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

FORM
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
March 28, 2020
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
maximlogoa19.jpg
MAXIM INTEGRATED PRODUCTS, INC.

(Exact name of registrant as specified in its charter)
Delaware
 
94-2896096
 (State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer I. D. No.)

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

(408) 601-1000
(Registrant’s Telephone Number, Including Area Code)
Title of each class 
Trading Symbol
Name of each exchange on which registered 
Common stock, $0.001 par value
MXIM
The NASDAQ Global Select Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller” reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of April 17, 2020, there were 266,625,382 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 March 28, 2020 and June 29, 2019
 
 
 
 
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 28, 2020 and March 30, 2019
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 28, 2020 and March 30, 2019
 
 
 
 
Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended March 28, 2020 and March 30, 2019
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 28, 2020 and March 30, 2019
 
 
 
 
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
 
 
 
 
SIGNATURE
 

2



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

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

 
March 28,
2020
 
June 29,
2019
 
(in thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,638,667

 
$
1,757,342

Short-term investments
47,109

 
140,990

Total cash, cash equivalents and short-term investments
1,685,776

 
1,898,332

Accounts receivable, net of allowances of $617 at March 28, 2020 and $148 at June 29, 2019
378,273

 
360,016

Inventories
220,686

 
246,512

Other current assets
25,288

 
34,640

Total current assets
2,310,023

 
2,539,500

Property, plant and equipment, net
564,636

 
577,722

Intangible assets, net
44,642

 
56,242

Goodwill
532,251

 
532,251

Other assets
97,383

 
38,267

TOTAL ASSETS
$
3,548,935

 
$
3,743,982

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
83,519

 
$
84,335

Price adjustment and other revenue reserves
111,235

 
100,490

Income taxes payable
39,809

 
33,765

Accrued salary and related expenses
122,220

 
118,634

Accrued expenses
31,143

 
33,943

Total current liabilities
387,926

 
371,167

Long-term debt
993,663

 
992,584

Income taxes payable
434,415

 
469,418

Other liabilities
112,988

 
65,537

Total liabilities
1,928,992

 
1,898,706

 
 
 
 
Commitments and contingencies (Note 12)


 


 
 
 
 
Stockholders’ equity:
 
 
 
Common stock and capital in excess of par value
267

 
272

Retained earnings
1,632,325

 
1,856,358

Accumulated other comprehensive loss
(12,649
)
 
(11,354
)
Total stockholders’ equity
1,619,943

 
1,845,276

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
$
3,548,935

 
$
3,743,982


See accompanying Notes to Condensed Consolidated Financial Statements.

3



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


 
Three Months Ended
 
Nine Months Ended
 
March 28,
2020
 
March 30,
2019
 
March 28,
2020
 
March 30,
2019
 
(in thousands, except per share data)
 
 
 
 
 
 
 
 
Net revenues
$
561,916

 
$
542,383

 
$
1,646,026

 
$
1,757,784

Cost of goods sold
195,479

 
201,552

 
575,742

 
613,669

Gross margin
366,437

 
340,831

 
1,070,284

 
1,144,115

Operating expenses:
 
 
 
 
 
 
 
Research and development
109,091

 
107,075

 
329,994

 
330,086

Selling, general and administrative
71,643

 
74,116

 
223,829

 
233,487

Intangible asset amortization
756

 
756

 
2,268

 
2,285

Impairment of long-lived assets

 

 

 
753

Severance and restructuring expenses
523

 
1,744

 
4,685

 
3,917

Other operating expenses (income), net
1,077

 

 
1,101

 
60

Total operating expenses
183,090

 
183,691

 
561,877

 
570,588

Operating income
183,347

 
157,140

 
508,407

 
573,527

Interest and other income (expense), net
(1,622
)
 
3,318

 
190

 
3,244

Income before provision for income taxes
181,725

 
160,458

 
508,597

 
576,771

Income tax provision
20,535

 
29,845

 
61,201

 
116,843

Net income
$
161,190

 
$
130,613

 
$
447,396

 
$
459,928

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.60

 
$
0.48

 
$
1.66

 
$
1.67

Diluted
$
0.59

 
$
0.47

 
$
1.64

 
$
1.64

 
 
 
 
 
 
 
 
Shares used in the calculation of earnings per share:
 
 
 
 
 
 
 
Basic
269,003

 
273,221

 
270,241

 
275,831

Diluted
271,579

 
276,610

 
273,187

 
279,680


See accompanying Notes to Condensed Consolidated Financial Statements.



4



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

 
Three Months Ended
 
Nine Months Ended
 
March 28,
2020
 
March 30,
2019
 
March 28,
2020
 
March 30,
2019
 
(in thousands)
Net income
$
161,190

 
$
130,613

 
$
447,396

 
$
459,928

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Change in net unrealized gains and losses on available-for-sale securities, net of tax benefit (expense) of $27, $97, $10 and $(131), respectively
(376
)
 
1,139

 
(258
)
 
3,116

Change in net unrealized gains and losses on cash flow hedges, net of tax benefit (expense) of $216, $69, $264 and $(241), respectively
(1,083
)
 
(351
)
 
(1,332
)
 
1,167

Change in net unrealized gains and losses on post-retirement benefits, net of tax benefit (expense) of $(20), $(23), $(62) and $(60), respectively
99

 
78

 
295

 
232

Other comprehensive income (loss), net
(1,360
)
 
866

 
(1,295
)
 
4,515

Total comprehensive income
$
159,830

 
$
131,479

 
$
446,101

 
$
464,443


See accompanying Notes to Condensed Consolidated Financial Statements.


5



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
 
March 28,
2020
 
March 30,
2019
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
447,396

 
$
459,928

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Stock-based compensation
72,141

 
64,973

Depreciation and amortization
72,149

 
85,176

Deferred taxes
(5,392
)
 
(12,161
)
Loss (gain) on disposal of property, plant and equipment
634

 
3,324

Other adjustments
9,226

 
265

Changes in assets and liabilities:
 
 
 
Accounts receivable
(7,512
)
 
5,475

Inventories
25,891

 
9,620

Other assets
(60,530
)
 
(3,026
)
Accounts payable
2,189

 
(10,971
)
Income taxes payable
(28,959
)
 
53,662

Accrued salary and related expenses
3,516

 
(19,845
)
Other liabilities
57,777

 
1,953

Net cash provided by (used in) operating activities
588,526

 
638,373

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(51,369
)
 
(52,170
)
Proceeds from sale of property, plant and equipment
268

 
34

Proceeds from sale of available-for-sale securities

 
30,192

Proceeds from maturity of available-for-sale securities
93,552

 
1,027,083

Payment in connection with business acquisition, net of cash acquired

 
(2,949
)
Purchases of available-for-sale securities

 
(214,587
)
Purchases of private company investments
(120
)
 
(1,676
)
Proceeds from sale of private company investments
173

 

Other investing activities
(118
)
 
(540
)
Net cash provided by (used in) investing activities
42,386

 
785,387

Cash flows from financing activities:
 
 
 
Repayment of debt

 
(500,000
)
Contingent consideration paid
(8,000
)
 
(9,052
)
Net issuance of restricted stock units
(29,136
)
 
(23,026
)
Proceeds from stock options exercised
16,630

 
18,986

Issuance of common stock under employee stock purchase program
18,535

 
17,689

Repurchase of common stock
(358,512
)
 
(437,047
)
Dividends paid
(389,104
)
 
(380,231
)
Net cash provided by (used in) financing activities
(749,587
)
 
(1,312,681
)
Net increase (decrease) in cash and cash equivalents
(118,675
)
 
111,079

Cash and cash equivalents:
 
 
 
Beginning of period
$
1,757,342

 
$
1,543,484

End of period
$
1,638,667

 
$
1,654,563

Supplemental disclosures of cash flow information:
 
 
 
Cash paid, net, during the period for income taxes
$
84,948

 
$
74,385

Cash paid for interest
$
25,501

 
$
31,751

Noncash financing and investing activities:
 
 
 
Accounts payable related to property, plant and equipment purchases
$
9,085

 
$
15,252


See accompanying Notes to Condensed Consolidated Financial Statements.

6



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)


 
Three Months Ended March 28, 2020
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 28, 2019
269,743

 
$
270

 
$

 
$
1,737,528

 
$
(11,289
)
 
$
1,726,509

Net income

 

 

 
161,190

 

 
161,190

Other comprehensive income (loss), net

 

 

 

 
(1,360
)
 
(1,360
)
Repurchase of common stock 
(2,812
)
 
(3
)
 
(19,679
)
 
(137,321
)
 

 
(157,003
)
Net issuance of restricted stock units
360

 

 
(11,570
)
 

 

 
(11,570
)
Stock options exercised
272

 

 
7,810

 

 

 
7,810

Stock-based compensation 

 

 
23,439

 

 

 
23,439

Dividends paid, $0.48 per common share

 

 

 
(129,072
)
 

 
(129,072
)
Balance, March 28, 2020
267,563

 
$
267

 
$

 
$
1,632,325

 
$
(12,649
)
 
$
1,619,943

 
 
 
 
 
 
 
 
 
 
 
 


 
Nine Months Ended March 28, 2020
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 29, 2019
271,852

 
$
272

 
$

 
$
1,856,358

 
$
(11,354
)
 
$
1,845,276

Net income

 

 

 
447,396

 

 
447,396

Other comprehensive income (loss), net

 

 

 

 
(1,295
)
 
(1,295
)
Repurchase of common stock 
(6,296
)
 
(5
)
 
(78,235
)
 
(280,272
)
 

 
(358,512
)
Cumulative-effect adjustment for adoption of ASU 2016-02

 

 

 
(2,053
)
 

 
(2,053
)
Net issuance of restricted stock units
1,017

 

 
(29,136
)
 

 

 
(29,136
)
Stock options exercised
588

 

 
16,630

 

 

 
16,630

Stock-based compensation 

 

 
72,206

 

 

 
72,206

Common stock issued under Employee Stock Purchase Plan
402

 

 
18,535

 

 

 
18,535

Dividends paid, $1.44 per common share

 

 

 
(389,104
)
 

 
(389,104
)
Balance, March 28, 2020
267,563

 
$
267

 
$

 
$
1,632,325

 
$
(12,649
)
 
$
1,619,943

 
 
 
 
 
 
 
 
 
 
 
 


See accompanying Notes to Condensed Consolidated Financial Statements.







7



MAXIM INTEGRATED PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)


 
Three Months Ended March 30, 2019
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 29, 2018
274,326

 
$
279

 
$

 
$
1,766,471

 
$
(11,336
)
 
$
1,755,414

Net income

 

 

 
130,613

 

 
130,613

Other comprehensive income (loss), net

 

 

 

 
866

 
866

Repurchase of common stock 
(2,210
)
 

 
(18,411
)
 
(98,580
)
 

 
(116,991
)
Net issuance of restricted stock units
402

 

 
(9,582
)
 

 

 
(9,582
)
Stock options exercised
177

 

 
5,143

 

 

 
5,143

Stock-based compensation 

 

 
22,850

 

 

 
22,850

Dividends paid, $0.46 per common share

 

 

 
(125,566
)
 

 
(125,566
)
Balance, March 30, 2019
272,695

 
$
279

 
$

 
$
1,672,938

 
$
(10,470
)
 
$
1,662,747

 
 
 
 
 
 
 
 
 
 
 
 


 
Nine Months Ended March 30, 2019
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders' Equity
 
Shares
 
Par Value
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2018
278,664

 
$
279

 
$

 
$
1,945,646

 
$
(14,985
)
 
$
1,930,940

Net income

 

 

 
459,928

 

 
459,928

Other comprehensive income (loss), net

 

 

 

 
4,515

 
4,515

Repurchase of common stock 
(8,032
)
 

 
(82,155
)
 
(354,892
)
 

 
(437,047
)
Cumulative-effect adjustment for adoption of ASU 2016-01



 

 
2,487

 

 
2,487

Net issuance of restricted stock units
980

 

 
(23,026
)
 

 

 
(23,026
)
Stock options exercised
699

 

 
18,986

 

 

 
18,986

Stock-based compensation 

 

 
65,035

 

 

 
65,035

Modification of liability to equity instruments (1)

 

 
3,471

 

 

 
3,471

Common stock issued under Employee Stock Purchase Plan
384

 

 
17,689

 

 

 
17,689

Dividends paid, $1.38 per common share

 

 

 
(380,231
)
 

 
(380,231
)
Balance, March 30, 2019
272,695



$
279


$


$
1,672,938


$
(10,470
)
 
$
1,662,747

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


See accompanying Notes to Condensed Consolidated Financial Statements.


8



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


NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Maxim Integrated Products, Inc. and all of its majority-owned subsidiaries (collectively, the “Company” or “Maxim Integrated”) included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America (“GAAP”) have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for fair statement have been included. The year-end condensed consolidated balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the nine months ended March 28, 2020 are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every fifth or sixth fiscal year will be a 53-week fiscal year. Fiscal years 2019 and 2020 are 52-week fiscal years.


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates relate to the useful lives and fair value of fixed assets, valuation allowance for deferred tax assets, reserves relating to uncertain tax positions, allowances for doubtful accounts, customer returns and allowances, allowance for distributor credits, inventory valuation, reserves relating to litigation matters, assumptions about the fair value of reporting units, accrued liabilities and reserves, assumptions related to the calculation of stock-based compensation and the value of intangibles acquired and goodwill associated with business combinations. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information.

The recent coronavirus (COVID-19) pandemic and the mitigation efforts by governments to attempt to control its spread created uncertainties and disruptions in the economic and financial markets. The Company is not aware of events or circumstances that would require an update to its estimates, judgments, or adjustments to the carrying values of its assets or liabilities as of April 29, 2020, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as developments occur and as the Company obtains additional information. These future developments are highly uncertain, and the outcomes, unpredictable. Actual results may differ from those estimates, and such differences may be material to the financial statements.

Recently Issued Accounting Pronouncements

(i) New Accounting Updates Recently Adopted

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

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


9



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

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

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

Updated Lease Accounting Policy

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

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

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

NOTE 3: BALANCE SHEET COMPONENTS

Inventories consist of:
 
March 28,
2020
 
June 29,
2019
 
(in thousands)
Raw materials
$
14,525

 
$
16,121

Work-in-process
148,670

 
160,273

Finished goods
57,491

 
70,118

Total inventories
$
220,686

 
$
246,512



Property, plant and equipment, net, consist of:
 
March 28,
2020
 
June 29,
2019
 
(in thousands) 
Land
$
17,720

 
$
17,720

Buildings and building improvements
314,323

 
265,191

Machinery, equipment and software
1,334,875

 
1,367,606

Total
1,666,918

 
1,650,517

Less: accumulated depreciation
(1,102,282
)
 
(1,072,795
)
Total property, plant and equipment, net
$
564,636

 
$
577,722



10




Accrued salary and related expenses consist of:
 
March 28,
2020
 
June 29,
2019
 
(in thousands)
Accrued vacation
$
28,449

 
$
30,250

Accrued bonus
51,565

 
71,466

Accrued salaries
14,161

 
8,329

Accrued fringe benefits
5,262

 
4,807

Other
22,783

 
3,782

Total accrued salary and related expenses
$
122,220

 
$
118,634



NOTE 4: DISAGGREGATION OF REVENUE

The following table summarizes net revenue disaggregated by end market. The Company classifies end market revenue by using estimates and assumptions based on historical experience and knowledge of current conditions, given available information.
 
Three Months Ended
 
Nine Months Ended
 
March 28, 2020
 
March 30, 2019
 
March 28, 2020
 
March 30, 2019
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
(in thousands, except percentages)
Automotive
$
157,336

 
28
%
 
$
151,867

 
28
%
 
$
444,535

 
27
%
 
$
448,717

 
26
%
Communications and Data Center
134,860

 
24
%
 
103,053

 
19
%
 
368,394

 
22
%
 
352,518

 
20
%
Consumer
101,145

 
18
%
 
124,748

 
23
%
 
339,289

 
21
%
 
422,829

 
24
%
Industrial
168,575

 
30
%
 
162,715

 
30
%
 
493,808

 
30
%
 
533,720

 
30
%
 
$
561,916

 
 
 
$
542,383

 
 
 
$
1,646,026

 
 
 
$
1,757,784

 
 


The following table summarizes net revenue disaggregated by sales channel:
 
Three Months Ended
 
Nine Months Ended
 
March 28, 2020
 
March 30, 2019
 
March 28, 2020
 
March 30, 2019
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
(in thousands, except percentages)
Distributors
$
290,848

 
52
%
 
$
234,561

 
43
%
 
$
838,676

 
51
%
 
$
784,652

 
45
%
Direct customers
271,068

 
48
%
 
307,822

 
57
%
 
807,350

 
49
%
 
973,132

 
55
%
 
$
561,916

 
 
 
$
542,383

 
 
 
$
1,646,026

 
 
 
$
1,757,784

 
 


NOTE 5: FAIR VALUE MEASUREMENTS

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


11



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

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

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

Assets and liabilities measured at fair value on a recurring basis were as follows:
 
March 28, 2020
 
June 29, 2019
 
Fair Value
 Measurements Using
 
Total
Balance
 
Fair Value
 Measurements Using
 
Total
Balance
 
Level 1
 
Level 2
 
Level 3
 
 
Level 1
 
Level 2
 
Level 3
 
 
(in thousands)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Money market funds
$
245,470

 
$

 
$

 
$
245,470

 
$
186,819

 
$

 
$

 
$
186,819

Short-term investments
 
 
 
 
 
 


 
 
 
 
 
 
 


    Certificates of deposit

 

 

 

 

 
1,000

 

 
1,000

    Corporate debt securities

 
47,109

 

 
47,109

 

 
139,990

 

 
139,990

Other current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts

 
580

 

 
580

 

 
651

 

 
651

Total assets
$
245,470

 
$
47,689

 
$

 
$
293,159

 
$
186,819

 
$
141,641

 
$

 
$
328,460

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
$

 
$
1,297

 
$

 
$
1,297

 
$

 
$
148

 
$

 
$
148

Contingent consideration

 

 

 

 

 

 
9,052

 
9,052

Total Liabilities
$

 
$
1,297

 
$

 
$
1,297

 
$

 
$
148

 
$
9,052

 
$
9,200



During the nine months ended March 28, 2020 and the year ended June 29, 2019, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

There were no assets or liabilities measured at fair value on a non-recurring basis as of March 28, 2020 and June 29, 2019 other than impairments of long-lived assets.

As of March 28, 2020 and June 29, 2019, the fair value of private company investments amounted to $20.5 million and $20.7 million, respectively. The aggregate amount of unrealized losses recognized from these investments were $3.4 million and $3.6 million, respectively, as of March 28, 2020 and June 29, 2019.

The Company recorded $(0.4) million and $0.5 million of unrealized gains (losses) on private company investments, during the three months ended March 28, 2020 and March 30, 2019, respectively. The Company recorded $0.2 million and $(0.2) million, of unrealized gains (losses) on private company investments during the nine months ended March 28, 2020 and March 30, 2019, respectively. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Condensed Consolidated Statements of Income.


12



NOTE 6: FINANCIAL INSTRUMENTS

Short-term investments
Fair values were as follows:
 
March 28, 2020
 
June 29, 2019
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
Amortized Cost