What changed in this filing

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Item 1A. Risk Factors

2022-05-18 compared with 2022-02-16 · 44 added, 41 removed, 337 unchanged (20% of the section changed)

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Risks Related to our Acquisition of Maxim Integrated Products, Inc.

We will incur substantial expenses related to the integration of Maxim.

We will continue to incur substantial expenses related to the ongoing integration of Maxim.

In August 2021, we completed our acquisition of Maxim, which we refer to as the acquisition or the merger.

We have incurred and expect to incur a number of non-recurring costs associated with combining the operations of the two companies.

These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, including severance payments that may be made to certain Maxim employees, filing fees, printing expenses and other related charges.

The combined company has and will continue to incur restructuring and integration costs in connection with the merger.

We have incurred and expect to continue to incur a number of non-recurring costs associated with combining the operations of the two companies.

The combined company has and will continue to incur restructuring and ongoing integration costs in connection with the merger.

The costs related to restructuring are being expensed as a cost of the ongoing results of operations.

There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the integration of Maxim’s business.

Although we expect that the elimination of duplicative costs, strategic benefits, and additional income, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction, merger-related and restructuring costs over time, any net benefit may not be achieved in the near term or at all.

There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the ongoing integration of Maxim’s business.

Although we expect that the elimination of duplicative costs, strategic benefits, and additional income, as well as the realization of other efficiencies related to the ongoing integration of the businesses, may offset incremental transaction, merger-related and restructuring costs over time, any net benefit may not be achieved in the near term or at all.

Combining our business with Maxim’s may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the merger, which may adversely affect the combined company’s business results and negatively affect the value of the combined company’s common stock.

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There can be no assurances that the two businesses can be integrated successfully.

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 ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall integration process that takes longer than originally anticipated.

Management must devote attention and resources to integrating the combined company's business practices and operations.

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

Management must devote attention and resources to continue integrating the combined company's business practices and operations.

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

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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.

An inability to realize the full extent of the anticipated benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.

An inability to realize the full extent of the anticipated benefits of the merger, as well as any delays encountered in the continuing integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company.

In addition, the continuing integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.

Actual growth and cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated.

If we are not able to adequately address integration challenges, we may be unable to successfully integrate the two companies or realize the anticipated benefits of the integration.

If we are not able to adequately address integration challenges, we may be unable to successfully integrate the two companies or realize the anticipated benefits of the ongoing integration.

Risks Related to our Global Operations

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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 continuing 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.

The continuing spread of COVID-19 has caused us and continues to cause 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, some of our employees continue to work 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.

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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.

Continuing political and global macroeconomic uncertainty, including related to the COVID-19 pandemic, trade and political disputes between the United States and China, China-Taiwan relations, the United Kingdom's withdrawal from the European Union, tensions between Russia and the United States, Ukraine and European countries and uncertainty regarding the stability of global credit and financial markets may lead consumers and businesses to postpone or reduce spending, which may cause our customers to cancel, decrease or delay their existing and future orders for our products and make it difficult for us to accurately forecast and plan our future business activities.

Continuing political and global macroeconomic uncertainty, including related to the COVID-19 pandemic, trade and political disputes between the United States and China, China-Taiwan relations, the United Kingdom's withdrawal from the European Union, the ongoing conflict between Russia and Ukraine, tensions between Russia, the United States and European countries and uncertainty regarding the stability of global credit and financial markets may lead consumers and businesses to postpone or reduce spending, which may cause our customers to cancel, decrease or delay their existing and future orders for our products and make it difficult for us to accurately forecast and plan our future business activities.

Financial difficulties experienced by our customers could result in nonpayment or payment delays for previously purchased products, thereby increasing our credit risk exposure.

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In addition, financial difficulties experienced by our suppliers, distributors or customers could result in product delays, increased accounts receivable defaults and inventory challenges.

If economic conditions deteriorate, we may

record additional charges relating to restructuring costs or the impairment of assets and our business and results of operations could be materially and adversely affected.

If economic conditions deteriorate, we may record additional charges relating to restructuring costs or the impairment of assets and our business and results of operations could be materially and adversely affected.

We are exposed to business, economic, political, legal, regulatory and other risks through our significant worldwide operations, which could adversely affect our business, financial condition and results of operations.

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Risks associated with our international business operations include the following:

• political, legal and economic changes, crises or instability and civil unrest in markets in which we do business, such as potential macroeconomic weakness related to trade and political disputes between the United States and China, changes in China-Taiwan relations that may adversely affect our operations in Taiwan, our customers, and the technology industry supply chain, the United Kingdom's withdrawal from the European Union, the implementation of the United States-Mexico-Canada Agreement and tensions between Russia and the United States, Ukraine and European countries;

• compliance requirements of U.S.

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

• trade policy, commercial, travel, export or taxation disputes or restrictions, government sanctions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S.

• trade policy, commercial, travel, export or taxation disputes or restrictions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S.

government or by the governments of the countries in which we do business, particularly in China;

• complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax regulations, price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, intellectual property, anti-corruption and environmental compliance, including the Foreign Corrupt Practices Act;

• sanctions imposed by governments in countries in which we do business, including those imposed on Russia by, among others, the European Union, the U.S.

and the United Kingdom in response to the ongoing conflict between Russia and Ukraine, which sanctions restrict a wide range of trade and financial dealings with Russian and Russian persons, as well as certain regions in Ukraine;

• complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax regulations, price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, cyber security, sustainability and climate-related regulations, intellectual property, anti-corruption and environmental compliance, including the Foreign Corrupt Practices Act;

• economic disruption from terrorism and threats of terrorism and the response to them by the U.S.

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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 three months of the fiscal year ending October 29, 2022 was below our U.S.

Our effective tax rate for the first three and six months of the fiscal year ending October 29, 2022 was below our U.S.

federal statutory rate of 21%.

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The ability to extend such tax holiday beyond its expiration date cannot be assured.

In addition, if we fail to meet certain conditions of the tax holiday, we may lose the benefit of the tax holiday and/or be subject to additional taxes and/or penalties.

In addition, if we fail to meet certain conditions

of the tax holiday, we may lose the benefit of the tax holiday and/or be subject to additional taxes and/or penalties.

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

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We typically do not have sales contracts with our customers that include long-term product purchase commitments.

In certain markets where end-user demand may be particularly volatile and difficult to predict, some customers place orders that require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding

commitment to purchase all, or even any, of the product.

In other instances, we manufacture product based on non-binding forecasts of customer demands, which may fluctuate significantly on a quarterly or annual basis and at times may prove to be inaccurate.

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We rely on third parties for supply of raw materials and parts, semiconductor wafer foundry services, assembly and test services, and transportation, among other things, and we generally cannot control their availability or conditions of supply or services.

We rely, and plan to continue to rely, on third-party suppliers and service providers, including raw material and components suppliers, semiconductor wafer foundries, assembly and test contractors, and freight carriers (collectively, vendors)

in manufacturing our products.

This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, and costs.

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The demand for our products is subject to the strength of our four major end markets of Industrial, Automotive, Communications, and Consumer.

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.

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.

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Our customers have on occasion been sued, and may be sued in the future, by third parties alleging infringement of intellectual property rights, or damages resulting from use of our products.

Those customers may seek indemnification from us

under the terms and conditions of our sales contracts with them.

Those customers may seek indemnification from us under the terms and conditions of our sales contracts with them.

In certain cases, our potential indemnification liability may be significant.

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Our continued success depends to a significant extent upon the recruitment, retention and effective succession of our key personnel, including our leadership team, management and technical personnel, particularly our experienced engineers.

The competition for these employees is intense.

The loss of key personnel or the inability to attract, hire and retain key employees with critical technical skills to achieve our strategy, including as a result of changes to immigration policies, could also have a material adverse effect on our business.

The competition for these employees is intense and the labor market is tight.

Further, we have recently experienced an increase in undesired attrition.

The loss of key personnel or the inability to attract, timely hire and retain key employees with critical technical skills to achieve our strategy, including as a result of changes to immigration policies, could cause business disruptions, increased expenses to address any disruptions, and could have a material adverse effect on our business.

We do not maintain any key person life insurance policy on any of our officers or other employees.

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• financial results and prospects of our customers;

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

and foreign government actions, including with respect to trade, travel, export and taxation, such as the adoption of comprehensive sanctions by, among others, the European Union, the U.S., and the United Kingdom in response to the ongoing conflict between Russia and Ukraine;

• changes in market valuations of other semiconductor companies;

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We have substantial existing indebtedness and the ability to incur significant additional indebtedness, which could limit our operations and our use of our cash flow and negatively impact our credit ratings.

As of January 29, 2022, we had approximately $6.3 billion in outstanding indebtedness.

As of April 30, 2022, we had approximately $6.3 billion in outstanding indebtedness.

In addition, we had $2.5 billion of availability under our $2.5 billion of unsecured revolving credit facility.

Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions.

Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional

financing and limiting our ability to acquire new products and technologies through strategic acquisitions.

We may also incur additional debt in the future, which would increase these risks.

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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.

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 and directors are temporarily working remotely, which may pose additional data security risks.

Due to the COVID-19 pandemic, some of our employees continue to work 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.

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, other cyber attacks, or acts of vandalism by third parties or our employees or contractors.

Further, geopolitical tensions or conflicts, such as the ongoing conflict between Russia and Ukraine, may create a heightened risk of cyber attacks, which could result in significant losses and damage, could damage our reputation with customers and suppliers and may expose us to litigation if the confidential information of our customers, suppliers, or employees is compromised.

Our security measures or those of our third-party service providers may not detect or prevent security breaches, cyber attacks, 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.

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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.

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

For example, in March 2022, a putative class action was filed in the Court of Chancery of the State of Delaware against us and the former directors of Maxim as described in Part II, Item 1, " Legal Proceedings ." 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.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors