1)
$352,960
 $54,206
 $46,778
 $44,821
 $42,502
 $40,650
 $124,003

(1)The Company orders materials and supplies in advance or with minimum purchase quantities. The Company is obligated to pay for the materials and supplies when received.

Purchase orders for the purchase of the majority of the Company's raw materials and other goods and services are not included in the table. The Company's purchase orders generally allow for cancellation without significant penalties. The Company does not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed its expected short-term requirements.

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.

NOTE 14: COMPREHENSIVE INCOME

The changes in accumulated other comprehensive income (loss) by component and related tax effects in the fiscal years ended June 27, 2020 and June 29, 2019 were as follows:


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Unrealized gain (loss) on intercompany receivables Unrealized gain (loss) on postretirement benefits Cumulative translation adjustment Unrealized gain (loss) on cash flow hedges Unrealized gain (loss) on available-for-sale securities Total
 (in thousands)
Balance, June 30, 2018$(6,280) $(2,516) $(1,136) $(1,383) $(3,670) $(14,985)
Other comprehensive income (loss) before reclassifications—
 —
 —
 (494) 3,804
 3,310
Amounts reclassified out of accumulated other comprehensive income (loss)—
 (1,848) —
 2,656
 —
 808
Tax effects—
 42
 —
 (354) (175) (487)
Other comprehensive income (loss)—
 (1,806) —
 1,808
 3,629
 3,631
Balance, June 29, 2019$(6,280) $(4,322) $(1,136) $425
 $(41) $(11,354)
Other comprehensive income (loss) before reclassifications—
 —
 —
 (1,262) 185
 (1,077)
Amounts reclassified out of accumulated other comprehensive income (loss)—
 (3,950) —
 1,578
 —
 (2,372)
Tax effects—
 284
 —
 (51) (25) 208
Other comprehensive income (loss)—
 (3,666) —
 265
 160
 (3,241)
Balance, June 27, 2020$(6,280) $(7,988) $(1,136) $690
 $119
 $(14,595)


Amounts reclassified out of Unrealized gain (loss) on postretirement benefits were included in Selling, general and administrative in the Consolidated Statements of Income. Amounts reclassified out of Unrealized gain (loss) on cash flow hedges were included in Net revenues, Cost of goods sold and Other operating expenses (income), net in the Consolidated Statements of Income.

NOTE 15: COMMON STOCK REPURCHASES

On July 20, 2017, the Board of Directors of the Company authorized the repurchase of up to $1.0 billion of the Company's common stock. The stock repurchase authorization did not have an expiration date and the pace of repurchase activity depended on factors such as current stock price, levels of cash generation from operations, cash requirements, and other factors. The prior authorization by the Company’s Board of Directors for repurchase of common stock was cancelled and superseded by this repurchase authorization.

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 generation from operations, cash requirements, and other factors. The prior authorization by the Company’s Board of Directors for repurchase of common stock was cancelled and superseded by this repurchase authorization.

During fiscal years 2020, 2019 and 2018, the Company repurchased approximately 7.9 million, 9.8 million and 7.5 million shares of its common stock for $440.8 million, $539.2 million and $408.0 million, respectively. As of June 27, 2020, the Company had a remaining authorization of $0.7 billion for future share repurchases. The Company suspended its repurchase program on July 13, 2020, the date the Company announced its planned merger with ADI.

NOTE 16: INTEREST AND OTHER INCOME (EXPENSE)

Interest and other income (expense) was as follows:


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Interest and other income (expense):     
Interest (expense)$(35,797) $(43,543) $(50,215)
Interest income30,220
 47,844
 38,292
Other income (expense), net(2,721) 3,022
 3,360
Total$(8,298) $7,323
 $(8,563)


As discussed in Note 6: "Financial Instruments", Interest expense consists primarily of interest expense associated with long-term notes. Interest expense associated with the notes was $35.6 million, $41.4 million and $49.5 million during the fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018, respectively. Interest expense associated with debt discounts and issuance fees was $1.4 million, $2.0 million and $2.9 million during the fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018, respectively. Interest income consists of interest earned on cash, cash equivalents, and short-term investments.

NOTE 17: INCOME TAXES

Pretax income was as follows:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Domestic pre-tax income$72,854
 $103,016
 $149,056
Foreign pre-tax income605,242
 651,405
 675,829
Total$678,096
 $754,421
 $824,885


The provision (benefit) for income taxes consisted of the following:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Federal 
  
  
Current$1,893
 $(114,494) $318,288
     Deferred9,828
 12,874
 25,769
State     
     Current(3,880) 9,842
 117
     Deferred552
 2,196
 1,325
Foreign      
     Current15,683
 17,562
 11,450
     Deferred(674) (1,045) 618
Total provision (benefit) for income taxes$23,402
 $(73,065) $357,567



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the Company's Federal statutory tax rate to the Company's effective tax rate is as follows:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
Federal statutory rate21.0 % 21.0 % 28.1 %
State tax, net of federal benefit(0.5) 1.4
 0.2
General business credits(1.8) (0.9) (0.8)
Effect of foreign operations(17.1) (15.8) (16.7)
Stock-based compensation1.0
 0.7
 0.4
Interest accrual for uncertain tax positions0.9
 1.1
 2.1
Transition Tax1.0
 9.0
 28.7
Global intangible low taxed income7.9
 7.4
 —
Deferred tax remeasurement—
 —
 1.6
Settlement of uncertain tax positions(7.5) (33.4) —
Other(1.4) (0.2) (0.3)
Effective tax rate3.5 % (9.7)% 43.3 %


On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act reduced the federal statutory tax rate from 35.0% to 21.0%, effective January 1, 2018, which results in federal statutory tax rates for the Company of 21.0%, 21.0% and 28.1% (average of a 35.0% rate for the first half of fiscal year 2018 and a 21.0% rate for the second half of fiscal year 2018) for fiscal years 2020, 2019 and 2018, respectively. In fiscal year 2018 the Company recorded a $13.7 million charge to remeasure deferred taxes as of the enactment date of the Act to reflect the federal statutory rate reduction.

The Act included a one-time tax on accumulated unremitted earnings of our foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allowed the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act was not completed. Provisional amounts must be adjusted within a one-year measurement period from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a $236.9 million provisional Transition Tax charge. During the measurement period the Company gathered information and analyzed available guidance and in the second quarter of fiscal year 2019 recorded a $22.1 million Transition Tax charge, which increased the Company’s fiscal year 2019 tax rate by 2.9%. As of the end of the second quarter of fiscal year 2019 accounting for income tax effects of the Act was completed.

The Act included Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impact the Company in fiscal year 2019. The GILTI provisions effectively subject income earned by the Company’s foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits. The Company has elected to treat tax generated by the GILTI provisions as a period expense.

In fiscal year 2019, the Company reversed $221.5 million of uncertain tax position reserves and $30.1 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of the Company’s fiscal year 2009 through fiscal year 2011 federal corporate income tax returns, which also settled intercompany buy-in license payment issues for fiscal years 2012 through 2019. $140.7 million of fiscal year 2009 through fiscal year 2018 advance tax payments made in June 2018 were applied to additional federal tax liabilities generated by the settlement. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $47.7 million in the fiscal fourth quarter.

In fiscal year 2020, the Company reversed $40.5 million of uncertain tax position reserves and $10.7 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of the Company’s fiscal year 2012 through fiscal year 2014 federal corporate income tax returns. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $6.5 million in the fiscal fourth quarter.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service released temporary regulations under Internal Revenue Code (“IRC”) Section 245A (“Section 245A”), as enacted by the Act, and IRC Section 954(c)(6) (the “Temporary Regulations”), which apply 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 intercompany Temporary Regulations, the Company benefited in fiscal years 2018 and 2019 from the FPHCI look-through exception. The Company has analyzed the

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

relevant Temporary Regulations and concluded that they were not validly issued. Therefore, the Company has not accounted for the effects of the retroactive Temporary Regulations in its results of operations for fiscal year 2019 or fiscal year 2020. 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 the validity of regulations as well as a potential litigation process, there can be no assurance that the relevant Temporary Regulations will be invalidated, modified or 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.

As of June 27, 2020, the Company's foreign subsidiaries have accumulated undistributed earnings of approximately $306.2 million that are intended to be indefinitely reinvested outside the U.S. No deferred tax liability has been recognized for the repatriation of these earnings. At June 27, 2020, the unrecognized deferred tax liability on these earnings was $27.2 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax assets and liabilities were as follows:
 June 27,
2020		 June 29,
2019
 (in thousands)
Deferred tax assets: 
  
     Accrued compensation$8,750
 $7,990
     Stock-based compensation10,476
 9,788
     Net operating loss carryovers40,933
 40,067
     Tax credit carryovers97,870
 93,269
     Other reserves and accruals not currently deductible for tax purposes17,580
 21,584
     Other 11,626
 11,500
Total deferred tax assets187,235
 184,198
    
Deferred tax liabilities: 
  
     Fixed assets and intangible assets cost recovery, net(58,293) (52,567)
     Unremitted earnings of foreign subsidiaries(9,968) (7,428)
     Other(3,080) (3,712)
Total deferred tax liabilities(71,341) (63,707)
    
Net deferred tax assets before valuation allowance115,894
 120,491
Valuation allowance(135,751) (131,798)
Net deferred tax assets (liabilities)$(19,857) $(11,307)


The valuation allowance as of June 27, 2020 and June 29, 2019 primarily relates to certain state and foreign net operating loss carryforwards and certain state tax credit carryforwards. The valuation allowance increased by $4.0 million in fiscal year 2020.

As of June 27, 2020, the Company has $15.0 million of federal net operating loss carryforwards expiring at various dates between fiscal years 2022 and 2033, $39.4 million of state net operating loss carryforwards expiring at various dates through fiscal year 2033, $140.2 million of foreign net operating loss carryforwards with no expiration date, $115.4 million of state tax credit carryforwards with no expiration date, and $6.6 million of state tax credit carryforwards expiring at various dates through fiscal year 2035.

The Company classifies unrecognized tax benefits as (i) a current liability to the extent that payment is anticipated within one year; (ii) a non-current liability to the extent that payment is not anticipated within one year; or (iii) a reduction to deferred tax assets to the extent that the unrecognized tax benefit relates to deferred tax assets such as operating loss or tax credit carryforwards or to the extent that operating loss or tax credit carryforwards would be able to offset the additional tax liability generated by unrecognized tax benefits.


MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the change in gross unrecognized tax benefits, excluding interest, penalties and the federal benefit for state unrecognized tax benefits, is as follows:
 For the Year Ended
 June 27,
2020		 June 29,
2019		 June 30,
2018
 (in thousands)
Balance as of beginning of year$220,397
 $591,458
 $539,569
Tax positions related to current year:     
     Addition3,459
 6,974
 48,646
Tax positions related to prior year:     
Addition5,626
 20,851
 3,806
Reduction(48,944) (236,705) —
Settlements(6,263) (161,847) —
Lapses in statutes of limitations—
 (334) (563)
Balance as of end of year$174,275
 $220,397
 $591,458


Prior year tax position activity in fiscal year 2019 includes the reversal of $221.5 million of tax reserves, primarily due to the settlement of an audit of the Company’s fiscal year 2009 through fiscal year 2011 federal corporate income tax returns, which also settled intercompany buy-in license payment issues for fiscal year 2012 through fiscal year 2019. Fiscal year 2019 settlements include $140.7 million of fiscal year 2009 through fiscal year 2018 advance tax payments made in June 2018 that were applied to additional federal tax liabilities generated by the federal tax audit settlement. Prior year tax position activity in fiscal year 2020 includes the reversal of $40.5 million of tax reserves, primarily due to the settlement of an audit of the Company’s fiscal year 2012 through fiscal year 2014 federal corporate income tax returns.

The total amount of gross unrecognized tax benefits as of June 27, 2020 that, if recognized, would affect the effective tax rate is $122.7 million. $51.6 million of unrecognized tax benefits would be offset by an increase in the valuation allowance for deferred tax assets and thus would not affect the effective tax rate.

The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.

The Company reports interest and penalties related to unrecognized tax benefits as a component of income tax expense. The gross amount, before the federal and state benefit, of interest and penalties recognized in income tax expense during the fiscal years ended June 27, 2020, June 29, 2019, and June 30, 2018 was $(5.9) million, $(30.2) million and $27.8 million, respectively, and the total amount of interest and penalties accrued as of June 27, 2020, June 29, 2019, and June 30, 2018 was $24.6 million, $31.7 million, and $61.9 million, respectively.

The Company’s federal corporate income tax returns are audited on a recurring basis by the Internal Revenue Service (“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.

A summary of the fiscal tax years that remain subject to examination, as of June 27, 2020, for the Company's major tax jurisdictions are as follows:
United States - Federal2015-Forward
Ireland2015-Forward


NOTE 18: BENEFITS

Defined contribution plan

U.S. employees are automatically enrolled in the Maxim Integrated 401(k) Plan (the "Plan") when they meet eligibility requirements unless they decline participation. Under the terms of the Plan, the Company matches 100% of the employee contributions for the first 3% of employee eligible compensation and an additional 50% match for the next 2% of employee eligible compensation,up to the IRS Annual Compensation Limits. Total defined contribution expense was $11.2 million, $11.6 million and $12.6 million in fiscal years 2020, 2019 and 2018, respectively.

MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Non-U.S. Pension Benefits

The Company sponsors defined-benefit pension plans in certain countries. Consistent with the requirements of local law, the Company deposits funds for certain plans with insurance companies, with third party trustees, or into government-managed accounts, and accrues for the unfunded portion of the obligation.

The Company sponsors retirement plans for employees in the Philippines and certain other countries. These plans are non-contributory and defined benefit types that provide retirement to employees equal to one-month salary for every year of credited service. The benefits are paid in a lump sum amount upon retirement or separation from the Company. Total defined benefit liability was $18.0 million and $12.6 million as of June 27, 2020 and June 29, 2019, respectively. Total accumulated other comprehensive loss related to this retirement plan was $6.3 million, $3.0 million and $1.0 million for the fiscal years 2020, 2019, and 2018, respectively.

U.S. Employees Postretirement Medical Expense & Funded Status Reconciliation

The Company provides postretirement medical expenses to certain former employees of Dallas Semiconductor and to certain Maxim Integrated executives. The Company adopted the postretirement medical plan as a result of the Company's acquisition of Dallas Semiconductor in 2001. A reconciliation of the funded status of these postretirement benefits, is as follows:
 June 27,
2020		 Estimated Fiscal Year 2021 Expense June 29,
2019		 Fiscal Year 2020 Expense
 (in thousands, except percentages)
Accumulated postretirement benefit obligation:       
Retirees and beneficiaries$(19,115)   $(18,241)  
Active participants(1,413)   (1,437)  
Funded status$(20,528)   $(19,678)  
        
Actuarial gain (loss)$705
   $118
  
Prior service cost—
   —
  
        
Amounts recognized in accumulated other comprehensive income:       
Net actuarial loss$1,877
   $1,172
  
Prior service cost249
   606
  
Total$2,126
   $1,778
  
        
Net periodic postretirement benefit cost:       
Interest cost  $524
   $695
Amortization:       
Prior service cost  249
   356
Total net periodic postretirement benefit cost  $773
   $1,051
        
Employer contributions  $740
   $550
        
Economic assumptions:       
Discount rate2.6%   3.6%  
Medical trend7.00%-5.00%   7.25%-5.00%  



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following benefit payments are expected to be paid:
 Non-Pension Benefits
Fiscal Year(in thousands)
2021$739
2022789
2023817
2024867
2025916
Thereafter16,400
Total$20,528


Dallas Semiconductor Split-Dollar Life Insurance

As a result of the Company's acquisition of Dallas Semiconductor in 2001, the Company assumed responsibility associated with a split-dollar life insurance policy held by a former Dallas Semiconductor director. The policy is owned by the individual with the Company retaining a limited collateral assignment.

The Company had $8.5 million and $6.9 million included in Other assets in the Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively, associated with the limited collateral assignment to the policy. The Company had a $9.7 million and $8.2 million obligation included in Other Liabilities in the Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively, related to the anticipated continued funding associated with the policy.

NOTE 19: QUARTERLY FINANCIAL DATA (UNAUDITED)

 Quarter Ended
Fiscal Year 2020June 27,
2020		 March 28, 2020 December 28, 2019 September 28, 2019
 (in thousands, except percentages and per share data)
Net revenues$545,369
 $561,916
 $551,070
 $533,040
Cost of goods sold 183,001
 195,479
 190,546
 189,717
Gross margin $362,368
 $366,437
 $360,524
 $343,323
Gross margin %66.4% 65.2% 65.4% 64.4%
Operating income$177,987
 $183,347
 $169,056
 $156,004
     % of net revenues32.6% 32.6% 30.7% 29.3%
Net income (1)
$207,298
 $161,190
 $146,050
 $140,156
        
Earnings per share: 
  
  
  
Basic$0.78
 $0.60
 $0.54
 $0.52
Diluted$0.77
 $0.59
 $0.53
 $0.51
        
Shares used in the calculation of earnings per share: 
  
  
  
     Basic 266,639
 269,003
 270,330
 271,388
     Diluted268,777
 271,579
 273,269
 274,436
  
  
  
  
Dividends declared and paid per share $0.48
 $0.48
 $0.48
 $0.48


(1)The fiscal quarter ended June 27, 2020 includes $51.2 million of net income from the release of uncertain tax position and related interest reserves and a $6.5 million Transition Tax charge. For details, refer to Note 17: "Income Taxes".



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Quarter Ended
Fiscal Year 2019June 29, 2019 March 30, 2019 December 29, 2018 September 29, 2018
 (in thousands, except percentages and per share data)
Net revenues $556,545
 $542,383
 $576,906
 $638,495
Cost of goods sold 200,154
 201,552
 203,858
 208,259
Gross margin $356,391
 $340,831
 $373,048
 $430,236
Gross margin %64.0% 62.8% 64.7% 67.4%
Operating income$173,571
 $157,140
 $182,204
 $234,183
     % of net revenues31.2% 29.0% 31.6% 36.7%
Net income (1)
$367,558
 $130,613
 $131,892
 $197,423
        
Earnings per share: 
  
  
  
     Basic$1.35
 $0.48
 $0.48
 $0.71
     Diluted$1.33
 $0.47
 $0.47
 $0.70
        
Weighted-average shares used in the calculation of earnings per share: 
  
  
  
     Basic 272,382
 273,221
 276,252
 278,045
     Diluted275,834
 276,610
 280,008
 282,454
        
Dividends declared and paid per share $0.46
 $0.46
 $0.46
 $0.46


(1)The fiscal quarter ended June 29, 2019 includes $251.6 million of net income from the release of uncertain tax position and related interest reserves and a $47.7 million Transition Tax charge. The fiscal quarter ended December 29, 2018 includes a $22.1 million Transition Tax charge. For details, refer to Note 17: "Income Taxes".



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20: SUBSEQUENT EVENT

Merger with Analog Devices

On July 13, 2020, the Company announced that it had entered into the ADI Merger Agreement with Analog Devices, 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, and 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. For additional information on the ADI Merger Agreement and the ADI Merger, please refer to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 13, 2020. 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.

A cash dividend of $0.48 per share will be paid on September 11, 2020, to Maxim Integrated stockholders of record on August 27, 2020. The Company will neither declare nor pay a dividend in any of the next succeeding four fiscal quarters and has suspended its open market stock repurchase program as the ADI Merger Agreement restricts the Company's ability to declare dividends and repurchase shares of the Company's common stock.







Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Maxim Integrated Products, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Maxim Integrated Products, Inc. and its subsidiaries (the “Company”) as of June 27, 2020and June 29, 2019, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended June 27, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended June 27, 2020 listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of June 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 27, 2020and June 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 27, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal year 2020.

Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board’s Auditing Standard No. 16, Communications with Audit Committees.
Pursuant to Independence Standards Board (United States) (PCAOB)Standard No. 1, “Independence Discussions with Audit Committees,” the Audit Committee received written disclosures and are requiredthe letter from the independent auditors, and discussed with the auditors their independence.
Based on the reviews and discussions referred to be independent with respectabove, the Audit Committee recommended to the Company in accordance withboard of directors that the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether theaudited consolidated financial statements are freebe included in Maxim Integrated’s Annual Report on Form
10-K
for the year ended June 26, 2021.
Audit Committee
Joseph R. Bronson, Chair
James R. Bergman
Mercedes Johnson
William D. Watkins
PART IV
Item 15. Exhibits, Financial Statement Schedules
31.1 Certification of material misstatement, whether duePrincipal Executive Officer pursuant to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our auditsSection 302 of the consolidated financial statements included performing proceduresSarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer pursuant to assess the risks of material misstatementSection 302 of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentationSarbanes-Oxley Act of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Write-down for Excess or Obsolete Inventories

As described in Note 2 to the consolidated financial statements, the total inventories balance was $259.6 million as of June 27, 2020. Inventories are stated at the lower of (i) standard cost, which approximates actual cost on a first-in-first-out basis, or (ii) net realizable value. A write-down to net realizable value is recorded if excess quantities or obsolescence is identified. At each reporting period, management assesses the Company’s ending inventories for excess quantities and obsolescence based on the projected sales outlook. This assessment, which requires significant judgment by management, includes analysis of projections of future demand. Because of the cyclical nature of the market, inventory levels, obsolescence of technology, and product life cycles, management generally writes down inventories to net realizable value based on forecasted product demand. As disclosed by management, the Company had net inventory write-downs of $16.5 million during fiscal year 2020.

The principal considerations for our determination that performing procedures relating to the write-down of excess or obsolete inventories is a critical audit matter are the significant amount of judgment by management in developing the assumptions of the forecasted product demand, which in turn led to significant auditor judgment, subjectivity and effort in performing audit procedures and evaluating audit evidence relating to the forecasted product demand.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s write-down for excess or obsolete inventories, including controls over the development of assumptions related to forecasted product demand. The procedures also included, among others, testing management’s process for developing the estimate of the write-down for excess or obsolete inventories, testing the completeness and accuracy of underlying data used in the estimate, and evaluating management’s assumptions of forecasted product demand. Evaluating management’s demand forecast for reasonableness involved considering historical sales by product, comparing prior period estimates to actual results of the same period, and determining whether the demand forecast used was consistent with evidence obtained in other areas of the audit.



/s/ PricewaterhouseCoopers LLP
San Jose, California

August 19, 2020

We have served as the Company’s auditor since 2016.




MAXIM INTEGRATED PRODUCTS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


 
Balance at
Beginning of
Period
 Additions Deductions 
Balance at
End of
Period
 (in thousands)
Price adjustments and other revenue reserves:      

     Year ended June 27, 2020$100,489
 $767,781
 $(719,354) $148,916
     Year ended June 29, 2019 (1)
$—
 $568,550
 $(468,061) $100,489
        
Returns and allowances:       
     Year ended June 27, 2020$148
 $625
 $(128) $645
     Year ended June 29, 2019 (1)
$140,115
 $697
 $(140,664) $148
     Year ended June 30, 2018$46,575
 $659,023
 $(565,483) $140,115


(1)Subsequent to the adoption of Topic 606 on July 1, 2018, revenue reserve allowances are presented on a gross basis as Price adjustment and other revenue reserves in the Consolidated Balance Sheets. Revenue reserve allowances for prior fiscal years are not adjusted and continue to be reported under Topic 605.


SIGNATURES

Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed
         
1.1 
Underwriting Agreement, dated June 8, 2017, between Maxim Integrated Products, Inc. and Merrill Lynch.
 8-K 
1.1
 6/13/2017
         
2.1 
Agreement and Plan of Merger, dated as of July 12, 2020, by and among Analog Devices, Inc., a Massachusetts corporation (“Parent”), Magneto Corp, a Delaware corporation and wholly owned subsidiary of Parent and Maxim Integrated Products, Inc.
 8-K 
2.1
 7/13/2020
         
3.1 Restated Certificate of Incorporation of the Company. 10-K 3.1 9/26/1995
         
3.2 Amendments to Restated Certificate of Incorporation of the Company. 
10-K
10-K
10-Q
10-Q
8-K
 
3.3
3.3
3.3
3.3
3.1
 
9/29/1997
9/24/1998
2/08/2000
2/09/2001
11/17/2015
         
3.3 
Amended and Restated Bylaws.
 10-Q 
3.1
 1/27/2017
         
4.1 
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

 10-K 
4.1
 8/21/2019
         
10.1 (A) 
The Company's Forms of Indemnity Agreement.
 10-K 
10.8
 9/8/2005
         
10.2 (A) 
Amended and Restated 1996 Stock Incentive Plan, as amended and restated.
 Proxy Statement Appendix B 9/30/2016
         
10.3 (A) Assumption Agreement, dated April 11, 2001, relating to Dallas Semiconductor Corporation Executives Retiree Medical Plan. 10-K 10.26 9/24/2001
         
10.4 (A) Dallas Semiconductor Corporation Executives Retiree Medical Plan. 10-K 10.28 9/24/2001
         
10.5 (A) 
Form of Non-Statutory Option Agreement, as amended and restated, under the Company's 1996 Stock Incentive Plan, for U.S. Option Optionees.
 10-Q 
10.30
 11/5/2009
         
10.6 (A) 
Form of Restricted Stock Unit Agreement under the Company's 1996 Stock Incentive Plan, for U.S. Holders.
 10-Q 
10.31
 11/5/2009
         
10.7 (A) 
Employment Agreement between the Company and Tunç Doluca dated as of September 30, 1993.
 10-K 
10.33
 9/30/2008
         
10.8 (A) 
Employment Letter Agreement between the Company and Bruce Kiddoo dated as of August 6, 2007.
 10-Q 
10.40
 9/30/2008
         
10.9 (A) 
Form of Non-Statutory Option Agreement, as amended and restated, under the Company's 1996 Stock Incentive Plan, for Non-U.S. Option Optionees.
 10-Q 
10.41
 11/6/2008
         
10.10 (A) 
Form of Restricted Stock Unit Agreement under the Company's 1996 Stock Incentive Plan, for Non-U.S. Holders.
 10-Q 
10.42
 11/6/2008
         
10.11 (A) 
2008 Employee Stock Purchase Plan, as amended.
 Proxy Statement Appendix A 9/30/2016


Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed
         
10.12 (A) 
Amendment to Dallas Semiconductor Corporation Executives Retiree Medical Plan.
 10-K 
10.45
 8/26/2009
         
10.13 (A) 
Amended and Restated Change In Control Employee Severance Plan for U.S. Based Employees.
 8-K 
10.1
 7/13/2020
         
10.14 (A) 
Amended and Restated Change In Control Employee Severance Plan for Non-U.S. Based Employees.
 8-K 
10.2
 7/13/2020
         
10.15 (A) 
Amended and Restated Equity Award Policy Acceleration Of Vesting In The Event of A Change In Control For Employees Based Outside The U.S.
 8-K 
10.3
 7/13/2020
         
10.16 
Credit Agreement, dated October 13, 2011, and amended on June 27, 2014, by and among the Company, as borrower, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., Wells Fargo Bank, National Association and Morgan Stanley MUFG Loan Partners, LLC, as Co-Documentation Agents, and the lenders party thereto (the “Credit Agreement”).
 10-Q 
10.52
 10/26/2011
         
10.17 
Underwriting Agreement, dated March 11, 2013, between the Company and J.P. Morgan Securities LLC.
 8-K 
1.1
 3/14/2013
         
10.18 
Underwriting Agreement, dated June 8, 2017, between the Company and Merrill Lynch.
 8-K 
1.1
 6/13/2017
         
10.19 
Third Supplemental Indenture, dated as of November 21, 2013, between the Company and Wells Fargo Bank, National Association, as trustee.
 8-K 
4.1
 11/21/2013
         
10.20 
Indenture, dated June 10, 2010, between the Company and Wells Fargo Bank, National Association, as trustee.
 S-3 
4.4
 6/10/2010
         
10.21 
Second Supplemental Indenture, dated as of March 18, 2013, between the Company and Wells Fargo Bank, National Association, as trustee.
 8-K 
4.1
 3/21/2013
         
10.22 
Fourth Supplemental Indenture, dated as of June 15, 2017, between the Company and Wells Fargo Bank, National Association, as trustee.

 8-K 
4.1
 6/20/2017
         
10.23 (A) 
Form of Global Performance Share Agreement for September 2017 Grants.
 10-Q 
10.1
 10/20/2017
         
10.24 (A) 
Form of Global Performance Share Agreement for September 2018 Grants.
 10-Q 
10.1
 11/1/2018
         
10.25 (A) 
Form of Global Performance Share Agreement for September 2019 Grants.
 10-Q 
10.1
 10/30/2019
         
10.26 (A) 
Form of Global Restricted Stock Unit Agreement.
 10-Q 
10.2
 10/20/2017
         
10.27 (A) 
Form of Global Restricted Stock Unit Agreement.
 10-Q 
10.2
 10/30/2019
         
10.28 (A)
 
Form of Global Restricted Stock Unit Agreement effective July 12, 2020.
 Filed herewith    
         
10.29 (A) 
Form of Global Employee Stock Purchase Plan Agreement.
 10-Q 
10.3
 10/30/2019
         


Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed
         
10.30 
Second Amendment to Credit Agreement, dated July 21, 2015.
 10-K 
10.23
 8/18/2015
         
10.31 
Third Amendment to Credit Agreement, dated June 13, 2016.
 10-K 
10.25
 8/12/2016
         
10.32 † 
Supply Agreement between the Company and TowerJazz Texas, Inc. (formerly known as TJ Texas, Inc.), a Delaware corporation and indirect wholly-owned subsidiary of Tower Semiconductor Ltd., an Israeli corporation, executed as of November 18, 2015.
 10-Q/A 
10.1
 5/10/2016
         
10.33 
Credit Agreement by and between Maxim Holding Company Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, dated June 23, 2016.
 8-K 
10.1
 6/24/2016
         
10.34 
Guaranty by Maxim Integrated Products, Inc. in favor of The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, dated June 23, 2016.
 8-K 
10.2
 6/24/2016
         
21.1
 
Subsidiaries of the Company.
 Filed herewith    
         
24.1 Power of Attorney (contained in the signature page to this Form 10-K). Filed herewith    
         
31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Filed herewith    
         
31.2
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Filed herewith    
         
32.1
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Filed herewith    
         
32.2
 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Filed herewith    
101.INS
XBRL Instance Document (1)
101.SCH
XBRL Taxonomy Extension Schema  (1)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase  (1)
101.DEF
XBRL Taxonomy Extension Definition Document  (1)
101.LAB
XBRL Taxonomy Extension Label Linkbase  (1)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase  (1)
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.  (1)
____________________
(A) Management contract or compensatory plan or arrangement.
† Portions of the exhibit (indicated by bracketed asterisks) have been omitted pursuant to an order granted by the Securities and Exchange Commission for confidential treatment.
(1) Filed or furnished herewith.



CORPORATE DATA AND STOCKHOLDER INFORMATION

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
San Jose, California

Registrar/Transfer Agent
Computershare
Canton, Massachusetts

Corporate Headquarters
160 Rio Robles
San Jose, California 95134
(408) 601-1000

Stock Listing

At August 10, 2020, there were approximately 600 stockholders of record of the Company's common stock as reported by Computershare. Maxim Integrated common stock is traded on the Nasdaq Global Select Market under the symbol “MXIM”.



ITEM 16. FORM 10-K SUMMARY

None.


SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this Reportreport to be signed on its behalf by the undersigned, thereunto duly authorized.


August 19, 2020
MAXIM INTEGRATED PRODUCTS, INC.
By:/s/ Brian C. White
Brian C. White
Senior Vice President, Chief Financial Officer





POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Tunç Doluca and Brian C. White, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SignatureTitleDate
 
/s/ Tunç DolucaPresident, Director and Chief Executive OfficerAugust 19, 2020Prashanth Mahendra-Rajah
Tunç Doluca(Principal Executive Officer)Prashanth Mahendra-Rajah
/s/ Brian C. WhiteSenior Vice President Chief Financial OfficerAugust 19, 2020
Brian C. White(Principal Financial and Accounting Officer)
/s/ William P. SullivanDirector and Chairman of the BoardAugust 19, 2020
William P. Sullivan
/s/ Tracy C. AccardiDirectorAugust 19, 2020
Tracy C. Accardi
/s/ James R. BergmanDirectorAugust 19, 2020
James R. Bergman
/s/ Joseph R. BronsonDirectorAugust 19, 2020
Joseph R. Bronson
/s/ Robert E. GradyDirectorAugust 19, 2020
Robert E. Grady
/s/ Mercedes JohnsonDirectorAugust 19, 2020
Mercedes Johnson
/s/ William D. WatkinsDirectorAugust 19, 2020
William D. Watkins
/s/ MaryAnn WrightDirectorAugust 19, 2020
MaryAnn Wright


82