in the first six months of fiscal 2019, $799.5 million of cash was used to pay down principal on the Term Loan Facility and the Credit Facility, net of amounts borrowed under the Credit Facility, respectively, compared to $573.0 million of cash used to pay down principal on the Term Loan Facility and the Credit Facility, net of amounts borrowed under the Credit Facility, in the first six

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in the first nine months of fiscal 2019, $1.27 billion of cash was used to pay down principal on the Term Loan Facility and the Credit Facility, net of amounts borrowed under the Credit Facility, respectively, compared to $830.0 million of cash used to pay down principal on the Term Loan Facility and the Credit Facility, net of amounts borrowed under the Credit Facility, in the first nine months of fiscal 2020, and

cash dividends paid to our stockholders of ~~$174.4~~$262.1 million and ~~$171.4~~$257.8 million during the ~~six~~nine months ended ~~September 30,~~December 31, 2019 and 2018, respectively.

On May 29, 2018, we completed the acquisition of Microsemi Corporation, a publicly traded company headquartered in Aliso Viejo, California. We paid an aggregate of approximately $8.19 billion in cash to the stockholders of Microsemi. The total consideration transferred in the acquisition, including approximately $53.9 million of non-cash consideration for the exchange of certain share-based payment awards of Microsemi for stock awards for our common stock, was approximately $8.24 billion. In addition to the consideration transferred, we recognized $3.23 billion in liabilities in our consolidated financial statements of Microsemi consisting of debt, taxes payable and deferred, pension obligations, restructuring, and contingent and other liabilities of which $2.06 billion of existing debt was paid off. We financed the purchase price using approximately $8.10 billion of borrowings consisting of $3.10 billion of loans under our Revolving Credit Facility, $3.00 billion under the Term Loan Facility, and $2.00 billion in newly issued senior secured notes. We incurred $22.0 million in acquisition costs related to the acquisition. During the ~~six~~nine months ended ~~September 30,~~December 31, 2019, we voluntarily prepaid $188.0 million of principal under the Term Loan Facility. During fiscal 2019, we voluntarily prepaid $1.09 billion of principal under the Term Loan Facility, of which $500.0 million was from funds borrowed under our Revolving Credit Facility. At ~~September 30,~~December 31, 2019, we had $1.72 billion of outstanding borrowings under our Term Loan Facility compared to $1.91 billion at March 31, 2019.

In September 2019, we amended our credit agreement dated May 29, 2018, to, among other things, reduce the margin added to the interest rate on revolving loans under the Credit Agreement. The amendment also allows us the option to

refinance the term loans or revolving loans up to a certain dollar limit and the option to factor receivables and certain related assets. The amendment lowered the Revolving Credit Facility thereunder to $3.57 billion from $3.60 billion at June 30, 2019.

The Credit Agreement provides for a revolving loan facility in an aggregate principal amount of approximately $3.57 billion, with a $250.0 million foreign currency sublimit, a $50.0 million letter of credit sublimit and a $25.0 million swingline loan sublimit. The Credit Agreement also provides for the Term Loan Facility. The Revolving Credit Facility consists of $3.57 billion of revolving loan commitments (the "2023 Revolving Loans") that terminate on May 18, 2023 (the "2023 Maturity Date"). The 2023 Revolving Loans bear interest, at our option, at the base rate plus a spread of 0.00% to 0.75% or an adjusted LIBOR rate plus a spread of 1.00% to 1.75%, in each case, with such spread being determined based on the consolidated senior leverage ratio for the preceding four fiscal quarter period. At ~~September 30,~~December 31, 2019, we had ~~$2.88~~$2.62 billion of outstanding borrowings under the Revolving Credit Facility compared to $3.27 billion at March 31, 2019. See Note 1412 of the notes to our condensed consolidated financial statements for more information regarding our Credit Agreement.

The enactment of the Act in 2017 imposed a tax on all previously untaxed earnings of non-U.S. subsidiaries of U.S. corporations. Due to this change, the jurisdiction in which our cash is at any given point in time no longer has a significant impact on our liquidity. Future distributions of a significant portion of our non-U.S. assets to the U.S. will no longer be subject to U.S. federal taxation. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts.

We enter into derivative transactions from time to time in an attempt to reduce our exposure to currency rate fluctuations. Although none of the countries in which we conduct significant foreign operations has had a highly inflationary economy in the last five years, there is no assurance that inflation rates or fluctuations in foreign currency rates in countries where we conduct operations will not adversely affect our operating results in the future. At ~~September 30,~~December 31, 2019, we had no foreign currency forward contracts ~~outstanding with a notional amount of $250.0 million and $30.1 million to economically hedge certain balance sheet exposures related to the Malaysian ringgit and Taiwanese dollar, respectively.~~outstanding.

There were no repurchases of common stock during the ~~six~~nine months ended ~~September 30,~~December 31, 2019. As of ~~September 30,~~December 31, 2019, we held approximately ~~14.5~~13.7 million shares as treasury shares.

On October 28, 2002, we announced that our Board of Directors had approved and instituted a quarterly cash dividend on our common stock. A quarterly dividend of ~~$0.3660~~$0.3665 per share was paid on ~~September 4,~~December 5, 2019 in the aggregate amount of ~~$87.3~~$87.7 million. A quarterly dividend of ~~$0.3665~~$0.3670 per share was declared on ~~November 5, 2019~~February 4, 2020 and will be paid on ~~December 5, 2019~~March 6, 2020 to stockholders of record as of ~~November~~February 21, ~~2019.~~2020. We expect the aggregate cash dividend for ~~December 2019~~March 2020 to be approximately ~~$87.7~~$88.0 million. Our Board is free to change our dividend practices at any time and to increase or decrease the dividend paid, or not to pay a dividend on our common stock on the basis of our results of operations, financial condition, cash requirements and future prospects, and other factors deemed relevant by our Board. Our current intent is to provide for ongoing quarterly cash dividends depending upon market conditions, our results of operations, and potential changes in tax laws.

We believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our Revolving Credit Facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months. However, the semiconductor industry is capital intensive. In order to remain competitive, we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development. We may increase our borrowings under our Revolving Credit Facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes. The timing and amount of any such financing requirements will depend on a number of factors, including our level of dividend payments, changes in tax laws and regulations regarding the repatriation of offshore cash (including the impact of the Act), demand for our products, changes in industry conditions, product mix, competitive factors and our ability to identify suitable acquisition candidates. There can be no assurance that such financing will be available on acceptable terms, and any additional equity financing would result in incremental ownership dilution to our existing stockholders.

Off-Balance Sheet Arrangements (Including Guarantees)

As of ~~September 30,~~December 31, 2019, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K with the exception of standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by us or our subsidiaries. We have not recorded any liability in connection with these guarantee arrangements. Based on historical experience and information currently available, we believe we will not be required to make any payments under these guarantee arrangements. Prior to the first quarter of fiscal 2020, we did not record any liability in connection with various operating leases for buildings and equipment entered into in the ordinary course of business. We recorded the associated lease obligations as a liability when we adopted the provisions of the Accounting Standard Update 2016-02-Leases, which was effective April 1, 2019. Refer to Note 2 and Note 119 to our condensed consolidated financial statements for additional information regarding the adoption of this accounting standard.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of ~~September 30,~~December 31, 2019, our long-term debt totaled ~~$11.09~~$10.83 billion. We have no interest rate exposure to rate changes on our fixed rate debt, which totaled $6.48 billion as of ~~September 30,~~December 31, 2019. We do have interest rate exposure with respect to the ~~$4.61~~$4.35 billion balance of our variable interest rate debt outstanding as of ~~September 30,~~December 31, 2019. A 50 basis point increase in interest rates would impact our expected annual interest expense for the next 12 months by approximately ~~$23.0~~$21.7 million.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we evaluated under the supervision of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In reviewing the accounting for certain transactions completed in fiscal 2019 as part of the realignment of our legal structure and other significant transactions, our management identified deficiencies in the operating effectiveness of controls intended to properly document and review relevant facts used to determine and apply the appropriate tax accounting under accounting standards generally accepted in the United States. Additionally, our controls did not operate to validate the completeness and accuracy of information used in the execution of certain key tax controls. These control deficiencies impacted the deferred tax, long-term income tax payable, and income tax benefit accounts and related disclosures and resulted in adjustments to our annual financial statements as of and for the year ended March 31, 2019. The errors arising from the underlying deficiencies are not material to the financial statements reported in any interim or annual period and therefore, did not result in a revision to previously filed financial statements. However, the control deficiencies could result in a failure to timely prevent or detect misstatements of the aforementioned accounts and disclosures that could be material to the annual or interim consolidated financial statements. Accordingly, our management has concluded that the deficiencies, in the aggregate, constitute a material weakness in our internal control over financial reporting.

In the fourth quarter of fiscal 2019, we also identified deficiencies in the design of our internal control over financial reporting as our management determined that there were not sufficient controls to prevent, detect and respond to unauthorized

access to our IT systems in a timely manner. Network authentication, segmentation and monitoring were in place, but were not sufficiently designed to address changes in the current risk environment. Our management has concluded that these deficiencies, in the aggregate, constitute a material weakness in our internal control over financial reporting.

Remediation Plans and Other Information

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, we began implementing a remediation plan to address the foregoing material weaknesses. However, these material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect the remediation of these material weaknesses to be completed by the end of fiscal 2020.

Changes in Internal Control over Financial Reporting

During the three months ended ~~September 30,~~December 31, 2019, we transitioned certain of Microsemi's processes to our internal control processes and we expect to transition more of such processes throughout the remainder of fiscal 2020.

In connection with the identified material weaknesses related to accounting for income taxes and to IT system access, we have taken steps to remediate the material weaknesses as described above. However, other than with respect to our transition of Microsemi to our systems and control environment as described above, during the three months ended ~~September 30,~~December 31, 2019, there was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Refer to Note 1613 to our condensed consolidated financial statements for information regarding legal proceedings.

Item 1A. RISK FACTORS

When evaluating Microchip and its business, you should give careful consideration to the factors listed below, in addition to the information provided elsewhere in this Form 10-Q and in other documents that we file with the Securities and Exchange Commission.

Our operating results are impacted by global economic conditions and may fluctuate in the future due to a number of factors that could reduce our net sales and profitability.

Our operating results are affected by a wide variety of factors that could reduce our net sales and profitability, many of which are beyond our control. Some of the factors that may affect our operating results include:

general economic, industry or political conditions in the U.S. or internationally, including ongoing uncertainty surrounding Brexit and its implications;

changes in demand or market acceptance of our products and products of our customers, and market fluctuations in the industries into which such products are sold;

trade restrictions and changes in tariffs, including those impacting business in China, Japan, and South Korea, as well as those focused on specific companies;

our ability to continue to realize the expected benefits of our acquisitions including our acquisition of Microsemi;

disruptions in our business, our supply chain or our customers' businesses due to cybersecurity incidents, terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns (including viral outbreaks such as the coronavirus), fires, natural disasters or disruptions in the transportation system;

our ability to ramp our factory capacity to meet customer demand;

changes in utilization of our manufacturing capacity and fluctuations in manufacturing yields;

our ability to secure sufficient wafer foundry, assembly and testing capacity;

changes or fluctuations in customer order patterns and seasonality;

changes in tax regulations and policies in the U.S. and other countries in which we do business including the impact of the Tax Cuts and Jobs Act of 2017 (the "Act");

new accounting pronouncements or changes in existing accounting standards and practices;

the mix of inventory we hold and our ability to satisfy orders from our inventory;

levels of inventories held by our customers;

risk of excess and obsolete inventories;

competitive developments including pricing pressures;

unauthorized copying of our products resulting in pricing pressure and loss of sales;

availability of raw materials, supplies and equipment;

our ability to successfully transition products to more advanced process technologies to reduce manufacturing costs;

the level of orders that are received and can be shipped in a quarter, including the impact of product lead times;

the level of sell-through of our products through distribution;

fluctuations in our mix of product sales;

announcements of other significant acquisitions by us or our competitors;

disruptions in our business or our customers' businesses due to cybersecurity incidents, terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns, fires, natural disasters or disruptions in the transportation system;

constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers;

costs and outcomes of any current or future tax audits or any litigation, investigation or claims involving intellectual property, our Microsemi acquisition, customers or other issues;

fluctuations in commodity or energy prices; and

property damage or other losses, whether or not covered by insurance.

We believe that period-to-period comparisons of our operating results are not necessarily meaningful and that you should not rely upon any such comparisons as indications of our future performance. In future periods, our operating results may fall below our public guidance or the expectations of public market analysts and investors, which would likely have a negative effect on the price of our common stock. Uncertain global economic conditions have caused our operating results to fluctuate significantly and make comparability between periods less meaningful.

We may not fully realize the anticipated benefits of our completed or future acquisitions or divestitures including our acquisition of Microsemi.

We have acquired, and expect in the future to acquire, additional businesses that we believe will complement or augment our existing businesses. On May 29, 2018, we completed our acquisition of Microsemi, which was our largest and most complex acquisition ever. In addition, in April 2016, we completed our acquisition of Atmel; and in August 2015, we completed our acquisition of Micrel. The integration process for our acquisitions is complex and may be costly and time consuming and include unanticipated issues, expenses and liabilities. We may not be able to successfully or profitably integrate, operate, maintain and manage any newly acquired operations or employees. We may not be able to maintain uniform standards, procedures and policies and we may be unable to realize the expected synergies and cost savings from the integration. There may be increased risk due to integrating financial reporting and internal control systems. We may have difficulty in developing, manufacturing and marketing the products of a newly acquired company, or in growing the business at the rate we anticipate. Following an acquisition, we may not achieve the revenue or net income levels that justify the acquisition. We may suffer loss of key employees, customers and strategic partners of acquired companies and it may be difficult to implement our corporate culture at acquired companies. We have been and may in the future be subject to claims from terminated employees, shareholders of Microchip or the acquired companies and other third parties related to the transaction. In particular, in connection with our Microsemi and Atmel acquisitions, we became involved with third-party claims, litigation, governmental investigations and disputes related to such businesses and transactions. See Note 1613 to our condensed consolidated financial statements for information regarding such matters. Acquisitions may also result in charges (such as acquisition-related expenses, write-offs, restructuring charges, or future impairment of goodwill), contingent liabilities, adverse tax consequences, additional share-based compensation expense and other charges that adversely affect our operating results. To fund our acquisition of Microsemi, we used a significant portion of our cash balances and incurred approximately $8.10 billion of additional debt. We may fund future acquisitions of new businesses or strategic alliances by utilizing cash, borrowings under our Revolving Credit Facility, raising debt, issuing shares of our common stock, or other mechanisms.

Further, if we decide to divest assets or a business, we may encounter difficulty in finding or completing divestiture opportunities or alternative exit strategies, which may include site closures, on acceptable terms or in a timely manner. These circumstances could delay the achievement of our strategic objectives or cause us to incur additional expenses with respect to assets or a business that we want to dispose of, or we may dispose of assets or a business at a price or on terms that are less favorable than we had anticipated. Even following a divestiture or other exit strategy, we may be contractually obligated with respect to certain continuing obligations to former employees, customers, vendors, landlords or other third parties. We may also have continuing obligations for pre-existing liabilities related to the former employees, assets or businesses. Such obligations may have a material adverse impact on our results of operations and financial condition.

In addition to acquisitions, we have in the past, and expect in the future, to enter into joint development agreements or other business or strategic relationships with other companies. These transactions are subject to a number of risks similar to those we face with our acquisitions including our ability to realize the expected benefits of any such transaction, to successfully market and sell any products resulting from such transactions or to successfully integrate any technology developed through such transactions.

Our financial condition and results of operations could be adversely affected if we do not effectively manage our current or future debt.

As of ~~September 30,~~December 31, 2019, the principal amount of our outstanding indebtedness was ~~$11.09~~$10.83 billion. In connection with our acquisition of Microsemi, we incurred debt consisting of $3.10 billion under our revolving line of credit, $3.00 billion under our term loan facility, and $2.00 billion in senior secured notes. At ~~September 30,~~December 31, 2019, we had ~~$2.88~~$2.62 billion in outstanding borrowings under our revolving line of credit which provides up to $3.57 billion of revolving loan commitments that terminate in 2023. At ~~September 30,~~December 31, 2019, we had $1.72 billion of outstanding borrowings under our term loan facility. ~~In February 2017,~~At December 31, 2019, we ~~issued $2.65~~had $4.48 billion of outstanding principal related to our convertible debt consisting of $2.76 billion of aggregate principal value issued in 2017 and $1.72 billion of ~~senior and junior convertible debt.~~principal value issued in 2015.

As a result of such transactions, we have a substantially greater amount of debt than we had maintained in the past. Our maintenance of substantial levels of debt could adversely affect our ability to take advantage of corporate opportunities and could adversely affect our financial condition and results of operations. We may need or desire to refinance our convertible debt, senior debt, term loan debt or any other future indebtedness and there can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms, if at all.

Servicing our current debt requires a significant amount of cash, we may not have sufficient cash flow from our business to fund future payments and any adverse changes in our credit ratings could increase our borrowing costs and could adversely affect our ability to access the debt markets.

Our ability to make scheduled payments of principal, to pay interest on or to refinance our indebtedness, including our outstanding convertible debt and debt incurred to finance our acquisition of Microsemi, depends on our future performance, which is subject to economic, financial, competitive and other factors. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and to fund capital expenditures, dividend payments, share repurchases or acquisitions. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. Our senior secured notes are rated by certain major credit rating agencies. These credit ratings impact our cost of borrowing and our ability to access the capital markets and are based on our financial performance and certain financial metrics including debt levels. There can be no assurance that we will be able to maintain our current credit ratings. Any downgrade of our credit rating by any of the major credit rating agencies could result in increased borrowing costs and could adversely affect our ability to access the debt markets to refinance our existing debt or finance future debt.

We are dependent on orders that are received and shipped in the same quarter and therefore have limited visibility to future product shipments.

Our net sales in any given quarter depend upon a combination of shipments from backlog and customer orders that are both received and shipped in that same quarter, which we refer to as turns orders. We measure turns orders at the beginning of a quarter based on the orders needed to meet the shipment targets that we set entering the quarter. Historically, we have relied on our ability to respond quickly to customer orders as part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules. Shorter lead times generally mean that turns orders as a percentage of our business are relatively high in any particular quarter and reduce our backlog visibility on future product shipments. Turns orders correlate to overall semiconductor industry conditions and product lead times. Because turns orders are difficult to predict, varying levels of turns orders make it more difficult to forecast net sales. As a significant portion of our products are manufactured at foundries, foundry lead times may affect our ability to satisfy certain turns orders. If we do not achieve a sufficient level of turns orders in a particular quarter relative to our revenue targets, our revenue and operating results will likely suffer.

We may lose sales if suppliers of raw materials, components or equipment fail to meet our or our customers' needs or increase costs due to increased tariffs or other factors.

Our semiconductor manufacturing operations require raw and processed materials and equipment that must meet exacting standards. We generally have more than one source for these supplies, but there are only a limited number of suppliers capable of delivering various materials and equipment that meet our standards. The materials and equipment necessary for our business could become more difficult to obtain as worldwide use of semiconductors in product applications increases. Additionally, consolidation in our supply chain due to mergers and acquisitions may reduce the number of suppliers or change the relationships that we have with our suppliers. Also, the application of trade restrictions or tariffs by the U.S. or other countries may adversely impact the industry supply chain. For example, the U.S. government has recently increased tariffs on products that have China as their country of origin and which are imported into the U.S. Likewise, the China government has increased tariffs on products that have the U.S. as their country of origin and which are imported into China. We have taken steps to attempt to mitigate the costs of these tariffs on our business. Although these increases in tariffs did not result in significant increases to the operating costs of our business, they did, however, adversely impact demand for our products during fiscal 2019 and the ~~six~~nine months ended ~~September 30,~~December 31, 2019. The recent additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have a material adverse impact on our operating results in the three months ending ~~December~~March 31, ~~2019~~2020 or future periods. We may also incur increases in manufacturing costs in mitigating the impact of tariffs on our operations. This could also impair sourcing flexibility. We have experienced supply shortages from time to time in the past, and on occasion our suppliers have told us they need more time than expected to fill our orders or that they will no longer support certain equipment with updates or spare and replacement parts. In particular, we have recently experienced longer lead times for equipment which we need for capacity expansion at certain of our manufacturing facilities. An interruption of any materials or equipment sources, or the lack of supplier support for a particular piece of equipment, could harm our business.

Our customers may also be adversely affected by these same issues. The materials, components and equipment necessary for their businesses could become more difficult to obtain for various reasons not limited to business interruptions of suppliers, consolidation in their supply chain due to mergers and acquisitions, or application of trade restrictions or tariffs that impair

sourcing flexibility or increase costs. If our customers are not able to produce their products, then their need for our products will decrease. Such interruptions of our customers’ businesses could harm our business.

Intense competition in the markets we serve may lead to pricing pressures, reduced sales of our products or reduced market share.

The semiconductor industry is intensely competitive and has been characterized by price erosion and rapid technological change. We compete with major domestic and international semiconductor companies, many of which have greater market recognition and substantially greater financial, technical, marketing, distribution and other resources than we do. The semiconductor industry has experienced significant merger and acquisition activity and consolidation in recent years which has resulted in several of our competitors becoming much larger in terms of revenue, product offerings and scale. We may be unable to compete successfully in the future, which could harm our business. Our ability to compete successfully depends on a number of factors both within and outside our control, including, but not limited to:

the quality, performance, reliability, features, ease of use, pricing and diversity of our products;

our success in designing and manufacturing new products including those implementing new technologies;

our ability to ramp production and increase capacity, as needed, at our wafer fabrication and assembly and test facilities;

the rate at which customers incorporate our products into their own applications and the success of such applications;

the rate at which the markets that we serve redesign and change their own products;

our ability to obtain adequate foundry and assembly and test capacity and supplies of raw materials and other supplies at acceptable prices;

changes in demand in the markets that we serve and the overall rate of growth or contraction of such markets, including but not limited to the automotive, personal computing and consumer electronics markets;

product introductions by our competitors;

the number, nature and success of our competitors in a given market;

our ability to protect our products and processes by effective utilization of intellectual property rights;

our ability to remain price competitive against companies that have copied our proprietary product lines, especially in countries where intellectual property rights protection is difficult to achieve and maintain;

our ability to address the needs of our customers; and

general market and economic conditions.

Historically, average selling prices in the semiconductor industry decrease over the life of any particular product. The average selling prices of our microcontroller, FPGA, and proprietary analog, interface, mixed signal and timing products have remained relatively constant, while average selling prices of our memory and non-proprietary analog, interface, mixed signal and timing products have declined over time. The overall average selling price of our products is affected by these trends; however, variations in our product and geographic mix of sales can cause wider fluctuations in our overall average selling price in any given period.

We have experienced, and expect to continue to experience, modest pricing declines in certain of our more mature proprietary product lines, primarily due to competitive conditions. We have been able to moderate average selling price declines in many of our proprietary product lines by continuing to introduce new products with more features and higher prices. However, there can be no assurance that we will be able to do so in the future. We have experienced in the past, and expect to continue to experience in the future, varying degrees of competitive pricing pressures in our memory and non-proprietary analog, interface, mixed signal and timing products. We may be unable to maintain average selling prices for our products as a result of increased pricing pressure in the future, which could adversely impact our operating results.

We are dependent on wafer foundries and other contractors to perform key manufacturing functions for us, and our licensees of our SuperFlash and other technologies also rely on foundries and other contractors.

We rely on outside wafer foundries for a significant portion of our wafer fabrication needs. Specifically, during the first ~~six~~nine months of fiscal 2020, approximately 61% of our net sales came from products that were produced at outside wafer foundries compared to 57% of our net sales in fiscal 2019. We also use several contractors located primarily in Asia for a portion of the assembly and testing of our products. Specifically, during the first ~~six~~nine months of fiscal 2020, approximately 55% of our assembly requirements and 46% of our test requirements were performed by third party contractors compared to approximately 62% of our assembly requirements and 51% of our test requirements during fiscal 2019. Our reliance on third party contractors and foundries increased as a result of our acquisitions of Microsemi, Atmel, Micrel and other companies. The disruption or termination of any of our contractors could harm our business and operating results.

Our use of third parties somewhat reduces our control over the subcontracted portions of our business. Our future operating results could suffer if any contractor were to experience financial, operational or production difficulties or situations when demand exceeds capacity, or if they were unable to maintain manufacturing yields, assembly and test yields and costs at approximately their current levels, or if the countries in which such contractors are located were to experience political upheaval or infrastructure disruption. If these third parties are unable or unwilling to timely deliver products or services conforming to our quality standards, we may not be able to qualify additional manufacturing sources for our products in a timely manner on terms favorable to us, or at all. Additionally, these subcontractors could abandon fabrication processes that are important to us, or fail to adopt advanced manufacturing technologies that we desire to control costs. In any such event, we could experience an interruption in production, an increase in manufacturing and production costs or a decline in product reliability, and our business and operating results could be adversely affected. Further, our use of subcontractors increases the risks of potential misappropriation of our intellectual property.

Certain of our SuperFlash and other technology licensees also rely on outside wafer foundries for wafer fabrication services. If our licensees were to experience any disruption in supply from outside wafer foundries, this would reduce the revenue we receive in our technology licensing business and would harm our operating results.

Our operating results will suffer if we ineffectively utilize our manufacturing capacity or fail to maintain manufacturing yields.

The manufacture and assembly of integrated circuits, particularly non-volatile, erasable CMOS memory and logic devices such as those that we produce, are complex processes. These processes are sensitive to a wide variety of factors, including the level of contaminants in the manufacturing environment, impurities in the materials used, the performance of our wafer fabrication and assembly and test personnel and equipment, and other quality issues. As is typical in the semiconductor industry, we have from time to time experienced lower than anticipated manufacturing yields. Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels. This could include delays in the recognition of revenue, loss of revenue or future orders, and customer-imposed penalties for our failure to meet contractual shipment deadlines. Our operating results are also adversely affected when we operate at less than optimal capacity. During the three and ~~six~~nine months ended ~~September 30,~~December 31, 2019, we operated at below normal capacity levels resulting in unabsorbed capacity charges of ~~$8.9~~$17.1 million and ~~$16.2~~$33.3 million, respectively. In certain periods in fiscal 2019, we operated at below normal capacity levels resulting in an unabsorbed capacity charge of ~~$19.0~~$16.2 million.

Our operating results are impacted by both seasonality and the wide fluctuations of supply and demand in the semiconductor industry.

The semiconductor industry is characterized by seasonality and wide fluctuations of supply and demand. Historically, since a significant portion of our revenue is from consumer markets and international sales, our business tends to generate stronger revenues in the first and second quarters and comparatively weaker revenues in the third and fourth quarters of our fiscal year. Broad fluctuations in our overall business, changes in semiconductor industry and global economic conditions (including trade tensions) and our acquisition activity (including our acquisition of Microsemi) have had and can have a more significant impact on our results than seasonality. As a result, in periods when these broad fluctuations, changes in business conditions or acquisitions occur, it is difficult to assess the impact of seasonal factors on our business. The semiconductor industry has also experienced significant economic downturns, characterized by diminished product demand and production over-capacity. We have sought to reduce our exposure to this industry cyclically by selling proprietary products, that cannot be easily or quickly replaced, to a geographically diverse customer base across a broad range of market segments. However, we have experienced substantial period-to-period fluctuations in operating results and expect, in the future, to experience period-to-period fluctuations in operating results due to general industry or economic conditions.

Our business is dependent on distributors to service our end customers.

Sales to distributors accounted for approximately 50% of our net sales in the first ~~six~~nine months of fiscal 2020 and approximately 51% of our net sales in fiscal 2019. We do not have long-term agreements with our distributors, and we and our distributors may each terminate our relationship with little or no advance notice.

Any future adverse conditions in the U.S. or global economies or in the U.S. or global credit markets could materially impact the operations of our distributors. Any deterioration in the financial condition of our distributors or any disruption in the operations of our distributors could adversely impact the flow of our products to our end customers and adversely impact our results of operation. In addition, during an industry or economic downturn, it is possible there will be an oversupply of products and a decrease in demand for our products from our distributors, which could reduce our net sales in a given period

and result in an increase in inventory returns. Violations of the Foreign Corrupt Practices Act, or similar laws, by our distributors or other channel partners could have a material adverse impact on our business.

Our success depends on our ability to introduce new products on a timely basis.

Our future operating results depend on our ability to develop and timely introduce new products that compete effectively on the basis of price and performance and which address customer requirements. The success of our new product introductions depends on various factors, including, but not limited to:

effective new product selection;

timely completion and introduction of new product designs;

procurement of licenses for intellectual property rights from third parties under commercially reasonable terms;

timely filing and protection of intellectual property rights for new product designs;

availability of development and support tools and collateral literature that make complex new products easy for engineers to understand and use; and

market acceptance of our customers' end products.

Because our products are complex, we have experienced delays from time to time in completing new product development. In addition, our new products may not receive or maintain substantial market acceptance. We may be unable to timely design, develop and introduce competitive products, which could adversely impact our future operating results.

Our success also depends upon our ability to develop and implement new design and process technologies. Semiconductor design and process technologies are subject to rapid technological change and require significant R&D expenditures. We and other companies in the industry have, from time to time, experienced difficulties in effecting transitions to advanced process technologies and, consequently, have suffered reduced manufacturing yields or delays in product deliveries. Our future operating results could be adversely affected if any transition to future process technologies is substantially delayed or inefficiently implemented.

We continue to be the target of attacks on our data, attempts to breach our security and attempts to introduce malicious software into our IT systems and any interruptions in our IT systems, unauthorized access to our IT systems or improper handling of data, could adversely affect our business.

We rely on the efficient and uninterrupted operation of complex IT systems and networks to operate our business. Any significant disruption to our systems or networks, including, but not limited to, new system implementations, computer viruses, security breaches, facility issues, natural disasters, terrorism, war, telecommunication failures or energy blackouts could have a material adverse impact on our business, operations, sales and operating results. Such disruption could result in a loss of our intellectual property or the release of sensitive competitive information or supplier, customer or employee personal data. Any loss of such information could harm our business or competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by any such disruptions or security breaches. Additionally, any failure to properly manage the collection, handling, transfer or disposal of personal data of employees and customers may result in regulatory penalties, enforcement actions, remediation obligations, litigation, fines and other sanctions.

From time to time, we have experienced verifiable attacks on our data, attempts to breach our security and attempts to introduce malicious software into our IT systems. For example, in fiscal 2019 we learned of an ongoing compromise of our computer networks by what is believed to be sophisticated hackers. We engaged experienced legal counsel and a leading forensic investigatory firm with experience in such matters. We have taken steps to identify malicious activity on our network including a compromise of our network and, in May 2019, we began implementing a containment plan. We are continuing to evaluate the effectiveness of the containment plan and the amount and content of the information that was compromised and to implement additional remedial actions. At this time, we do not believe that this IT system compromise has had a material adverse effect on our business or resulted in any material damage to us. However, we are still evaluating the amount and type of data that was compromised and there can be no assurance as to what the impact of this IT system compromise will be. As a result of the IT system compromise, our management, including our chief executive officer and our chief financial officer, has concluded that our internal controls related to IT system access were not effective resulting in a material weakness in our internal controls. For additional information, refer to Item 4 "Controls and Procedures".

Due to the types of products we sell and the significant amount of sales we make to government agencies or customers whose principal sales are to U.S. government agencies, we expect to continue to be the target of attacks on our data, attempts to breach our security and attempts to introduce malicious software into our IT systems. Were any future attacks to be successful, we may be unaware of the incident, its magnitude, or its effects until significant harm is done. In recent years, we have

implemented improvements to our protective measures which include, but are not limited to, the following: firewalls, endpoint detection and response software, patches, log monitors, event correlation tools, routine backups with offsite retention of storage media, system audits, dual factor identification, data partitioning and routine password modifications. As a result of the material weakness in our internal controls resulting from the IT systems compromise, we have taken remediation actions and implemented additional controls and we plan to continue to take further actions to attempt to address evolving threats. Recent system improvements have not been fully effective in preventing attacks on our data and breaches to our security and there can be no assurance that any future system improvements will be effective in preventing attacks or breaches or limiting the damage from any future cyber attacks or disruptions. Such system improvements have resulted in increased costs to us and any future improvements, attack or disruption could result in additional costs related to rebuilding of our internal systems, defending litigation, responding to regulatory actions, or paying damages. Such attacks or disruptions could have a material adverse impact on our business, operations and financial results.

Third-party service providers, such as wafer foundries, assembly and test contractors, distributors, credit card processors and other vendors have access to certain portions of our and our customers' sensitive data. In the event that these service providers do not properly safeguard the data that they hold, security breaches and loss of data could result. Any such loss of data by our third-party service providers could negatively impact our business, operations and financial results, as well as our relationship with our customers.

If we fail to remediate our material weaknesses and achieve and maintain proper and effective internal control and remediate current or future deficiencies, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors' views of us.

As discussed in Item 4 “Controls and Procedures” of our Form 10-K filed on May 30, 2019, in the fourth quarter of fiscal 2019, we identified a material weakness in our internal controls related to accounting for income taxes and we also identified a material weakness in our internal controls related to IT system access. Internal controls related to such matters are important to accurately reflect our financial position and results of operations in our financial reports. We are in the process of remediating the material weaknesses, but our efforts may not be successful. If we are unable to remediate the material weaknesses in an appropriate and timely manner, or if we identify additional control deficiencies that individually or together constitute significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and consequently, our ability to prepare financial statements within required time periods, could be adversely affected. Failure to maintain effective internal controls could result in violations of applicable securities laws, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation and investigations, negatively affect investor confidence in our financial statements, and adversely impact our stock price and ability to access capital markets.

Ensuring that we have adequate internal financial and accounting controls and procedures so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our 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 in accordance with United States generally accepted accounting principles. We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 which requires an annual management assessment of the effectiveness of our internal control over financial reporting and a report by our independent auditors. In addition to the identified material weaknesses related to accounting for income taxes and to IT system access, we have from time to time identified significant deficiencies related to other matters. If we fail to remediate our material weaknesses or significant deficiencies or to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, harm our ability to operate our business and reduce the trading price of our stock.

Our reported financial results may be adversely affected by new accounting pronouncements or changes in existing accounting standards and practices.

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation or changes by the Financial Accounting Standards Board (FASB) and the SEC. New accounting pronouncements and varying interpretations of accounting standards and practices have occurred in the past and are expected to occur in the future. New accounting pronouncements or a change in the interpretation of existing accounting standards or practices may have a significant effect on our reported financial results and may even affect our reporting of transactions completed before the change is announced or effective.

Business interruptions to our operations or the operations of our key vendors, subcontractors, licensees or customers, whether due to natural disasters, cybersecurity incidents, or other events, could harm our business.

Operations at any of our facilities, at the facilities of any of our wafer fabrication or assembly and test subcontractors, or at any of our significant vendors or customers may be disrupted for reasons beyond our control. These reasons may include work stoppages, power loss, insufficient water, cyber attacks, computer network compromises, incidents of terrorism or security risk, political instability, public health issues (including viral outbreaks such as the coronavirus), telecommunications, transportation or other infrastructure failure, radioactive contamination, fire, earthquake, floods, droughts, volcanic eruptions or other natural disasters. We have taken steps to mitigate the impact of some of these events should they occur; however, we cannot be certain that our actions will be effective to avoid a significant impact on our business in the event of a disaster or other business interruption.

In particular, Thailand has experienced periods of severe flooding in recent years. While our facilities in Thailand have continued to operate normally, there can be no assurance that any future flooding in Thailand would not have a material adverse impact on our operations. If operations at any of our facilities, or our subcontractors' facilities are interrupted, we may not be able to shift production to other facilities on a timely basis, and we may need to spend significant amounts to repair or replace our facilities and equipment. If we experienced business interruptions, we would likely experience delays in shipments of products to our customers and alternate sources for production may be unavailable on acceptable terms. This could result in reduced revenues and profits and the cancellation of orders or loss of customers. Although we maintain business interruption insurance, such insurance will likely not be enough to compensate us for any losses that may occur and any losses or damages incurred by us as a result of business interruptions could significantly harm our business.

Additionally, operations at our customers and licensees may be disrupted for a number of reasons. In the event of customer disruptions, sales of our products may decline and our revenue, profitability and financial condition could suffer. Likewise, if our licensees are unable to manufacture and ship products incorporating our technology, or if there is a decrease in product demand due to a business disruption, our royalty revenue may decline.

Our technology licensing business exposes us to various risks.

Our technology licensing business is based on our SuperFlash and other technologies. The success of our licensing business depends on the continued market acceptance of these technologies and on our ability to further develop and enhance such technologies and to introduce new technologies in the future. To be successful, any such technology must be able to be repeatably implemented by licensees, provide satisfactory yield rates, address licensee and customer requirements, and perform competitively. The success of our technology licensing business depends on various other factors, including, but not limited to:

proper identification of licensee requirements;

timely development and introduction of new or enhanced technology;

our ability to protect and enforce our intellectual property rights for our licensed technology;

our ability to limit our liability and indemnification obligations to licensees;

availability of sufficient development and support services to assist licensees in their design and manufacture of products integrating our technology;

availability of foundry licensees with sufficient capacity to support OEM production; and

market acceptance of our customers' end products.

Because our licensed technologies are complex, there may be delays from time to time in developing and enhancing such technologies. There can be no assurance that our existing or any enhanced or new technology will achieve or maintain substantial market acceptance. Our licensees may experience disruptions in production or lower than expected production levels which would adversely affect the revenue that we receive from them. Our technology license agreements generally include an indemnification clause that indemnifies the licensee against liability and damages (including legal defense costs) arising from intellectual property matters. We could be exposed to substantial liability for claims or damages related to intellectual property matters or indemnification claims. Any claim, with or without merit, could result in significant legal fees and require significant attention from our management. Any of the foregoing issues may adversely impact the success of our licensing business and adversely affect our future operating results.

We are exposed to various risks related to legal proceedings, investigations or claims.

We are currently, and in the future may be, involved in legal proceedings, investigations or claims regarding patent infringement, other intellectual property rights, product failures, our Microsemi acquisition, contracts and other matters. As is typical in the semiconductor industry, we receive notifications from third parties from time to time who believe that we owe them indemnification or other obligations related to claims made against us, our direct or indirect customers or our licensees. These legal proceedings and claims, even if meritless, could result in substantial costs to us and divert our resources. If we are not able to resolve a claim, settle a matter, obtain necessary licenses on commercially reasonable terms, reengineer our products

or processes to avoid infringement, provide a cost-effective remedy, or successfully prosecute or defend our position, we could

incur uninsured liability in any of them, be required to take an appropriate charge to operations, be enjoined from selling a material portion of our products or using certain processes, suffer a reduction or elimination in the value of our inventories, and our business, financial condition or results of operations could be harmed.

It is also possible that from time to time we may be subject to claims related to the manufacture, performance or use of our products. These claims may be due to injuries, economic damage or environmental exposures related to manufacturing, a product's nonconformance to our specifications or specifications agreed upon with the customer, changes in our manufacturing processes, or unexpected customer system issues due to the integration of our products or insufficient design or testing by our customers. We could incur significant expenses related to such matters, including, but not limited to:

costs related to writing off the value of our inventory of nonconforming products;

recalling nonconforming products;

providing support services, product replacements, or modifications to products and the defense of such claims;

diversion of resources from other projects;

lost revenue or a delay in the recognition of revenue due to cancellation of orders or unpaid receivables;

customer imposed fines or penalties for failure to meet contractual requirements; and

a requirement to pay damages or penalties.

Because the systems into which our products are integrated have a higher cost of goods than the products we sell, the expenses and damages we are asked to pay may be significantly higher than the sales and profits we received from the products involved. While we specifically exclude consequential damages in our standard terms and conditions, certain of our contracts may not exclude such liabilities. Further, our ability to avoid such liabilities may be limited by applicable law. We do have liability insurance which covers certain damages arising out of product defects, but we do not expect that insurance will cover all claims or be of a sufficient amount to fully protect against such claims. Costs or payments we may make in connection with these customer claims may adversely affect the results of our operations.

Further, we sell to customers in industries such as automotive, aerospace, defense, safety, security, and medical, where failure of the systems in which our products are integrated could cause damage to property or persons. We may be subject to claims if our products, or the integration of our products, cause system failures. We will face increased exposure to claims if there are substantial increases in either the volume of our sales into these applications or the frequency of system failures integrating our products.

Failure to adequately protect our intellectual property could result in lost revenue or market opportunities.

Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success. To that end, we have acquired certain patents and patent licenses and intend to continue to seek patents on our technology and manufacturing processes. The process of seeking patent protection can be long and expensive, and patents may not be issued from currently pending or future applications. In addition, our existing and new patents, trademarks and copyrights that issue may not have sufficient scope or strength to provide meaningful protection or commercial advantage to us. We may be subject to, or may ourselves initiate, interference proceedings in the U.S. Patent and Trademark Office, patent offices of a foreign country or U.S. or foreign courts, which can require significant financial and management resources. In addition, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as the laws of the U.S. Infringement of our intellectual property rights by a third party could result in uncompensated lost market and revenue opportunities for us. Although we continue to vigorously and aggressively defend and protect our intellectual property on a worldwide basis, there can be no assurance that we will be successful in our endeavors.

Our operating results may be adversely impacted if economic conditions impact the financial viability of our licensees, customers, distributors, or suppliers.

We regularly review the financial performance of our licensees, customers, distributors and suppliers. However, any downturn in global economic conditions may adversely impact the financial viability of our licensees, customers, distributors or suppliers. The financial failure of a large licensee, customer or distributor, an important supplier, or a group thereof, could have an adverse impact on our operating results and could result in our not being able to collect our accounts receivable balances, higher reserves for doubtful accounts, write-offs for accounts receivable, and higher operating costs as a percentage of net sales.

Regulatory authorities in jurisdictions into or from which we ship our products could levy fines, restrict or delay our ability to export or transfer products, or increase costs associated with the manufacture or transfer of products.

A significant portion of our sales are made through the exporting and importing of products. In addition to local jurisdictions' trade regulations, our U.S.-manufactured products or products based on U.S. technology are subject to U.S. laws and regulations governing international trade, including, but not limited to the Foreign Corrupt Practices Act, Export Administration Regulations, International Traffic in Arms Regulations and trade sanctions against embargoed countries and denied entities administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC). Licenses or proper license exceptions are required for the shipment of our products to certain countries. A determination by the U.S. or foreign government that we have failed to comply with trade or export regulations or anti-bribery regulations can result in penalties which may include denial of export privileges, fines, civil or criminal penalties, and seizure of products. Such penalties could have a material adverse effect on our business, sales and earnings. Further, a change in these laws and regulations could restrict our ability to transfer product to previously permitted countries, customers, distributors or other third parties. For example, in fiscal 2019, the U.S. Commerce Department banned U.S. companies from selling products or transferring technology to ZTE, a Chinese company, and certain of its subsidiaries. In fiscal 2020, the U.S. Commerce Department banned U.S. companies from selling products or transferring technology to certain Chinese companies, including Huawei and certain of its subsidiaries. Any one or more of these sanctions, future sanctions, a change in laws or regulations, or a prohibition on shipment of our products or transfer of our technology to significant customers could have a material adverse effect on our business, financial condition and results of operations.

For certain of our products associated with our Microsemi acquisition, we rely on U.S. export licenses to ship our products to non-U.S. customers. In 2018, there was a federal government shutdown from January 20, 2018 to January 23, 2018 and a second shutdown from December 22, 2018 through January 25, 2019. Due to the U.S. federal government shutdown, the agency that approves these export licenses was temporarily closed. This resulted in a delay in certain shipments that were scheduled to ship within the quarter. Although this delay did not result in a material adverse impact on our revenue in previous quarters, it could have a material adverse impact on our revenue within the quarter of any future government shutdown, and in the following quarter depending on the ability of the governmental agency to expedite processing of licenses delayed during the shutdown.

The U.S. and other countries have levied tariffs and taxes on certain goods and implemented trade restrictions on materials and products. Trade tensions between the U.S. and China escalated in 2018 and 2019, including the U.S. increasing tariffs on Chinese origin goods, and China increasing tariffs on U.S. goods. Some of our products were affected and are continuing to be affected by the increased tariffs. Higher duties on existing tariffs and further rounds of tariffs have been recently announced or threatened by the U.S. and Chinese administrations. We have taken steps to mitigate the costs of these tariffs on our business. Although these increases in tariffs did not result in significant increases to the operating costs of our business, they did, however, adversely impact demand for our products during fiscal 2019 and the first, second and ~~second~~third quarters of fiscal 2020. The recent additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have a material adverse impact on our operating results in the three months ending ~~December~~March 31, ~~2019~~2020 or future periods. Increased tariffs on our customers' products could impact their sales of their products, and increased tariffs on our products in comparison to those of our competitors could each result in lower demand for our products. Additionally, the Japan-South Korea trade dispute could put pressures on our Japanese and South Korean customers, and the ongoing uncertainty regarding Brexit and its implications could also result in lower demand for our products.

Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products, which could have a material adverse effect on our business, results of operations or financial conditions.

We are highly dependent on foreign sales and operations, which exposes us to foreign political and economic risks including risks from recent increases in tariffs.

Sales to foreign customers account for a substantial portion of our net sales. During the first ~~six~~nine months of fiscal 2020, approximately 79% of our net sales were made to foreign customers, including 21% in China, 15% in Taiwan and ~~11%~~10% in Germany. During fiscal 2019, approximately 80% of our net sales were made to foreign customers, including 22% in China and 13% in Taiwan.

A strong position in the Chinese market is a key component of our global growth strategy. The market for integrated circuit products in China is highly competitive, and both international and domestic competitors are aggressively seeking to increase their market share. Increased competition or economic weakness in the China market has recently made it more difficult for us to achieve our desired sales volumes in China. In particular, the trade relationship between the U.S. and China has worsened, economic conditions in China remain uncertain, and we are unable to predict whether such uncertainty will continue or worsen in future periods. The U.S. government has increased tariffs on products that have China as their country of

origin and which are imported into the U.S. Likewise, the China government has increased tariffs on products that have the U.S. as their country of origin and which are imported into China. We have taken steps to mitigate the costs of these tariffs on our business. Although these increases in tariffs did not result in significant increases to the operating costs of our business, they did, however, adversely impact demand for our products during fiscal 2019 and the first, second and ~~second~~third quarters of fiscal 2020. The recent additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have a material adverse impact on our operating results in the three months ending ~~December~~March 31, ~~2019~~2020 or future periods. Additionally, tariffs on our customers' products could impact their sales of such end products, resulting in lower demand for our products. We may also incur increases in manufacturing costs in mitigating the impact of tariffs on our customers.

Additionally, the Japan-South Korea trade dispute could put pressure on our Japanese and South Korean customers. These pressures may result in various negative effects such as a decrease in the supply of raw materials or components needed to complete products, an increase in costs of raw materials or components, the inability to receive licenses to sell their products in the other country, boycotts, or similar actions. These negative effects on our customers may then result in decreased demand for our products and decreased revenue.

We purchase a substantial portion of our raw materials and equipment from foreign suppliers. In addition, we own product assembly and testing facilities near Bangkok, Thailand, which has experienced periods of political instability in the past. A large portion of our finished goods inventory is maintained in Thailand. From time to time, Thailand has also experienced periods of severe flooding. There can be no assurance that any future flooding or political instability in Thailand would not have a material adverse impact on our operations. As part of our Atmel acquisition, we acquired a test facility in Calamba, Philippines. We use various foundries and other foreign contractors for a significant portion of our assembly and testing and wafer fabrication requirements.

Our reliance on foreign operations, foreign suppliers, maintenance of substantially all of our finished goods inventory at foreign locations and significant foreign sales exposes us to foreign political and economic risks, including, but not limited to:

political, social and economic instability;

trade restrictions and changes in tariffs;

potentially adverse tax consequences;

economic uncertainty in the worldwide markets served by us;

import and export license requirements and restrictions;

changes in rules and laws related to taxes, environmental, health and safety, technical standards and consumer protection in various jurisdictions;

currency fluctuations and foreign exchange regulations;

difficulties in staffing and managing international operations;

employment regulations;

disruptions due to cybersecurity incidents;

disruptions in international transport or delivery;

public health ~~conditions;~~conditions (including viral outbreaks such as the coronavirus); and

difficulties in collecting receivables and longer payment cycles.

If any of these risks materialize, or are worse than we anticipate, our sales could decrease and our operating results could suffer, we could face an increase in the cost of components, production delays, general business interruptions, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business.

Further changes in trade policy, tariffs, additional taxes, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.

Our contractual relationships with our customers expose us to risks and liabilities.

We do not typically enter into long-term contracts with our non-distributor customers, and therefore we cannot be certain about future order levels from our customers. When we do enter into customer contracts, the contract is generally cancelable at the convenience of the customer. Even though we had ~~over~~approximately 120,000 customers and our ten largest direct customers made up approximately 12% of our total revenue for the ~~six~~nine months ended ~~September 30,~~December 31, 2019 and ~~six~~five of our top ten direct customers are contract manufacturers that perform manufacturing services for many customers, cancellation of customer contracts could have an adverse impact on our revenue and profits.

We have contracts with certain customers that differ from our standard terms of sale. For several of the significant markets that we sell into, such as the automotive and personal computer markets, our current or potential customers may possess significant leverage over us in negotiating the terms and conditions of supply as a result of their market size and position. For example, under certain contracts we may commit to supply specific quantities of products on scheduled delivery dates, or agree to extend our obligations for certain liabilities such as warranties or indemnification for quality issues or claims of intellectual property infringement. If we are unable to supply the customer as required under the contract, the customer may incur additional production costs, lost revenues due to subsequent delays in their own manufacturing schedule, or quality-related issues. We may be liable for the customer's costs, expenses and damages associated with their claims and we may be obligated to defend the customer against claims of intellectual property infringement and pay the associated legal fees. While we try to minimize the number of contracts which contain such provisions, manage the risks underlying such liabilities, and set caps on our liability exposure, sometimes we are not able to do so. In order to win important designs, avoid losing business to competitors, maintain existing business, or be permitted to bid on new business, we have been, and may in the future be, forced to agree to uncapped liability for such items as intellectual property infringement, product failure, or confidentiality. Such provisions expose us to risk of liability far exceeding the purchase price of the products we sell under such contracts, the lifetime revenues we receive from such products, or various forms of potential consequential damages. Further, where we do not have negotiated contracts with our customers, the terms of our customer's orders may govern the transaction and contain terms that are not favorable to us. These significant additional risks could result in a material adverse impact on our results of operations and financial condition.

Reliance on government contracts and sales to governmental agencies could have a material adverse effect on our results of operations.

A significant portion of the sales of Microsemi (which we acquired in May 2018) are from or are derived from government agencies or customers whose principal sales are to U.S. government agencies. Such sales are subject to uncertainties regarding governmental spending levels, spending priorities, regulatory and policy changes. Future sales to U.S. government agencies or their prime customers are also subject to uncertain government appropriations and national defense policies and priorities, including the constraints of the budgetary process, changes in the timing and potential spending priorities and the impact of any past or future government shutdowns, contract terminations or renegotiations, or future sequestrations. Such sales are also subject to uncertainties related to monetary, regulatory, tax and trade policies implemented by current or future administrations or by the U.S. Congress.

In the past, Microsemi has experienced delays and reductions in appropriations on programs that included its products. For example, there were federal government shutdowns from January 20, 2018 to January 23, 2018 and from December 22, 2018 through January 25, 2019. Further delays, reductions in or terminations of government contracts or subcontracts, including those caused by any past or future shutdown of the U.S. federal government, could materially and adversely affect our operating results. If the U.S. government fails to complete its annual budget process or to provide for a continuing resolution to fund government operations, another federal government shutdown may occur, during which time we may experience further delays and reductions in appropriations or reductions in or terminations of government contracts or subcontracts, which could materially and adversely affect our operating results. While we generally function as a subcontractor in these type of transactions, further changes in U.S. government procurement regulations and practices, particularly surrounding initiatives to reduce costs or increase compliance obligations (such as the Cybersecurity Maturity Model Certification), may adversely impact the contracting environment and our operating results.

The U.S. government and its contractors may terminate their contracts with Microsemi or us at any time. For example, in 2014, Microsemi had a $75 million contract terminated for convenience by the U.S. government. Uncertainty with respect to government spending and termination of contracts associated with government related projects could have a material adverse impact on the revenue and other benefits we achieve from our Microsemi acquisition. Our business related to U.S. governmental agencies or customers not only requires us to comply with the contract terms, but also with applicable governmental regulations, particularly for our facilities, systems and personnel that service such customers. Maintaining compliance with these regulations, including any audit requirements, requires that we devote significant resources to such matters in terms of training, personnel, information technology and facilities. Any failure to maintain compliance with these requirements may result in fines and penalties and loss of current or future business that may materially and adversely affect our operating results.

We must attract and retain qualified personnel to be successful, and competition for qualified personnel can be intense.

Our success depends upon the efforts and abilities of our senior management, engineering, manufacturing and other personnel. The competition for qualified engineering and management personnel can be intense. We may be unsuccessful in retaining our existing key personnel or in attracting and retaining additional key personnel that we require. The loss of the services of one or more of our key personnel or the inability to add key personnel could harm our business. The loss of, or any inability to attract personnel, even if not key personnel, if experienced in sufficient numbers could harm our business. We have no employment agreements with any member of our senior management team.

Fluctuations in foreign currency exchange rates could adversely impact our operating results.

We use forward currency exchange contracts in an attempt to reduce the adverse earnings impact from the effect of exchange rate fluctuations on our non-U.S. dollar net balance sheet exposures. Nevertheless, in periods when the U.S. dollar significantly fluctuates in relation to the non-U.S. currencies in which we transact business, the value of our non-U.S. dollar transactions can have an adverse effect on our results of operations and financial condition. In particular, in periods when a foreign currency significantly declines in value in relation to the U.S. dollar, customers transacting in that foreign currency may find it more difficult to fulfill their previously committed contractual obligations or to undertake new obligations to make payments or purchase products. In periods when the U.S. dollar is significantly declining in relation to the British pound, Euro, Thai baht, Taiwan dollar and Malaysian ringgit, the operational costs in our European and Thailand subsidiaries are adversely affected. Although our business has not been materially adversely impacted by recent changes in the value of the U.S. dollar, there can be no assurance as to the future impact that any weakness or strength in the U.S. dollar will have on our business or results of operations.

The occurrence of events for which we are self-insured, or which exceed our insurance limits, may adversely affect our profitability and liquidity.

We have insurance contracts with independent insurance companies related to many different types of risk; however, we self-insure for some potentially significant risks and obligations. In these circumstances, we believe that it is more cost effective for us to self-insure certain risks than to pay the high premium costs. The risks and exposures that we self-insure include, but are not limited to certain property, product defects, cybersecurity matters, employment risks, environmental matters, political risks, and intellectual property matters. Should there be a loss or adverse judgment or other decision in an area for which we are self-insured, then our financial condition, results of operations and liquidity may be adversely affected.

We are subject to stringent environmental and other regulations, which may force us to incur significant expenses.

We must comply with all applicable federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous substances used in our products and manufacturing processes. Our failure to comply, or the failure of entities that we have acquired over time to have complied, with applicable regulations could result in significant fines, liability for clean up, suspension of production, cessation of operations or future liabilities. Such environmental regulations have required us in the past, and could require us in the future, to buy costly equipment or to incur significant expenses to comply with such regulations. Our failure to control the use of, or adequately restrict the discharge of, hazardous substances could impact the health of our employees and others and could impact our ability to operate. Such failure could also restrict our ability to ship certain products to certain countries, require us to modify our operations' logistics, or require us to incur other significant costs and expenses. There is a continuing expansion in environmental laws with a focus on reducing or eliminating hazardous substances and substances of high concern in electronic products and shipping materials. These and other future environmental regulations could require us to reengineer certain of our existing products and may make it more expensive for us to manufacture, sell and ship our products. In addition, the number and complexity of laws focused on the energy efficiency of electronic products and accessories, the recycling of electronic products,

and the reduction in the quantity and the recycling of packing materials have expanded significantly. It may be difficult for us to timely comply with these laws and we may not have sufficient quantities of compliant products to meet customers' needs, thereby adversely impacting our sales and profitability. We may also have to write off inventory in the event that we hold unsaleable inventory as a result of changes to regulations or customer requirements. We expect these risks and trends to continue. In addition, we anticipate increased customer requirements to meet voluntary criteria related to the reduction or elimination of substances of high concern in our products, energy efficiency measures, and supplier practices associated with sourcing and manufacturing. These requirements may increase our own costs, as well as those passed on to us by our supply chain.

Customer demands for us to implement business practices that are more stringent than existing legal requirements may reduce our revenue opportunities or cause us to incur higher costs.

Some of our customers and potential customers are requiring that we implement operating practices that are more stringent than what is required by applicable laws with respect to workplace and labor requirements, the type of materials we use in our products, environmental matters or other items. To comply with such requirements, we may have to pass these same operating practices on to our suppliers. Our suppliers may refuse to implement these operating practices, or may charge us more for complying with them. The cost to implement such practices may cause us to incur higher costs and reduce our profitability, and if we choose not to implement such practices, such customers may disqualify us as a supplier, resulting in decreased revenue opportunities. Developing, administering, monitoring and auditing these customer-requested practices at our own sites and those in our supply chain will increase our costs and may require that we hire more personnel.

Customer demands and regulations related to conflict-free minerals may force us to incur additional expenses.

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, in August 2012, the SEC released investigation, disclosure and reporting requirements regarding the use of "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries and which are necessary to the functionality or production of products. We filed a report on Form SD with the SEC regarding such matters on May 31, 2019. Other countries are considering similar regulations. If we cannot certify that we are using conflict-free minerals, customers may demand that we change the sourcing of minerals and other materials used in the manufacture of our products, even if the costs for compliant minerals and materials significantly increases and availability is limited. If we make changes to materials or suppliers, there will likely be costs associated with qualifying new suppliers and production capacity and quality could be negatively impacted. Our relationships with customers and suppliers may be adversely affected if we are unable to certify that our products are "conflict-free." We have incurred, and expect in the future to incur, additional costs associated with complying with these new disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. We may also encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict free in a materially different manner than advocated by the Responsible Minerals Initiative or the Dodd-Frank Wall Street Reform and Consumer Protection Act. If we are not able to meet customer requirements, customers may choose to disqualify us as a supplier and we may have to write off inventory in the event that it cannot be sold.

The outcome of future examinations of our income tax returns could have an adverse effect on our results of operations.

We are subject to examination of our income tax returns by the IRS and other tax authorities for fiscal 2007 and later. We are subject to certain income tax examinations in foreign jurisdictions for fiscal 2007 and later. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the current examinations. There can be no assurance that the final determination of any of these or any future examinations will not have an adverse effect on our effective tax rates, financial position and results of operations.

Exposure to greater than anticipated income tax liabilities, changes in tax rules and regulations (including the Act), changes in the interpretation of tax rules and regulations, or unfavorable assessments from tax audits could affect our effective tax rates, financial condition and results of operations.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our income tax obligations could be affected by many factors, including but not limited to changes to our corporate operating structure, intercompany arrangements and tax planning strategies.

Our income tax expense is computed based on tax rates at the time of the respective financial period. Our future effective tax rates, financial condition and results from operations could be unfavorably affected by changes in the tax rates in

jurisdictions where our income is earned, by changes in the tax rules and regulations or the interpretation of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets.

Currently, a majority of our revenue is generated from customers located outside the U.S., and a substantial portion of our assets, including employees, are located outside of the U.S. The adoption of the Act significantly changed the taxation of U.S.-based multinational corporations, by, among other things, reducing the U.S. corporate income tax rate, adopting elements of a territorial tax system, assessing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creating new taxes on certain foreign-sourced earnings. The Act is unclear in some respects and will require interpretations and continued implementation of regulations by the Internal Revenue Service, as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could lessen or increase certain adverse impacts of the legislation. A significant portion of our earnings are earned by our subsidiaries outside the U.S. Changes to the taxation of certain foreign earnings resulting from the Act, along with the state tax impact of these changes and potential future cash distributions, will likely have an adverse effect on our effective tax rate. Furthermore, changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings. The foregoing items could have a material adverse effect on our business, cash flow, results of operations or financial conditions.

The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors.

The market price of our common stock has fluctuated significantly in the past and is likely to fluctuate in the future. The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors, many of which are beyond our control, including, but not limited to:

quarterly variations in our operating results or the operating results of other technology companies;

our ability to continue to realize the expected benefits of our acquisition of Microsemi;

changes in our financial guidance or our failure to meet such guidance;

changes in analysts' estimates of our financial performance or buy/sell recommendations;

general conditions in the semiconductor industry;

global economic and financial conditions;

any other acquisitions we pursue or complete; and

actual or anticipated announcements of technical innovations or new products by us or our competitors.

In addition, the stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for many companies and that often have been unrelated to the operating performance of such companies. These broad market fluctuations and other factors have harmed and may harm the market price of our common stock. Some or all of the foregoing factors could also cause the market price of our convertible debentures to decline or fluctuate substantially.

Anti-takeover defenses in our charter documents and under Delaware law could discourage takeover attempts, which could also reduce the market price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change in control of Microchip. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include:

the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

the requirement that a special meeting of stockholders may be called only by the holders of 50% or more of the combined voting power of all classes of our capital stock, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquiror to amend the bylaws to facilitate an unsolicited takeover attempt; and

advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential

acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time. The application of Section 203 also could have the effect of delaying or preventing a change in control of us.

Any of these provisions could, under certain circumstances, depress the market price of our common stock.

As a result of our acquisition activity, our goodwill and intangible assets have increased significantly in recent years and we may in the future incur impairments to goodwill or intangible assets.

When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. As of ~~September 30,~~December 31, 2019, we had goodwill of $6.66 billion and net intangible assets of ~~$6.19~~$5.94 billion. In connection with the completion of our acquisition of Microsemi in May 2018, our balance of goodwill and intangible assets increased significantly. We review our indefinite-lived intangible assets, including goodwill, for impairment annually in the fourth fiscal quarter or whenever events or changes in circumstances indicate that the carrying amount of those assets is more likely than not impaired. Factors that may be considered in assessing whether goodwill or intangible assets may be impaired include a decline in our stock price or market capitalization, reduced estimates of future cash flows and slower growth rates in our industry. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. Because we operate in highly competitive environments, projections of our future operating results and cash flows may vary significantly from our actual results. No goodwill impairment charges were recorded in fiscal 2020 or fiscal 2019. In the ~~six~~nine months ended ~~September 30,~~December 31, 2019, we recognized $0.5 million of intangible asset impairment charges. In fiscal 2019, we recognized $3.1 million of intangible asset impairment charges. If in future periods, we determine that our goodwill or intangible assets are impaired, we will be required to write down these assets which would have a negative effect on our condensed consolidated financial statements.

Our foreign pension plans are unfunded, and any requirement to fund these plans in the future could negatively affect our cash position and operating capital.

In connection with our acquisitions of Microsemi and Atmel, we assumed defined benefit pension plans that cover certain of our French and German employees. Plan benefits are managed in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. The projected benefit obligation totaled ~~$71.5~~$73.5 million at ~~September 30,~~December 31, 2019. Most of these plans are unfunded in compliance with local statutory regulations, and we have no immediate intention of funding these plans. Benefits are paid when amounts become due, commencing when participants retire. We expect to pay approximately $1.3 million in fiscal 2020 for benefits earned. Should legislative regulations require complete or partial funding of these plans in the future, it could negatively affect our cash position and operating capital.

From time to time we receive grants from governments, agencies and research organizations. If we are unable to comply with the terms of those grants, we may not be able to receive or recognize grant benefits or we may be required to repay grant benefits previously paid to us and recognize related charges, which would adversely affect our operating results and financial position.

From time to time, we receive economic incentive grants and allowances from European governments, agencies and research organizations targeted at increasing employment at specific locations. The subsidy grant agreements typically contain economic incentive, headcount, capital and research and development expenditure and other covenants that must be met to receive and retain grant benefits, and these programs can be subjected to periodic review by the relevant governments. Noncompliance by us with the conditions of the grants could result in our forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date.

Conversion of our debentures will dilute the ownership interest of our existing stockholders.

The conversion of some or all of our outstanding debentures will dilute the ownership interest of existing stockholders to the extent we deliver common stock upon conversion of the debentures. Upon conversion, we may satisfy our conversion obligation by delivering cash, shares of common stock or any combination, at our option. If upon conversion we elect to deliver cash for the lesser of the conversion value and principal amount of the debentures, we would pay the holder the cash value of the applicable number of shares of our common stock. Upon conversion, we intend to satisfy the lesser of the principal amount or the conversion value of the debentures in cash. If the conversion value of a debenture exceeds the principal amount of the debenture, we may also elect to deliver cash in lieu of common stock for the conversion value in excess of the one thousand dollars principal amount (i.e., the conversion spread). There would be no adjustment to the numerator in the net income per common share computation for the cash settled portion of the debentures as that portion of the debt instrument will always be settled in cash. The conversion spread will be included in the denominator for the computation of diluted net income per common share. Any sales in the public market of any common stock issuable upon conversion of our debentures could adversely affect prevailing market prices of our common stock. In addition, the existence of the debentures may encourage short selling by market participants because the conversion of the debentures could be used to satisfy short positions, or anticipated conversion of the debentures into shares of our common stock could depress the price of our common stock.

Climate change regulations and sustained adverse climate change pose regulatory and physical risks that could harm our results of operations or affect the way we conduct business.

Climate change regulations at the federal, state or local level or in international jurisdictions could require us to limit emissions, change our manufacturing processes, obtain substitute materials which may cost more or be less available, increase our investment in control technology for greenhouse gas emissions, fund offset projects or undertake other costly activities. These regulations could significantly increase our costs and restrict our manufacturing operations by virtue of requirements for new equipment. New permits may be required for our current operations, or expansions thereof. Failure to timely receive permits could result in fines, suspension of production, or cessation of operations at one or more facilities. In addition, restrictions on carbon dioxide or other greenhouse gas emissions could result in significant costs such as higher energy costs, and utility companies passing down carbon taxes, emission cap and trade programs and renewable portfolio standards. The cost of complying, or of failing to comply, with these and other climate change and emissions regulations could have an adverse effect on our operating results.

Further, any sustained adverse change in climate could have a direct adverse economic impact on us, such as water and power shortages, and higher costs of water or energy to control the temperature of our facilities. Certain of our operations are located in arid or tropical regions, such as Arizona, Thailand, and the Philippines. Some environmental experts predict that these regions may become vulnerable to storms, severe floods and droughts due to climate change. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can interrupt our business, we cannot be certain that our plans will protect us from all such disasters or events.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not repurchase any shares of our common stock in the three months ended ~~September 30,~~December 31, 2019.

Item 6. EXHIBITS

Incorporated by Reference
Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Included Herewith
10.1
Amendment No.1 to Amended and Restated Credit Agreement, dated as of September 26, 2019, among Microchip Technology Incorporated, the Subsidiary Guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.
8-K 000-21184 10.1 10/01/2019
31.1*
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act)
X
31.2*
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act)
X
32*
Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
X
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive File because its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File

Number

Exhibit

Filing

Date

Included

Herewith

3.1

Restated Certificate of Incorporation of Registrant

10-Q

000-21184

3.1

11/12/2002

3.2

Amended and Restated Bylaws of Registrant, as amended through May 21, 2019

8-K

000-21184

3.1

5/24/2019

10.1*

2004 Equity Incentive Plan as Amended and Restated November 12, 2019

10.2

Notice of Grant of Restricted Stock Units (TSR)

8-K

000-21184

10.1

1/7/2020

31.1*

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act)

31.2*

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act)

32*

Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

* Furnished herewith.

SIGNATURES

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



		MICROCHIP TECHNOLOGY INCORPORATED

Date:	~~November 6, 2019~~February 4, 2020	By: /s/ J. Eric Bjornholt
		J. Eric Bjornholt
		Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer, and Principal Financial and Accounting Officer)

7167



Delaware		86-0629024
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)



Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered		~~October 31, 2019~~January 29, 2020
Common Stock, $0.001 par value	MCHP	NASDAQ	Stock Market LLC	~~238,977,636~~239,538,076 shares
		(Nasdaq Global Select Market)



		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – ~~September 30,~~December 31, 2019 and March 31, 2019	3

	Condensed Consolidated Statements of Income – Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2019 and 2018	4

	Condensed Consolidated Statements of Comprehensive Income – Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2019 and 2018	5

	Condensed Consolidated Statements of Cash Flows – ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2019 and 2018	6

	Condensed Consolidated Statements of Changes in Equity - Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2019 and 2018	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3533

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5147

Item 4.	Controls and Procedures	5147

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5349

Item 1A.	Risk Factors	5349

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6965

Item 6.	Exhibits	7066

SIGNATURES

CERTIFICATIONS

EXHIBITS

													ASSETS
	September 30,			March 31,			December 31,			March 31,
	2019			2019			2019			2019
Cash and cash equivalents	$	401.8		$	428.6		$	397.1		$	428.6
Short-term investments	3.3			2.3			5.2			2.3
Accounts receivable, net	848.6			880.6			807.5			880.6
Inventories	734.2			711.7			708.8			711.7
Other current assets	189.9			191.6			185.4			191.6
Total current assets	2,177.8			2,214.8			2,104.0			2,214.8
Property, plant and equipment, net	937.0			996.7			909.7			996.7
Goodwill	6,664.6			6,663.9			6,664.8			6,663.9
Intangible assets, net	6,187.3			6,685.6			5,939.5			6,685.6
Long-term deferred tax assets	1,662.0			1,677.2			1,738.4			1,677.2
Other assets	229.8			111.8			232.2			111.8
Total assets	$	17,858.5		$	18,350.0		$	17,588.6		$	18,350.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	235.6		$	226.4		$	209.3		$	226.4
Accrued liabilities	800.5			787.3			726.5			787.3
Current portion of long-term debt	1,387.3			1,360.8			1,400.8			1,360.8
Total current liabilities	2,423.4			2,374.5			2,336.6			2,374.5
Long-term debt	8,415.3			8,946.2			8,179.7			8,946.2
Long-term income tax payable	716.5			756.2			711.4			756.2
Long-term deferred tax liability	577.9			706.1			386.3			706.1
Other long-term liabilities	364.1			279.5			358.0			279.5
Stockholders' equity:
Preferred stock, $0.001 par value; authorized 5,000,000 shares; no shares issued or outstanding	—			—			—			—
Common stock, $0.001 par value; authorized 450,000,000 shares; 253,232,909 shares issued and 238,763,453 shares outstanding at September 30, 2019; 253,232,909 shares issued and 237,589,501 shares outstanding at March 31, 2019	0.2			0.2
Common stock, $0.001 par value; authorized 450,000,000 shares; 253,232,909 shares issued and 239,534,856 shares outstanding at December 31, 2019; 253,232,909 shares issued and 237,589,501 shares outstanding at March 31, 2019							0.2			0.2
Additional paid-in capital	2,731.5			2,679.6			2,738.7			2,679.6
Common stock held in treasury: 14,469,456 shares at September 30, 2019; 15,643,408 shares at March 31, 2019	(545.2		)	(582.2		)
Common stock held in treasury: 13,698,053 shares at December 31, 2019; 15,643,408 shares at March 31, 2019							(520.8		)	(582.2		)
Accumulated other comprehensive loss	(22.3		)	(20.7		)	(22.0		)	(20.7		)
Retained earnings	3,197.1			3,210.6			3,420.5			3,210.6
Total stockholders' equity	5,361.3			5,287.5			5,616.6			5,287.5
Total liabilities and stockholders' equity	$	17,858.5		$	18,350.0		$	17,588.6		$	18,350.0



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018			2019			2018			2019			2018
Net sales	$	1,337.8		$	1,432.5		$	2,660.4		$	2,644.9		$	1,287.4		$	1,374.7		$	3,947.8		$	4,019.7
Cost of sales (1)	510.3			743.2			1,017.7			1,313.6			501.9			595.1			1,519.6			1,908.8
Gross profit	827.5			689.3			1,642.7			1,331.3			785.5			779.6			2,428.2			2,110.9

Research and development (1)	219.8			221.9			438.9			393.8			217.1			217.7			656.0			611.6
Selling, general and administrative (1)	172.3			176.6			340.2			340.7			170.7			174.8			510.9			515.5
Amortization of acquired intangible assets	248.2			169.9			496.7			303.6			248.7			193.7			745.4			497.2
Special charges and other, net (1)	3.6			18.2			11.7			58.3
Special charges (income) and other, net (1)													17.8			(1.3		)	29.5			57.0
Operating expenses	643.9			586.6			1,287.5			1,096.4			654.3			584.9			1,941.8			1,681.3

Operating income	183.6			102.7			355.2			234.9			131.2			194.7			486.4			429.6
Losses on equity method investments	—			(0.1		)	—			(0.1		)	—			(0.1		)	—			(0.2		)
Other income (expense):
Interest income	1.0			0.9			1.7			6.6			0.6			0.7			2.3			7.3
Interest expense	(129.6		)	(138.6		)	(262.2		)	(229.0		)	(119.7		)	(137.6		)	(381.9		)	(366.7		)
Loss on settlement of debt	(0.1		)	(4.1		)	(2.0		)	(4.1		)	—			(0.2		)	(2.0		)	(4.3		)
Other (loss) income, net	(1.4		)	(0.2		)	1.3			(10.0		)
Income (loss) before income taxes	53.5			(39.4		)	94.0			(1.7		)
Income tax benefit	(55.4		)	(135.7		)	(65.6		)	(133.7		)
Other loss, net													(1.5		)	(2.5		)	(0.2		)	(12.4		)
Income before income taxes													10.6			55.0			104.6			53.3
Income tax (benefit) provision													(300.5		)	5.8			(366.1		)	(127.9		)
Net income	$	108.9		$	96.3		$	159.6		$	132.0		$	311.1		$	49.2		$	470.7		$	181.2


Basic net income per common share	$	0.46		$	0.41		$	0.67		$	0.56		$	1.30		$	0.21		$	1.97		$	0.77
Diluted net income per common share	$	0.43		$	0.38		$	0.63		$	0.52		$	1.20		$	0.20		$	1.84		$	0.73
Dividends declared per common share	$	0.3660		$	0.3640		$	0.7315		$	0.7275		$	0.3665		$	0.3645		$	1.0980		$	1.0920
Basic common shares outstanding	238.4			235.8			238.1			235.5			239.2			236.7			238.5			235.9
Diluted common shares outstanding	255.3			251.8			254.6			252.0			258.3			244.6			255.8			249.5

(1) Includes share-based compensation expense as follows:
Cost of sales	$	5.2		$	3.9		$	10.1		$	7.5		$	5.7		$	3.4		$	15.8		$	10.9
Research and development	$	22.3		$	19.7		$	41.8		$	33.8		$	21.2		$	19.4		$	63.0		$	53.2
Selling, general and administrative	$	17.8		$	17.8		$	34.1		$	29.5		$	16.6		$	16.6		$	50.7		$	46.1
Special charges and other, net	$	—		$	1.2		$	—		$	17.1
Special charges (income) and other, net													$	—		$	0.2		$	—		$	17.3


	Common Stock and Additional Paid-in-Capital					Common Stock Held in Treasury					Accumulated Other Comprehensive Income			Retained Earnings			Total Equity			Common Stock and Additional Paid-in-Capital					Common Stock Held in Treasury					Accumulated Other Comprehensive Income			Retained Earnings			Total Equity
	Shares		Amount			Shares		Amount			Accumulated Other Comprehensive Income			Retained Earnings			Total Equity			Shares		Amount			Shares		Amount			Accumulated Other Comprehensive Income			Retained Earnings			Total Equity
Balance at March 31, 2018	253.2		$	2,562.7		18.2		$	(662.6	)	$	(17.6	)	$	1,397.3		$	3,279.8		253.2		$	2,562.7		18.2		$	(662.6	)	$	(17.6	)	$	1,397.3		$	3,279.8
Net income	—		—			—		—			—			35.7			35.7			—		—			—		—			—			35.7			35.7
Other comprehensive income	—		—			—		—			4.4			—			4.4			—		—			—		—			4.4			—			4.4
Adoption of ASU 2016-01, cumulative adjustment	—		—			—		—			(1.7		)	1.7			—			—		—			—		—			(1.7		)	1.7			—
Adoption of ASU 2016-16, cumulative adjustment	—		—			—		—			—			1,558.1			1,558.1			—		—			—		—			—			1,558.1			1,558.1
Adoption of ASC 606, cumulative adjustment	—		—			—		—			—			241.9			241.9			—		—			—		—			—			241.9			241.9
Non-cash consideration, exchange of employee stock awards - Microsemi acquisition	—		53.9			—		—			—			—			53.9			—		53.9			—		—			—			—			53.9
Proceeds from sales of common stock through employee equity incentive plans	0.7		6.4					—			—			—			6.4			0.7		6.4					—			—			—			6.4
Restricted stock unit and stock appreciation right withholdings	(0.2	)	(16.8		)			—			—			��			(16.8		)	(0.2	)	(16.8		)			—			—			—			(16.8		)
Treasury stock used for new issuances	(0.5	)	(14.9		)	(0.5	)	14.9			—			—			—			(0.5	)	(14.9		)	(0.5	)	14.9			—			—			—
Share-based compensation	—		45.9			—		—			—			—			45.9			—		45.9			—		—			—			—			45.9
Cash dividend	—		—			—		—			—			(85.5		)	(85.5		)	—		—			—		—			—			(85.5		)	(85.5		)
Balance at June 30, 2018	253.2		2,637.2			17.7		(647.7		)	(14.9		)	3,149.2			5,123.8			253.2		2,637.2			17.7		(647.7		)	(14.9		)	3,149.2			5,123.8
Net income	—		—			—		—			—			96.3			96.3			—		—			—		—			—			96.3			96.3
Other comprehensive loss	—		—			—		—			(1.8		)	—			(1.8		)	—		—			—		—			(1.8		)	—			(1.8		)
Proceeds from sales of common stock through employee equity incentive plans	0.9		13.9			—		—			—			—			13.9			0.9		13.9			—		—			—			—			13.9
Restricted stock unit and stock appreciation right withholdings	(0.2	)	(20.1		)	—		—			—			—			(20.1		)	(0.2	)	(20.1		)	—		—			—			—			(20.1		)
Treasury stock used for new issuances	(0.7	)	(22.3		)	(0.7	)	22.3			—			—			—			(0.7	)	(22.3		)	(0.7	)	22.3			—			—			—
Share-based compensation	—		44.0			—		—			—			—			44.0			—		44.0			—		—			—			—			44.0
Cash dividend	—					—		—			—			(85.9		)	(85.9		)	—					—		—			—			(85.9		)	(85.9		)
Balance at September 30, 2018	253.2		$	2,652.7		17.0		$	(625.4	)	$	(16.7	)	$	3,159.6		$	5,170.2		253.2		2,652.7			17.0		(625.4		)	(16.7		)	3,159.6			5,170.2
Net income																				—		—			—		—			—			49.2			49.2
Other comprehensive loss																				—		—			—		—			(0.3		)	—			(0.3		)
Proceeds from sales of common stock through employee equity incentive plans																				1.0		6.6			—		—			—			—			6.6
Restricted stock unit and stock appreciation right withholdings																				(0.3	)	(20.1		)	—		—			—			—			(20.1		)
Treasury stock used for new issuances																				(0.7	)	(23.6		)	(0.7	)	23.6			—			—			—
Share-based compensation																				—		41.9			—		—			—			—			41.9
Cash dividend																				—		—			—		—			—			(86.4		)	(86.4		)
Balance at December 31, 2018																				253.2		$	2,657.5		16.3		$	(601.8	)	$	(17.0	)	$	3,122.4		$	5,161.1

Balance at March 31, 2019	253.2		$	2,679.8		15.6		$	(582.2	)	$	(20.7	)	$	3,210.6		$	5,287.5		253.2		$	2,679.8		15.6		$	(582.2	)	$	(20.7	)	$	3,210.6		$	5,287.5
Net income	—		—			—		—			—			50.7			50.7			—		—			—		—			—			50.7			50.7
Other comprehensive income	—		—			—		—			(0.3		)	—			(0.3		)	—		—			—		—			(0.3		)	—			(0.3		)
Adoption of ASU 2018-02, cumulative adjustment	—		—			—		—			(1.3		)	1.3			—			—		—			—		—			(1.3		)	1.3			—
Proceeds from sales of common stock through employee equity incentive plans	0.5		7.3			—		—			—			—			7.3
Restricted stock unit and stock appreciation right withholdings	(0.1	)	(11.4		)	—		—			—			—			(11.4		)
Treasury stock used for new issuances	(0.4	)	(13.8		)	(0.4	)	13.8			—			—			—
Share-based compensation	—		41.6			—		—			—			—			41.6
Cash dividend	—		—			—		—			—			(87.1		)	(87.1		)
Balance at June 30, 2019	253.2		2,703.5			15.2		(568.4		)	(22.3		)	3,175.5			5,288.3
Net Income	—		—			—		—			—			108.9			108.9
Other comprehensive income	—		—			—		—			—			—			—
Proceeds from sales of common stock through employee equity incentive plans	0.9		20.2			—		—			—			—			20.2



Assets acquired
Cash and cash equivalents	$	340.0
Accounts receivable	215.6
Inventories	576.2
Other current assets	85.2
Property, plant and equipment	201.5
Goodwill	4,364.9
Purchased intangible assets	5,634.5
Long-term deferred tax assets	5.9
Other assets	53.3
Total assets acquired	11,477.1

Liabilities assumed
Accounts payable	(233.8		)
Other current liabilities	(149.3		)
Long-term debt	(2,056.9		)
Deferred tax liabilities	(565.1		)
Long-term income tax payable	(177.7		)
Other long-term liabilities	(49.8		)
Total liabilities assumed	(3,232.6		)
Purchase price allocated	$	8,244.5



Purchased Intangible Assets	Weighted Average
	Useful Life	May 29, 2018
	(in years)	(in millions)
Core and developed technology	15	$	4,569.1
In-process research and development	—	847.1
Customer-related	12	200.2
Backlog	1	12.3
Other	4	5.8
Total purchased intangible assets		$	5,634.5


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2019				December 31, 2019				December 31, 2019
	Net Sales		Gross Profit		Net Sales		Gross Profit		Net Sales		Gross Profit		Net Sales		Gross Profit
Semiconductor products	$	1,314.6	$	804.3	$	2,618.6	$	1,600.9	$	1,257.0	$	755.1	$	3,875.6	$	2,356.0
Technology licensing	23.2		23.2		41.8		41.8		30.4		30.4		72.2		72.2
Total	$	1,337.8	$	827.5	$	2,660.4	$	1,642.7	$	1,287.4	$	785.5	$	3,947.8	$	2,428.2


	Restructuring						Non-Restructuring						Restructuring						Non-Restructuring
	Employee Separation Costs			Exit Costs			Exit Costs			Total			Employee Separation Costs			Exit Costs			Exit Costs			Total
Balance at March 31, 2019	$	12.9		$	19.2		$	15.7		$	47.8		$	12.9		$	19.2		$	15.7		$	47.8
Charges	7.3			0.5			—			7.8			10.7			10.8			—			21.5
Payments	(8.1		)	(3.2		)	(2.4		)	(13.7		)	(8.9		)	(4.3		)	(3.4		)	(16.6		)
Non-cash - Other	0.6			0.6			0.2			1.4			(0.1		)	(0.6		)	0.5			(0.2		)
Effect of adoption of ASC 842	—			(12.5		)	—			(12.5		)	—			(12.5		)	—			(12.5		)
Balance at September 30, 2019	$	12.7		$	4.6		$	13.5		$	30.8
Balance at December 31, 2019													$	14.6		$	12.6		$	12.8		$	40.0
Current										$	21.2											$	22.6
Non-current										9.6												17.4
Total										$	30.8											$	40.0


~~Level 1-~~	~~Observable inputs such as quoted prices in active markets;~~


~~Level 2-~~	~~Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and~~


	September 30,				March 31,				December 31,				March 31,
	2019				2019				2019				2019
	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
Revolving Credit Facility									$	2,610.9	$	2,624.5	$	3,251.8	$	3,266.5
Term Loan Facility									$	1,708.2	$	1,723.5	$	1,892.1	$	1,911.5
2023 Senior Secured Notes	$	987.1	$	1,055.0	$	985.4	$	1,020.1	$	988.0	$	1,058.8	$	985.4	$	1,020.1
2021 Senior Secured Notes	$	990.2	$	1,022.5	$	987.4	$	1,008.1	$	991.6	$	1,022.5	$	987.4	$	1,008.1
Term Loan Facility	$	1,707.5	$	1,723.5	$	1,892.1	$	1,911.5
2017 Senior Convertible Debt	$	1,522.8	$	2,666.5	$	1,493.6	$	2,285.4	$	1,537.7	$	2,968.1	$	1,493.6	$	2,285.4
2015 Senior Convertible Debt	$	1,387.3	$	3,270.2	$	1,360.8	$	2,810.6	$	1,400.8	$	3,710.8	$	1,360.8	$	2,810.6
2017 Junior Convertible Debt	$	340.8	$	888.6	$	335.9	$	740.8	$	343.3	$	994.1	$	335.9	$	740.8


~~Level 3-~~	~~Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.~~



	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Total Balance
Assets
Cash equivalents:
Money market mutual funds	$	1.1	$	—	$	1.1
Short-term investments:
Marketable equity securities	3.3		—		3.3
Total assets measured at fair value	$	4.4	$	—	$	4.4


Level 1-	Observable inputs such as quoted prices in active markets;


Level 2-	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and


Level 3-	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


Fiscal year ending March 31,	Operating Leases		Operating Leases
Remainder of 2020	$	24.9	$	14.7
2021	41.7		45.6
2022	36.8		40.4
2023	21.0		22.8
2024	14.4		14.9
Thereafter	28.4		29.9
Total lease payments	$	167.2	$	168.3
Less: Imputed lease interests	14.9		14.4
Total lease liabilities	$	152.3	$	153.9



Fiscal year ending March 31,	Operating Leases
2020	$	49.0
2021	38.2
2022	30.3
2023	18.0
2024	9.1
Thereafter	22.6
Total	$	167.2



	As of ~~September 30,~~December 31, 2019
Weighted average remaining lease-term	~~4.7~~4.5
Weighted average discount rate	4.6	%


	September 30, 2019							December 31, 2019
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Core and developed technology	$	7,347.4	$	(1,526.2	)	$	5,821.2	$	7,345.0	$	(1,733.8	)	$	5,611.2
Customer-related	917.1		(616.1		)	301.0		916.7		(651.7		)	265.0
In-process research and development	9.6		—			9.6		8.8		—			8.8
Distribution rights and other	84.6		(29.1		)	55.5		90.6		(36.1		)	54.5
Total	$	8,358.7	$	(2,171.4	)	$	6,187.3	$	8,361.1	$	(2,421.6	)	$	5,939.5



	March 31, 2019
	Gross Amount		Accumulated Amortization			Net Amount
Core and developed technology	$	7,339.2	$	(1,102.2	)	$	6,237.0
Customer-related	917.1		(544.0		)	373.1
In-process research and development	7.7		—			7.7
Distribution rights and other	81.4		(13.6		)	67.8
Total	$	8,345.4	$	(1,659.8	)	$	6,685.6


Fiscal Year Ending March 31,	Projected Amortization Expense	Projected Amortization Expense
2020	$516.1	$	259.0
2021	$970.1	$	972.9
2022	$894.9	$	902.2
2023	$682.7	$	708.4
2024	$616.0	$	616.3


	Semiconductor Products Reporting Unit		Technology Licensing Reporting Unit		Semiconductor Products Reporting Unit		Technology Licensing Reporting Unit
Balance at March 31, 2019	$	6,644.7	$	19.2	$	6,644.7	$	19.2
Additions	0.7		—		0.9		—
Balance at September 30, 2019	$	6,645.4	$	19.2
Balance at December 31, 2019					$	6,645.6	$	19.2


		Coupon Interest Rate		Effective Interest Rate	Fair Value of Liability Component at Issuance ⁽¹⁾	September 30, 2019			March 31, 2019			Coupon Interest Rate	Effective Interest Rate	Fair Value of Liability Component at Issuance ⁽¹⁾	December 31, 2019			March 31, 2019

Senior Secured Indebtedness
Revolving Credit Facility						$	2,881.5		$	3,266.5					$	2,624.5		$	3,266.5
Term Loan Facility						1,723.5			1,911.5						1,723.5			1,911.5
2023 Notes, maturing June 1, 2023 ("2023 Notes")			4.333%		4.7%			1,000.0			1,000.0		4.333%	4.7%			1,000.0			1,000.0
2021 Notes, maturing June 1, 2021 ("2021 Notes")		3.922%		4.5%		1,000.0			1,000.0			3.922%	4.5%		1,000.0			1,000.0
Total Senior Secured Indebtedness						6,605.0			7,178.0						6,348.0			7,178.0
Senior Subordinated Convertible Debt - Principal Outstanding	Senior Subordinated Convertible Debt - Principal Outstanding											Senior Subordinated Convertible Debt - Principal Outstanding
2017 Senior Convertible Debt, maturing February 15, 2027 ("2017 Senior Convertible Debt")		1.625%		6.0%	$1,396.3	2,070.0			2,070.0			1.625%	6.0%	$1,396.3	2,070.0			2,070.0
2015 Senior Convertible Debt, maturing February 15, 2025 ("2015 Senior Convertible Debt")		1.625%		5.9%	$1,160.1	1,725.0			1,725.0			1.625%	5.9%	$1,160.1	1,725.0			1,725.0
Junior Subordinated Convertible Debt - Principal Outstanding	Junior Subordinated Convertible Debt - Principal Outstanding											Junior Subordinated Convertible Debt - Principal Outstanding
2017 Junior Convertible Debt, maturing February 15, 2037 ("2017 Junior Convertible Debt")		2.250%		7.4%	$321.1	686.3			686.3			2.250%	7.4%	$321.1	686.3			686.3
Total Convertible Debt						4,481.3			4,481.3						4,481.3			4,481.3

Gross long-term debt including current maturities						11,086.3			11,659.3						10,829.3			11,659.3
Less: Debt discount ⁽²⁾						(1,208.6		)	(1,268.7		)				(1,177.9		)	(1,268.7		)
Less: Debt issuance costs ⁽³⁾						(75.1		)	(83.6		)				(70.9		)	(83.6		)
Net long-term debt including current maturities						9,802.6			10,307.0						9,580.5			10,307.0
Less: Current maturities ⁽⁴⁾						(1,387.3		)	(1,360.8		)				(1,400.8		)	(1,360.8		)
Net long-term debt						$	8,415.3		$	8,946.2					$	8,179.7		$	8,946.2


Fiscal year ending March 31,	Expected Maturities		Expected Maturities
2020	$	—	$	—
2021	—		—
2022	1,000.0		1,000.0
2023	—		—
2024	3,881.5		3,624.5
Thereafter	6,204.8		6,204.8
Total	$	11,086.3	$	10,829.3


	Dividend adjusted rates as of September 30, 2019					Dividend adjusted rates as of December 31, 2019
	Conversion Rate	Approximate Conversion Price		Incremental Share Factor	Maximum Conversion Rate	Conversion Rate	Approximate Conversion Price		Incremental Share Factor	Maximum Conversion Rate
2017 Senior Convertible Debt ⁽¹⁾	10.3801	$	96.34	5.1900	14.7916	10.4213	$	95.96	5.2106	14.8503
2015 Senior Convertible Debt ⁽¹⁾	16.1870	$	61.78	8.0935	22.6617	16.2513	$	61.53	8.1256	22.7517
2017 Junior Convertible Debt ⁽¹⁾	10.5654	$	94.65	5.2828	14.7916	10.6074	$	94.27	5.3038	14.8503


	Unrealized holding gains (losses) available-for-sale debt securities			Defined benefit pension plans			Foreign Currency			Total			Unrealized holding gains (losses) available-for-sale debt securities			Defined benefit pension plans			Foreign Currency			Total
Accumulated other comprehensive income (loss) at March 31, 2019	$	0.2		$	(6.2	)	$	(14.7	)	$	(20.7	)	$	0.2		$	(6.2	)	$	(14.7	)	$	(20.7	)
Impact of change in accounting principle	(0.2		)	(1.1		)	—			(1.3		)	(0.2		)	(1.1		)	—			(1.3		)
Opening Balance as of April 1, 2019	—			(7.3		)	(14.7		)	(22.0		)	—			(7.3		)	(14.7		)	(22.0		)
Other comprehensive income (loss) before reclassifications	—			1.7			(2.4		)	(0.7		)	—			0.1			(0.7		)	(0.6		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			0.4			—			0.4			—			0.6			—			0.6
Net other comprehensive income (loss)	—			2.1			(2.4		)	(0.3		)	—			0.7			(0.7		)	—
Accumulated other comprehensive loss at September 30, 2019	$	—		$	(5.2	)	$	(17.1	)	$	(22.3	)
Accumulated other comprehensive loss at December 31, 2019													$	—		$	(6.6	)	$	(15.4	)	$	(22.0	)