UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

OR

(Exact name of Registrant as Specified in its Charter)

160 Rio Robles

San Jose, California 95134

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, 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):

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

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 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 sixthree months ended December 30, 2017September 29, 2018 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 24, 2017.30, 2018.

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 20172018 was a 52-week53-week fiscal year and fiscal year 20182019 is a 53-week52-week fiscal year. The second quarter of fiscal year 2017 was a 13-week quarter and the second quarter of fiscal year 2018 was a 14-week quarter.

balances are presented on a gross basis as accrued price adjustments and other revenue reserves of $141.7 million, which is intendedpresented in the price adjustment and other revenue reserves balance sheet caption.

(ii) Recent Accounting Updates Not Yet Effective

corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use

Property, plant and equipment, net consists of:

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:

 

 

The Company’s Level 1 assets consist of money market funds.

 

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 and long-term debt that are valued using quoted market prices or are determined using a yield curve model based on current market rates.

The Company did not hold anyCompany's Level 3 assets orand liabilities asconsist of December 30, 2017 and June 24, 2017.acquisition related contingent consideration liabilities.

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

During the sixthree months ended December 30, 2017September 29, 2018 and the year ended June 24, 2017,30, 2018, 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 December 30, 2017September 29, 2018 and June 24, 201730, 2018 other than impairments of Long-Livedlong-lived assets. For details, please refer to Note 14: “Impairmentthe three months ended September 29, 2018, the Company did not record any impairment of long-lived assets”.assets. For the fiscal year ended June 30, 2018, the Company recorded $0.9 million in impairment of long-lived assets in the Company's Consolidated Statements of Income. The Company uses various inputs to evaluate investments in privately held companies, including valuations of recent financing events as well as other relevant information regarding the performance of the issuer.

Short-term investments

Fair values were as follows:

In the three and six months ended DecemberSeptember 29, 2018 and June 30, 2017 and the year ended June 24, 2017,2018, the Company did not recognize any impairment charges on short-term investments. All available-for-sale investments have maturity dates between December 31, 2017September 29, 2018 and December 1, 2020.March 12, 2021.

Our investment managers investThe Company invests in various financial instruments including U.SU.S. Treasury securities, corporate debt securities, commercial paper, and certificates of deposit which include instruments issued or managed by industrial, financial, and utility institutions and U.S. Treasury securities which include U.S. government Treasury bills and Treasury notes.

Derivative instruments and hedging activities

The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. The Company does not use these foreign currency forward contracts for trading purposes.

As of December 30, 2017September 29, 2018 and June 24, 2017,30, 2018, the notional amounts of the forward contracts the Company held to purchase international currencies were $16.9$21.8 million and $44.5$21.1 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $27.5$25.8 million and $21.6$21.3 million, respectively. The fair values of our outstanding foreign currency forward contracts and gain (loss) included in the Condensed Consolidated Statements of Income were not material for the three and six months ended DecemberSeptember 29, 2018 and June 30, 2017 and the year ended June 24, 2017.2018.

The following table summarizes the gains and (losses) from hedging activities recognized in the Company's Condensed Consolidated Statements of Income:

The following table summarizes the Company’s outstanding debt obligations:

On June 15, 2017, the Company completed a public offering of $500 million aggregate principal amount of the Company's 3.45% senior unsecured and unsubordinated notes due in June 2027 (“2027 Notes”), with an effective interest rate of 3.5%. Interest on the 2027 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2017. The net proceeds of this offering were approximately $495.2 million, after issuing at a discount and deducting paid expenses.

On November 21, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company’s 2.5% coupon senior unsecured and unsubordinated notes due in November 2018 (“2018 Notes”), with an effective interest rate of 2.6%. Interest on the 2018 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2014. The net proceeds of this offering were approximately $494.5 million, after issuing at a discount and deducting paid expenses.

On March 18, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company’s 3.375% senior unsecured and unsubordinated notes due in March 2023 (“2023 Notes”), with an effective interest rate of 3.5%. Interest on the 2023 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2013. The net proceeds of this offering were approximately $490 million, after issuing at a discount and deducting paid expenses.

The debt indentures that govern the 2027 Notes, the 2023 Notes and the 2018 Notes, respectively, include covenants that limit the Company's ability to grant liens on its facilities and to enter into sale and leaseback transactions, which could limit the Company's ability to secure additional debt funding in the future. In circumstances involving a change of control of the Company followed

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net in the Condensed Consolidated Statements of Income over the life of the notes. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes, were $12.4 million and $9.3$12.6 million during the three months ended December 30,September 29, 2018 and September 23, 2017, and December 24, 2016, respectively. Amortized discount and expenses, as well as interest expense associated with the notes, were $24.7 million and $18.4 million during the six months ended December 30, 2017 and December 24, 2016, respectively.

The estimated fair value of the Company’s outstanding debt obligations was approximately $1,509$1,461 million as of December 30, 2017.September 29, 2018. The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.

The Company recorded interest expense of $12.5$12.6 million and $9.5$12.6 million during the three months ended December 30,September 29, 2018, and September 23, 2017, and December 24, 2016, respectively. The Company recorded interest expense of $25.1 million and $18.8 million during the six months ended December 30, 2017 and December 24, 2016, respectively.

The Company has access to a $350 million senior unsecured revolving credit facility with certain institutional lenders that expires on June 27, 2019. The facility fee is at a rate per annum that varies based on the Company’s index debt rating and any advances under the credit agreement will accrue interest at a base rate plus a margin based on the Company’s index debt rating. The credit agreement requires the Company to comply with certain covenants, including a requirement that the Company maintain a ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of not more than 3 to 1 and a minimum interest coverage ratio (EBITDA divided by interest expense) greater than 3.5 to 1. As of December 30, 2017,September 29, 2018, the Company had not borrowed any amounts from this credit facility and was in compliance with all debt covenants.

Other Financial Instruments

At December 30, 2017,September 29, 2018, the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the board of directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), and market stock units (“MSUs”) to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than seven years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSUs granted after August 2017 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

MSUs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017 and after, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD; these MSUs vest based upon annual performance

The following tables show 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 30,September 29, 2018 and September 23, 2017, and December 24, 2016, respectively:

The expenses included in the Condensed Consolidated Statements of Income related tofor RSUs include expenses related to MSUs of $2.2$2.4 million and $0.9$1.4 million for the three months ended December 30,September 29, 2018 and September 23, 2017, and December 24, 2016, respectively and $3.6 million and $1.5 million for the six months ended December 30, 2017 and December 24, 2016, respectively.

Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

There were no stock options granted in the three and six months ended December 30, 2017 and December 24, 2016.September 29, 2018 or September 23, 2017.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 30, 2017September 29, 2018 and their activity for the sixthree months ended December 30, 2017:

As of December 30, 2017,September 29, 2018, there was less than $0.1 million of totalno unrecognized stock compensation cost related to less than 0.1 millionfrom unvested stock options, which is expected to be recognized over a weighted average period of approximately 0.4 years.options.

The fair value of RSUs and other awards under the Company’s 1996 Plan is estimated using the value 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. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs and other awards granted was $50.36$54.98 and $37.27$41.69 per share for the three months ended December 30,September 29, 2018 and September 23, 2017, and December 24, 2016, respectively and $42.41 and $36.09 per share for the six months ended December 30, 2017 and December 24, 2016, respectively.

The following table summarizes the outstanding and expected to vest RSUs and other awards as of December 30, 2017September 29, 2018 and their activity during the sixthree months ended December 30, 2017:September 29, 2018:

The Company withheld shares totaling $6.1 million and $11.5$7.5 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 30, 2017.September 29, 2018. 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 30, 2017,September 29, 2018, there was $160.2$187.7 million of unrecognized compensation expense related to 6.56.2 million unvested RSUs and other awards, which is expected to be recognized over a weighted average period of approximately 2.93.0 years.

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017 and after, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD or the TSR of the companies included in the XSD, index, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted in September 2017 vest based upon annual performance and are subject to continued service through the end of the four-year period, but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The weighted-average fair value of MSUs granted was $51.03$75.48 and $37.29$51.03 per share for the sixthree months ended December 30,September 29, 2018 and September 23, 2017, and December 24, 2016, respectively.

The following table summarizes the number of MSUs outstanding and expected to vest as of December 30, 2017September 29, 2018 and their activity during the sixthree months ended December 30, 2017:September 29, 2018:

As of December 30, 2017,September 29, 2018, there was $26.9$38.0 million of unrecognized compensation expense related to 1.1 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 3.03.1 years.

Employee Stock Purchase Plan

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

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:

As of December 30,September 29, 2018 and September 23, 2017, and December 24, 2016, there was $6.5$3.5 million and $6.1$2.9 million, respectively, of unrecognized compensation expense related to the 2008 ESPP.

Basic earnings (loss) per share are computed using the weighted average number of shares of common stock outstanding during the period. For purposes of computing basic earnings (loss) per share, the weighted average number of outstanding shares of common stock excludes unvested RSUs and other awards as well as MSUs. Diluted earnings (loss) per share incorporates the incremental shares issuable upon the assumed exercise of stock options, assumed release of unvested RSUs and other awards as well as MSUs, and assumed issuance of common stock under the 2008 ESPP using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings (loss) per share:

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