Maxim_Q2 '13 10-Q



 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 29, 2012
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________.

Commission file number 1-34192
MAXIM INTEGRATED PRODUCTS, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
 (State or Other Jurisdiction of Incorporation or Organization)
 
94-2896096 
(I.R.S. Employer I. D. No.)

160 Rio Robles
San Jose, California 95134
(Address of Principal Executive Offices including Zip Code)

(408) 601-1000
(Registrant's Telephone Number, Including Area Code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [x]
Accelerated filer [ ]
Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one):
YES [ ] NO [x]

As of January 18, 2013 there were 292,478,140 shares of Common Stock, par value $.001 per share, of the registrant outstanding.

 
 
 
 
 





MAXIM INTEGRATED PRODUCTS, INC.
INDEX

 
PART I - FINANCIAL INFORMATION
 
Page
 
 
 
Item 1. Financial Statements (Unaudited)
 
 
 
 
Condensed Consolidated Balance Sheets as of December 29, 2012 and June 30, 2012
 
 
 
 
Condensed Consolidated Statements of Income for the Three and Six Months Ended December 29, 2012 and December 31, 2011
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 29, 2012 and December 31, 2011
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 29, 2012 and December 31, 2011
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
 
 
 
Item 4. Controls and Procedures
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1. Legal Proceedings
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
 
Item 3. Defaults Upon Senior Securities
 
 
 
 
 Item 4. Mine Safety Disclosures
 
 
 
 
Item 5. Other Information
 
 
 
 
Item 6. Exhibits
 
 
 
 
SIGNATURES
 








2



Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 
December 29,
2012
 
June 30,
2012
 
(in thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
955,107

 
$
881,060

Short-term investments
75,192

 
75,326

Total cash, cash equivalents and short-term investments
1,030,299

 
956,386

Accounts receivable, net
264,545

 
317,461

Inventories
257,690

 
242,162

Deferred tax assets
80,991

 
98,180

Other current assets
90,470

 
85,177

Total current assets
1,723,995

 
1,699,366

Property, plant and equipment, net
1,359,014

 
1,353,606

Intangible assets, net
182,521

 
208,913

Goodwill
422,083

 
423,073

Other assets
50,940

 
52,988

TOTAL ASSETS
$
3,738,553

 
$
3,737,946

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
Accounts payable
$
110,495

 
$
147,086

Income taxes payable
22,146

 
22,589

Accrued salary and related expenses
152,122

 
191,846

Accrued expenses
58,900

 
64,092

Current portion of long-term debt
304,794

 
303,496

Deferred revenue on shipments to distributors
25,362

 
26,280

Total current liabilities
673,819

 
755,389

Long-term debt
3,997

 
5,592

Income taxes payable
260,770

 
212,389

Deferred tax liabilities
192,434

 
198,502

Other liabilities
26,321

 
27,797

Total liabilities
1,157,341

 
1,199,669

 
 
 
 
Commitments and contingencies (Note 11)


 


 
 
 
 
Stockholders' equity:
 
 
 
Common stock and capital in excess of par value
7,040

 
293

Retained earnings
2,589,619

 
2,553,418

Accumulated other comprehensive loss
(15,447
)
 
(15,434
)
Total stockholders' equity
2,581,212

 
2,538,277

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$
3,738,553

 
$
3,737,946


See accompanying Notes to Condensed Consolidated Financial Statements.

3



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
(in thousands, except per share data)
 
 
 
 
 
 
 
 
Net revenues
$
605,306

 
$
591,359

 
$
1,228,381

 
$
1,227,361

Cost of goods sold
241,931

 
243,399

 
479,315

 
483,928

Gross margin
363,375

 
347,960

 
749,066

 
743,433

Operating expenses:
 
 
 
 
 
 
 
Research and development
135,742

 
142,084

 
268,672

 
282,297

Selling, general and administrative
80,058

 
80,826

 
160,245

 
163,282

Intangible asset amortization
3,903

 
4,338

 
7,952

 
8,659

Impairment of long-lived assets
22,222

 

 
24,929

 

Severance and restructuring expenses
2,236

 
6,047

 
2,236

 
6,539

Other operating expenses (income), net
1,666

 
155

 
2,081

 
(4,234
)
Total operating expenses
245,827

 
233,450

 
466,115

 
456,543

Operating income
117,548

 
114,510

 
282,951

 
286,890

Interest and other income (expense), net
(2,798
)
 
2,374

 
(8,540
)
 
(1,726
)
Income before provision for income taxes
114,750

 
116,884

 
274,411

 
285,164

Provision for income taxes
38,128

 
28,754

 
69,901

 
63,588

Net income
$
76,622

 
$
88,130

 
$
204,510

 
$
221,576

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.26

 
$
0.30

 
$
0.70

 
$
0.76

Diluted
$
0.26

 
$
0.29

 
$
0.68

 
$
0.74

 
 
 
 
 
 
 
 
Shares used in the calculation of earnings per share:
 
 
 
 
 
 
 
Basic
292,075

 
291,824

 
292,143

 
293,098

Diluted
298,759

 
299,290

 
298,704

 
300,083

 
 
 
 
 
 
 
 
Dividends paid per share
$
0.24

 
$
0.22

 
$
0.48

 
$
0.44


See accompanying Notes to Condensed Consolidated Financial Statements.




4



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
(in thousands)
Net income
$
76,622

 
$
88,130

 
$
204,510

 
$
221,576

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Unrealized gains (losses) on available-for-sale securities, net of tax benefit (expense) of $38, $20, $58 and $46, respectively
(67
)
 
(33
)
 
(102
)
 
(80
)
Unrealized gains (losses) on cash flow hedges, net of tax benefit (expense) of $117, $(40), $(218), and $146, respectively
(202
)
 
69

 
383

 
(256
)
Tax effect of the unrealized exchange gain (loss) on long-term intercompany receivables
(466
)
 
1,246

 
(1,548
)
 
1,489

Unrealized gains (losses) on post-retirement benefits, net of tax benefit (expense) of $(69), $(35), $(168) and $(71), respectively
203

 
62

 
1,254

 
123

Other comprehensive income (loss)
(532
)
 
1,344

 
(13
)
 
1,276

Total comprehensive income
$
76,090

 
$
89,474

 
$
204,497

 
$
222,852


See accompanying Notes to Condensed Consolidated Financial Statements.


5



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
204,510

 
$
221,576

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Stock-based compensation
45,342

 
46,939

Depreciation and amortization
105,554

 
104,066

Deferred taxes
9,793

 
39,477

Tax benefit (shortfall) related to stock-based compensation
6,522

 
(1,153
)
Impairment of long lived assets
24,929

 

Excess tax benefit from stock-based compensation
(11,834
)
 
(7,063
)
Loss (gain) from sale of property, plant and equipment
(139
)
 
251

Loss (gain) from sale of investments in privately-held companies

 
(1,811
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
52,916

 
51,970

Inventories
(15,445
)
 
9,246

Other current assets
(3,748
)
 
(13,455
)
Accounts payable
(36,002
)
 
(13,515
)
Income taxes payable
47,938

 
16,317

Deferred revenue on shipments to distributors
(918
)
 
(5,745
)
All other accrued liabilities
(37,576
)
 
(76,971
)
Net cash provided by operating activities
391,842

 
370,129

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchase of property, plant and equipment
(112,805
)
 
(117,685
)
Proceeds from sale of property, plant and equipment
4,459

 
1,709

Acquisitions

 
(166,287
)
Purchases of available-for-sale securities

 
(25,108
)
Proceeds from sale of investments in privately-held companies

 
3,225

Net cash used in investing activities
(108,346
)
 
(304,146
)
 
 
 
 
Cash flows from financing activities:
 
 
 
           Excess tax benefit from stock-based compensation
11,834

 
7,063

Contingent consideration paid
(7,476
)
 

Repayment of notes payable
(298
)
 
(20,406
)
Net issuance of restricted stock units

(13,645
)
 
(14,992
)
Proceeds from stock options exercised
39,214

 
16,164

Issuance of employee stock purchase plan
16,768

 
14,906

Repurchase of common stock
(115,584
)
 
(161,160
)
Dividends paid
(140,262
)
 
(128,939
)
Net cash used in financing activities
(209,449
)
 
(287,364
)
Net increase (decrease) in cash and cash equivalents
74,047

 
(221,381
)
Cash and cash equivalents:
 
 
 
Beginning of period
881,060

 
962,541

End of period
$
955,107

 
$
741,160

Supplemental disclosures of cash flow information:
 
 
 
Cash paid (refunded), net during the period for income taxes
$
7,397

 
$
16,829

Cash paid for interest
$
5,282

 
$
5,653

Noncash financing and investing activities:
 
 
 
Accounts payable related to property, plant and equipment purchases
$
25,490


$
36,450


See accompanying Notes to Condensed Consolidated Financial Statements.

6



MAXIM INTEGRATED PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed interim consolidated financial statements of Maxim Integrated Products, Inc. and all of its majority-owned subsidiaries (collectively, the "Company" or "Maxim Integrated") included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments considered necessary for fair presentation have been included. The year-end condensed consolidated balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the six months ended December 29, 2012 are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2012.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every fifth or sixth fiscal year will be a 53-week fiscal year. Fiscal year 2013 is a 52-week fiscal year and fiscal year 2012 was a 53-week fiscal year.

NOTE 2: RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In the first quarter of fiscal year 2013, the Company adopted Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220)-Presentation of Comprehensive Income and Accounting Standards Update No. 2011-12, Comprehensive Income (Topic 220)-Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The adoption of these amended standards impacted the presentation of other comprehensive income, as the Company elected to present two separate but consecutive statements, but did not impact our financial position or results of operations.
NOTE 3: BALANCE SHEET COMPONENTS

Accounts receivables, net consist of:

 
December 29,
2012
 
June 30,
2012
Accounts Receivables:
(in thousands)
Accounts receivable
$
277,287

 
$
329,990

Returns and allowances
(12,742
)
 
(12,529
)
 
$
264,545

 
$
317,461


Inventories consist of:

 
December 29,
2012
 
June 30,
2012
Inventories:
(in thousands)
Raw materials
$
12,580

 
$
11,922

Work-in-process
166,571

 
149,603

Finished goods
78,539

 
80,637

 
$
257,690

 
$
242,162







7



Property, plant and equipment, net consist of:

 
December 29,
2012
 
June 30,
2012
Property, plant and equipment:
(in thousands) 
Land
$
62,093

 
$
65,007

Buildings and building improvements
357,759

 
348,727

Machinery and equipment
2,040,072

 
2,105,905

 
2,459,924

 
2,519,639

Less: accumulated depreciation and amortization                       
(1,100,910
)
 
(1,166,033
)
 
$
1,359,014

 
$
1,353,606


NOTE 4: FAIR VALUE MEASUREMENTS

The FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:
 
Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.
 
The Company's Level 1 assets consist of money market funds.
 
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company's Level 2 assets and liabilities consist of certificates of deposit, government agency securities and foreign currency forward contracts.
 
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's Level 3 consist of contingent consideration liability related to certain acquisitions and assets held-for-sale and certain fixed assets impaired during the period.

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

 
As of December 29, 2012
 
As of June 30, 2012
 
Fair Value
 
 
 
Fair Value
 
 
 
Measurements Using
 
Total
 
Measurements Using
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Balance
 
Level 1
 
Level 2
 
Level 3
 
Balance
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (1)
$
424,423

 
$

 
$

 
$
424,423

 
$
602,462

 
$

 
$

 
$
602,462

Certificates of deposit (1)

 
6,188

 

 
6,188

 

 
6,182

 

 
6,182

Government agency securities (2)

 
75,192

 

 
75,192

 

 
75,326

 

 
75,326

Foreign currency forward contracts (3)

 
1,176

 

 
1,176

 

 
642

 

 
642

Total Assets
$
424,423

 
$
82,556

 
$

 
$
506,979

 
$
602,462

 
$
82,150

 
$

 
$
684,612

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts (4)
$

 
$
556

 
$

 
$
556

 
$

 
$
507

 
$

 
$
507

Contingent Consideration (4)

 

 
12,595

 
12,595

 

 

 
17,737

 
17,737

Total Liabilities
$

 
$
556

 
$
12,595

 
$
13,151

 
$

 
$
507

 
$
17,737

 
$
18,244


8




(1) Included in Cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets.
(2) Included in Short-term investments in the accompanying Condensed Consolidated Balance Sheets.
(3) Included in Other current assets in the accompanying Condensed Consolidated Balance Sheets.
(4) Included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

The tables below present reconciliations for liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended December 29, 2012 and for the year ended June 30, 2012:

Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3)
 
 
 
 
 
 
 
December 29,
2012
 
June 30,
2012
Contingent Consideration
 
(in thousands)
Beginning balance
  
$
17,737

 
$
8,800

Total gains or losses (realized and unrealized):
 
 
 
 
Included in earnings
 
2,334

 
1,670

Additions
 

 
11,354

Payments
 
(7,476
)
 
(4,087
)
Ending balance
  
$
12,595

 
$
17,737

 
 
 
 
 
Changes in unrealized losses (gains) included in earnings related to liabilities still held as of period end
 
$
2,334

 
$
1,670


The valuation of contingent consideration is based on a probability weighted earnouts model which relies primarily on estimates of milestone achievements and discount rates applicable for the period expected payout. The most significant unobservable input used in the determination of estimated fair value of contingent consideration is the estimates on the likelihood of milestone achievements, which directly correlates to the fair value recognized in the Condensed Consolidated Balance Sheets.

The fair value of this liability is estimated quarterly by management based on inputs received from the Company's engineering and finance personnel. The determination of the milestone achievement is performed by the Company's engineering department and reviewed by the accounting department. Potential valuation adjustments are made as the progress toward achieving milestones becomes determinable, with the impact of such adjustments being recorded through Other operating expenses (income), net. 

During the six months ended December 29, 2012 and the year ended June 30, 2012, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

Assets measured at fair value on a non-recurring basis were as follows:

As of December 29, 2012, long-lived assets including primarily used fabrication tools and test equipment were written down to their fair value, less cost to sell, of $3.0 million, resulting in an impairment loss of $22.2 million, which was included in earnings for the period. The impairment charge was measured using Level 3 inputs. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of asset fair values. The fair value was determined mainly after consideration of evidence such as broker quotes, and current market and asset conditions. Please refer to Note 15: "Impairment of long-lived assets" of these Notes to Condensed Consolidated Financial Statements.

As of June 30, 2012, long-lived assets comprised of buildings held for sale were written down to their fair value, less cost to sell, of $19.7 million, resulting in an impairment loss of $22.4 million, which was included in earnings for the period. The impairment charge was measured using Level 3 inputs. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of assets fair values. The fair value of the land and buildings was determined mainly after consideration of evidence such as appraisals and offers received. Please refer to Note 15: "Impairment of long-lived assets" of these Notes to Condensed Consolidated Financial Statements.






9



NOTE 5: FINANCIAL INSTRUMENTS

Short-term investments
Fair values were as follows:
 
December 29, 2012
 
June 30, 2012
 
Amortized Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
Amortized Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
(in thousands)
Available-for-sale investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency securities
$
75,034

 
$
158

 
$

 
$
75,192

 
$
75,007

 
$
319

 
$

 
$
75,326

Total available-for-sale investments
$
75,034

 
$
158

 
$

 
$
75,192

 
$
75,007

 
$
319

 
$

 
$
75,326


In the six months ended December 29, 2012 and the year ended June 30, 2012, Maxim Integrated did not recognize any impairment charges on short-term investments.
The government agency securities have maturity dates between February 26, 2013 and December 18, 2013.
Derivative instruments and hedging activities

Foreign Currency Risk

The Company generates revenues in various global markets based on orders obtained in non-U.S. currencies, primarily the Japanese Yen, the Euro and the British Pound. Maxim Integrated incurs expenditures denominated in non-U.S. currencies, principally the Philippine Peso and Thai Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and expenditures for sales offices and research and development activities undertaken outside of the U.S. Maxim Integrated is exposed to fluctuations in foreign currency exchange rates primarily on orders and accounts receivable from sales in these foreign currencies and cash flows for expenditures in these foreign currencies. Maxim Integrated has established risk management strategies designed to reduce the impact of volatility of future cash flows caused by changes in the exchange rate for these currencies. These strategies reduce, but do not entirely eliminate, the impact of currency exchange rates movements. Maxim Integrated does not use derivative financial instruments for speculative or trading purposes. The Company routinely hedges its exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. If a financial counterparty to any of the Company's hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, the Company may experience financial losses.
 
For derivative instruments that are designated and qualify as cash flow hedges under Accounting Standards Codification ("ASC") No. 815-Derivatives and Hedging, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive loss and reclassified into earnings into the same financial statement line as the item being hedged, and in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in interest and other income (expense), net.
 
For derivative instruments that are not designated as hedging instruments under ASC No. 815, gains and losses are recognized in interest and other income (expense), net. All derivatives are foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivatives largely offset the changes in the fair value of the assets or liabilities being hedged.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets
Maxim Integrated estimates the fair value of derivatives primarily based on pricing models using current market rates and records all derivatives on the balance sheet at fair value. The gross notional and the recorded fair value of derivative financial instruments in the Condensed Consolidated Balance Sheets were as follows:


10



 
As of December 29, 2012
 
As of June 30, 2012
 
Gross Notional(1)
 
Other Current Assets
 
Accrued Expenses
 
Gross Notional (1)
 
Other Current Assets
 
Accrued Expenses
 
(in thousands)
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
45,703

 
$
810

 
$
515

 
$
37,955

 
$
150

 
$
459

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
40,658

 
366

 
41

 
35,105

 
492

 
48

Total derivatives
$
86,361

 
$
1,176

 
$
556

 
$
73,060

 
$
642

 
$
507

(1) Represents the face amounts of contracts that were outstanding as of December 29, 2012 and June 30, 2012, as applicable.
Derivatives designated as hedging instruments

The following table provides the balances and changes in the accumulated other comprehensive loss (income) related to derivative instruments during the six months ended December 29, 2012 and the year ended June 30, 2012.

 
 
December 29,
2012
 
June 30,
2012
 
 
(in thousands)
Beginning balance
  
$
309

 
$
(234
)
Gain (loss) reclassified to income
 
(584
)
 
653

Loss (gain) recorded in other comprehensive loss
  
(21
)
 
(110
)
Ending balance
  
$
(296
)
 
$
309


Maxim Integrated expects to reclassify an estimated net accumulated other comprehensive gain of $0.2 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions in association with cash flow hedges.
The before-tax effect of cash flow derivative instruments for the three and six months ended December 29, 2012 and December 31, 2011 was as follows:
 
 
Loss (Gain) Reclassified from Accumulated OCI into Income (Effective portion)
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
Location
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
 
 
 
(in thousands)
Cash Flow hedges:
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
Net revenues
 
$
147

 
$
(3
)
 
$
122

 
$
(245
)
Foreign exchange contracts
 
Cost of goods sold
 
(443
)
 
(322
)
 
(10
)
 
(127
)
Foreign exchange contracts
 
Operating expenses
 
(293
)
 
(225
)
 
(696
)
 
(225
)
Total cash flow hedges
 
 
 
$
(589
)
 
$
(550
)
 
$
(584
)
 
$
(597
)
The before-tax effect of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Income for the three and six months ended December 29, 2012 and December 31, 2011 was as follows:

11



 
Gain (Loss) Recognized in Income on Derivative Instrument
 
 
Three Months Ended
 
Six Months Ended
 
Location
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
 
(in thousands)
Foreign exchange contracts
Interest and other income (expense), net
$
904

 
$
645

 
$
(792
)
 
$
979

Total
 
$
904

 
$
645

 
$
(792
)
 
$
979


Volume of Derivative Activity

Total net U.S. Dollar notional amounts for foreign currency forward contracts, presented by net currency purchase (sale), are as follows:

In United States Dollars
 
December 29,
2012
 
June 30,
2012
 
 
(in thousands)
Euro
 
$
10,152

 
$
(10,686
)
Japanese Yen
 
(9,272
)
 
(2,254
)
British Pound
 
(8,691
)
 
(575
)
Philippine Peso
 
16,587

 
15,443

Thai Baht
 
3,966

 
4,264

Total                                                
 
$
12,742

 
$
6,192


Long-term debt
The following table summarizes the Company's long-term debt:
 
December 29,
2012
 
June 30,
2012
 
(in thousands)
3.45% fixed rate notes due June 2013
$
300,000

 
$
300,000

SensorDynamics Debt (Denominated in Euro)
 
 
 
Term fixed rate notes (2.0%-2.5%) due March 2013 to September 2015
6,497

 
6,285

Amortizing fixed rate notes (1.5%-2.75%) due up to June 2014
682

 
1,127

Amortizing floating rate notes (EURIBOR plus 1.5%) due up to June 2014
1,612

 
1,676

Total
308,791

 
309,088

Less: Current portion
(304,794
)
 
(303,496
)
Total long-term debt
$
3,997

 
$
5,592


On June 17, 2010, the Company completed a public offering of $300 million aggregate principal amount of the Company's 3.45% senior unsecured notes due on June 14, 2013 ("$300 million notes"), with an effective interest rate of 3.49%. Interest is payable semi-annually in arrears on June 14 and December 14 of each year. The $300 million notes are governed by base and supplemental indentures dated June 10, 2010 and June 17, 2010, respectively, between the Company and Wells Fargo Bank, National Association, as trustee.

In conjunction with the SensorDynamics acquisition as discussed in Note 13: "Acquisitions" of these Notes to Condensed Consolidated Financial Statements, Maxim Integrated acquired certain fixed and floating rate notes as detailed in the table above.

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net over the life of the notes. Interest expense associated with the notes was $2.6 million and $2.8 million during the three months ended December 29, 2012 and December 31, 2011, respectively. Interest expense associated with the notes was $5.2 million and $5.4 million during the six months ended December 29, 2012 and December 31, 2011,

12



respectively. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income.

The estimated fair value of Maxim Integrated's debt was approximately $313 million at December 29, 2012. The estimated fair value of the debt is based primarily on quoted market prices.

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

NOTE 6: STOCK-BASED COMPENSATION

The following table shows total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three and six months ended December 29, 2012 and December 31, 2011:

 
Three Months Ended
 
December 29, 2012
 
December 31, 2011
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
(in thousands)
Cost of goods sold
$
477

 
$
2,572

 
$
634

 
$
3,683

 
$
565

 
$
2,657

 
$
470

 
$
3,692

Research and development
2,288

 
8,401

 
1,451

 
12,140

 
2,440

 
9,207

 
1,262

 
12,909

Selling, general and administrative
1,286

 
5,152

 
584

 
7,022

 
1,704

 
4,778

 
391

 
6,873

Pre-tax stock-based compensation expense
$
4,051

 
$
16,125

 
$
2,669

 
$
22,845

 
4,709

 
$
16,642

 
$
2,123

 
$
23,474

Less: income tax effect
 
 
 
 
 
 
3,938

 
 
 
 
 
 
 
5,809

Net stock-based compensation expense


 

 


 
$
18,907

 

 

 

 
$
17,665


 
Six Months Ended
 
December 29, 2012
 
December 31, 2011
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
(in thousands)
Cost of goods sold
$
875

 
$
4,743

 
$
1,053

 
$
6,671

 
$
1,082

 
$
4,964

 
$
903

 
$
6,949

Research and development
4,117

 
17,611

 
2,735

 
24,463

 
4,495

 
19,165

 
2,510

 
26,170

Selling, general and administrative
2,841

 
10,271

 
1,096

 
14,208

 
3,132

 
9,903

 
785

 
13,820

Pre-tax stock-based compensation expense
$
7,833

 
$
32,625

 
$
4,884

 
$
45,342

 
$
8,709

 
$
34,032

 
$
4,198

 
$
46,939

Less: income tax effect
 
 
 
 
 
 
8,770

 
 
 
 
 
 
 
11,268

Net stock-based compensation expense


 

 

 
$
36,572

 

 

 

 
$
35,671


Fair Value

The fair value of options granted to employees under the Company's Amended and Restated 1996 Stock Incentive Plan and rights to acquire common stock under the Company's 2008 Employee Stock Purchase Plan (the "ESPP") is estimated on the date of grant using the Black-Scholes option valuation model. The fair value of Restricted Stock Units ("RSUs") is estimated using the value

13



of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting.

Expected volatilities are based on the historical volatilities from the Company's traded common stock over a period equal to the expected term. The Company is utilizing the simplified method to estimate expected holding periods. The risk-free interest rate is based on the U.S. Treasury yield. The Company determines the dividend yield by dividing the annualized dividends per share by the prior quarter's average stock price. The result is analyzed by the Company to decide whether it represents expected future dividend yield. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The fair value of share-based awards granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

 
Stock Options
 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
Expected holding period (in years)
5.1

 
5.1

 
5.4

 
5.1

Risk-free interest rate
0.7
%
 
1.0
%
 
0.7
%
 
1.3
%
Expected stock price volatility
37.6
%
 
38.0
%
 
37.8
%
 
38.0
%
Dividend yield
3.6
%
 
3.8
%
 
3.3
%
 
3.1
%

 
ESPP
 
Three Months Ended
 
Six Months Ended
 
December 29, 2012
 
December 31, 2011
 
December 29, 2012
 
December 31, 2011
Expected holding period (in years)
0.5

 
0.5

 
0.5

 
0.5

Risk-free interest rate
0.1
%
 
0.1
%
 
0.1
%
 
0.1
%
Expected stock price volatility
26.1
%
 
32.2
%
 
26.1
%
 
32.2
%
Dividend yield
3.6
%
 
3.8
%
 
3.6
%
 
3.8
%

The weighted-average fair value of stock options granted was $6.59 and $6.05 per share for the three months ended December 29, 2012 and December 31, 2011, respectively. The weighted-average fair value of RSUs granted was $26.82 and $23.46 per share for the three months ended December 29, 2012 and December 31, 2011, respectively.

The weighted-average fair value of stock options granted was $6.26 and $5.81 per share for the six months ended December 29, 2012 and December 31, 2011, respectively. The weighted-average fair value of RSUs granted was $24.67 and $20.05 per share for the six months ended December 29, 2012 and December 31, 2011, respectively.

Stock Options

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 29, 2012 and their activity for the six months ended December 29, 2012:

14



 
Number of
Shares 
 
Weighted Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term (in Years)
 
 
Aggregate
Intrinsic
Value (1) 
Balance at June 30, 2012
24,234,994

 
$
25.20

 
 
 
 
Options Granted
2,656,716

 
27.30

 
 
 
 
Options Exercised
(2,316,931
)
 
16.58

 
 
 
 
Options Cancelled
(1,483,197
)
 
31.53

 
 
 
 
Balance at December 29, 2012
23,091,582

 
$
25.90

 
3.6

 
$
151,652,908

Exercisable, December 29, 2012
11,965,565

 
$
30.23

 
2.0

 
$
53,498,126

Vested and expected to vest, December 29, 2012
21,740,804

 
$
26.06

 
3.4

 
$
142,535,169

 
(1)
Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company's common stock on December 28, 2012, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of December 29, 2012.
As of December 29, 2012, there was $38.2 million of total unrecognized stock compensation cost related to 11.1 million unvested stock options, which is expected to be recognized over a weighted average period of approximately 3.0 years.

Restricted Stock Units

The following table summarizes outstanding and expected to vest RSUs as of December 29, 2012 and their activity during the six months ended December 29, 2012:

 
Number of
Shares 
 
Weighted Average
Remaining
Contractual Term
(in Years)
 
 
Aggregate Intrinsic
Value (1) 
Balance at June 30, 2012
8,923,454

 
 
 
 
Restricted stock units granted
2,612,007

 
 
 
 
Restricted stock units released
(1,615,135
)
 
 
 
 
Restricted stock units cancelled
(422,274
)
 
 
 
 
Balance at December 29, 2012
9,498,052

 
2.9

 
$
286,379,516

Outstanding and expected to vest, December 29, 2012
8,307,507

 
2.8

 
$
249,723,671

(1)
Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on December 28, 2012, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of December 29, 2012.
The Company withheld shares totaling $6.5 million and $13.6 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the three and six months ended December 29, 2012, respectively. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of December 29, 2012, there was $139.7 million of unrecognized compensation expense related to 9.5 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Employee Stock Purchase Plan

As of December 29, 2012, there was $9.0 million of unrecognized compensation expense related to the ESPP.




15



NOTE 7: EARNINGS PER SHARE

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

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

 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
(in thousands, except per share data)
Numerator for basic earnings per share and diluted earnings per share
 
 
 
 
 
 
 
Net income
$
76,622

 
$
88,130

 
$
204,510

 
$
221,576

 
 
 
 
 
 
 
 
Denominator for basic earnings per share
292,075

 
291,824

 
292,143

 
293,098

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options, ESPP and RSUs
6,684

 
7,466

 
6,561

 
6,985

Denominator for diluted earnings per share
298,759

 
299,290

 
298,704

 
300,083

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.26

 
$
0.30

 
$
0.70

 
$
0.76

Diluted
$
0.26

 
$
0.29

 
$
0.68

 
$
0.74

Approximately 11.6 million and 14.6 million stock options were excluded from the calculation of diluted earnings per share for the three months ended December 29, 2012 and December 31, 2011, respectively. Approximately 11.2 million and 14.2 million stock options were excluded from the calculation of diluted earnings per share for the six months ended December 29, 2012 and December 31, 2011, respectively. These options were excluded because they were determined to be antidilutive. However, such options could be dilutive in the future and, under those circumstances, would be included in the calculation of diluted earnings per share.

NOTE 8: SEGMENT INFORMATION

The Company operates and tracks its results in one reportable segment. The Company designs, develops, manufactures and markets a broad range of linear and mixed signal integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by ASC No. 280, Disclosures about Segments Reporting ("ASC 280").

The Company has three operating segments which aggregate into one reportable segment. Under ASC 280, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles of ASC 280, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:

the nature of products and services;
the nature of the production processes;
the type or class of customer for their products and services; and
the methods used to distribute their products or provide their services.

The Company meets each of the aggregation criteria for the following reasons:

the sale of analog and mixed signal integrated circuits is the primary source of revenue for each of the Company's three operating segments;

16



the integrated circuits sold by each of the Company's operating segments are manufactured using similar semiconductor manufacturing processes;
the integrated circuits marketed by each of the Company's operating segments are sold to the same types of customers; and
all of the Company's integrated circuits are sold through a centralized sales force and common wholesale distributors.

All of the Company's operating segments share similar long term financial performance as they have similar economic characteristics. The causes for variation among the Company's operating segments are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amounts and types of tools and materials required are similar for each operating segment. Finally, even though the Company periodically reorganizes the Company's operating segments based upon changes in customers, end-markets or products, acquisitions, long-term growth strategies, and the experience and bandwidth of the senior executives in charge, the common financial goals for each operating segment remain constant.

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

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

 
 
Three Months Ended
 
Six Months Ended
 
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
 
(in thousands)
United States
 
$
62,860

 
$
74,512

 
$
121,981

 
$
151,441

China
 
266,479

 
260,396

 
541,384

 
536,826

Japan
 
35,171

 
37,327

 
70,987

 
74,234

Korea
 
56,616

 
41,678

 
120,995

 
107,439

Rest of Asia
 
102,075

 
88,318

 
203,686

 
168,632

Europe
 
66,941

 
70,995

 
137,848

 
154,633

Rest of World
 
15,164

 
18,133

 
31,500

 
34,156

 
 
$
605,306

 
$
591,359

 
$
1,228,381

 
$
1,227,361


Net long-lived assets by geographic region were as follows:
 
December 29,
2012
 
June 30,
2012
 
(in thousands)
United States
$
1,028,384

 
$
957,982

Philippines
199,752

 
247,681

Thailand
82,045

 
99,308

Rest of World
48,833

 
48,635

 
$
1,359,014

 
$
1,353,606











17



NOTE 9: COMPREHENSIVE INCOME
 
The components of Accumulated Other Comprehensive Loss were as follows:
 
 
December 29,
2012
 
June 30,
2012
 
 
(in thousands)
Tax effect of the unrealized exchange loss on long-term intercompany receivables
 
$
(8,017
)
 
$
(6,469
)
Unrealized loss on post-retirement benefits
 
(6,190
)
 
(7,444
)
Cumulative translation adjustment
 
(1,527
)
 
(1,527
)
Unrealized gain (loss) on cash flow hedges
 
187

 
(196
)
Unrealized gain on available-for-sale securities
 
100

 
202

Accumulated Other Comprehensive Loss
 
$
(15,447
)
 
$
(15,434
)

NOTE 10: INCOME TAXES

In the three and six months ended December 29, 2012, the Company recorded an income tax provision of $38.1 million and $69.9 million, respectively, compared to an income tax provision of $28.8 million and $63.6 million in the three and six months ended December 31, 2011, respectively. 

The Company's federal statutory tax rate is 35%. The Company's income tax provision for the three and six months ended December 29, 2012 and December 31, 2011 was lower than the amount computed by applying the statutory tax rate primarily because the earnings of the foreign subsidiaries were taxed at lower rates. The Company's income tax provision for the three and six months ended December 29, 2012 included a $21.4 million discrete tax charge for research and development expenses of a foreign subsidiary for which no tax benefit is available.
On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012, which extended the research tax credit for two years from January 1, 2012 to December 31, 2013.  As a result of the retroactive extension back to January 1, 2012, we expect to recognize a one-time benefit of $7.6 million for research tax credits earned in the fiscal year 2012 and first two quarters of fiscal year 2013. This benefit will be recognized in the third quarter of fiscal year 2013, which is the quarter in which the legislation that extended the research tax credit was enacted.

In fiscal year 2012 the U.S. Internal Revenue Service commenced an audit of the Company's federal corporate income tax returns for fiscal years 2009 through 2011, which is still ongoing.

NOTE 11: COMMITMENTS AND CONTINGENCIES

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

Indemnification
 
The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees and damages and costs awarded against such parties in certain circumstances in which the Company's products are alleged to infringe third party intellectual property rights, including patents, registered trademarks and copyrights. The terms of the Company's indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to the Company's potential liability for indemnification relating to intellectual property infringement claims.
 
Legal fees associated with indemnification obligations, defense and other related costs
 
Pursuant to the Company's charter documents and separate written indemnification agreements, the Company has indemnification obligations to its current executive officers and directors, as well as certain former officers and directors. Pursuant to such

18



obligations, the Company has incurred expenses related to legal fees and expenses advanced to certain former officers of the Company subject to civil charges by the SEC in connection with Maxim Integrated's historical stock option granting practices.  The Company expenses such amounts as incurred.

NOTE 12: COMMON STOCK REPURCHASES

In August 2011, the Board of Directors authorized the Company to repurchase up to $750 million of the Company's common stock from time to time at the discretion of the Company's management. This stock repurchase authorization has no expiration date. All prior authorizations by the Company's Board of Directors for the repurchase of common stock were canceled and superseded by this authorization.

During the six months ended December 29, 2012, the Company repurchased approximately 4.3 million shares of its common stock for $115.6 million. As of December 29, 2012, the Company had remaining authorization to repurchase up to an additional $435.6 million of the Company's common stock. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company's common stock and general market and business conditions.

NOTE 13: ACQUISITIONS
 
Acquisitions completed through second quarter of fiscal year 2013

Maxim has not completed any acquisitions in the six months ended December 29, 2012; however, Maxim paid $7.5 million in contingent consideration relating to certain prior years acquisitions in the six months ended December 29, 2012. Total contingent consideration that could still be paid out under these acquisitions amounts to $16.9 million.

Acquisitions completed during fiscal year 2012

The purchase price allocation for acquisitions completed in fiscal year 2012 is set forth in the table below, including work performed by third-party valuation specialists.

Pro forma results of operations for these acquisitions have not been presented because they are not material to Maxim Integrated's condensed consolidated income, either individually or in the aggregate. Revenue and earnings per share for the acquired businesses since the date of acquisition through December 29, 2012 were not provided as they are not material. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not expected to be deductible for tax purposes. Acquisition costs for fiscal year 2012 were not material.

Aggregate purchase price allocation for acquisitions made by Maxim Integrated during fiscal year 2012:

 
SensorDynamics
 
Other acquisitions
 
Total
 
 
 
(in thousands)
 
 
Tangible assets
$
18,692

 
$
1,159

 
$
19,851

Debt assumed
(29,078
)
 

 
(29,078
)
Other liabilities assumed
(37,559
)
 
(4,729
)
 
(42,288
)
Net liabilities assumed
(47,945
)
 
(3,570
)
 
(51,515
)
Amortizable intangible assets
20,900

 
17,840

 
38,740

In-process research and development ("IPR&D")
19,600

 

 
19,600

Goodwill (1)
130,594

 
38,392

 
168,986

 
 
 
 
 
 
Total purchase price
$
123,149

 
$
52,662

 
$
175,811

(1) Includes $11.4 million of contingent consideration relating to the other acquisitions discussed further below.

The following table presents details of the Company's intangible assets acquired through business combinations completed during fiscal year 2012 (in thousands, except years):


19



 
Intellectual Property
 
Customer Relationships
 
Tradename
 
Total
 
Weighted Average Useful Life (in Years)
 
Amount
 
Weighted Average Useful Life (in Years)
 
Amount
 
Weighted Average Useful Life (in Years)
 
Amount
 
 
SensorDynamics
7.0

 
$
16,400

 
7.0

 
$
4,100

 
3.0

 
$
400

 
$
20,900

Other acquisitions
9.2

 
15,340

 
3.0

 
2,500

 

 

 
17,840

Total
 
 
$
31,740

 
 
 
$
6,600

 
 
 
$
400

 
$
38,740

Weighted Average (in Years)
8.1

 
 
 
5.5

 
 
 
3.0

 
 
 
 

SENSORDYNAMICS

On July 18, 2011, the Company acquired SensorDynamics, a semiconductor company that develops proprietary sensor and microelectromechanical solutions. SensorDynamics is based in Lebring, near Graz, Austria. The purpose of the acquisition was to allow Maxim Integrated to combine sensors with analog products. The total cash consideration associated with the acquisition was approximately $123.1 million.

OTHER ACQUISITIONS

The Company acquired three other companies during fiscal year 2012, which included a company that develops low power high performance analog circuits. The total cash consideration paid in these three acquisitions was approximately $41.3 million. Maxim Integrated also recorded $11.4 million, representing the fair value of contingent consideration that would be payable in the future should certain specified project milestones be met. The contingent consideration was calculated based on probabilities that were developed regarding the likelihood that the product development milestones would be met and when the contingent payments would occur. Based on these factors, a probability weighted earnout amount was calculated and discounted (at the cost of debt) to present value.

NOTE 14: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company performed the annual impairment analysis during the first quarter of fiscal year 2013 and concluded that goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value, including goodwill.

Activity and goodwill balances for the six months ended December 29, 2012 were as follows:

 
Goodwill
 
(in thousands)
Balance at June 30, 2012
$
423,073

Adjustments
(990
)
Balance at December 29, 2012
$
422,083


Intangible Assets

The useful lives of amortizable intangible assets are as follows:
 
Asset
 
Life
Intellectual Property
 
5-10 years
Customer Relationships
 
3-10 years
Tradename
 
3 years
Backlog
 
1 year

20



  
Intangible assets consisted of the following:
 
 
December 29, 2012
 
June 30, 2012
 
Original
Cost 
 
Accumulated
Amortization 
 
Net
 
Original
Cost
 
Accumulated
Amortization
 
Net
 
(in thousands)
Intellectual property
$
231,912

 
$
121,202

 
$
110,710

 
$
227,912

 
$
102,501

 
$
125,411

Customer relationships
95,230

 
47,041

 
48,189

 
95,230

 
39,583

 
55,647

Backlog
6,400

 
6,400

 

 
6,400

 
6,400

 

Tradename
2,100

 
1,758

 
342

 
2,100

 
1,525

 
575

Total amortizable purchased intangible assets
335,642

 
176,401

 
159,241

 
331,642

 
150,009

 
181,633

IPR&D
23,280

 

 
23,280

 
27,280

 

 
27,280

Total purchased intangible assets
$
358,922

 
$
176,401

 
$
182,521

 
$
358,922

 
$
150,009

 
$
208,913


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

 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
(in thousands)
Cost of goods sold
$
8,986

 
$
8,080

 
$
18,440

 
$
17,514

Intangible asset amortization
3,903

 
4,338

 
7,952

 
8,659

Total intangible asset amortization expenses
$
12,889

 
$
12,418

 
$
26,392

 
$
26,173

The following table represents the estimated future amortization expense of intangible assets as of December 29, 2012:
 
Fiscal Year
 
Amount
 
 
(in thousands)
Remaining six months of 2013
 
$
24,597

2014
 
44,739

2015
 
41,536

2016
 
28,244

2017
 
18,233

2018
 
1,455

Thereafter
 
437

Total intangible assets
 
$
159,241


NOTE 15: IMPAIRMENT OF LONG-LIVED ASSETS

Fiscal year 2013:

During the second quarter of fiscal year 2013, the Company identified certain assets as excess primarily attributable to the transition to utilizing newer, more efficient manufacturing equipment. These assets included used fabrication tools and test manufacturing equipment. In connection with these circumstances, the Company recorded a charge for the write down of equipment to its estimated fair value. The total charge of $22.2 million was included in impairment of long-lived assets in the Company's Condensed Consolidated Statements of Income. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of assets fair values. The fair value of the equipment was determined mainly after consideration of quoted market prices of similar equipment adjusted for equipment specifications and condition in addition to the current market demand and size.

21




During the first quarter of fiscal year 2013, the Company identified certain idle facilities as held for sale. In connection with these circumstances, the Company recorded a charge for the write-down of land and buildings to their estimated fair value, less cost to sell. The total charge of $2.7 million was included in impairment of long-lived assets in the Company's Condensed Consolidated Statements of Income. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of assets fair values. The fair value of the land and buildings was determined mainly after consideration of evidence such as appraisals and offers received.

Fiscal year 2012:

During the fourth quarter of fiscal year 2012, the Company identified certain idle facilities as held for sale. In connection with these circumstances, the Company recorded a charge for the write-down of land and buildings to their estimated fair value, less cost to sell. The total charge of $22.4 million was included in impairment of long-lived assets in the Company's Consolidated Statements of Income. The Company reached its conclusion regarding the asset impairment after conducting an evaluation of assets fair values. The fair value of the land and buildings was determined mainly after consideration of evidence such as appraisals and offers received.

The Company has ceased depreciation and classified the above assets as held for sale based on its intentions to sell the assets and has included the lower of fair value less cost to sell and net book value of $24.0 million in other assets in the Condensed Consolidated Balance Sheet as of June 30, 2012.

NOTE 16: SUBSEQUENT EVENT

On December 31,2012, the Company sold its video processing product line to GEO Semiconductor, Inc.

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

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

Overview of Business

Maxim Integrated is incorporated in the state of Delaware. Maxim Integrated designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for a large number of geographically diverse customers. The Company also provides a range of high-frequency process technologies and capabilities that can be used in custom designs. The analog market is fragmented and characterized by many diverse applications, a great number of product variations and, with respect to many circuit types, relatively long product life cycles. The Company is a global company with wafer manufacturing facilities in the U.S., testing facilities in the Philippines and Thailand and sales and circuit design offices throughout the world. The major end-markets in which the Company's products are sold are the communications, computing, consumer and industrial markets.

CRITICAL ACCOUNTING POLICIES

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations, and that require us to make our most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include revenue recognition and related allowances, which impact the recording of revenues; valuation of inventories, which impacts costs of goods sold and gross margins; the assessment of recoverability of long-lived assets, which impacts write-offs of fixed assets, intangible assets, and goodwill; accounting for stock-based compensation, which impacts cost of goods sold, gross margins and operating expenses; accounting for income taxes, which impacts the income tax provision; and assessment of contingencies, which impacts charges recorded in cost of goods sold and

22



operating expenses. We have other significant accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or are less likely to have a material impact on our reported results of operations for a given period.

There have been no material changes during the six months ended December 29, 2012 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012.



23



RESULTS OF OPERATIONS

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

 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
 
Net revenues
100.0
 %
 
100.0
%
 
100.0
 %
 
100.0
 %
Cost of goods sold
40.0
 %
 
41.2
%
 
39.0
 %
 
39.4
 %
Gross margin
60.0
 %
 
58.8
%
 
61.0
 %
 
60.6
 %
Operating expenses:
 
 
 
 
 
 
 
Research and development
22.4
 %
 
24.0
%
 
21.9
 %
 
23.0
 %
Selling, general and administrative
13.2
 %
 
13.7
%
 
13.0
 %
 
13.3
 %
Intangible asset amortization
0.6
 %
 
0.7
%
 
0.6
 %
 
0.7
 %
Impairment of long-lived assets
3.7
 %
 
%
 
2.0
 %
 
 %
Severance and restructuring expenses
0.4
 %
 
1.0
%
 
0.2
 %
 
0.5
 %
Other operating expenses (income), net
0.3
 %
 
%
 
0.2
 %
 
(0.3
)%
Total operating expenses
40.6
 %
 
39.4
%
 
37.9
 %
 
37.2
 %
Operating income
19.4
 %
 
19.4
%
 
23.1
 %
 
23.4
 %
Interest and other income (expense), net
(0.5
)%
 
0.4
%
 
(0.7
)%
 
(0.1
)%
Income before provision for income taxes
18.9
 %
 
19.8
%
 
22.4
 %
 
23.3
 %
Provision for income taxes
6.3
 %
 
4.9
%
 
5.7
 %
 
5.2
 %
Net income
12.6
 %
 
14.9
%
 
16.7
 %
 
18.1
 %

The following table shows stock-based compensation included in the components of the Condensed Consolidated Statements of Income reported above as a percentage of net revenues for the periods indicated:

 
Three Months Ended
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
December 29,
2012
 
December 31,
2011
 
 
 
 
 
 
Cost of goods sold
0.6
%
 
0.6
%
 
0.5
%
 
0.6
%
Research and development
2.0
%
 
2.2
%
 
2.0
%
 
2.1
%
Selling, general and administrative
1.2
%
 
1.2
%
 
1.2
%
 
1.1
%
 
3.8
%
 
4.0
%
 
3.7
%
 
3.8
%

Net Revenues

Net revenues were $605.3 million and $591.4 million for the three months ended December 29, 2012 and December 31, 2011, respectively, an increase of 2.4%. Net revenues were $1,228.4 million and $1,227.4 million for the six months ended December 29, 2012 and December 31, 2011, respectively, an increase of 0.1%. We classify our shipments by four major end market categories: Communications, Computing, Consumer and Industrial. Net shipments increased during the three and six months ended December 29, 2012 as compared to the three and six months ended December 31, 2011 due to improved demand for our products in the consumer markets primarily from growth in smart phones. This increase was offset by continued decline in our notebook business in the computing market.

During the three months ended December 29, 2012 and December 31, 2011, approximately 90% and 87% of net revenues, respectively, were derived from customers outside of the U.S. During the six months ended December 29, 2012 and December 31, 2011, approximately 90% and 88% of net revenues, respectively, were derived from customers outside of the U.S. While the

24



majority of these sales are denominated in U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets and liabilities denominated in foreign currencies. The impact of changes in foreign exchange rates on our revenue and results of operations for the three and six months ended December 29, 2012 and December 31, 2011 was immaterial.

Gross Margin

Our gross margin percentages were 60.0% and 58.8% for the three months ended December 29, 2012 and December 31, 2011, respectively. The gross margin increased primarily due to lower inventory reserve requirements and improved manufacturing efficiencies from test operations.

Our gross margin percentages were 61.0% and 60.6% for the six months ended December 29, 2012 and December 31, 2011, respectively. The gross margin increased primarily due to lower inventory reserve requirements and improved manufacturing efficiencies from test operations.

Research and Development

Research and development expenses were $135.7 million and $142.1 million for the three months ended December 29, 2012 and December 31, 2011, respectively, which represented 22.4% and 24.0% of net revenues, respectively. The $6.4 million decrease was primarily attributable to a decrease in salaries and related expenses of $6.0 million as a result of decreased headcount and one extra week in the fiscal quarter ended December 31, 2011.

Research and development expenses were $268.7 million and $282.3 million for the six months ended December 29, 2012 and December 31, 2011, respectively, which represented 21.9% and 23.0% of net revenues, respectively. The $13.6 million decrease was primarily attributable to a decrease in salaries and related expenses of $9.4 million as a result of decreased headcount and one extra week in the fiscal quarter ended December 31, 2011.

Selling, General and Administrative

Selling, general and administrative expenses were relatively flat at $80.1 million and $80.8 million for the three months ended December 29, 2012 and December 31, 2011, respectively, which represented 13.2% and 13.7% of net revenues, respectively. There were no significant fluctuations in line items making up the selling, general and administrative expenses.

Selling, general and administrative expenses were relatively flat at $160.2 million and $163.3 million for the six months ended December 29, 2012 and December 31, 2011, respectively, which represented 13.0% and 13.3% of net revenues, respectively. There were no significant fluctuations in line items making up the selling, general and administrative expenses.

Impairment of Long-lived Assets

Impairment of long lived assets was $22.2 million and $24.9 million in the three and six months ended December 29, 2012, respectively. The impairment was primarily due to the transition to utilizing newer, more efficient manufacturing equipment.. The Company recorded a charge for the write-down of the equipment to its estimated fair value less estimated cost to sell.

Other Operating Expenses (Income), net

Other operating expenses, net were $1.7 million and $0.2 million during the three months ended December 29, 2012 and December 31, 2011, respectively. The net increase in expense was primarily driven by contingent consideration adjustments related to certain acquisitions. Contingent consideration is measured at fair value with valuation adjustments made as progress toward achieving milestones becomes determinable.

Other operating expenses (income), net were $2.1 million and $(4.2) million during the six months ended December 29, 2012 and December 31, 2011, respectively. The net increase in expense was primarily driven by contingent consideration adjustments related to certain acquisitions of $2.3 million in the six months ended December 29, 2012 and a reversal of payroll related tax reserves totaling approximately $4.6 million due to the lapsing of the statutes of limitations in the six months ended December 31, 2011.

Interest and Other (Expense) Income, net

Interest and other (expense) income, net were $(2.8) million and $2.4 million for the three months ended December 29, 2012 and December 31, 2011, respectively. This net increase in expense was primarily driven by an increase in foreign exchange losses of

25



$2.8 million and a gain from sale of investments in privately-held companies of $1.8 million in the three months ended December 31, 2011, that did not recur in the three months ended December 29, 2012.

Interest and other expense, net were $8.5 million and $1.7 million for the six months ended December 29, 2012 and December 31, 2011, respectively. This net increase in expense was primarily driven by an increase in foreign exchange losses of $5.8 million and gain from sale of investments in privately-held companies of $1.8 million in the six months ended December 31, 2011, that did not recur in the six months ended December 29, 2012. This was partially offset by a decrease in interest expense.

Provision for Income Taxes

In the three and six months ended December 29, 2012, the Company recorded an income tax provision of $38.1 million and $69.9 million respectively, compared to an income tax provision of $28.8 million and $63.6 million in the three and six months ended December 31, 2011, respectively. 
 
The Company's federal statutory tax rate is 35%. The Company's income tax provision for the three and six months ended December 29, 2012 and December 31, 2011 was lower than the amount computed by applying the statutory tax rate primarily because the earnings of the foreign subsidiaries were taxed at lower rates. The Company's income tax provision for the three and six months ended December 29, 2012 included a $21.4 million discrete tax charge for research and development expenses of a foreign subsidiary for which no tax benefit is available.
On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012, which extended the research tax credit for two years from January 1, 2012 to December 31, 2013.  As a result of the retroactive extension back to January 1, 2012, we expect to recognize a one-time benefit of $7.6 million for research tax credits earned in the fiscal year 2012 and first two quarters of fiscal year 2013. This benefit will be recognized in the third quarter of fiscal year 2013, which is the quarter in which the legislation that extended the research tax credit was enacted.
In fiscal year 2012 the U.S. Internal Revenue Service commenced an audit of the Company's federal corporate income tax returns for fiscal years 2009 through 2011, which is still ongoing.

BACKLOG

At December 29, 2012 and September 29, 2012, our current quarter backlog was approximately $353 million and $400 million, respectively. We include in backlog orders with customer request dates within the next three months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to customers. In addition, backlog includes orders from domestic distributors for which revenues are not recognized until the products are sold by the distributors. Accordingly, we believe that our backlog is not a reliable measure of future revenues. All backlog numbers have been adjusted for estimated future U.S. distribution ship and debit pricing adjustments.

26



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 
Financial condition

Cash flows were as follows:
 
Six Months Ended
 
December 29,
2012
 
December 31,
2011
 
(in thousands)
Net cash provided by operating activities
$
391,842

 
$
370,129

Net cash used in investing activities
(108,346
)
 
(304,146
)
Net cash used in financing activities
(209,449
)
 
(287,364
)
Net increase (decrease) in cash and cash equivalents
$
74,047

 
$
(221,381
)
Operating activities

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

Cash from operations for the six months ended December 29, 2012 increased by approximately $21.7 million compared with the six months ended December 31, 2011. This was due to net increases in cash provided by other accrued liabilities and income tax payable of $71.0 million and impairment of used fabrication tools and test manufacturing equipment of $24.9 million. These increases were offset by decreases in deferred taxes, inventories and accounts payable of $76.9 million.

Investing activities

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

Cash used in investing activities decreased by $195.8 million for the six months ended December 29, 2012 compared with the six months ended December 31, 2011. The decrease was primarily due to decreases in cash used for acquisitions of $166.3 million relating to SensorDynamics and other fiscal year 2012 acquisitions.

Financing activities

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

Net cash used in financing activities decreased by approximately $77.9 million for the six months ended December 29, 2012 compared with the six months ended December 31, 2011. The decrease was primarily due to lower repurchases of common stock of $45.6 million and higher proceeds received on exercise of stock options of $23.1 million due to higher average share price.

Liquidity and Capital Resources
Debt Levels
On June 17, 2010, we completed a public offering of $300 million aggregate principal amount of the Company's 3.45% senior unsecured and unsubordinated notes due on June 14, 2013. In addition, on July 18, 2011, we acquired certain fixed and floating rate notes in conjunction with our acquisition of SensorDynamics. (Please refer to Note 5: Financial Instruments to the Condensed Consolidated Financial Statements).

Outstanding debt is at $309 million as of December 29, 2012 and June 30, 2012, bearing weighted average interest rates of 3.43% and 3.45% for the six months ended December 29, 2012 and for the year ended June 30, 2012, respectively.

As of December 29, 2012, our available funds consisted of $1,030.3 million in cash, cash equivalents and short-term investments. We anticipate that the available funds and cash generated from operations will be sufficient to meet cash and working capital requirements, including the anticipated level of capital expenditures, common stock repurchases, debt repayments and dividend payments for at least the next twelve months.


27



Off-Balance-Sheet Arrangements

As of December 29, 2012, the Company did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk has not changed materially from the interest rate and foreign currency risks disclosed in Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012.

The impact of inflation and changing prices on the Company's net revenues and on operating income during the six months ended December 29, 2012 and December 31, 2011 was not material.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer ("CEO") and our chief financial officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December 29, 2012. Our management, including the CEO and the CFO, has concluded that the Company's disclosure controls and procedures were effective as of December 29, 2012. The purpose of these controls and procedures is to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules, and that such information is accumulated and communicated to our management, including our CEO and our CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the six months ended December 29, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Internal Controls

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

PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The information set forth above under Part I, Item 1, Note 11 "Commitment and Contingencies" to the Condensed Consolidated Financial Statements is incorporated herein by reference.

ITEM 1A: RISK FACTORS

A description of risks associated with our business, financial condition and results of our operations is set forth in Item 1A - Risk Factors of our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, which is incorporated herein by reference.







28



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

The following table summarizes the activity related to stock repurchases for the three months ended December 29, 2012:

 
Issuer Repurchases of Equity Securities
 
(in thousands, except per share amounts)
 
Total Number
of Shares
Purchased
 
Average Price
Paid
per Share
 
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or Programs
 
Approximate Dollar Value of Shares
That May Yet
Be Purchased
Under the Plans
or Programs
Sep. 30, 2012 - Oct. 27, 2012
740

 
$
27.07

 
740

 
$
466,023

Oct. 28, 2012 - Nov. 24, 2012
500

 
27.88

 
500

 
452,081

Nov. 25, 2012 - Dec. 29, 2012
566

 
29.08

 
566

 
435,620

Total for the quarter
1,806

 
$
27.93

 
1,806

 
$
435,620


In August 2011, the Company's Board of Directors authorized the Company to repurchase up to $750 million of the Company's common stock from time to time at the discretion of the Company's management. This stock repurchase authorization has no expiration date. All prior authorizations by the Company's Board of Directors for the repurchase of common stock were canceled and superseded by this authorization.

In the fiscal quarter ended December 29, 2012, the Company repurchased approximately 1.8 million shares of its common stock for approximately $50.4 million. As of December 29, 2012, the Company had remaining authorization to repurchase up to an additional $435.6 million of the Company's common stock. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company's common stock and general market and business conditions.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

Total Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income, which requires companies to present the components of net income and other comprehensive income either in a single continuous statement or in two separate but consecutive statements. ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. ASU No. 2011-05 does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. Additionally, ASU No. 2011-05 does not affect the calculation or reporting of earnings per share. ASU 2011-05 is effective for reporting periods beginning after December 15, 2011. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-12 defers the changes in ASU No. 2011-05 that pertain to how, when and where reclassification adjustments are presented. The Company adopted these ASUs retrospectively effective September 29, 2012 and elected to present comprehensive income in a separate statement immediately following the condensed consolidated statements of income. The adoption had no effect on the Company's financial position, results of operations or cash flows. The impact of the adoption to previously issued consolidated financial statements is the presentation of the Comprehensive Income in a separate statement as follows:


29



 
Year Ended
 
June 30,
2012
 
June 25,
2011
 
June 26,
2010
 
(in thousands)
Net income
$
386,727

 
$
489,009

 
$
125,139

Other comprehensive income (loss), net of tax:
 
 
 
 
 
Unrealized gains (losses) on available-for-sale securities
(129
)
 
331

 
(1,346
)
Unrealized gains (losses) on cash flow hedges
(46
)
 

 
(150
)
Tax effect of the unrealized exchange gain (loss) on long-term intercompany receivables
1,612

 
(2,369
)
 
(1,893
)
Unrealized gains (losses) on post-retirement benefits
(2,603
)
 
(289
)
 
(896
)
Other comprehensive income (loss)
(1,166
)
 
(2,327
)
 
(4,285
)
Total comprehensive income
$
385,561

 
$
486,682

 
$
120,854


30



ITEM 6: EXHIBITS

(a) Exhibits
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 *
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 *
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
*This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three and six months ended December 29, 2012, (ii) Condensed Consolidated Balance Sheets at December 29, 2012 and June 30, 2012, (iii) Condensed Consolidated Statement of Comprehensive Income for the three and six months ended December 29, 2012, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended December 29, 2012 and (v) Notes to Condensed Consolidated Financial Statements.
 
 
In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.





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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.

January 25, 2013
 
MAXIM INTEGRATED PRODUCTS, INC.
 
 
 
 
 
By:/s/ David A. Caron
 
 
 
 
 
David A. Caron
 
 
Vice President and Chief Accounting Officer
 
 
(Chief Accounting Officer and Duly Authorized Officer)


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