What changed in this filing

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Item 1A. Risk Factors

2021-02-17 compared with 2020-08-19 · 130 added, 119 removed, 279 unchanged (47% of the section changed)

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Additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business.

The description below includes any material changes to and supersedes the description of the risk factors affecting our business previously discussed in "Risk Factors” set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

Risks Related to the Proposed Acquisition of Maxim Integrated Products, Inc.

Our ability to complete the acquisition of Maxim Integrated Products, Inc.

(Maxim) is subject to various closing conditions, including approval by our and Maxim’s shareholders and the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the acquisition not to be completed.

(Maxim) is subject to various closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the acquisition not to be completed.

On July 12, 2020, we entered into a definitive agreement (the Merger Agreement) to acquire Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies.

The merger is subject to a number of conditions to closing as specified in the Merger Agreement.

These closing conditions include, among others, the approval by our shareholders of the issuance of our common stock pursuant to the Merger Agreement, the adoption by Maxim stockholders of the Merger Agreement, the expiration or earlier termination of any applicable waiting period (or any extension thereof), the receipt of required approvals under U.S.

and certain foreign competition laws, and the absence of governmental restraints or prohibitions preventing the consummation of the merger.

No assurance can be given that the required shareholder, governmental and regulatory consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals.

These closing conditions include, among others, the receipt of required approvals under certain foreign competition laws, and the absence of governmental restraints or prohibitions preventing the consummation of the merger.

No assurance can be given that the required governmental and regulatory consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals.

Any delay in completing the merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we and Maxim expect to achieve if the merger is successfully completed within its expected time frame.

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Under certain circumstances, including if the proposed merger is terminated due to a failure to obtain the required regulatory clearances, we may be required to pay Maxim a termination fee of $830.0 million.

In addition, either we or Maxim may be required to pay a termination fee to the other party equal to $725.0 million if the Merger Agreement is terminated in certain other circumstances, including if the Merger Agreement is terminated because either our or Maxim’s board of directors has changed its recommendation in respect of the shareholder proposals relating to the merger.

We can provide no assurance that the various closing conditions will be satisfied and that the necessary approvals will be obtained, or that any required conditions will not materially adversely affect the combined company following the acquisition.

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The termination of the Merger Agreement could negatively impact our business.

If the merger is not completed for any reason, including as a result of a failure to obtain the required approvals from our shareholders or Maxim’s stockholders, our ongoing business may be adversely affected and, without realizing any of the expected benefits of having completed the merger, we would be subject to a number of risks, including the following:

If the merger is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the expected benefits of having completed the merger, we would be subject to a number of risks, including the following:

• we may experience negative reactions from the financial markets, including negative impacts on our stock price;

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• we will be required to pay our costs relating to the merger, such as financial advisory, legal, financing and accounting costs and associated fees and expenses, whether or not the merger is completed;

• the Merger Agreement places certain restrictions on the conduct of our business prior to completion of the merger and such restrictions, the waiver of which is subject to Maxim’s consent (not to be unreasonably withheld, conditioned or delayed), may prevent us from taking certain actions during the pendency of the merger;

• matters relating to the merger (including integration planning) will require substantial commitments of time and resources by our and Maxim’s management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to our business.

Until the completion of the merger or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our shareholders.

• we could be subject to time-consuming and costly litigation related to the merger;

• matters relating to the merger (including integration planning) require substantial commitments of time and resources by our management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to our business.

From and after the date of the Merger Agreement and prior to completion of the merger, the Merger Agreement restricts us from taking specified actions without Maxim’s consent and requires that our business be conducted in the ordinary course in all material respects.

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It is possible that the integration process could result in the loss of key employees from both companies, the loss of customers, the disruption of our, Maxim’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated.

The combined company will be required to devote management attention and resources to integrating its business practices and operations, and prior to the merger, management attention and resources will be required to plan for such integration.

The combined company will be required to devote management attention and resources to integrating its business practices and operations, and prior to the merger,

management attention and resources will be required to plan for such integration.

Potential difficulties the combined company may encounter in the integration process include the following:

• lost sales and customers as a result of certain customers of either or both of the two companies deciding not to do business with the combined company, or deciding to decrease their amount of business in order to reduce their reliance on a single company;

• lost sales and customers as a result of certain of our and/or Maxim's customers deciding not to do business with the combined company, or deciding to decrease their amount of business in order to reduce their reliance on a single company;

• integrating personnel from the two companies while maintaining focus on providing consistent, high-quality products and services, especially in the COVID-19 environment which has required employees to work remotely in some locations;

• potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger;

• performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations.

• our and/or Maxim's performance shortfalls as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations.

Any of these factors could result in the combined company failing to realize the anticipated benefits of the acquisition, on the expected timeline or at all.

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Such sales of our common stock could have the effect of depressing the market price for our common stock.

Risks Related to the Business

Risks Related to our Global Operations

The extent to which the novel strain of the coronavirus (COVID-19) pandemic will adversely affect our business, financial condition and results of operations is uncertain.

The COVID-19 pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

These measures have adversely impacted and are expected to further adversely impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.

We have significant operations worldwide, including in the United States, the Philippines, Ireland, Singapore, Malaysia, China, and India, and each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities.

There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, and restrictions on our access to our facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers.

Increased restrictions on or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, would limit our capacity to meet customer demand and have a material adverse effect on our business, financial condition and results of operations.

The spread of COVID-19 has caused us to modify our business practices, including restricting employee travel, modifying employee work locations, and canceling physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.

For example, many of our employees are temporarily working remotely, which may impact our business operations or customer relationships.

Such actions may result in further disruptions to our supply chain, manufacturing operations and facilities, and workforce.

We cannot provide assurance that such measures will be sufficient to mitigate the risks posed by COVID-19, and our ability to perform critical functions could be harmed.

The COVID-19 pandemic has significantly increased economic and demand uncertainty and has caused an economic slowdown that is likely to continue and result in a global recession.

These measures have adversely impacted and are expected to continue to adversely impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.

We have significant operations worldwide, including in the United States, the Philippines, Ireland, Singapore, Malaysia, China, and India.

Each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.

It is uncertain what the extent of the impact, and duration, of such measures and potential future measures may be and how such measures will affect our vendors and suppliers.

Increased restrictions on or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer demand and have a material adverse effect on our business, financial condition and results of operations.

The spread of COVID-19 has caused us to modify our business practices by, among other things, restricting employee travel, modifying employee work locations, and canceling physical participation in meetings, events and conferences.

As a result of our changed workplace practices, many of our employees are temporarily working remotely.

Any of these changes may adversely impact our business operations or customer relationships and result in further disruptions to our supply chain, manufacturing operations and facilities, and workplace.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers, which may cause even further disruption.

Although these alternations to our business practices are intended to minimize the spread of COVID-19, we cannot provide assurance that such measures will be sufficient to mitigate the risks posed by COVID-19, and if

a significant number of our employees or members of our board of directors become ill, our ability to perform critical functions could be harmed.

The COVID-19 pandemic has significantly increased economic and demand uncertainty and has caused an economic slowdown that is likely to continue and could result in a global recession.

The COVID-19 pandemic has led to disruption and volatility in the global capital markets, which may adversely affect our and our customers’ and suppliers’ liquidity, cost of capital and ability to access the capital markets.

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We cannot at this time fully quantify or forecast the impact of the COVID-19 pandemic on our business.

The degree to which the pandemic impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic, the actions to contain the virus or treat its impact, or how quickly and to what extent normal economic and operating conditions can resume.

The degree to which the pandemic impacts our business, financial condition and results of operations will depend on the effectiveness of vaccines and therapeutics and future developments, which are highly uncertain, including the scope and duration of the pandemic, the actions to contain the virus or treat its impact, or how quickly and to what extent normal economic and operating conditions can resume.

Political and economic uncertainty as well as disruptions in global credit and financial markets could materially and adversely affect our business and results of operations.

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• compliance requirements of U.S.

customs and export regulations, including the Export Administration Regulations (EAR) and the International Traffic and Arms Regulations (ITAR);

customs and export regulations, including the Export Administration Regulations and the International Traffic and Arms Regulations;

• currency conversion risks and exchange rate and interest rate fluctuations, including the potential impact of the transition from LIBOR;

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Many of these risks are present within our business operations in China.

For example, changes in U.S.-China relations, the political environment or international trade policies and relations could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations, or retaliatory actions, which has had and may continue to have an adverse effect on our business plans and operating results.

For example, changes in U.S.-China relations, the political environment or international trade policies and relations could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations, or retaliatory actions, which have had and may continue to have an adverse effect on our business plans and operating results.

For example, the U.S.

government has recently expanded export restrictions that limit our ability to sell to certain Chinese companies and to third parties that do business with those companies.

These restrictions may negatively impact demand for our products, including by causing our current or potential customers to amass large inventories of our products, replace our products with products from another supplier that is not subject to the export restrictions, or focus on building indigenous semiconductor capacity to reduce reliance on U.S.

Furthermore, if these export restrictions cause our current or potential customers to view U.S.

companies as unreliable, we could suffer reputational damage or lose business to foreign competitors who are not subject to such export restrictions, and our business could be materially harmed.

We are continuing to evaluate the impact of these restrictions on our business, but these actions may have direct and indirect adverse impacts on our revenues and results of operations in China and elsewhere.

In addition, our success in the Chinese markets may be adversely affected by China's continuously evolving policies, laws and regulations, including those relating to antitrust, cybersecurity and data protection, the environment, indigenous innovation and the promotion of a domestic semiconductor industry, and intellectual property rights and enforcement and protection of those rights.

If we are unable to address our U.S.

cash requirements, it may be necessary for us to consider repatriation of foreign earnings, which could have a material adverse effect on our results of operations and financial condition.

We carry outside basis differences in certain of our subsidiaries, primarily arising from acquisition accounting adjustments and undistributed earnings that are considered indefinitely reinvested.

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cash requirements through operations, borrowings under our current revolving credit facility, future debt or equity offerings or other sources of cash obtained at an acceptable cost, it may be necessary for us to consider repatriation of earnings that are indefinitely reinvested, and we may be required to pay additional taxes under current tax laws, which could have a material adverse effect on our results of operations and financial condition.

Risks Related to our Business, Industry and Partners

Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may materially fluctuate.

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• changes in our effective tax rates or new or revised tax legislation in the United States, Ireland or worldwide;

• the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions, changes in law, regulations or other restrictions, including executive orders, changes in import and export regulations, export classifications or changes in duties and tariffs, particularly with respect to China;

• the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions;

changes in law, regulations or other restrictions, including executive orders;

and changes in import and export regulations, including restrictions on exports to certain companies or to third parties that do business with such companies, export classifications, or duties and tariffs, particularly with respect to China;

• the timing of new product announcements or introductions by us, our customers or our competitors and the market acceptance of such products;

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Our effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where our income is earned.

Our effective tax rate for the first nine months of the fiscal year ending October 31, 2020 was below our U.S.

Our effective tax rate for the first three months of the fiscal year ending October 30, 2021 was below our U.S.

federal statutory rate of 21%.

This is primarily due to lower statutory tax rates applicable to our operations in the foreign

jurisdictions in which we earn income.

This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.

A number of factors may increase our future effective tax rate, including:

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adjustments to income taxes upon finalization of various tax returns;

increases in expenses not deductible for tax purposes, including executive compensation subject to the limitations of Section 162(m) of the Internal Revenue Code and amortization of assets acquired in connection with strategic transactions;

increases in expenses not

deductible for tax purposes, including executive compensation subject to the limitations of Section 162(m) of the Internal Revenue Code and amortization of assets acquired in connection with strategic transactions;

decreased availability of tax deductions for stock-based compensation awards worldwide;

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Any significant increase in our future effective tax rate could adversely impact our net income during future periods.

Compliance with the Tax Cuts and Jobs Act of 2017 (Tax Legislation) may require the collection of information not regularly produced within the Company, and therefore necessitate the use of estimates in our Condensed Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions.

As regulations and guidance evolve with respect to the Tax Legislation, and as more information is gathered and analyzed, our results may differ from previous estimates and may materially affect our Condensed Consolidated Financial Statements.

Compliance with tax legislation may require the collection of information not regularly produced within the Company, and therefore necessitate the use of estimates in our Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions.

As regulations and guidance evolve with respect to tax legislation, and as more information is gathered and analyzed, our results may differ from previous estimates and may materially affect our Consolidated Financial Statements.

We are also subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction.

Changes in these laws and regulations, including those that align to or are associated with the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting (BEPS) Actions Plans, could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.

We may be unable to adequately protect our proprietary intellectual property rights, which may limit our ability to compete effectively.

Our future success depends, in part, on our ability to protect our intellectual property.

We primarily rely on patent, mask work, copyright, trademark and trade secret laws, as well as nondisclosure agreements, information security practices, and other methods, to protect our proprietary information, technologies and processes.

Despite our efforts to protect our intellectual property, it is possible that competitors or other unauthorized third parties may obtain or disclose our confidential information, reverse engineer or copy our technologies, products or processes, or otherwise misappropriate our intellectual property.

Moreover, the laws of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our intellectual property.

There can be no assurance that the claims allowed in our issued patents will be sufficiently broad to protect our technology.

In addition, any of our existing or future patents may be challenged, invalidated or circumvented.

As such, any rights granted under these patents may not prevent others from exploiting our proprietary technology.

We may not be able to obtain foreign patents or pending applications corresponding to our U.S.

patents and applications.

Even if patents are granted, we may not be able to effectively enforce our rights.

If our patents and mask works do not adequately protect our technology, or if our registrations expire prior to end of life of our products, our competitors may be able to offer products similar to ours.

Our competitors may also be able to develop similar technology independently or design around our patents.

We generally enter into confidentiality agreements with our employees, consultants and strategic partners.

We also try to control access to and distribution of our technologies, documentation and other proprietary information.

Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products or technology without our authorization.

Also, former employees may seek employment with our business partners, customers or competitors, and there can be no assurance that the confidential nature of our proprietary information will be maintained in the course of such future employment.

A significant disruption in, or breach in security of, our information technology systems or certain of our products could materially and adversely affect our business or reputation.

We rely on information technology systems throughout our company to keep financial records and customer data, process orders, manage inventory, coordinate shipments to customers, maintain confidential and proprietary information, assist in semiconductor engineering and other technical activities and operate other critical functions such as Internet connectivity, network communications and email.

Our information technology systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, employee malfeasance, user errors, catastrophes or other unforeseen events.

Due to the COVID-19 pandemic, many of our employees are temporarily working

remotely, which may pose additional data security risks.

We also rely upon external cloud providers for certain infrastructure activities.

If we were to experience a prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.

We may also be subject to security breaches of our information technology systems and certain of our products caused by viruses, illegal break-ins or hacking, sabotage, or acts of vandalism by third parties or our employees or contractors.

Our security measures or those of our third party service providers may not detect or prevent security breaches, defects, bugs or errors.

In addition, we provide our confidential and proprietary information to our strategic partners in certain cases where doing so is necessary to conduct our business.

While we employ confidentiality agreements to protect such information, those third parties may nonetheless also be subject to security breaches or otherwise compromise the protection of such information.

Security breaches of our information technology systems or those of our partners could result in the misappropriation or unauthorized disclosure of confidential and proprietary information belonging to us or to our employees, partners, customers, suppliers, or other third parties which could result in our suffering significant financial or reputational damage.

Our customers typically do not make long-term product purchase commitments and incorrect forecasts or reductions, cancellations or delays in orders for our products could adversely affect our operating results.

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Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products.

Some of our competitors may

have more advantageous supply or development relationships with our current and potential customers or suppliers.

Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers.

Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the U.S., including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries.

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As a result, we could forgo revenue opportunities, potentially lose market share and damage our customer relationships, all of which could materially and adversely affect our business, financial condition and results of operations.

If we are unable to generate sufficient cash flow, we may not be able to service our debt obligations, including making payments on our outstanding indebtedness.

Our ability to make payments of principal and interest on our indebtedness when due depends upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our consolidated operations, many of which are beyond our control.

For example, the disruption to economic activity resulting from the COVID-19 pandemic has had, and is likely to continue to have, adverse effects on our supply chain, manufacturing operations and facilities, and workforce.

If we are unable to generate sufficient cash flow from operations in the future to service our outstanding debt, we may be required to, among other things:

• seek additional financing in the debt or equity markets;

• refinance or restructure all or a portion of our indebtedness;

• borrow under our revolving credit facility;

• divert funds that would otherwise be invested in growing our business operations;

• repatriate earnings as dividends from foreign locations with potential for negative tax consequences;

• sell selected assets.

Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results.

In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms.

In the case of financing or refinancing, favorable interest rates will depend on the health of the debt capital markets.

The markets for semiconductor products are cyclical, and increased production may lead to overcapacity and lower prices, and conversely, we may not be able to satisfy unexpected demand for our products.

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If we expand our operations and workforce too rapidly or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, or if we overbuild inventory in a period of decreased demand, our operating results may be adversely affected as a result of increased operating expenses, reduced margins, underutilization of capacity or asset impairment charges.

These capacity expansions by us and other semiconductor manufacturers could also lead to overcapacity in our target markets which could lead to price erosion that would adversely impact our operating results.

These capacity expansions by us and other semiconductor manufacturers could also lead to overcapacity in our target markets

which could lead to price erosion that would adversely impact our operating results.

Conversely, during periods of rapid increases in demand, our available capacity may not be sufficient to satisfy the demand.

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In addition, if any of our products contain defects, or have reliability, quality or compatibility problems not capable of being resolved, our reputation may be damaged, which could make it more difficult for us to sell our products to customers and which could also adversely affect our operating results.

Furthermore, we market and sell our products through authorized third-party distributors, and from time to time our products may be diverted from our authorized distribution channels and sold on the “gray market.” There is a risk that customers purchasing our products on the gray market may use our products for purposes for which they were not intended, or may purchase counterfeit or substandard products, including products that have been altered, mishandled or damaged, or used products presented as new, which could result in damage to property or persons and cause serious reputational harm.

The fabrication of integrated circuits is highly complex and precise, and our manufacturing processes utilize a substantial amount of technology.

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This instability could result in manufacturing delays and product shortages, which could have a material adverse effect on our operating results.

We are occasionally involved in litigation, including claims regarding intellectual property rights, which could be costly to litigate and could require us to redesign products or pay significant royalties.

The semiconductor industry is characterized by frequent claims and litigation involving patent and other intellectual property rights.

Other companies or individuals have obtained patents covering a variety of semiconductor designs and

processes, and we might be required to obtain licenses under some of these patents or be precluded from making and selling infringing products, if those patents are found to be valid and infringed by us.

In the event a third party makes a valid intellectual property claim against us and a license is not available to us on commercially reasonable terms, or at all, we could be forced either to redesign or to stop production of products incorporating that intellectual property, and our operating results could be materially and adversely affected.

Litigation may be necessary to enforce our patents or other of our intellectual property rights or to defend us against claims of infringement, and this litigation could be costly and divert the attention of our key personnel.

We could also be subject to litigation or arbitration disputes arising under our contractual obligations, as well as customer indemnity, warranty or product liability claims that could lead to significant costs and expenses as we defend those claims or pay damage awards.

There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters.

An adverse outcome in litigation or arbitration could have a material adverse effect on our financial position or on our operating results or cash flows in the period in which the dispute is resolved.

If we are unable to recruit or retain our key personnel, our ability to execute our business strategy will be adversely affected.

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To remain competitive, we may need to invest in or acquire other companies, purchase or license technology from third parties, or enter into other strategic transactions in order to introduce new products or enhance our existing products.

An element of our business strategy involves expansion through the acquisitions of businesses, assets, products or technologies that allow us to complement our existing product offerings, diversify our product portfolio, expand our market coverage, increase our engineering workforce, expand our technical skill sets or enhance our technological capabilities.

coverage, increase our engineering workforce, expand our technical skill sets or enhance our technological capabilities.

We may not be able to find businesses that have the technology or resources we need and, if we find such businesses, we may not be able to invest in, purchase or license the technology or resources on commercially favorable terms or at all.

Acquisitions, investments and technology licenses are challenging to complete for a number of reasons, including difficulties in identifying potential targets, the cost of potential transactions, competition among prospective buyers and licensees, the need for regulatory approvals, and difficulties related to integration efforts.

In addition, investments in private companies are subject to a risk of a partial or total loss of our investment.

In addition, investments in companies are subject to a risk of a partial or total loss of our investment.

Both in the U.S.

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A significant portion of our sales are through independent global and regional distributors that are not under our control.

Arrow Electronics is currently our largest distributor.

These independent distributors generally represent product lines offered by several companies and thus could reduce their sales efforts for our products or they could terminate their representation of us.

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Termination of a significant distributor or a group of distributors, whether at our initiative or the distributor’s initiative or through consolidation in the distribution industry, could disrupt our current business, and if we are unable to find suitable replacements with the appropriate scale and resources, our operating results could be adversely affected.

Effective November 4, 2018, all distributor sales are recognized upon shipment to the distributor under Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

We are now required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor.

We are required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor.

If our estimates of such credits and rights are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period.

Our stock price may be volatile.

The market price of our common stock has been volatile in the past and may be volatile in the future, as it may be significantly affected by factors including:

• the extent of the impact and the duration of the COVID-19 outbreak;

• global economic conditions generally;

• crises in global credit, debt and financial markets;

• actual or anticipated fluctuations in our revenue and operating results;

• changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications, or our failure to perform in line with those estimates or statements or our published guidance;

• financial results and prospects of our customers;

and foreign government actions, including with respect to trade, travel, export and taxation;

• changes in market valuations of other semiconductor companies;

• rumors and speculation in the press, investment community or on social media about us, our customers or other companies in our industry;

• announcements by us, our customers or our competitors of significant new products, technical innovations, material transactions, acquisitions or dispositions, litigation, capital commitments, including share repurchases and dividend policies, or revised earnings estimates;

• departures of key personnel;

• alleged noncompliance with laws, regulations or ethics standards by us or any of our employees, officers or directors;

• negative media publicity targeting us or our suppliers, customers or competitors.

The stock market has historically experienced volatility, especially within the semiconductor industry, that often has been unrelated to the performance of particular companies.

These market fluctuations may cause our stock price to fall regardless of our operating results.

Our directors and executive officers periodically buy or sell shares of our common stock in the market, including pursuant to Rule 10b5-1 trading plans.

Regardless of the individual's reasons for such purchases or sales, securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result.

Risks Related to our Indebtedness

If we are unable to generate sufficient cash flow, we may not be able to service our debt obligations, including making payments on our outstanding indebtedness.

If we are unable to generate sufficient cash flow from operations in the future to service our outstanding debt, we may be required to, among other things:

• seek additional financing in the debt or equity markets;

• refinance or restructure all or a portion of our indebtedness;

• borrow under our revolving credit facility;

• divert funds that would otherwise be invested in growing our business operations;

• repatriate earnings as dividends from foreign locations with potential for negative tax consequences;

• sell selected assets.

Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results.

In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms.

In the case of financing or refinancing, favorable interest rates will depend on the health of the debt capital markets.

Restrictions in our revolving credit facility, term loan and outstanding debt instruments may limit our activities.

Our current revolving credit facility, term loan and outstanding debt instruments impose, and future debt instruments to which we may become subject may impose, restrictions that limit our ability to engage in activities that could otherwise benefit our Company, including to undertake certain transactions, to create certain liens on our assets and to incur certain subsidiary indebtedness.

Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as changes in technology, government regulations and the level of competition in our markets.

In addition, our revolving credit facility and term loan require us to maintain compliance with specified financial ratios.

If we breach any of the covenants under our revolving credit facility, the indentures governing our outstanding senior unsecured notes, the term loan facility or any future debt instruments to which we may become subject and do not obtain appropriate waivers, then, subject to applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable and/or we may be restricted from further borrowing under our revolving credit facility.

Risks Related to Legal, Regulatory and Compliance Matters

We may be unable to adequately protect our proprietary intellectual property rights, which may limit our ability to compete effectively.

Our future success depends, in part, on our ability to protect our intellectual property.

Moreover, the laws of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our intellectual property.

There can be no assurance that the claims allowed in our issued patents will be sufficiently broad to protect our technology.

In addition, any of our existing or future patents may be challenged, invalidated or circumvented.

As such, any rights granted under these patents may not prevent others from exploiting our proprietary technology.

We may not be able to obtain foreign patents or pending applications corresponding to our U.S.

patents and applications.

Even if patents are granted, we may not be able to effectively enforce our rights.

Our competitors may also be able to develop similar technology independently or design around our patents.

We generally enter into confidentiality agreements with our employees, consultants and strategic partners.

We also try to control access to and distribution of our technologies, documentation and other proprietary information.

Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products or technology without our authorization.

A significant disruption in, or breach in security of, our information technology systems or certain of our products could materially and adversely affect our business or reputation.

Due to the COVID-19 pandemic, many of our employees and directors are temporarily working remotely, which may pose additional data security risks.

We also rely upon external cloud providers for certain infrastructure activities.

Our security measures or those of our third-party service providers may not detect or prevent security breaches, defects, bugs or errors.

In addition, we provide our confidential and proprietary information to our strategic partners in certain cases where doing so is necessary to conduct our business.

Those third parties may be subject to security breaches or otherwise compromise the protection of such information.

The semiconductor industry is characterized by frequent claims and litigation involving patent and other intellectual property rights.

Other companies or individuals have obtained patents covering a variety of semiconductor designs and processes, and we might be required to obtain licenses under some of these patents or be precluded from making and selling infringing products, if those patents are found to be valid and infringed by us.

There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters.

We are subject to environmental, health and safety (EHS) regulations, which could increase our expenses and affect our operating results.

Our industry is subject to EHS requirements, particularly those that control and restrict the sourcing, use, transportation, emission, discharge, storage and disposal of certain substances, and materials used or produced in the semiconductor manufacturing process.

Public attention to environmental sustainability and social responsibility concerns continues to increase, and our customers routinely include stringent environmental and other standards in their contract with us.

Changes in EHS laws or regulations may require us to invest in costly equipment or make manufacturing process changes and may adversely affect the sourcing, supply and pricing of materials used in our products.

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• increased expenses associated with compliance.

Restrictions in our revolving credit facility, term loan and outstanding debt instruments may limit our activities.

Our ability to comply with these financial restrictions and covenants is dependent on our future performance,

which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as changes in technology, government regulations and the level of competition in our markets.

In addition, our revolving credit facility and term loan require us to maintain compliance with specified financial ratios.

If we fail to comply with government contracting regulations, we could suffer a loss of revenue or incur price adjustments or other penalties.

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In connection with our United States government business, we are also subject to government audits and to review and approval of our policies, procedures, and internal controls for compliance with procurement regulations and applicable laws, such as the Cybersecurity Maturity Model Certification.

In certain circumstances, if we do not comply with the terms of a contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could in extreme circumstances be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period of time.

In certain circumstances, if we do not comply with the terms of a government contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could in extreme circumstances be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period of time.

Any such suspension or debarment or other sanction could have an adverse effect on our business.

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If we were unable to comply with these requirements, or if personnel critical to our performance of these contracts were unable to obtain or maintain their security clearances, we might be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue.

Our stock price may be volatile.

The market price of our common stock has been volatile in the past and may be volatile in the future, as it may be significantly affected by factors including:

• the extent of the impact and the duration of the COVID-19 outbreak;

• global economic conditions generally;

• crises in global credit, debt and financial markets;

• actual or anticipated fluctuations in our revenue and operating results;

• changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications or our failure to perform in line with those estimates or statements or our published guidance;

• financial results and prospects of our customers;

and foreign government actions, including with respect to trade, travel, export and taxation;

• changes in market valuations of other semiconductor companies;

• rumors and speculation in the press, investment community or on social media about us, our customers or other companies in our industry;

• departures of key personnel;

• alleged noncompliance with laws, regulations or ethics standards by us or any of our employees, officers or directors;

• negative media publicity targeting us or our suppliers, customers or competitors.

The stock market has historically experienced volatility, especially within the semiconductor industry, that often has been unrelated to the performance of particular companies.

These market fluctuations may cause our stock price to fall regardless of our operating results.

Our directors and executive officers periodically sell shares of our common stock in the market, including pursuant to Rule 10b5-1 trading plans.

Regardless of the individual's reasons for such sales, securities analysts and investors could view such sales as a negative indicator and our stock price could be adversely affected as a result.

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What changed 10-Q

Item 1A. Risk Factors