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MAXIM INTEGRATED PRODUCTS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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08/11/2017 | 10:31pm CEST
The following discussion and analysis should be read in conjunction with our
Consolidated Financial Statements and notes thereto included in Part IV,
Item 15(a), the risk factors included in Part I, Item 1A, and the
"forward-looking statements" and other risks described herein and elsewhere in
this Annual Report.

Overview

We are a global company with manufacturing facilities in the United States, the
Philippines and Thailand, and sales offices and design centers throughout the
world. We design, develop, manufacture and market linear and mixed-signal
integrated circuits, commonly referred to as analog circuits, for a large number
of customers in diverse geographical locations. The analog market is fragmented
and characterized by diverse applications, a great number of product variations
and, with respect to many circuit types, relatively long product life cycles.
The major end-markets in which we sell our products are the automotive,
communications and data center, computing, consumer and industrial markets. We
are incorporated in the State of Delaware.

Critical Accounting Policies


The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results we report in our
financial statements. The Securities and Exchange Commission ("SEC") has defined
the most critical accounting policies as the ones that are most important to the
presentation of our financial condition and results of operations, and that
require us to make our most difficult and subjective accounting judgments, often
as a result of the need to make estimates of matters that are inherently
uncertain. Based on this definition, our most critical accounting policies
include revenue recognition, which impacts the recording of net revenues;
valuation of inventories, which impacts costs of goods sold and gross margins;
the assessment of recoverability of long-lived assets, which impacts impairment
of long-lived assets; assessment of recoverability of intangible assets and
goodwill, which impacts impairment of goodwill and intangible assets; accounting
for income taxes, which impacts the income tax provision; and assessment of
litigation and contingencies, which impacts charges recorded in cost of goods
sold, selling, general and administrative expenses and income taxes. These
policies and the estimates and judgments involved are discussed further below.
We have other significant accounting policies that either do not generally
require estimates and judgments that are as difficult or subjective, or it is
less likely that such accounting policies would have a material impact on our
reported results of operations for a given period. Our significant accounting
policies are described in Note 2 to the Consolidated Financial Statements
included in this Annual Report.

Revenue Recognition


We recognize revenue for sales to direct customers and sales to certain
distributors upon shipment, provided that persuasive evidence of a sales
arrangement exists, the price is fixed or determinable, title and risk of loss
has transferred, collectability of the resulting receivable is reasonably
assured, there are no customer acceptance requirements and we do not have any
significant post-shipment obligations. We estimate returns for sales to direct
customers and certain distributors based on historical return rates applied
against current period gross revenue. Specific customer returns and allowances
are considered within this estimate.

Accounts receivable from direct customers and distributors are recognized and
inventory is relieved upon shipment as title to inventories generally transfers
upon shipment, at which point we have a legally enforceable right to collection
under normal terms. Accounts receivable related to consigned inventory is
recognized when the customer takes title to such inventory from its consigned
location, at which point inventory is relieved, title transfers, and we have a
legally enforceable right to collection under the terms of our agreement with
the related customers.

We estimate potential future returns and sales allowances related to current
period product revenue. Management analyzes historical returns, changes in
customer demand and acceptance of products when evaluating the adequacy of
returns and sales allowances. Estimates made by us may differ from actual
returns and sales allowances. These differences may materially impact reported
revenue and amounts ultimately collected on accounts receivable. Historically,
such differences have not been material.

An allowance for distributor credits covering price adjustments is made based on
our estimate of historical experience rates as well as considering economic
conditions and contractual terms. To date, actual distributor claims activity
has been materially consistent with the provisions we have made based on our
historical estimates.

The Company had historically recognized a portion of revenue through certain
distributors at the time the distributor resold the product to its end customer
(also referred to as the sell-through basis of revenue recognition) given the
difficulty in estimating the ultimate price of these product shipments and
amount of potential returns. The Company continuously reassesses its ability to

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reliably estimate the ultimate price of these products and the amount of
potential returns, and over the past several years, has made investments in its
systems and updates to processes around its distribution channel to improve the
quality of the information for preparing such estimates. Resulting from this
continuous reassessment, in the fourth quarter of fiscal 2017, the Company began
recognizing revenue with a certain distributor (less its estimate of future
price adjustments and returns) upon shipment to the distributor (also referred
to as the sell-in basis of revenue recognition).

Inventories


Inventories are stated at the lower of (i) standard cost, which approximates
actual cost on a first-in-first-out basis, or (ii) net realizable value. Our
standard cost revision policy is to monitor manufacturing variances and revise
standard costs on a quarterly basis. Because of the cyclical nature of the
market, inventory levels, obsolescence of technology, and product life cycles,
we generally write-down inventories to net realizable value based on forecasted
product demand. Actual demand and market conditions may be lower than those
projected by us. This difference could have a material adverse effect on our
gross margin should inventory write-downs beyond those initially recorded become
necessary. Alternatively, should actual demand and market conditions be more
favorable than those estimated by us, gross margin could be favorably impacted
as we release these reserves upon the ultimate product shipment. During fiscal
years 2017, 2016 and 2015, we had net inventory write-downs of $19.0 million,
$26.2 million and $28.6 million, respectively. When the Company records a
write-down on inventory, it establishes a new, lower cost basis for that
inventory, and subsequent changes in facts and circumstances will not result in
the restoration or increase in that newly established cost basis.

Long-Lived Assets


We evaluate the recoverability of property, plant and equipment in accordance
with Accounting Standards Codification ("ASC") No. 360, Property, Plant, and
Equipment ("ASC 360"). We perform periodic reviews to determine whether facts
and circumstances exist that would indicate that the carrying amounts of
property, plant and equipment might not be fully recoverable. If facts and
circumstances indicate that the carrying amount of property, plant and equipment
might not be fully recoverable, we compare projected undiscounted net cash flows
associated with the related asset or group of assets over their estimated
remaining useful lives against their respective carrying amounts. In the event
that the projected undiscounted cash flows are not sufficient to recover the
carrying value of the assets, the assets are written down to their estimated
fair values based on the expected discounted future cash flows attributable to
the assets. Evaluation of impairment of property, plant and equipment requires
estimates in the forecast of future operating results that are used in the
preparation of the expected future undiscounted cash flows. Actual future
operating results and the remaining economic lives of our property, plant and
equipment could differ from our estimates used in assessing the recoverability
of these assets. These differences could result in impairment charges, which
could have a material adverse impact on our results of operations.

Intangible Assets and Goodwill


We account for intangible assets in accordance with ASC No. 350,
Intangibles-Goodwill and Other ("ASC 350"). We review goodwill and purchased
intangible assets with indefinite lives for impairment annually and whenever
events or changes in circumstances indicate the carrying value of an asset may
not be recoverable, such as when reductions in demand or significant economic
slowdowns in the semiconductor industry are present.

Intangible asset reviews are performed when indicators exist that could indicate
the carrying value may not be recoverable based on comparisons to undiscounted
expected future cash flows. If this comparison indicates that there is
impairment, the impaired asset is written down to fair value, which is typically
calculated using: (i) quoted market prices or (ii) discounted expected future
cash flows utilizing a discount rate consistent with the guidance provided in
FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in
Accounting Measurements. Impairment is based on the excess of the carrying
amount over the fair value of those assets.

Goodwill represents the excess of the purchase price in a business combination
over the fair value of net tangible and intangible assets acquired. In
accordance with ASC 350, the Company tests goodwill for impairment at the
reporting unit level (operating segment or one level below an operating segment)
on an annual basis or more frequently if the Company believes indicators of
impairment exist. As part of its analysis, the Company first performs a
qualitative assessment to determine if it is more likely than not that the fair
value of a reporting unit is less than its carrying amount. If, as a result of
the qualitative assessment, the company determines that it is more likely than
not that the fair value of a reporting unit is less than its carrying amount,
then the company performs the quantitative goodwill impairment test. This test
involves comparing the fair values of the applicable reporting units with their
aggregate carrying values, including goodwill. The Company generally determines
the fair value of the Company's reporting units using the income approach
methodology of valuation that includes the discounted cash flow method as well
as the market approach which includes the guideline company method. If the
carrying amount of a reporting unit exceeds the reporting

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unit's fair value, the Company recognizes an impairment of goodwill measured as
the amount by which a reporting unit's carrying value exceeds its fair value
with the loss recognized not to exceed the total amount of goodwill allocated to
the reporting unit.

Accounting for Income Taxes


We must make certain estimates and judgments in the calculation of income tax
expense, determination of uncertain tax positions, and in the determination of
whether deferred tax assets are more likely than not to be realized. The
calculation of our income tax expense and income tax liabilities involves
dealing with uncertainties in the application of complex tax laws and
regulations.

ASC 740-10, Income Taxes ("ASC 740-10"), prescribes a recognition threshold and
measurement framework for financial statement reporting and disclosure of tax
positions taken or expected to be taken on a tax return. Under ASC 740-10, a tax
position is recognized in the financial statements when it is more likely than
not, based on the technical merits, that the position will be sustained upon
examination, including resolution of any related appeals or litigation
processes. A tax position that meets the recognition threshold is then measured
to determine the largest amount of the benefit that has a greater than 50%
likelihood of being realized upon settlement. Although we believe that our
computation of tax benefits to be recognized and realized are reasonable, no
assurance can be given that the final outcome will not be different from what
was reflected in our income tax provisions and accruals. Such differences could
have a material impact on our net income and operating results in the period in
which such determination is made. See Note 15: "Income Taxes" in the Notes to
Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual
Report for further information related to ASC 740-10.

We evaluate our deferred tax asset balance and record a valuation allowance to
reduce the net deferred tax assets to the amount that is more likely than not to
be realized. In the event it is determined that the deferred tax assets to be
realized in the future would be in excess of the net recorded amount, an
adjustment to the deferred tax asset valuation allowance would be recorded. This
adjustment would increase income in the period such determination was made.
Likewise, should it be determined that all or part of the net deferred tax asset
would not be realized in the future, an adjustment to increase the deferred tax
asset valuation allowance would be charged to income in the period such
determination is made. In assessing the need for a valuation allowance,
historical levels of income, expectations and risks associated with estimates of
future taxable income and ongoing prudent and practicable tax planning
strategies are considered. Realization of our deferred tax asset is dependent
primarily upon future taxable income in the U.S. and certain foreign
jurisdictions. Our judgments regarding future profitability may change due to
future market conditions, changes in U.S. or international tax laws and other
factors. These changes, if any, may require material adjustments to the net
deferred tax asset and an accompanying reduction or increase in net income in
the period in which such determinations are made.

Litigation and Contingencies


From time to time, we receive notices that our products or manufacturing
processes may be infringing the patent or other intellectual property rights of
others, notices of stockholder litigation or other lawsuits or claims against
us. We periodically assess each matter in order to determine if a contingent
liability in accordance with ASC No. 450, Contingencies ("ASC 450"), should be
recorded. In making this determination, management may, depending on the nature
of the matter, consult with internal and external legal counsel and technical
experts. We expense legal fees associated with consultations and defense of
lawsuits as incurred. Based on the information obtained, combined with
management's judgment regarding all of the facts and circumstances of each
matter, we determine whether a contingent loss is probable and whether the
amount of such loss can be estimated. Should a loss be probable and estimable,
we record a contingent loss in accordance with ASC 450. In determining the
amount of a contingent loss, we take into consideration advice received from
experts in the specific matter, the current status of legal proceedings,
settlement negotiations which may be ongoing, prior case history and other
factors. Should the judgments and estimates made by management be incorrect, we
may need to record additional contingent losses that could materially adversely
impact our results of operations. Alternatively, if the judgments and estimates
made by management are incorrect and a particular contingent loss does not
occur, the contingent loss recorded would be reversed thereby favorably
impacting our results of operations.

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


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                                                    For the Year Ended
                                             June 24,    June 25,    June 27,
                                               2017        2016        2015

Net revenues                                    100  %      100  %      100  %
Cost of goods sold                               37  %     43.3  %     44.9  %
Gross margin                                   63.0  %     56.7  %     55.1  %
Operating expenses:
Research and development                       19.8  %     21.3  %     22.6  %
Selling, general and administrative            12.7  %     13.2  %     13.4 

%

Intangible asset amortization                   0.4  %      0.6  %      0.7 

%

Impairment of long-lived assets                 0.3  %      7.3  %      2.9 

%

Impairment of goodwill and intangible assets - % 1.3 % 4.0

%

Severance and restructuring expenses            0.5  %      1.1  %      1.3 

%

Other operating expenses (income), net         (1.0 )%     (2.4 )%     (0.1 )%
Total operating expenses                       32.7  %     42.4  %     44.8  %
Operating income                               30.3  %     14.3  %     10.3  %

Interest and other income (expense), net (0.7 )% (1.3 )% 0.4

%

Income before provision for income taxes 29.6 % 13.0 % 10.7

 %
Provision for income taxes                      4.7  %      2.6  %      1.7  %
Net income                                     24.9  %     10.4  %      9.0  %


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

                                            For the Year Ended
                                    June 24,     June 25,    June 27,
                                      2017         2016        2015

Cost of goods sold                     0.4 %         0.4 %      0.5 %
Research and development               1.6 %         1.7 %      1.8 %

Selling, general and administrative 1.1 % 1.1 % 1.1 %

                                       3.1 %         3.2 %      3.4 %



Net Revenues

We reported net revenues of $2,295.6 million, $2,194.7 million and $2,306.9
million in fiscal years 2017, 2016 and 2015, respectively. Our net revenues in
fiscal year 2017 increased by 4.6% compared to our net revenues in fiscal year
2016. Revenue from automotive products was up 18%, primarily due to increased
demand for infotainment products. Revenue from industrial products was up 4%,
primarily driven by shipments of control and automation products. Revenue from
communications and data center products was up 3%, due to higher shipments of
data center products. These increases were partially offset by a decrease in
revenue from consumer products of 2%, primarily due to lower shipments of
smartphone products. Also, in the fourth quarter of fiscal 2017 the Company
began recognizing revenue with a certain distributor (less its estimate of
future price adjustments and returns) upon shipment to the distributor (also
referred to as the sell-in basis of revenue recognition). As a result of this
change, the Company recognized incremental $19.4 million of revenue during the
fourth quarter of fiscal 2017.

Our net revenues in fiscal year 2016 decreased by 4.9%, compared to our net
revenues in fiscal year 2015. Revenue from communications and data center
products was down 15% mainly due to lower demand for server, basestation and
data storage products. Revenue from consumer products was down 10%, primarily
driven by lower demand for smartphone products. This decrease was partially
offset by an increase in net revenues in automotive of 32%, primarily driven by
infotainment.


                                       27
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Approximately 88%, 89% and 88% of our net revenues in fiscal years 2017, 2016
and 2015, respectively, were derived from customers located outside the United
States, primarily in Asia and Europe. While less than 1.0% of our sales are
denominated in currencies other than U.S. dollars, we enter into foreign
currency forward contracts to mitigate our risks on firm commitments and net
monetary assets denominated in foreign currencies. The impact of changes in
foreign exchange rates on net revenues and our results of operations for fiscal
years 2017, 2016 and 2015 were immaterial.

Gross Margin


Our gross margin as a percentage of net revenue was 63.0% in fiscal year 2017
compared to 56.7% in fiscal year 2016. Our gross margin increased by 6.3
percentage points, partially driven by lower accelerated depreciation in fiscal
year 2017 of $65.0 million (3.1 percentage point increase to gross margin) and
partially driven by improved factory utilization and cost reduction initiatives
(3.2 percentage point increase to gross margin).

Our gross margin as a percentage of net revenue was 56.7% in fiscal year 2016
compared to 55.1% in fiscal year 2015. Our gross margin increased by 1.6
percentage points, primarily from a $73.8 million, or 8.1%, decrease in
production related costs (1.3 percentage point increase to gross margin). These
reduced production related costs were primarily due to the realization of
benefits from increased outsourcing of manufacturing, improved utilization of
our wafer fabrication facility and cost savings initiatives, as well as due to
the 4.9% decrease in net revenue, and to a lesser extent due to the mix of
products sold.

Research and Development


Research and development expenses were $454.0 million and $467.2 million for
fiscal years 2017 and 2016, respectively, which represented 19.8% and 21.3% of
net revenues, respectively. The $13.2 million decrease in research and
development expenses was primarily attributable to a decrease in salaries and
related expenses of $5.9 million as a result of headcount reductions related to
restructuring programs and spending control efforts.

Research and development expenses were $467.2 million and $521.8 million for
fiscal years 2016 and 2015, respectively, which represented 21.3% and 22.6% of
net revenues, respectively. The $54.6 million decrease in research and
development expenses was primarily attributable to a decrease in salaries and
related expenses of $44.0 million as a result of headcount reductions related to
restructuring programs and spending control efforts.

The level of research and development expenditures as a percentage of net
revenues will vary from period to period depending, in part, on the level of net
revenues and on our success in recruiting the technical personnel needed for our
new product introductions and process development. We view research and
development expenditures as critical to maintaining a high level of new product
introductions, which in turn are critical to our plans for future growth.

Selling, General and Administrative


Selling, general and administrative expenses were $291.5 million and $288.9
million in fiscal years 2017 and 2016, respectively, which represented 12.7% and
13.2% of net revenues, respectively. The $2.6 million increase in selling,
general and administrative expenses was primarily attributable to an increase in
salaries and related expenses of $12.6 million driven by increased employee
profit sharing bonus, partially offset by a decrease in legal expenses.

Selling, general and administrative expenses were $288.9 million and $308.1
million in fiscal years 2016 and 2015, respectively, which represented 13.2% and
13.4% of net revenues, respectively. The $19.2 million decrease in selling,
general and administrative expenses was primarily attributable to a decrease in
salaries and related expenses of $11.0 million as a result of headcount
reductions related to restructuring programs and spending control efforts.

The level of selling, general and administrative expenditures as a percentage of
net revenues will vary from period to period, depending on the level of net
revenues and our success in recruiting sales and administrative personnel needed
to support our operations.

Impairment of Long-lived Assets


Impairment of long-lived assets was $7.5 million in fiscal year 2017 and $160.6
million in fiscal year 2016, which represented 0.3% and 7.3% of net revenues,
respectively. The $153.1 million decrease was primarily due to the
classification of our wafer manufacturing facility in San Antonio, Texas as held
for sale in the first quarter of fiscal year 2016 which was written down to fair
value, less cost to sell, resulting in an impairment of $157.7 million.


                                       28
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Impairment of long-lived assets was $160.6 million in fiscal year 2016 and $67.0
million in fiscal year 2015, which represented 7.3% and 2.9% of net revenues,
respectively. The $93.6 million increase was primarily due to the classification
of our wafer manufacturing facility in San Antonio, Texas as held for sale in
the first quarter of fiscal year 2016 which was written down to fair value, less
cost to sell, resulting in an impairment of $157.7 million.

For further details of the asset impairments, please refer to Note 9: "Impairment of long-lived assets" in our consolidated financial statements included in Part IV, Item 15(a) to this Annual Report.

Impairment of Goodwill and Intangible Assets


There was no impairment of goodwill and intangible assets in fiscal year 2017
and $27.6 million of impairment in fiscal year 2016, which represented 1.3% of
fiscal year 2016 net revenues. This decrease was driven by a $27.6 million
impairment during fiscal year 2016 of in-process research and development
obtained in previous acquisitions, primarily from the acquisition of Volterra.

Impairment of goodwill and intangible assets was $27.6 million in fiscal year
2016 and $93.0 million in fiscal year 2015, which represented 1.3% and 4.0% of
net revenues, respectively. The $65.4 million decrease was primarily driven by a
$93.0 million impairment to goodwill and in-process research and development for
the Sensing Solutions reporting unit in fiscal year 2015 compared to a $27.6
million impairment in fiscal year 2016 of in-process research and development
obtained in previous acquisitions, primarily from the acquisition of Volterra.

For further details on impairments recorded of goodwill and intangible assets,
please refer to Note 8: "Goodwill and intangible assets" in our consolidated
financial statements included in Part IV, Item 15(a) to this Annual Report.

Severance and Restructuring Expenses


Severance and restructuring expenses were $12.5 million in fiscal year 2017 and
$24.5 million in fiscal year 2016, which represented 0.5% and 1.1% of net
revenues, respectively. The $12.0 million decrease was primarily due to the
timing of restructuring activities initiated by the Company associated with
continued reorganization of certain business units and functions and the closure
of the Dallas wafer level packaging ("WLP") manufacturing facilities.

Severance and restructuring expenses were $24.5 million in fiscal year 2016 and
$30.6 million in fiscal year 2015, which represented 1.1% and 1.3% of net
revenues, respectively. The $6.1 million decrease was primarily due to the
timing of restructuring activities initiated by the Company. During fiscal year
2016, the Company incurred $24.0 million of severance and restructuring expenses
associated with continued reorganization of certain business units and functions
and the closure of the Dallas wafer level packaging ("WLP") manufacturing
facilities and $0.4 million associated with the completion of the shutdown of
our San Jose wafer fabrication facility.

For further details on our restructuring plans and charges recorded, please refer to Note 16: "Restructuring Activities" in our consolidated financial statements included in Part IV, Item 15(a) to this Annual Report.

Other Operating Expenses (Income), Net


Other operating expenses (income), net were $(22.9) million and $(50.4) million
in fiscal year 2017 and 2016, respectively, which represented (1.0)% and (2.4)%
of net revenues, respectively. The net decrease in other operating income of
$27.5 million was primarily driven by the gain of $26.6 million on the sale of
our micro-electromechanical systems (MEMS) business line recorded in fiscal year
2017 compared to the gain of $58.9 million on the asset sale of our energy
metering business recorded in fiscal year 2016.

Other operating expenses (income), net were $(50.4) million and $(2.0) million
in fiscal years 2016 and 2015, respectively, which represented (2.4)% and (0.1)%
of net revenues, respectively. The net decrease in other operating expenses of
$48.4 million was primarily driven by the gain of $58.9 million on the asset
sale of our energy metering business recorded in fiscal year 2016.

Interest and Other Income (Expense), Net


Interest and other income (expense), net was $(15.2) million in fiscal year 2017
and $(28.8) million in fiscal year 2016, which represented (0.7)% and (1.3)% of
net revenues, respectively. The change in interest and other expense of $13.6
million was primarily attributable to increased interest income on cash
equivalents and short-term investments.


                                       29
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Interest and other income (expense), net was $(28.8) million in fiscal year 2016
and $8.9 million in fiscal year 2015, which represented (1.3)% and 0.4% of net
revenues, respectively. The change in interest and other expense of $(37.7)
million was primarily attributable to the gain of $35.8 million on the sale of
our Capacitive Touch business, which occurred in the fourth quarter of fiscal
year 2015.

Provision for Income Taxes

Our annual income tax expense was $108.0 million, $57.6 million, and $40.1 million, in fiscal years 2017, 2016 and 2015, respectively. The effective tax rate was 15.9%, 20.2% and 16.3% for fiscal years 2017, 2016 and 2015, respectively. Our federal statutory tax rate is 35%.


Our fiscal year 2017 effective tax rate was lower than the statutory tax rate
primarily because earnings of foreign subsidiaries, generated by our
international operations managed in Ireland, were taxed at lower rates, and
$14.4 million of excess tax benefits generated by the settlement of share-based
awards, partially offset by stock-based compensation for which no tax benefit is
expected and interest accruals for unrecognized tax benefits.

Our fiscal year 2016 effective tax rate was lower than the statutory tax rate
primarily because earnings of foreign subsidiaries, generated by our
international operations managed in Ireland, were taxed at lower rates,
partially offset by stock-based compensation for which no tax benefit is
expected, interest accruals for unrecognized tax benefits and $20.4 million of
non-deductible goodwill included in the sale of the energy metering business.

Our fiscal year 2015 effective tax rate was lower than the statutory tax rate
primarily because earnings of foreign subsidiaries, generated by our
international operations managed in Ireland, were taxed at lower tax rates, a
$2.9 million tax benefit for fiscal year 2014 research tax credits that were
generated by the retroactive extension of the federal research tax credit to
January 1, 2014 by legislation that was signed into law on December 19, 2014,
and a $24.8 million tax benefit for the favorable settlement of a Singapore tax
issue, partially offset by a $84.1 million goodwill impairment charge that
generated no tax benefit and stock-based compensation for which no tax benefit
is expected.

We have various entities domiciled within and outside the United States. The
following is a breakout of our U.S. and Foreign income (loss) before income
taxes:

                                        For the Year Ended
                                June 24,     June 25,      June 27,
                                  2017         2016          2015
                                          (in thousands)

Domestic pre-tax income (loss) $ 154,628 $ (48,985 ) $ 68,289 Foreign pre-tax income (loss) 524,961 334,039 177,881 Total

                          $ 679,589    $ 285,054     $ 246,170



A relative increase in earnings in lower tax jurisdictions, such as Ireland, may
lower our consolidated effective tax rate, while a relative increase in earnings
in higher tax jurisdictions, such as the United States, may increase our
consolidated effective tax rate.

In fiscal year 2017 the percentage of pre-tax income from our foreign operations
declined versus fiscal year 2016, which was primarily due to a $157.7 million
fiscal year 2016 impairment of long-lived assets associated with the Company's
wafer manufacturing facility in San Antonio, Texas that reduced domestic pre-tax
income, partially offset by a $24.1 million fiscal year 2016 in-process research
and development impairment charge realized by a foreign affiliate. The impact of
pre-tax income from foreign operations reduced our effective tax rate by 20.2
percentage points in fiscal year 2017 as compared to 21.7 percentage points in
fiscal year 2016. The decreased fiscal year 2017 tax rate benefit from foreign
operations was primarily attributable to the relative decrease in fiscal year
2017 pre-tax income from foreign operations.

In fiscal year 2016 the percentage of pre-tax income from our foreign operations
increased, which was primarily due to a $157.7 million fiscal year 2016
impairment of long-lived assets associated with the Company's wafer
manufacturing facility in San Antonio, Texas that reduced domestic pre-tax
income and a $93.0 million fiscal year 2015 goodwill and in-process research and
development impairment charge realized by a foreign affiliate, partially offset
by a $24.1 million fiscal year 2016 in-process research and development
impairment charge realized by a foreign affiliate. The impact of pre-tax income
from foreign operations reduced our effective tax rate by 21.7 percentage points
in fiscal year 2016 as compared to 24.6 percentage points in fiscal year 2015.
The decreased fiscal year 2016 tax rate benefit from foreign operations was
primarily attributable to a $24.8 million tax

                                       30
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benefit in fiscal year 2015 for the favorable settlement of a Singapore tax issue, partially offset by the relative increase in fiscal year 2016 pre-tax income from foreign operations.

Recently Issued Accounting Pronouncements

Refer to our discussion of recently issued accounting pronouncements as included in Part IV, Item 15. Exhibits and financial statement schedules, Note 2: "Summary of Significant Accounting Policies".

Financial Condition, Liquidity and Capital Resources

Financial Condition

Our primary source of liquidity is our cash flows from operating activities resulting from net income and management of working capital. In fiscal year 2017, additional sources of liquidity were cash provided by investing activities, generated by the sale of a certain non-core business and operating assets sold as part of our manufacturing transformation.

Cash flows were as follows:

                                                        For the Year Ended
                                           June 24,          June 25,          June 27,
                                             2017              2016              2015
                                                          (in thousands)
Net cash provided by (used in)
operating activities                    $     773,657     $     721,885     $     693,706
Net cash provided by (used in)
investing activities                         (325,396 )          62,722           (36,073 )
Net cash provided by (used in)
financing activities                         (307,369 )        (230,343 )        (429,140 )
Net increase (decrease) in cash and
cash equivalents                        $     140,892     $     554,264     $     228,493


Operating Activities

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


Cash provided by operating activities was $773.7 million in fiscal year 2017, an
increase of $51.8 million compared with fiscal year 2016. This increase was
primarily driven by an increase in net income of $344.1 million driven by
improved gross margin. This increase was offset by lower non-cash adjustments of
$158.7 million of impairment of long-lived assets primarily related to the
Company's wafer manufacturing facility in San Antonio, Texas in fiscal year 2016
and by lower non-cash adjustments of $80.3 million of depreciation and
amortization charges.

Cash provided by operating activities was $721.9 million in fiscal year 2016, an
increase of $28.2 million compared with fiscal year 2015. This increase was
primarily driven by decreases in inventory of $41.9 million resulting from the
sale of our San Antonio wafer manufacturing facility and sale of our energy
metering business, as well as actions to keep inventory balances in line with
current revenue levels. In addition, the increase was due to changes in our
deferred tax balances and other current asset balance of $24.4 million and $11.7
million respectively. These increases were partially offset by reductions in
non-cash adjustments to net income of depreciation and amortization of $54.8
million.

Investing Activities

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

Cash used in investing activities was $325.4 million in fiscal year 2017, an increase of $388.1 million compared with fiscal year 2016. The change was primarily due to a $350.2 million increase in purchases of U.S. treasury securities for the purpose of increasing interest income.


Cash provided by investing activities was $62.7 million in fiscal year 2016, an
increase of $98.8 million compared with fiscal year 2015. The change was
primarily due to $105.0 million in proceeds from the sale of our energy metering
business in fiscal year 2016, compared to $35.6 million from the sale of our
Capacitive Touch business in fiscal year 2015, a $69.4 million increase. Also,
cash provided by the sale of property, plant and equipment increased $56.1
million, the majority of which was from the sale of our San Jose wafer
manufacturing facility. Fiscal year 2016 also included $50.0 million of proceeds
from the maturity of

                                       31
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available for sale securities. These cash inflows were partially offset by a $74.8 million increase in purchases of U.S. treasury securities.

Financing Activities


Financing cash flows consist primarily of new borrowings, repurchases of common
stock, issuance and repayment of notes payables, payment of dividends to
stockholders, proceeds from stock option exercises and employee stock purchase
plan and withholding tax payments associated with net share settlements of
equity awards.

Net cash used in financing activities was $307.4 million in fiscal year 2017, an
increase of $77.0 million compared with fiscal year 2016. This increase was due
primarily to the issuance of the $500.0 million of long-term debt compared to
$250.0 million of short-term debt issued in fiscal year 2016, offset by the
repayment in fiscal year 2017 of $250.0 million of notes payable and an increase
of $31.9 million in dividend payments.

Net cash used in financing activities was $230.3 million in fiscal year 2016, a
decrease of $198.8 million compared with fiscal year 2015. This decrease was due
primarily to the issuance of the $250.0 million short-term debt. This decrease
was offset primarily due to an increase of $42.0 million in repurchases of
common stock and an increase of $24.1 million in dividend payments.

Liquidity and Capital Resources


As of June 24, 2017, our available funds consisted of $2.7 billion in cash, cash
equivalents and short-term investments. We anticipate that the available funds
and cash generated from operations will be sufficient to meet cash and working
capital requirements, including the anticipated level of capital expenditures,
common stock repurchases, debt repayments and dividend payments for at least the
next twelve months.

Long-Term Debt Levels

On June 15, 2017, the Company completed a public offering of $500 million aggregate principal amount of the Company's 3.450% senior unsecured and unsubordinated notes due on June 15, 2027 ("2027 Notes").

On November 21, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company's 2.5% senior unsecured and unsubordinated notes due on November 15, 2018 ("2018 Notes").

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 on March 15, 2023 ("2023 Notes").


The debt indentures that govern the 2027 Notes, the 2023 Notes, and the 2018
Notes, respectively, include covenants that, under certain circumstances, limit
our ability to grant liens on our facilities and to enter into sale and
leaseback transactions, which could limit our ability to secure additional debt
funding in the future. In circumstances involving a change of control of the
Company followed by a downgrade of the rating of the 2027 Notes, the 2023 Notes,
or the 2018 Notes, we would be required to make an offer to repurchase the
affected notes at a purchase price equal to 101% of the aggregate principal
amount of such notes, plus accrued and unpaid interest.

Short-Term Credit Agreement


On June 23, 2016, a wholly-owned foreign subsidiary of the Company entered into
a short-term credit agreement (the "Credit Agreement") with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (the "Lender"), in order to facilitate the return of
capital to the Company. The Credit Agreement provided for, among other things,
the Lender making an unsecured term loan in an amount equal to $250 million and
had a maturity date of June 22, 2017. On December 21, 2016, the $250 million
aggregate principal amount and all outstanding interest on the loan were repaid.

Available Borrowing Resources


We have 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
us to comply with certain covenants, including a requirement that we 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

                                       32
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by interest expense) of greater than 3.5 to 1. As of June 24, 2017, we had not
borrowed any amounts from this credit facility and we were in compliance with
all debt covenants.

Contractual Obligations

The following table summarizes our significant contractual obligations at
June 24, 2017, and the effect such obligations are expected to have on our
liquidity and cash flows in future periods. This table excludes amounts already
recorded on our Consolidated Balance Sheet as current liabilities at June 24,
2017:

                                                                    Payment due by period
                                                         Less than 1                                   More than 5
                                             Total           year        1-3 years      3-5 years         years
Contractual Obligations:                                               (in thousands)

Operating lease obligations (1) $ 53,734 $ 11,081 $ 12,882 $ 9,241 $ 20,530 Long-term debt obligations (2)

             1,500,000              -        500,000              -        1,000,000
Interest payments associated with debt
obligations (3)                              284,272         46,625         73,111         68,250           96,286
Inventory related purchase obligations
(4)                                          581,667         86,685        145,382         99,957          249,643
Total                                    $ 2,419,673     $  144,391     $  731,375     $  177,448     $  1,366,459



(1) We lease some facilities under non-cancelable operating lease agreements
that expire at various dates through 2036.
(2) Long-term debt represents amounts primarily due for our long-term notes.
(3) Interest payments calculated based on contractual payment requirements under
the debt agreements.
(4) We order some materials and supplies in advance or with minimum purchase
quantities. We are obligated to pay for the materials and supplies when
received. Additionally, in 2016 we entered into a long-term supply agreement
with the semiconductor foundry TowerJazz to supply finished wafers on our
existing processes and products, which contains minimum purchase requirements.

Purchase orders for the purchase of the majority of our raw materials and other
goods and services are not included above. Our purchase orders generally allow
for cancellation without significant penalties. We do not have significant
agreements for the purchase of raw materials or other goods specifying minimum
quantities or set prices that exceed our expected short-term requirements.

As of June 24, 2017, our gross unrecognized income tax benefits were $539.6
million which excludes $71.4 million of accrued interest and penalties. At this
time, we are unable to make a reasonably reliable estimate of the timing of
payments of these amounts, if any, in individual years due to uncertainties in
the timing or outcomes of either actual or anticipated tax audits. As a result,
these amounts are not included in the table above.

Off-Balance-Sheet Arrangements

As of June 24, 2017, we did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

© Edgar Online, source Glimpses

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EBIT 2018 814 M
Net income 2018 619 M
Finance 2018 1 229 M
Yield 2018 3,25%
P/E ratio 2018 19,98
P/E ratio 2019 18,46
EV / Sales 2018 4,73x
EV / Sales 2019 4,47x
Capitalization 12 408 M
Chart MAXIM INTEGRATED PRODUCTS
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Maxim Integrated Products Technical Analysis Chart | MXIM | US57772K1016 | 4-Traders
Technical analysis trends MAXIM INTEGRATED PRODUCTS
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Mean consensus HOLD
Number of Analysts 27
Average target price 47,9 $
Spread / Average Target 8,9%
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NameTitle
Tunç Doluca President, Chief Executive Officer & Director
William P. Sullivan Chairman
Bruce E. Kiddoo Chief Financial Officer & Senior Vice President
Anthony J. Stratakos Chief Technology Officer, VP-Advanced R&D
James R. Bergman Independent Director
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