Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2020



☐	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: 0-21184

MICROCHIP TECHNOLOGY INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)



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

2355 W. Chandler Blvd., Chandler, AZ 85224-6199

(480) 792-7200

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant's

Principal Executive Offices)

Indicate by checkmark 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 such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x 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 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer	x	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 revised 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 ☒

Shares Outstanding of Registrant's Common Stock



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered		July 29, 2020
Common Stock, $0.001 par value	MCHP	NASDAQ	Stock Market LLC	252,451,515 shares
		(Nasdaq Global Select Market)

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

INDEX



PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – June 30, 2020 and March 31, 2020	3

	Condensed Consolidated Statements of Income – Three Months Ended June 30, 2020 and 2019	4

	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended June 30, 2020 and 2019	5

	Condensed Consolidated Statements of Cash Flows – Three Months Ended June 30, 2020 and 2019	6

	Condensed Consolidated Statements of Changes in Equity - Three Months Ended June 30, 2020 and 2019	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 6.	Exhibits	58

	Signatures

	Certifications

	Exhibits

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)



ASSETS
	June 30,			March 31,
	2020			2020
Cash and cash equivalents	$	378.2		$	401.0
Short-term investments	2.0			2.0
Accounts receivable, net	894.3			934.0
Inventories	657.2			685.7
Other current assets	203.3			194.5
Total current assets	2,135.0			2,217.2
Property, plant and equipment, net	844.0			876.1
Goodwill	6,664.8			6,664.8
Intangible assets, net	5,486.8			5,702.3
Long-term deferred tax assets	1,639.1			1,748.5
Other assets	258.4			217.2
Total assets	$	17,028.1		$	17,426.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	211.1		$	246.8
Accrued liabilities	778.4			781.8
Current portion of long-term debt	1,596.3			608.8
Total current liabilities	2,585.8			1,637.4
Long-term debt	7,730.0			8,873.4
Long-term income tax payable	681.1			668.4
Long-term deferred tax liability	112.3			318.5
Other long-term liabilities	417.6			342.9
Stockholders' equity:
Preferred stock, $0.001 par value; authorized 5,000,000 shares; no shares issued or outstanding	—			—
Common stock, $0.001 par value; authorized 450,000,000 shares; 265,047,572 shares issued and 252,450,046 shares outstanding at June 30, 2020; 258,391,231 shares issued and 245,325,643 shares outstanding at March 31, 2020	0.3			0.2
Additional paid-in capital	2,542.3			2,675.1
Common stock held in treasury: 12,597,526 shares at June 30, 2020; 13,065,588 shares at March 31, 2020	(485.8		)	(500.6		)
Accumulated other comprehensive loss	(21.1		)	(21.6		)
Retained earnings	3,465.6			3,432.4
Total stockholders' equity	5,501.3			5,585.5
Total liabilities and stockholders' equity	$	17,028.1		$	17,426.1

See accompanying notes to condensed consolidated financial statements

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)



	Three Months Ended June 30,
	2020			2019
Net sales	$	1,309.7		$	1,322.6
Cost of sales ⁽¹⁾	511.4			507.4
Gross profit	798.3			815.2

Research and development⁽¹⁾	198.0			219.1
Selling, general and administrative ⁽¹⁾	146.3			167.9
Amortization of acquired intangible assets	235.4			248.5
Special charges and other, net	0.3			8.1
Operating expenses	580.0			643.6

Operating income	218.3			171.6
Other income (expense):
Interest income	0.3			0.7
Interest expense	(99.1		)	(132.6		)
Loss on settlement of debt	(26.8		)	(1.9		)
Other (loss) income, net	(3.2		)	2.7
Income before income taxes	89.5			40.5
Income tax benefit	(34.1		)	(10.2		)
Net income	$	123.6		$	50.7


Basic net income per common share	$	0.50		$	0.21
Diluted net income per common share	$	0.48		$	0.20
Dividends declared per common share	$	0.3675		$	0.3655
Basic common shares outstanding	247.7			237.8
Diluted common shares outstanding	257.8			253.9

⁽¹⁾Includes share-based compensation expense as follows:
Cost of sales	$	6.4		$	4.9
Research and development	$	20.5		$	19.5
Selling, general and administrative	$	15.5		$	16.3

See accompanying notes to condensed consolidated financial statements

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)



	Three Months Ended June 30,
	2020			2019
Net income	$	123.6		$	50.7
Components of other comprehensive income (loss):
Defined benefit plans:
Actuarial losses related to defined benefit pension plans, net of tax effect	(0.8		)	(0.8		)
Reclassification of realized transactions, net of tax effect	0.3			0.2
Change in net foreign currency translation adjustment	1.0			0.3
Other comprehensive income (loss), net of tax effect	0.5			(0.3		)
Comprehensive income	$	124.1		$	50.4

See accompanying notes to condensed consolidated financial statements

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	Three Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income	$	123.6		$	50.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	292.8			307.1
Deferred income taxes	(49.4		)	(16.8		)
Share-based compensation expense related to equity incentive plans	42.4			40.7
Loss on settlement of debt	26.8			1.9
Amortization of debt discount	25.3			29.9
Amortization of debt issuance costs	4.8			4.2
Gains on sale of assets	(0.9		)	—
Impairment of intangible assets	—			0.5
Gains on available-for-sale investments and marketable equity securities, net	(0.2		)	(0.8		)
Other non-cash adjustment	0.5			(0.1		)
Changes in operating assets and liabilities, excluding impact of acquisitions:
Decrease (increase) in accounts receivable	39.7			(56.2		)
Decrease (increase) in inventories	24.9			(20.5		)
(Decrease) increase in accounts payable and accrued liabilities	(46.6		)	49.7
Change in other assets and liabilities	1.4			14.4
Change in income tax payable	16.7			(24.1		)
Net cash provided by operating activities	501.8			380.6
Cash flows from investing activities:
Investments in other assets	(7.6		)	(2.6		)
Proceeds from sale of assets	0.2			0.2
Capital expenditures	(9.5		)	(23.9		)
Net cash used in investing activities	(16.9		)	(26.3		)
Cash flows from financing activities:
Payments on settlement of convertible debt	(1,027.2		)	—
Proceeds from issuance of senior notes	2,182.0			—
Repayment of bridge loan facility	(615.0		)	—
Repayments of term loan facility	(17.8		)	(188.0		)
Proceeds from borrowings on revolving loan under credit facility	1,238.0			204.0
Repayments of revolving loan under credit facility	(2,171.9		)	(273.5		)
Deferred financing costs	(5.2		)	—
Payment of cash dividends	(90.4		)	(87.1		)
Proceeds from sale of common stock	11.0			7.3
Tax payments related to shares withheld for vested restricted stock units	(11.0		)	(11.4		)
Capital lease payments	(0.2		)	(0.2		)
Net cash used in financing activities	(507.7		)	(348.9		)
Net (decrease) increase in cash and cash equivalents	(22.8		)	5.4
Cash and cash equivalents, and restricted cash at beginning of period	401.0			428.6
Cash and cash equivalents, and restricted cash at end of period	$	378.2		$	434.0

Supplemental disclosure of cash flow information
Restricted cash	$	—		$	38.8

See accompanying notes to condensed consolidated financial statements

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)



	Common Stock and Additional Paid-in-Capital					Common Stock Held in Treasury					Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
	Shares		Amount			Shares		Amount			Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
Balance at March 31, 2019	253.2		$	2,679.8		15.6		$	(582.2	)	$	(20.7	)	$	3,210.6		$	5,287.5
Net income	—		—			—		—			—			50.7			50.7
Other comprehensive loss	—		—			—		—			(0.3		)	—			(0.3		)
Adoption of ASU 2018-02, cumulative adjustment	—		—			—		—			(1.3		)	1.3			—
Proceeds from sales of common stock through employee equity incentive plans	0.5		7.3			—		—			—			—			7.3
Restricted stock unit and stock appreciation right withholdings	(0.1	)	(11.4		)	—		—			—			—			(11.4		)
Treasury stock used for new issuances	(0.4	)	(13.8		)	(0.4	)	13.8			—			—			—
Share-based compensation	—		41.6			—		—			—			—			41.6
Cash dividend	—		—			—		—			—			(87.1		)	(87.1		)
Balance at June 30, 2019	253.2		$	2,703.5		15.2		$	(568.4	)	$	(22.3	)	$	3,175.5		$	5,288.3

Balance at March 31, 2020	258.4		$	2,675.3		13.1		$	(500.6	)	$	(21.6	)	$	3,432.4		$	5,585.5
Net income	—		—			—		—			—			123.6			123.6
Other comprehensive income	—		—			—		—			0.5			—			0.5
Proceeds from sales of common stock through employee equity incentive plans	0.6		11.0			—		—			—			—			11.0
Restricted stock unit and stock appreciation right withholdings	(0.1	)	(11.0		)	—		—			—			—			(11.0		)
Treasury stock used for new issuances	(0.5	)	(14.8		)	(0.5	)	14.8			—			—			—
Shares issued to settle convertible debt	6.6		651.5			—		—			—			—			651.5
Settlement of convertible debt	—		(810.7		)	—		—			—			—			(810.7		)
Share-based compensation	—		41.3			—		—			—			—			41.3
Cash dividend	—		—			—		—			—			(90.4		)	(90.4		)
Balance at June 30, 2020	265.0		$	2,542.6		12.6		$	(485.8	)	$	(21.1	)	$	3,465.6		$	5,501.3

See accompanying notes to condensed consolidated financial statements

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MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Microchip Technology Incorporated and its majority-owned and controlled subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the financial statements and tables in these notes, except per share amounts, are stated in millions of U.S. dollars unless otherwise noted.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP), pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The information furnished herein reflects all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair statement of the results for the interim periods reported. Certain information and footnote disclosures normally included in audited consolidated financial statements have been condensed or omitted pursuant to such SEC rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020. The results of operations for the three months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021 or for any other period.

Note 2. Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On April 1, 2020, the Company adopted the following Accounting Standards Updates, none of which had a material impact on its consolidated financial statements.



Accounting Standards Updates		Description
ASU 2018-15		Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
ASU 2018-13		Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
ASU 2017-04		Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
ASU 2016-13		Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04-Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to US GAAP for applying guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance enhances and simplifies various aspects of the income tax accounting standard ASC 740, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. The amendments are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

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Note 3. Segment Information

The Company's reportable segments are semiconductor products and technology licensing. The Company does not allocate operating expenses, interest income, interest expense, other income or expense, or provision for or benefit from income taxes to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as it does not manage its segments by such metrics.

The following table represents net sales and gross profit for each segment for the three months ended June 30, 2020 (in millions):



	Three Months Ended
	June 30, 2020
	Net Sales		Gross Profit
Semiconductor products	$	1,287.8	$	776.4
Technology licensing	21.9		21.9
Total	$	1,309.7	$	798.3

The following table represents net sales and gross profit for each segment for the three months ended June 30, 2019 (in millions):



	Three Months Ended
	June 30, 2019
	Net Sales		Gross Profit
Semiconductor products	$	1,304.0	$	796.6
Technology licensing	18.6		18.6
Total	$	1,322.6	$	815.2

Note 4. Net Sales

The following table represents the Company's net sales by product line (in millions):



	Three Months Ended June 30,
	2020		2019
Microcontrollers	$	716.4	$	708.3
Analog, interface, mixed signal and timing products	370.2		386.4
Field-programmable gate array products	86.8		91.0
Licensing, memory and other	136.3		136.9
Total net sales	$	1,309.7	$	1,322.6

The product lines listed above are included entirely in the Company's semiconductor product segment with the exception of the licensing, memory and other product line, which includes products from both the semiconductor product and technology licensing segments.

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The following table represents the Company's net sales by contract type (in millions):



	Three Months Ended June 30,
	2020		2019
Distributors	$	658.9	$	665.1
Direct customers	628.9		638.9
Licensees	21.9		18.6
Total net sales	$	1,309.7	$	1,322.6

Distributors are customers that buy products with the intention of reselling them. Distributors generally have a distributor agreement with the Company to govern the terms of the relationship. Direct customers are non-distributor customers, which generally do not have a master sales agreement with the Company. The Company's direct customers primarily consist of OEMs and, to a lesser extent, contract manufacturers. Licensees are customers of the Company's technology licensing segment, which include purchasers of intellectual property and customers that have licensing agreements to use the Company's SuperFlash® embedded flash and Smartbits® one time programmable NVM technologies. All of the contract types listed in the table above are included in the Company's semiconductor product segment with the exception of licenses, which is included in the technology licensing segment.

Substantially all of the Company's net sales are recognized from contracts with customers.

Note 5. Net Income Per Common Share

The following table sets forth the computation of basic and diluted net income per common share (in millions, except per share amounts):



	Three Months Ended June 30,
	2020		2019
Net income	$	123.6	$	50.7
Basic weighted average common shares outstanding	247.7		237.8
Dilutive effect of stock options and RSUs	2.9		3.7
Dilutive effect of 2015 Senior Convertible Debt	7.2		12.4
Dilutive effect of 2017 Senior Convertible Debt	—		—
Dilutive effect of 2017 Junior Convertible Debt	—		—
Diluted weighted average common shares outstanding	257.8		253.9
Basic net income per common share	$	0.50	$	0.21
Diluted net income per common share	$	0.48	$	0.20

The Company computed basic net income per common share based on the weighted average number of common shares outstanding during the period. The Company computed diluted net income per common share based on the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding RSUs. Weighted average common shares exclude the effect of option shares which are not dilutive. There were no anti-dilutive option shares for each of the three months ended June 30, 2020 and 2019.

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Diluted weighted average common shares outstanding for the three months ended June 30, 2020 and 2019 includes 7.2 million shares and 12.4 million shares, respectively, issuable upon the exchange of the Company's 2015 Senior Convertible Debt (as defined below). There were no shares issuable upon the exchange of the Company's 2017 Senior Convertible Debt (as defined below) or the Company's 2017 Junior Convertible Debt (as defined below). The convertible debt has no impact on diluted net income per common share unless the average price of the Company's common stock exceeds the conversion price because the Company intends to settle the principal amount of the debentures in cash upon conversion. Prior to conversion, the Company will include, in the diluted net income per common share calculation, the effect of the additional shares that may be issued when the Company's common stock price exceeds the conversion price using the treasury stock method. The following is the weighted average conversion price per share used in calculating the dilutive effect (see Note 6 for details on the convertible debt):



	Three Months Ended June 30,
	2020		2019
2015 Senior Convertible Debt	$	61.21	$	62.18
2017 Senior Convertible Debt	$	95.45	$	96.96
2017 Junior Convertible Debt	$	93.77	$	95.26

Note 6. Debt

Debt obligations included in the condensed consolidated balance sheets consisted of the following (in millions):



	Coupon Interest Rate	Effective Interest Rate	Fair Value of Liability Component at Issuance ⁽¹⁾
				June 30,			March 31,
				2020			2020
Senior Secured Indebtedness
Revolving Credit Facility				$	1,454.6		$	2,388.5
Term Loan Facility				1,705.7			1,723.5
Bridge Loan Facility				—			615.0
2023 Notes, maturing June 1, 2023 ("4.333% 2023 Notes")	4.333%	4.7%		1,000.0			1,000.0
2021 Notes, maturing June 1, 2021 ("3.922% 2021 Notes")	3.922%	4.5%		1,000.0			1,000.0
2023 Notes, maturing September 1, 2023 ("2.670% 2023 Notes")	2.670%	2.8%		1,000.0			—
Senior Unsecured Indebtedness
2025 Notes, maturing September 1, 2025 ("4.250% 2025 Notes")	4.250%	4.6%		1,200.0			—
Total Senior Indebtedness				7,360.3			6,727.0
Senior Subordinated Convertible Debt - Principal Outstanding
2017 Senior Convertible Debt, maturing February 15, 2027 ("2017 Senior Convertible Debt")	1.625%	6.0%	$1,085.8	1,426.1			2,070.0
2015 Senior Convertible Debt, maturing February 15, 2025 ("2015 Senior Convertible Debt")	1.625%	5.9%	$604.2	726.7			1,110.0
Junior Subordinated Convertible Debt - Principal Outstanding
2017 Junior Convertible Debt, maturing February 15, 2037 ("2017 Junior Convertible Debt")	2.250%	7.4%	$321.1	686.3			686.3
Total Convertible Debt				2,839.1			3,866.3

Gross long-term debt including current maturities				10,199.4			10,593.3
Less: Debt discount ⁽²⁾				(815.0		)	(1,043.2		)
Less: Debt issuance costs ⁽³⁾				(58.1		)	(67.9		)
Net long-term debt including current maturities				9,326.3			9,482.2
Less: Current maturities ⁽⁴⁾				(1,596.3		)	(608.8		)
Net long-term debt				$	7,730.0		$	8,873.4

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⁽¹⁾As each of the convertible debt instruments may be settled in cash upon conversion, for accounting purposes, they were bifurcated into a liability component and an equity component, which are both initially recorded at fair value. The amount allocated to the equity component is the difference between the principal value of the instrument and the fair value of the liability component at issuance. The resulting debt discount is being amortized to interest expense at the respective effective interest rate over the contractual term of the debt.

⁽²⁾The unamortized discount consists of the following (in millions):



	June 30,			March 31,
	2020			2020
Bridge Loan Facility	$	—		$	(3.1	)
4.333% 2023 Notes	(3.2		)	(3.5		)
3.922% 2021 Notes	(1.7		)	(2.1		)
2.670% 2023 Notes	(2.9		)	—
4.250% 2025 Notes	(14.8		)	—
2017 Senior Convertible Debt	(337.0		)	(504.2		)
2015 Senior Convertible Debt	(120.6		)	(192.9		)
2017 Junior Convertible Debt	(334.8		)	(337.4		)
Total unamortized discount	$	(815.0	)	$	(1,043.2	)

⁽³⁾Debt issuance costs consist of the following (in millions):



	June 30,			March 31,
	2020			2020
Revolving Credit Facility	$	(13.5	)	$	(14.6	)
Term Loan Facility	(13.9		)	(14.6		)
Bridge Loan Facility	—			(3.1		)
4.333% 2023 Notes	(7.1		)	(7.7		)
3.922% 2021 Notes	(3.7		)	(4.8		)
2.670% 2023 Notes	(1.7		)	—
4.250% 2025 Notes	(2.0		)	—
2017 Senior Convertible Debt	(8.7		)	(13.0		)
2015 Senior Convertible Debt	(4.4		)	(7.0		)
2017 Junior Convertible Debt	(3.1		)	(3.1		)
Total debt issuance costs	$	(58.1	)	$	(67.9	)

⁽⁴⁾ As of June 30, 2020, current maturities consist of the liability component of the 2015 Senior Convertible Debt, as the notes were convertible and the 3.922% 2021 Notes which are due June 1, 2021. As of March 31, 2020, current maturities included the Bridge Loan Facility (as defined below).

Expected maturities relating to the Company’s debt obligations as of June 30, 2020 are as follows (in millions):



Fiscal year ending March 31,	Expected Maturities
2021	$	—
2022	1,000.0
2023	—
2024	3,454.6
2025	726.7
Thereafter	5,018.1
Total	$	10,199.4

Ranking of Convertible Debt - The Senior Subordinated Convertible Debt and Junior Subordinated Convertible Debt (collectively, the Convertible Debt) are unsecured obligations which are subordinated in right of payment to the amounts outstanding under the Company's Revolving Credit Facility, Term Loan Facility, Bridge Loan Facility, 4.333% 2023 Notes, 3.922% 2021 Notes, 2.670% 2023 Notes, and 4.250% 2025 Notes (collectively, the Senior Indebtedness). The Junior Subordinated Convertible Debt is expressly subordinated in right of payment to any existing and future senior debt of the

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Company (including the Senior Indebtedness, and the Senior Subordinated Convertible Debt) and is structurally subordinated in right of payment to the liabilities of the Company's subsidiaries. The Senior Subordinated Convertible Debt is subordinated to the Senior Indebtedness; ranks senior to the Company's indebtedness that is expressly subordinated in right of payment to it, including the Junior Subordinated Convertible Debt; ranks equal in right of payment to any of the Company's unsubordinated indebtedness that does not provide that it is senior to the Senior Subordinated Convertible Debt; ranks junior in right of payment to any of the Company's secured and unsecured unsubordinated indebtedness to the extent of the value of the assets securing such indebtedness; and is structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries.

Summary of Conversion Features - Each series of Convertible Debt is convertible, subject to certain conditions, into cash, shares of the Company's common stock or a combination thereof, at the Company's election, at specified Conversion Rates (see table below), adjusted for certain events including the declaration of cash dividends. Except during the three-month period immediately preceding the maturity date of the applicable series of Convertible Debt, each series of Convertible Debt is convertible only upon the occurrence of (1) such time as the closing price of the Company's common stock exceeds the Conversion Price (see table below) by 130% for 20 days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter or (2) during the 5 business day period after any 10 consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day or (3) upon the occurrence of certain corporate events specified in the indenture of such series of Convertible Debt. In addition, for each series, if at the time of conversion the applicable price of the Company's common stock exceeds the applicable Conversion Price at such time, the applicable Conversion Rate will be increased by up to an additional maximum incremental shares rate, as determined pursuant to a formula specified in the indenture for the applicable series of Convertible Debt, and as adjusted for cash dividends paid since the issuance of such series of Convertible Debt. However, in no event will the applicable Conversion Rate exceed the applicable Maximum Conversion Rate specified in the indenture for the applicable series of Convertible Debt (see table below).

The following table sets forth the applicable Conversion Rates adjusted for dividends declared since issuance of such series of Convertible Debt and the applicable Incremental Share Factors and Maximum Conversion Rates as adjusted for dividends paid since the applicable issuance date:



	Dividend adjusted rates as of June 30, 2020
	Conversion Rate	Approximate Conversion Price		Incremental Share Factor	Maximum Conversion Rate
2017 Senior Convertible Debt ⁽¹⁾	10.5000	$	95.24	5.2500	14.9625
2015 Senior Convertible Debt ⁽¹⁾	16.3740	$	61.07	8.1870	22.9236
2017 Junior Convertible Debt ⁽¹⁾	10.6875	$	93.57	5.3438	14.9625

⁽¹⁾As of June 30, 2020, the 2017 Senior Convertible Debt and the 2017 Junior Convertible Debt were not convertible. As of June 30, 2020, the holders of the 2015 Senior Convertible Debt have the right to convert their notes between July 1, 2020 and September 30, 2020 because the Company's common stock price has exceeded the Conversion Price by 130% for the specified period of time during the quarter ended June 30, 2020. As of June 30, 2020, the adjusted conversion rate for the 2015 Senior Convertible Debt would be increased to 19.8131 shares of common stock per $1,000 principal amount of notes based on the closing common stock price of $105.31 to include an additional maximum incremental share rate per the terms of the indenture. As of June 30, 2020, the 2017 Senior Convertible Debt, 2015 Senior Convertible Debt and 2017 Junior Convertible Debt had a value if converted above par of $226.2 million, $789.5 million and $129.2 million, respectively.

The Company may not redeem any series of Convertible Debt prior to the relevant maturity date and no sinking fund is provided for any series of Convertible Debt. Upon the occurrence of a fundamental change as defined in the applicable indenture of such series of Convertible Debt, holders of such series may require the Company to purchase all or a portion of their Convertible Debt for cash at a price equal to 100% of the principal amount plus any accrued and unpaid interest.

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Interest expense consists of the following (in millions):



	Three Months Ended June 30,
	2020		2019
Debt issuance amortization	$	4.1	$	3.3
Debt discount amortization	1.5		0.7
Interest expense	52.7		78.7
Total interest expense on Senior Indebtedness	58.3		82.7
Debt issuance amortization	0.7		0.9
Debt discount amortization	23.8		29.2
Coupon interest expense	15.3		19.3
Total interest expense on Convertible Debt	39.8		49.4
Other interest expense	1.0		0.5
Total interest expense	$	99.1	$	132.6

The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 6.6 years, 4.6 years, and 16.6 years for the 2017 Senior Convertible Debt, 2015 Senior Convertible Debt and 2017 Junior Convertible Debt, respectively.

In June 2020, the Company used a portion of the proceeds from the issuance of the 2.670% 2023 Notes and the 4.250% 2025 Notes (as further defined below) to (i) repay $615.0 million in borrowings under the 364-Day Senior Secured Bridge Credit Agreement (as described below) resulting in a loss on settlement of debt of $5.3 million consisting of unamortized financing fees, (ii) settle approximately $383.3 million aggregate principal amount of the Company's 2015 Senior Convertible Debt and approximately $643.9 million aggregate principal amount of the Company's 2017 Senior Convertible Debt, and (iii) repay a portion of the amount outstanding under the Company's existing revolving credit facility (the "Revolving Credit Facility") as well as for general corporate purposes (the "June 2020 Settlements"). The Company settled, in separate privately negotiated transactions that are accounted for as induced conversions, (i) approximately $383.3 million aggregate principal amount of its 2015 Senior Convertible Debt for $383.3 million in cash and 4.1 million shares of the Company's common stock valued at $405.1 million for total consideration of $788.4 million, of which $314.4 million was allocated to the fair value of the liability component and $464.4 million was allocated to the reacquisition of the equity component, and (ii) approximately $643.9 million aggregate principal amount of its 2017 Senior Convertible Debt for $643.9 million in cash and 2.5 million shares of the Company's common stock valued at $246.4 million for total consideration of $890.3 million, of which $481.0 million was allocated to the fair value of the liability component and $390.9 million was allocated to the reacquisition of the equity component. The consideration was allocated to the liability and equity components using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument prior to the settlement, resulting in a net loss on inducement and settlement of debt of $21.5 million.

In March 2020, the Company settled, in privately negotiated transactions that are accounted for as induced conversions, $615.0 million aggregate principal amount of its 2015 Senior Convertible Debt for $615.0 million in cash and 5.2 million shares of the Company's common stock valued at $351.8 million for total consideration of $966.8 million. In addition, the Company also entered into a 364-Day Senior Secured Bridge Credit Agreement, which provides for a term loan facility (the "Bridge Loan Facility") for an aggregate principal amount of $615.0 million to finance the cash portion of its 2015 Senior Convertible Debt settlement transaction.

Senior Notes

2.670% 2023 Notes and 4.250% 2025 Notes

In May 2020, the Company issued $1.00 billion aggregate principal amount of 2.670% Senior Secured Notes due 2023 (the "2.670% 2023 Notes") and $1.20 billion aggregate principal amount of 4.250% Senior Unsecured Notes due 2025 (the "4.250% 2025 Notes") in a private placement. In connection with the issuance of these notes, the Company incurred issuance costs of $3.8 million and recorded a debt discount of $18.0 million for fees deducted from the proceeds, which will both be amortized using the effective interest method over the term of the debt. The Company used proceeds from the issuance of the 2.670% 2023 Notes and the 4.250% 2025 Notes to fund the June 2020 Settlements. The 2.670% 2023 Notes mature on September 1, 2023 and interest accrues at a rate of 2.670% per annum, payable semi-annually in arrears on March 1 and September 1 of each

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year. The 4.250% 2025 Notes mature on September 1, 2025 and interest accrues at a rate of 4.250% per annum, payable semi-annually in arrears on March 1 and September 1 of each year.

The Company may, at its option, redeem some or all of the 2.670% 2023 Notes prior to September 1, 2023 at a price equal to the greater of (a) 100% of the principal amount of the 2.670% 2023 Notes redeemed and (b) the sum of the present value of all remaining scheduled payments of principal and interest (discounted in accordance with the 2.670% 2023 Notes indenture) that would have been due on the redeemed 2.670% 2023 Notes, in each case, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to September 1, 2022, the Company may, at its option, redeem up to 40% of the original aggregate principal amount of the 4.250% 2025 Notes with the net cash proceeds of one or more equity offerings (as such terms are defined in the 4.250% 2025 Notes indenture), at a price equal to 104.250% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, provided that (i) at least 60% of the original aggregate principal amount of the 4.250% 2025 Notes remains outstanding after each such redemption and (ii) such redemption occurs within 60 days after the closing of such equity offering. In addition, prior to September 1, 2022, the Company may, at its option, redeem the 4.250% 2025 Notes in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of 4.250% 2025 Notes redeemed, plus, in each case, a premium equal to the greater of (i) 1.0% of the principal amount of such 4.250% 2025 Notes and (ii) the excess, if any, of (a) the present value as of such date of redemption of (1) the redemption price of such 4.250% 2025 Notes on September 1, 2022, plus (2) all required interest payments due on such 4.250% 2025 Notes through September 1, 2022 (excluding accrued but unpaid interest to the date of redemption) computed using a discount rate equal to the treasury rate (as defined in the 4.250% 2025 Notes indenture) as of such date of redemption plus 50 basis points, over (b) the then outstanding principal amount of such 4.250% 2025 Notes. On or after September 1, 2022, the Company may, at its option, redeem some or all of the 4.250% 2025 Notes, at a redemption price equal to (i) if during the twelve-month period beginning on September 1, 2022, 102.125% of the aggregate principal amount of 4.250% 2025 Notes redeemed, (ii) if during the twelve-month period beginning on September 1, 2023, 101.063% of the aggregate principal amount of 4.250% 2025 Notes redeemed, and (iii) if during the twelve-month period beginning on September 1, 2024 or thereafter, 100% of the aggregate principal amount of 4.250% 2025 Notes redeemed, in each case, plus accrued and unpaid interest on such 4.250% 2025 Notes, if any, to, but excluding, the repurchase date.

If the Company experiences a specified change of control triggering event, the Company must offer to repurchase the 2.670% 2023 Notes and 4.250% 2025 Notes at a price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The 2.670% 2023 Notes indenture and the 4.250% 2025 Notes indenture contain customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries' ability to, among other things, create or incur certain liens, and enter into sale and leaseback transactions, and consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets, to another person. The 2.670% 2023 Notes indenture contains covenants that restrict the ability of the Company and its subsidiaries to sell or otherwise dispose of any assets constituting collateral securing the 2.670% 2023 Notes. These covenants are subject to a number of limitations and exceptions set forth in the indentures.

The 2.670% 2023 Notes and 4.250% 2025 Notes are guaranteed by certain of the Company's subsidiaries that have also guaranteed the obligations under the Company's Revolving Credit Facility and under the Term Loan Facility (the Term Loan Facility together with the Revolving Credit Facility, the “Senior Credit Facilities”), and under the Company's existing Senior Secured Notes. In the future, each subsidiary of the Company that is a guarantor or other obligor of the Company's existing Senior Credit Facilities or certain other indebtedness of the Company will guarantee the 2.670% 2023 Notes and 4.250% 2025 Notes.

The 2.670% 2023 Notes and the 2.670% 2023 Notes guarantees are secured, on a pari passu first lien basis with the Company's existing Senior Credit Facilities, by substantially all of the tangible and intangible assets (other than certain excluded assets) of the Company and the guarantors that secure obligations under the Company's existing Senior Credit Facilities, in each case subject to certain thresholds, exceptions and permitted liens, as set forth in a pledge and the security agreement, dated May 29, 2020, by and among the Company, the subsidiary guarantors party thereto and the collateral agent.

4.333% 2023 Notes and 3.922% 2021 Notes

In May 2018, the Company issued $1.00 billion aggregate principal amount of 3.922% Senior Secured Notes due 2021 (the “3.922% 2021 Notes”) and $1.00 billion aggregate principal amount of 4.333% Senior Secured Notes due 2023 (the “4.333% 2023 Notes”, and together with the 3.922% 2021 Notes, the "Senior Secured Notes") in a private placement. In connection with the issuance of these notes, the Company incurred issuance costs of $24.4 million and recorded a debt discount of $10.5 million for fees deducted from the proceeds, which will both be amortized using the effective interest method over the term of the debt. The 3.922% 2021 Notes mature on June 1, 2021 and the 4.333% 2023 Notes mature on June 1, 2023. Interest on the

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3.922% 2021 Notes accrues at a rate of 3.922% per annum, payable semi-annually in arrears on June 1 and December 1 of each year. Interest on the 4.333% 2023 Notes accrues at a rate of 4.333% per annum, payable semi-annually in arrears on June 1 and December 1 of each year.

Senior Credit Facilities

In March 2020 and September 2019, the Company amended the Company's Credit Agreement to, among other things, amend certain negative covenants, including covenants that restrict the Company and its subsidiaries’ ability to, among other things, incur subsidiary indebtedness, grant liens and enter into certain restrictive agreements. The amendments provide the Company the ability to finance a Convertible Notes repurchase not to exceed $1.0 billion with secured debt, and the ability to factor receivables and certain related assets as further explained below. In addition, the amendments reduce the margin added to the interest rate on revolving loans under the Credit Agreement to 0.0% to 0.75% for base rate loans and 1.0% to 1.75% for the LIBOR rate loans, in each case determined based on the Company's senior leverage ratio. The amendments reduced the commitments for the Revolving Credit Facility thereunder to $3.57 billion from $3.60 billion.

Note 7. Fair Value of Financial Instruments

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


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


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


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

The carrying amount of cash equivalents approximates fair value because their maturity is less than three months. Management believes the carrying amount of the equity and cost-method investments materially approximated fair value at June 30, 2020 based upon unobservable inputs. The fair values of these investments have been determined as Level 3 fair value measurements. The carrying amount of accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term maturity of the amounts and are considered Level 2 in the fair value hierarchy.

The fair values of the Company's revolving credit facility, term loan facility and bridge loan facility are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the Company's revolving credit facility, term loan facility and bridge loan facility at June 30, 2020 approximated the carrying value excluding debt discounts and debt issuance costs and are considered Level 2 in the fair value hierarchy. The Company measures the fair value of its senior and junior subordinated convertible debt and senior secured and unsecured notes for disclosure purposes. These fair values are based on observable market prices for this debt, which is traded in less active markets and are therefore classified as a Level 2 fair value measurement.

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The following table shows the carrying amounts and fair values of the Company's debt obligations as of June 30, 2020 and March 31, 2020 (in millions).



	June 30, 2020				March 31, 2020
	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
Revolving Credit Facility	$	1,441.1	$	1,454.6	$	2,373.9	$	2,388.5
Term Loan Facility	$	1,691.8	$	1,705.7	$	1,708.9	$	1,723.5
Bridge Loan Facility	$	—	$	—	$	608.8	$	615.0
4.333% 2023 Notes	$	989.7	$	1,080.0	$	988.8	$	990.0
3.922% 2021 Notes	$	994.6	$	1,020.0	$	993.1	$	985.0
2.670% 2023 Notes	$	995.4	$	1,030.0	$	—	$	—
4.250% 2025 Notes	$	1,183.2	$	1,207.6	$	—	$	—
2017 Senior Convertible Debt	$	1,080.4	$	2,104.4	$	1,552.8	$	2,130.3
2015 Senior Convertible Debt	$	601.7	$	1,613.4	$	910.1	$	1,601.8
2017 Junior Convertible Debt	$	348.4	$	997.4	$	345.8	$	656.2

⁽¹⁾ The carrying amounts presented are net of debt discounts and debt issuance costs (see Note 6 for further information).

Note 8. Intangible Assets and Goodwill

Intangible assets consist of the following (in millions):



	June 30, 2020
	Gross Amount		Accumulated Amortization			Net Amount
Core and developed technology	$	7,333.0	$	(2,132.2	)	$	5,200.8
Customer-related	903.6		(701.2		)	202.4
In-process research and development	7.7		—			7.7
Distribution rights and other	132.9		(57.0		)	75.9
Total	$	8,377.2	$	(2,890.4	)	$	5,486.8



	March 31, 2020
	Gross Amount		Accumulated Amortization			Net Amount
Core and developed technology	$	7,331.9	$	(1,924.6	)	$	5,407.3
Customer-related	903.6		(674.7		)	228.9
In-process research and development	8.8