-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oc6QY9BGwiF98TU/UpTjJTtzLgKpdq85r2RY2UV16f6otQeqWxvEwdjeFxwu7zs/ h0qVu5EcByKiPXzYDf0m8g== 0000950149-96-001484.txt : 19960930 0000950149-96-001484.hdr.sgml : 19960930 ACCESSION NUMBER: 0000950149-96-001484 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960927 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXIM INTEGRATED PRODUCTS INC CENTRAL INDEX KEY: 0000743316 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 942896096 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16538 FILM NUMBER: 96635356 BUSINESS ADDRESS: STREET 1: 120 SAN GABRIEL DR CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4087377600 MAIL ADDRESS: STREET 1: 120 SAN GABRIEL DR CITY: SUNNYVALE STATE: CA ZIP: 94086 10-K 1 MAXIM INTEGRATED PRODUSTS, INC. 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF ___ THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended June 30, 1996 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _____________ to ____________ COMMISSION FILE NUMBER 0-16538 MAXIM INTEGRATED PRODUCTS, INC. (Exact name of registrant as specified in its charter) Delaware 94-2896096 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 120 San Gabriel Drive Sunnyvale, California 94086 (Address of Principal Executive Offices, including Zip Code) Registrant's telephone number, including area code: (408) 737-7600 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The aggregate market value of the voting stock held by nonaffiliates of the registrant as of August 1, 1996 was approximately $1,349,000,000*. Number of shares outstanding of the registrant's Common Stock, $.001 par value, as of June 30, 1996: 61,445,519. 2 DOCUMENTS INCORPORATED BY REFERENCE: Part II - Annual Report to Stockholders for the fiscal year ended June 30, 1996 Part III - Proxy Statement for the 1996 Annual Meeting of Stockholders Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any Amendment to this Form 10-K.___________ * Excludes the Common Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding at August 1, 1996. Exclusion of such shares should not be construed to indicate that each of such persons possesses the power, direct or indirect, to control the Registrant, or that each such person is controlled by or under common control with the Registrant. 2 3 PART I ITEM 1. BUSINESS Maxim Integrated Products, Inc., ("Maxim" or the "Company") designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits. The Company also provides a range of high-frequency design processes and capabilities that can be used in custom design. The analog market is highly fragmented and characterized by many diverse applications, a great number of product variations, and relatively long product life cycles. Maxim's objective is to actively develop and market both proprietary and industry-standard analog integrated circuits that meet the increasingly stringent quality standards demanded by customers. Maxim operates two Class 10 wafer fabrication facilities capable of producing 0.8 and 1.2 micron CMOS and bipolar products (see "Manufacturing" below). In addition, the Company subcontracts the fabrication of a small portion of its silicon wafers to outside silicon foundries. Based on product announcements by its competitors, Maxim believes that in the past 13 years it has developed more products for the analog market, including proprietary and second- source products, than any of its competitors over the same period. THE ANALOG INTEGRATED CIRCUIT MARKET All electronic signals fall into one of two categories, linear or digital. Linear (or analog) signals represent real world phenomena, such as temperature, pressure, sound, or speed, and are continuously variable over a wide range of values. Digital signals represent the "ones" and "zeros" of binary arithmetic and are either on or off. Three general classes of semiconductor products arise from this partitioning of signals into linear or digital. There are those, such as memories and microprocessors, which operate only in the digital domain. There are linear devices such as amplifiers, references, analog multiplexers, and switches, which operate primarily in the analog domain. Finally, there are mixed-signal devices that combine linear and digital functions on the same integrated circuit and interface between the analog and digital worlds. Maxim targets the combined linear and mixed signal market, often collectively referred to as the analog market. The Company believes that, compared to the digital integrated circuit market, the analog market has generally been characterized by a wider range of standard products used in smaller quantities by a large number of customers; longer product life cycles; less competition from Japanese and other foreign manufacturers; lower capital requirements as a result of using more mature manufacturing technologies; and relatively more stable growth rates that are less influenced by economic cycles. The Company believes that the widespread application of low-cost microprocessor-based 3 4 systems has affected the market for analog integrated circuits by increasing the need for interfaces with the analog world. The analog market is a highly fragmented group of niche markets, serving numerous and widely differing applications for instrumentation, industrial control, data processing, communications, military, video, and selected medical equipment. For each application, different users may have unique requirements for circuits with specific resolution, accuracy, linearity, speed, power, and signal amplitude capability, which results in a high degree of market complexity. Maxim's products can be used in a variety of applications but serve only certain segments of the total analog market. PRODUCTS AND APPLICATIONS The Company initially entered the analog market with a relatively narrow portfolio of products as second sources for industry standard parts for which there was an existing customer base. After establishing a position in the market, the Company began to introduce technically innovative proprietary products. Although second-sourcing continues to be a component of the Company's product development program, current research and development emphasizes development of proprietary circuits. The Company believes it addresses the requirements of the market by providing competitively priced products that add value to electronic equipment with superior quality and reliability. As of June 30, 1996, Maxim has introduced over 1,000 products. These products are available with numerous packaging alternatives, including packages for surface mount technology. The following table illustrates the major industries served by the Company and typical applications for which the Company's products can be used: Industry Typical Application Communications . . . . . . . . . . . Phones * Cellular * Cordless Broadband Networks Fiber Optics Direct Broadcast TV Video Communications Pagers Central Office Switches PBX Industrial Control . . . . . . . . . . Control of * Temperature * Flow 4 5 * Pressure * Velocity * Position Robotics Instrumentation . . . . . . . . . Testers Analyzers Data Recorders Measuring Instruments * Temperature * Pressure * Speed * Electrical * Sound * Light Automatic Test Equipment Data Processing . . . . . . . . Workstations Personal Computers Printers Point of Sale Terminals Bar-code Readers Minicomputers Mainframes Disk Drives Tape Drives The Company also sells products for military and selected medical equipment. While Maxim's proprietary products have received substantial market acceptance, Maxim has experienced additional competition as Maxim's competitors have developed second sources for Maxim's successful innovative proprietary products. Typically in the semiconductor industry, when a proprietary product becomes second sourced, the credibility of the original design is enhanced, and there is an opportunity to increase total revenues as the potential customers' reluctance to design in a sole source product is removed, but gross margins may be adversely affected due to increased price competition. PRODUCT QUALITY Maxim places strong emphasis on product quality from initial design through final quality assurance. In the product design phase, Maxim applies a set of circuit design rules that it believes results in enhanced product reliability. Upon receipt from Maxim's own fabrication facilities, or from silicon foundries, a majority of processed wafers are tested for conformance with specific parameters. Products are individually 5 6 tested using specialized test equipment and complex programs to ensure that they meet data sheet performance levels. In addition, long-term operating life and mechanical stress tests are performed on samples routinely to assure continued consistency. MANUFACTURING Once a product has been designed and released to production, Maxim uses its own wafer fabrication facilities and to a small extent silicon foundries to produce wafers. The majority of processed wafers are subjected to parametric and functional testing before being sent to subcontractors, where they are cut into individual circuits and assembled into a variety of packages. Products accounting for approximately 50% of the worldwide revenue of the Company are functionally tested by a subcontractor located in the Philippines. The Company owns the test equipment used by the subcontractor and pays a fee for the operation of the test facilities. Units from these lots are then sample tested and inspected for final quality assurance. The rest of the products are fully tested at Maxim upon receipt from the subcontractor. The broad range of products demanded by the analog integrated circuit market requires multiple manufacturing process technologies. Nineteen different process technologies are currently used for wafer fabrication of the Company's products. Historically, wafer fabrication of analog integrated circuits has not required the state-of-the-art processing equipment necessary for the fabrication of advanced digital integrated circuits although newer processes do utilize and require some of these facilities and equipment. In addition, hybrid products are manufactured using a complex multi-chip technology featuring thin-film, thick-film, and laser-trimmed resistors. For redundant supply of these technologies in multiple fabrication lines, the Company relies on its two geographically remote fabrication facilities and, to a small extent, manufacturing subcontractors. The Company currently uses three subcontract silicon foundries which represent less than 8% of wafer production. Each of the subcontractors currently used by Maxim are unrelated to Maxim. In December 1989, the Company acquired wafer fabrication facility capable of producing 3 micron CMOS and bipolar products. Maxim leased the building housing the facility and purchased all manufacturing assets required for its manufacturing operations. In May 1994, the Company acquired a mixed-class wafer fabrication facility capable of producing CMOS and bipolar products (see "Item 2. Properties" below). As is typical in the semiconductor industry, the Company has experienced disruptions in the supply of processed wafers due to quality problems or failure to achieve satisfactory electrical yields. Procurement from foundries is done by purchase order rather than long-term contracts and Maxim's foundries could decline additional 6 7 purchase orders at their discretion. There can be no assurance that material disruptions in supply will not occur in the future. If the foundries used by the Company and its own internal wafer fabs are unable or unwilling to produce adequate supplies of processed wafers conforming to the Company's quality standards, the Company's business and relationships with its customers may be adversely affected. As is customary in the industry, the Company ships most of its processed wafers to foreign assembly subcontractors, located in the Philippines, Malaysia, Thailand, South Korea and Japan, where wafers are separated into individual integrated circuits and packaged. SALES AND MARKETING In the United States and Canada, the Company sells its products through a direct sales organization comprised of 12 regional sales offices and through distribution. The distribution portion is through four national and three regional and/or specialist distributors with a combined total of approximately 115 locations. As is customary in the industry, domestic distributors are entitled to certain price rebates and limited product return privileges. International sales are conducted by 10 Maxim sales offices and 33 sales representative organizations and distributors. The Company sells in both United States dollars and local currency. Over half of the Company's international sales are billed and payable in United States dollars and are therefore not directly subject to currency exchange fluctuations. A portion of the sales in UK, French, and German affiliates are denominated in the local currencies. The majority of the sales to customers in Japan are denominated in the Yen. The Company placed foreign currency forward contracts to protect the United States dollar value of its firm commitments and net monetary assets. Changes in the relative value of the dollar, however, may create pricing pressures for Maxim's products. In addition, various forms of protectionist trade legislation have been proposed in the United States and certain foreign countries. A change in current tariff structures or other trade policies could adversely affect the Company's foreign marketing strategies. In general, payment terms for foreign customers, distributors and others, are longer than for U.S. customers, and certain major foreign customers habitually pay for product well beyond the payment dates. As is customary in the semiconductor industry, the Company's domestic distributors may market products competitive with Maxim's. The Company's independent sales representatives and foreign distributors may not represent competitive product lines, although they are permitted to sell non-competing products for other companies. International sales accounted for approximately 52%, 49% and 57% of net revenues in fiscal 1994, 1995 and 1996, respectively. See Note 12 of "Financial 7 8 Information - Notes to Consolidated Financial Statements" set forth in the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996. The Company also sells product directly to certain customers. In particular, the Company has a long-term supply arrangement with Tektronix, Inc. for the supply of products manufactured by Tektronix prior to its sale of its integrated circuits operation ("ICO") to the Company and for new designs created by Tektronix. Due to the relatively lengthy manufacturing cycle, the Company builds some of its inventory in advance of receiving orders from its customers. As a consequence of inaccuracies inherent in forecasting, inventory imbalances periodically occur that result in surplus amounts of some Company products and shortages of others. Such shortages can adversely affect customer relations; surpluses can result in larger than desired inventory levels. As of June 30, 1996, the Company's backlog was approximately $140 million as compared to approximately $199 million at June 30, 1995. The Company includes in its backlog customer released orders with firm schedules for shipment within the next 12 months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to the customers. In addition, the Company's backlog includes its orders from domestic distributors as to which revenues are not recognized until the products are sold by the distributors. Accordingly, the Company believes that its backlog at any time should not be used as a measure of future revenues. The Company warrants its products to its customers generally for 12 months from shipment, but in certain cases for longer periods. Warranty expense to date has been minimal. RESEARCH AND DEVELOPMENT The Company believes that research and development is critical to its future success. Objectives for the research and development function include definition and design of innovative proprietary products that meet customer needs, development of second-source products, design of parts for high yield and reliability, and development of manufacturing processes to support an expanding product line. Research, development, and engineering expenses were approximately $22.6 million, $42.4 million and $47.5 million in fiscal 1994, 1995 and 1996, respectively. COMPETITION The analog integrated circuit industry is intensely competitive, and virtually all major semiconductor companies presently compete with, or conceivably could compete with, some segment of the Company's business. Maxim's primary competitors are 8 9 Analog Devices, Inc., and Linear Technology Corporation. Other competitors with respect to some of the Company's products include Burr-Brown Corporation, Harris Corporation, Lucent Technologies, Micrel, Inc., Motorola, Inc., National Semiconductor Corporation, Philips Electronics N.V., Siliconix Incorporated, Sipex Corporation, TelCom Semiconductor, Inc., and Texas Instruments Incorporated. While Japanese and other foreign manufacturers have not played a major role in markets from which the Company currently derives the bulk of its revenue, they possess the necessary technical and financial capabilities to participate in these markets, and there can be no assurance that significant foreign competition will not develop in the future. Many of Maxim's competitors have substantially greater financial, manufacturing, and marketing resources than the Company, and some of Maxim's competitors have greater technical resources. The Company believes it competes favorably with these corporations primarily on the basis of technical innovation, product definition, quality, and service. There can be no assurance that competitive factors will not adversely affect the Company's future business. PATENTS, LICENSES, AND OTHER INTELLECTUAL PROPERTY RIGHTS The Company relies primarily upon know-how, rather than on patents, to develop and maintain its competitive position. There can be no assurance that others will not develop or patent similar technology or reverse engineer the Company's products or that the confidentiality agreements with employees, consultants, silicon foundries and other suppliers and vendors will be adequate to protect the Company's interests. Maxim currently owns 55 U.S. patents and 22 foreign patents with expiration dates ranging from December 1997 to March 2015. In addition, the Company has applied for 34 U.S. patents, a large number of which have corresponding patent applications in multiple foreign jurisdictions. It is the Company's policy to seek patent protection for significant inventions that may be patented, though the Company may elect, in appropriate cases, not to seek patent protection even for significant inventions if other protection, such as maintaining the invention as a trade secret, is considered more advantageous. There can be no assurance that any patent will issue on pending applications or that any patent issued will provide substantive protection for the technology or product covered by it. In addition, the Company has registered certain of its mask sets under the Semiconductor Chip Protection Act of 1984. The Company believes that patent and mask work protection are of less significance in its business than experience, innovation, and management skill. Maxim has registered several of its trademarks with the U.S. Patent and Trademark Office and in foreign jurisdictions. 9 10 Maxim is a party to a number of licenses, including patent licenses and other licenses obtained from Tektronix in connection with its acquisition of Tektronix's ICO in fiscal 1994. Because of the many technological developments and the technical complexity semiconductor industry, it is possible that certain of the Company's designs or processes may involve infringement of patents or other intellectual property rights held by others. From time to time, the Company has received, and in the future may receive, notice of claims of infringement by its products on intellectual property rights of third parties. If any such infringements were to exist, the Company might be obligated to seek a license from the holder of the rights and might have liability for past infringement. In the past, it has been common semiconductor industry practice for patent holders to offer licenses on reasonable terms and rates. Although in some situations, typically where the patent directly relates to a specific product or family of products, patent holders have refused to grant licenses, the practice of offering licenses appears to be generally continuing. However, no assurance can be given that the Company will be able to obtain licenses as needed in all cases or that the terms of any license that may be offered will be acceptable to Maxim. In those circumstances where an acceptable license is not available, the Company would need either to change the process or product so that it no longer infringes or else stop manufacturing the product or products involved in the infringement. ENVIRONMENTAL REGULATION Federal, state, and local regulations impose a variety of environmental controls on the storage handling discharge and disposal of certain chemicals and gases used in semiconductor manufacturing. The Company's facilities have been designed to comply with these regulations, and it believes that its activities are conducted in material compliance with such regulations. There can be no assurance, however, that interpretation and enforcement of current or future environmental regulations will not impose costly requirements upon the Company. Any failure of the Company to control adequately the storage use and disposal of regulated substances could result in future liabilities. Increasing public attention has been focused on the environmental impact of electronic manufacturing operations. While the Company to date has not experienced any materially adverse effects on its business from environmental regulations, there can be no assurance that changes in such regulations will not impose costly equipment or other requirements. EMPLOYEES As of June 30, 1996, Maxim had 1,987 employees, of which 279 were in engineering, research and development, 983 in manufacturing and operations, 252 in 10 11 marketing and sales, and 60 in finance and administration. In addition, the Company retained 413 temporary employees, principally in manufacturing and operations. The supply of skilled analog designers and other engineers required for Maxim's business is limited, and competition for such personnel is intense. The Company's growth also requires the hiring or training of additional middle level managers. If the Company is unable to hire, retain, and motivate qualified technical and management personnel, its operations and financial results will be adversely affected. None of the Company's employees is subject to a collective bargaining agreement. The Company believes that its relations with its employees are good. MAXTEK COMPONENTS CORPORATION In connection with Maxim's 1994 purchase of the integrated circuits business of Tektronix, Inc., Maxim and Tektronix jointly formed a new company, which is equally owned, to operate Tektronix's hybrid circuit business. This new company, named Maxtek Components Corporation, is an independent company devoted to design and production of multichip modules and hybrids. Maxtek's principal customer, Tektronix, accounts for over 50% of its revenue. Under Maxtek's supply agreements, all of its costs related to the Tektronix supply agreement are reimbursed on a cost plus profit basis. High-frequency designs often require a multitude of component technologies, and there are no monolithic IC processes currently available that can combine the performance advantages of all disparate technologies. High-frequency modules and hybrids are intended to combine the optimum technologies and deliver maximum performance. RISK FACTORS An investment in the securities of Maxim involves certain risks. In evaluating the Company and its business, prospective investors should give careful consideration to the factors listed below, in addition to the information provided elsewhere in this Annual Report on Form 10-K and in other documents filed with the Securities and Exchange Commission. The statements contained in this annual report on form 10-K which are not purely historical are forward looking statements, including statements regarding the Company's expectations, plans, or intentions regarding the future. All forward looking statements included in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward looking statement. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Forward looking statements in this annual report on form 10-K involve risk and uncertainty, including risk factors discussed below. 11 12 FACTORS AFFECTING FUTURE OPERATING RESULTS The Company's future operating results are difficult to predict and may be affected by a number of factors including the timing of new product announcements or introductions by the Company and its competitors, competitive pricing pressures, fluctuations in manufacturing yields and manufacturing efficiency, adequate availability of wafers and manufacturing capacity, changes in product mix, and economic conditions in the United States and international markets. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. The semiconductor industry experienced increased demand during the period through 1995 and production capacity constraints affected the industry's, including Maxim's, ability to meet that demand. More recently, demand on the industry has declined and it is uncertain what level of demand will prevail in the future for the industry and the Company. As a result of these and other factors, there can be no assurance that the Company will not experience material fluctuations in its projections and future operating results on a quarterly or annual basis. The Company's ability to realize its revenue goals and projections is affected by its ability to match current production mix with the product mix required to fulfill orders received within a quarter for delivery in that quarter (referred to as "turns business"). This issue, which has been one of the distinguishing characteristics of the analog integrated circuit industry, results from the very large number of individual parts offered for sale (in Maxim's case, in excess of 7,000 separate line items) combined with limitations on the ability to forecast orders accurately. Because of this extreme complexity in the Company's business, no assurance can be given that the Company will achieve an optimum match of manufacturing and shippable orders. DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES The Company's future success will depend in part on its continued ability to introduce new products and to develop new process technologies. Semiconductor design and process technology are subject to rapid technological change, requiring a high level of expenditures for research and development. Design and process development for the analog portion of the market, in which the Company participates, are particularly challenging. The success of new product introductions is dependent on several factors, including proper new product selection, timely product introduction, achievement of acceptable production yields, and market acceptance. From time to time, Maxim has not fully achieved its new product introduction and process development goals. For example, increasing manufacturing capacity and efficiency in newer processes supporting the Company's most advanced CMOS products and the Company's products manufactured on its high-frequency processes has advanced at a slower rate than planned. There can be no assurance that the Company will successfully develop or implement new process technologies or that new products will be introduced on a timely basis or receive substantial market acceptance. 12 13 In addition, the Company's growth is dependent on its continued ability to penetrate new markets such as the high-frequency communications segment of the electronics market where the Company has limited experience and competition is intense. There can be no assurance that the markets being served by the Company will continue to grow; that the Company's existing and new products will meet the requirements of such markets; that the Company's products will achieve customer acceptance in such markets; that competitors will not force prices to an unacceptably low level or take market share from the Company; or that the Company can achieve or maintain profit in these markets. MANUFACTURING RISKS The fabrication of integrated circuits is a highly complex and precise process. Minute impurities, contaminants in the manufacturing environment, difficulties in the fabrication process, defects in the masks used to print circuits on a wafer, manufacturing equipment failures, wafer breakage, or other factors can cause a substantial percentage of wafers to be rejected or numerous die on each wafer to be nonfunctional. The Company has from time to time in the past experienced lower than expected production yields, which have delayed product shipments and adversely affected gross margins. There can be no assurance that the Company will not experience a decrease in manufacturing yields or that the Company will be able to maintain acceptable manufacturing yields in the future. The number of shippable die per wafer for a given product is critical to the Company's results of operations. To the extent the Company does not achieve acceptable manufacturing yields or experiences delays in its wafer fab, assembly or final test operations, its results of operations could be adversely affected. During periods of decreased demand, fixed wafer fabrication costs could have an adverse effect on the Company's financial condition, gross margins, or results of operations. The Company manufactures over 90% of its products at two internal wafer fabrication facilities. One of those fabs is currently operating at capacity. Given the nature of the Company's products, it would be difficult to arrange for independent manufacturing facilities to supply such products. Any prolonged inability to utilize one of the Company's manufacturing facilities as a result of fire, natural disaster or otherwise, would have a material adverse effect on the Company's results of operations. COMPETITION The Company experiences intense competition from a number of companies, many of which have significantly greater financial, manufacturing and marketing resources than the Company and some of which have greater technical resources than the Company. To the extent that the Company's proprietary products become more 13 14 successful, competitors will offer second sources for some of those products, possibly causing some erosion of profit margins. Although Japanese and other foreign manufacturers have not played a major role in the markets from which the Company currently derives the bulk of its revenue, they possess the necessary technical and financial capabilities to participate in these markets, and there can be no assurance that significant foreign competition will not develop in the future. See "Business-Competition". DEPENDENCE ON INDEPENDENT FOUNDRIES AND SUBCONTRACTORS Although the Company has an internal capability to fabricate most of its wafers, Maxim remains dependent on outside silicon foundries for a small but important portion of its wafer fabrication. Each of the foundries currently used by Maxim is unrelated to Maxim and is a relatively small operation. As is typical in the semiconductor industry, the Company has experienced from time to time disruptions in the supply of processed wafers from these foundries due to quality problems, failure to achieve satisfactory electrical yields and capacity limitations. Procurement from foundries is done by purchase order rather than long-term contracts. If these foundries are unable or unwilling to produce adequate supplies of processed wafers conforming to the Company's quality standards, the Company's business and relationships with its customers for the limited quantities of products produced by these foundries would be adversely affected if the company were unable to find alternate sources of supply or successfully produce the required wafers itself. Maxim relies primarily on subcontractors located in the Philippines, Malaysia and South Korea to separate wafers into individual integrated circuits and package them. The Company also relies on an outside subcontractor to operate a captive test facility in the Philippines which is responsible for testing approximately 60% of the Company's unit shipments. In the past, South Korea and the Philippines have experienced relatively severe political disorders, labor disruptions, and natural disasters. Although the Company has been affected by these problems, none has materially affected the Company's revenues to date. However, similar problems in the future or more aggravated consequences of current problems could affect deliveries to Maxim of assembled, tested product, possibly resulting in substantial delayed or lost sales and/or increased expense. See "Business-Manufacturing". AVAILABILITY OF MATERIALS, SUPPLIES, AND SUBCONTRACT SERVICES The semiconductor industry has been in the midst of a very large expansion of fabrication capacity and production worldwide. As a result of increasing demands from semiconductor manufacturers, availability of certain basic materials and supplies, such as polysilicon, silicon wafers, lead frames and molding compounds, and of subcontract services, like epitaxial growth and ion implantation, which is essential to a large portion of Maxim's production, and assembly of integrated circuits into packages, have been in short supply. Maxim devotes continuous efforts to maintaining availability of 14 15 all required materials, supplies and subcontract services. However, Maxim does not have long- term agreements providing for all of these materials, supplies and services, and shortages could occur as a result of capacity limitations or production constraints on suppliers that could have materially adverse effects on Maxim's ability to achieve its planned production. DEPENDENCE ON INDEPENDENT DISTRIBUTORS AND SALES REPRESENTATIVES A significant portion of the Company's sales are realized through electronics distributors and independent sales representatives that are not under the direct control of the Company. These independent sales organizations generally represent product lines offered by several companies and thus could reduce their sales efforts applied to the Company's products or terminate their representation of the Company. As noted above, payment terms for foreign distributors are substantially longer, either according to contract or de facto, than for U.S. customers, and the inability to collect open accounts could adversely affect the Company's results of operation. One of Maxim's most direct competitors, Analog Devices Inc., has attempted in past years to successfully cause U.S. distributors to stop distributing Maxim products. Additional terminations by significant distributors or representatives could have a material adverse impact on the Company. See "Business-Sales and Marketing." FUTURE REVENUE FROM ACQUIRED BUSINESS During fiscal 1994, the Company acquired the integrated circuit operation ("ICO") of Tektronix, Inc. The Company's ability to successfully exploit the acquisition is dependent upon a number of factors, including completion of development of manufacturable processes acquired from Tektronix, development of new high-frequency processes, development of new products designed on the acquired high-frequency processes for Tektronix and its former customers and, to a large extent, for customers that have not historically purchased high-frequency products from the Company or Tektronix. In addition, the Company's ability to meet its sales commitments to existing customers and to expand its sales to those and to new customers depends on the Company's ability to achieve acceptable yields and production levels. While the Company has devoted substantial attention to production issues associated with the acquired facility, the Company continues to experience lower than satisfactory manufacturing yields to meet customer demand. The high-frequency business is a potentially large growth area for the Company, and the Company's inability to successfully address one or more of these challenges could materially adversely affect its business. PROTECTION OF PROPRIETARY INFORMATION The Company relies primarily upon know-how, rather than on patents, to develop and maintain its competitive position. There can be no assurance that others 15 16 will not develop or patent similar technology or reverse engineer the Company's products or that the confidentiality agreements upon which the Company relies will be adequate to protect its interests. Other companies have obtained patents covering a variety of semiconductor designs and processes, and the Company might be required to obtain licenses under some of these patents or be precluded from making and selling the infringing products. There can be no assurance that Maxim would be able to obtain licenses, if required, upon commercially reasonable terms. See "Business-Patents and Licenses." FOREIGN TRADE AND CURRENCY EXCHANGE Many of the materials and manufacturing steps in the Company's products are supplied by foreign companies, and approximately 57% of the Company's net revenues in fiscal 1996 were from foreign customers. Accordingly, both manufacturing and sales of the Company's products may be adversely affected by political or economic conditions abroad. In addition, various forms of protectionist trade legislation have been proposed in the United States and certain foreign countries. A change in current tariff structures or other trade policies could adversely affect the Company's foreign manufacturing or marketing strategies. Currency exchange fluctuations could also increase the cost of components manufactured abroad and the cost of the Company's products to foreign customers or decrease the costs of products from the Company's foreign competitors. See "Business-Manufacturing" and "Business-Sales and Marketing." DEPENDENCE ON KEY PERSONNEL The Company's success depends to a significant extent upon the continued service of its president, John F. Gifford, its other executive officers, and key management and technical personnel, particularly its experienced analog design engineers, and on its ability to continue to attract, retain and motivate qualified personnel. The Company does not maintain any key person life insurance policy on any such person. The competition for such employees is very intense. The loss of the services of Mr.Gifford, or of one or more of the Company's executive officers, design engineers, other key personnel, or the inability to continue to attract qualified personnel, could have a material adverse effect on the Company. 16 17 ITEM 2. PROPERTIES Maxim's headquarters are located in a 63,000 square foot building in Sunnyvale, California, which the Company purchased in October 1987. Between December 1989 and June 1996, the Company has purchased 6 buildings adjacent to its headquarters building in Sunnyvale with an aggregate of 94,800 square feet of space. These buildings serve as the executive offices of the Company and also provide space for engineering, manufacturing, administration, customer service and other uses. In December 1989, in connection with acquiring one of its wafer fabrication facilities, Maxim assumed the operating lease of the 30,000 square foot building housing these assets in Sunnyvale, California. This lease extends through November 2003 and has a five year lease extension option. In May 1994, Maxim purchased the Tektronix integrated circuit operation. This facility, located in Beaverton, Oregon on 21 acres, totals 226,000 square feet and contains 60,000 square feet of wafer fabrication areas as well as engineering, manufacturing, and general office space. A portion of the space is leased to unrelated parties. The Company expects these buildings and the contiguous land to be adequate for its purposes through fiscal 1997. In 1996, the Company began construction of an approximate 130,000 square foot facility in the Philippines. The facility is currently planned to be completed in the first half of 1997 and would initially be used for test operations. In 1996, the Company acquired an approximate nine acre parcel in Sunnyvale, California. The Company plans to build a wafer fabrication facility on this site in the future as demand dictates. ITEM 3. LEGAL PROCEEDINGS The information required by this item is incorporated by reference from the Company's Form 10-K for the fiscal year ended June 30, 1995, under the heading "Item 3. Legal Proceedings" and Form 10-Q for the quarterly period ended March 31, 1996, under the heading "Item 1: Legal Proceedings." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 17 18 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996 under the headings "Financial Information - Financial Highlights by Quarter" and "Corporate Data, Stockholder Information." ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996 under the heading "Financial Information - Selected Financial Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996 under the heading "Financial Information - Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference from the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1996 under the headings "Financial Information - Consolidated Balance Sheets, - Consolidated Statement of Income, - Consolidated Statements of Stockholders' Equity, - Consolidated Statement of Cash Flows, - Notes to Consolidated Financial Statements, - Report of Ernst & Young LLP, Independent Auditors and - Financial Highlights by Quarter." ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 18 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Other than as follows, the information required by this item is incorporated by reference from the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders under the headings "Proposal 1 - Election of Directors" and "Compliance with Section 16(A) of the Securities Exchange Act of 1934." EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are as follows:
Name Age Position John F. Gifford 55 President, Chief Executive Officer and Chairman of the Board Frederick G. Beck 59 Vice President Ziya G. Boyacigiller 44 Vice President Michael J. Byrd 36 Vice President and Chief Financial Officer Stephen R. Combs 46 Vice President Tunc Doluca 38 Vice President Kenneth J. Huening 35 Vice President William N. Levin 55 Vice President Robert F. Scheer 43 Vice President Richard E. Slater 45 Vice President and Chief Accounting Officer Vijay Ullal 38 Vice President
19 20 Mr. Gifford, a founder of the Company, has served as Maxim's President, Chief Executive Officer and Chairman of the Board since its incorporation in April 1983. Mr. Beck, a founder of the Company, has served as Vice President since May 1983, except for a medical leave between December 1991 and January 1994. Mr. Boyacigiller joined Maxim in June 1983 and was promoted to Vice President in April 1995. Prior to April 1995, he served in business management and IC design positions. Mr. Byrd joined Maxim in February 1994 as Vice President and Chief Financial Officer. Prior to joining Maxim he was with Ernst & Young from August 1982 to February 1994 where he held various positions, including partner. Dr. Combs, a founder of the Company, has served as Vice President since May 1983. Mr. Doluca joined Maxim in October 1984 and was promoted to Vice President in July 1994. Prior to July 1994, he served in a number of integrated circuit development positions. Mr. Huening joined Maxim in December 1983 and was promoted to Vice President in December 1993. Prior to December 1993, he served in a number of quality assurance positions. Mr. Levin joined Maxim in August 1990 as Vice President. From 1987 and until joining Maxim, he was Vice President, Program Management, for Shugart Corporation. Mr. Scheer joined Maxim in June 1983 and was promoted to Vice President in June 1992. Mr. Slater joined Maxim in March 1984, has served as Controller since 1986 and was promoted to Vice President in August 1990. Mr. Ullal joined Maxim in December 1989 and was promoted to Vice President in March 1996. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference from the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders under the headings "Executive Compensation" and "Performance Graph." 20 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference from the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders under the heading "Security Ownership of Certain Beneficial Owners and Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) The following financial statements are included in the Company's 1996 Annual Report to Stockholders and are incorporated herein by reference pursuant to Item 8. Consolidated Balance Sheets at June 30, 1996 and 1995. Consolidated Statements of Income for each of the three years in the period ended June 30, 1996. Consolidated Statements of Stockholders' Equity for each of the three years in the period ended June 30, 1996. Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 1996. Notes to Consolidated Financial Statements (a) (2) The following financial statement schedule is filed as part of this Form 10-K. Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable, or because the required information is included in the consolidated financial statements or notes thereto. (a) (3) Exhibits. See attached Exhibit Index. (b) Reports on Form 8-K. None 21 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: September 25, 1996 MAXIM INTEGRATED PRODUCTS, INC. By /s/ Michael J. Byrd Michael J. Byrd, Vice President and Chief Financial Officer (For the Registrant and as Principal Financial Officer) By /s/ Richard E. Slater Richard E. Slater, Vice President and Chief Accounting Officer (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ John F. Gifford President, Chief September 25, 1996 - ------------------- John F. Gifford Executive Officer and Chairman of the Board (Principal Executive Officer) /s/ James R. Bergman Director September 25, 1996 - -------------------- James R. Bergman /s/ Robert F. Graham Director September 25, 1996 - -------------------- Robert F. Graham /s/ A.R. Wazzan Director September 25, 1996 - -------------------- A.R. Wazzan
22 23 EXHIBIT INDEX
Exhibit Sequentially Number Numbered Page Description - ------- ------------- ----------- 3.1 0 Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on September 21, 1995 3.2 0 Bylaws of the Company 10.1 X Form of the Company's Domestic Distributor Agreement 10.2 # Form of the Company's International Distributor Agreement 10.3 # Form of the Company's Domestic Sales Representative Agreement 10.4 # Form of the Company's International Representative Agreement 10.5 0 Agreement dated as of July 14, 1987, amended and restated February 1994 between John F. Gifford and the Company(1) 10.6 X Agreement dated as of March 7, 1991 between John F. Gifford and the Company(1) 10.7 + Deferred Compensation agreement dated as of March 13, 1994 between John F. Gifford and the Company(1) 10.8 * Form of Indemnity Agreement 10.9 Z Asset Purchase Agreement by and between the Company and Tektronix, Inc., dated as
- --------------------- (1) Management contract or compensatory plan or arrangement. 23 24 of March 31, 1994, as amended, with certain attachments(2) 10.10 0 Technology Transfer Agreement dated May 27, 1994 by and between the Company and Tektronix, Inc.(2) 10.11 0 Incentive Stock Option Plan, as amended(1) 10.12 0 1987 Supplemental Stock Option Plan, as amended(1) 10.13 0 Nonemployee Stock Option Plan, as amended(1) 10.14 0 1987 Employee Stock Participation Plan, as amended(1) 10.15 1988 Nonemployee Director Stock Option Plan, as amended(1) 10.16 1996 Stock Incentive Plan(1) 11.1 Statement re Computation of Income Per Share 13.1 Portions of the Annual Report to Stockholders for the fiscal year ended June 30, 1996 incorporated by reference into the Form 10-K 21 List of Subsidiaries 23 Consent of Ernst & Young LLP, Independent Auditors
* Incorporated by Reference to the Company's Registration Statement on Form S-1 No. 33-19561. - --------------------------- (2) Schedules and certain attachments omitted pursuant to Item 601(b) of Registration S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the Commission. Certain material omitted pursuant to the request for confidential treatment by the Company. 24 25 X Incorporated by Reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1991. # Incorporated by Reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1992. + Incorporated by Reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1993. Z Incorporated by Reference to the Company's Form 8-K filed with the Commission on June 11, 1994. 0 Incorporation by Reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1995. 25 26 MAXIM INTEGRATED PRODUCTS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (amounts in thousands)
Additions Charged Balance at to Costs Balance at Beginning and End of Period Expenses Deductions (1) of Period ---------- -------- ------------- ---------- Allowance for doubtful accounts: Year ended June 30, 1994 $ 378 $ 35 $ 34 $ 379 Year ended June 30, 1995 $ 379 $ 805 $ 39 $1,145 Year ended June 30, 1996 $ 1,145 $ 154 $ 9 $1,290
- --------------- (1) Uncollectible accounts written off. 26 EX-10.15 2 EXHIBIT 10.15 1 EXHIBIT 10.15 MAXIM INTEGRATED PRODUCTS, INC. 1988 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN Adopted August 23, 1988 Approved by Stockholders on October 26, 1988 Amended by the Board of Directors on August 9, 1990 Approved by Stockholders on October 26, 1990 Amended by the Board of Directors on May 8, 1991 and August 14, 1991 Approved by Stockholders on November 7, 1991 Amended by the Board of Directors on February 23, 1995 Amended by the Board of Directors on February 29, 1996 1. PURPOSE (a) The purpose of the Maxim Integrated Products, Inc. 1988 Nonemployee Director Stock Option Plan (the "Plan") is to provide a means by which each director of MAXIM INTEGRATED PRODUCTS, INC. (the "Company") who is not an employee of the Company and has not prior to August 23, 1988 been granted an option by the Company (each such person being hereafter referred to as a "Non-Employee Director") will be given an opportunity to purchase stock of the Company. (b) The Company, by means of the Plan, seeks to retain the services of persons now serving as Non-employee Directors of the Company, to secure and retain the services of persons capable of serving in such capacity, and to provide incentives for such persons to exert maximum efforts for the success of the Company. 1 2 2. ADMINISTRATION (a) The Plan shall be administered by the Board of Directors of the Company (the "Board") unless and until the Board delegates administration to a committee, as provided in subparagraph 2(b). (b) The Board may delegate administration of the Plan to a committee composed of not fewer than three (3) members of the Board (the "Committee"). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 3. SHARES SUBJECT TO THE PLAN (a) Subject to the provisions of paragraph 10 relating to adjustments upon changes in stock, the stock that may be sold pursuant to options granted under the Plan shall not exceed in the aggregate six hundred twenty five thousand (625,000) shares (adjusted to reflect the stock dividend effective November 23, 1994 and November 29, 1995) of the Company's Common Stock. If any option granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under such option shall again become available for the Plan. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 4. ELIGIBILITY Options shall be granted only to Non-employee Directors of the Company. 2 3 5. AUTOMATIC GRANTS (a) Each person who is elected for the first time to be a Non-employee Director shall, upon the date of his initial election to be a Non-employee Director by the Board or stockholders of the company, automatically be granted an option to purchase thirty thousand (30,000) shares (adjusted to reflect the stock dividend effective November 23, 1994 and November 29, 1995) of the Company's Common Stock (subject to adjustment as provided in paragraph 10 hereof) on such date upon the terms and conditions set forth herein. (b) Each Non-employee Director who serves on the Company's Board of Directors on the Adoption Date shall automatically be granted an option to purchase ten thousand (10,000) shares of the Company's Common Stock (subject to adjustment as provided in Paragraph 10 hereof) on such date upon the terms and conditions set forth herein. 6. OPTION PROVISIONS Each option shall contain the following terms and conditions: (a) The term of each option commences on the date it is granted and, unless sooner terminated as set forth herein, expires on the date ("Expiration Date") five years from the date of grant. The term of each option may terminate sooner than such Expiration Date if the optionee's service as a Non-employee Director of the Company terminates for any reason or for no reason. In the event of such termination of service, the option shall terminate on the earlier of the Expiration Date or the date seven (7) months following the date of termination of service; provided, however, that if such termination of service is due to the optionee's death, the option shall terminate on the earlier of the Expiration Date or twelve (12) months following the date of the optionee's death. In any and all circumstances, an option may be exercised following termination of the optionee's service 3 4 as a Non-employee Director of the Company only as to that number of shares as to which it was exercisable on the date of termination of such service under the provisions of subparagraph 6(e). Notwithstanding the foregoing, if exercise within the foregoing periods is prohibited under paragraph 13 below, the term of the option shall be extended to a date thirty days following the first date on which the condition of paragraph 13 of the Plan has been met, and the option shall be exercisable as to the number of shares that could have been exercised on the date of termination of service had the condition of paragraph 13 been satisfied on that date. (b) The exercise price of each option shall be one hundred percent (100%) of the fair market value of the stock subject to such option on the date such option is granted. (c) Payment of the exercise price of each option is due in full in cash upon any exercise when the number of shares being purchased upon such exercise is less than 1,000 shares; but when the number of shares being purchased upon an exercise is 1,000 or more shares, the optionee may elect to make payment of the exercise price under one of the following alternatives: (i) Payment of the exercise price per share in cash at the time of exercise; or (ii) Provided that at the time of exercise the Company's common stock is publicly traded and quoted regularly in The Wall Street Journal, payment by delivery of already-owned shares of common stock of the Company owned by the optionee for at least six (6) months and owned free and clear of any liens, claims, encumbrances or security interests, which Common Stock shall be valued at fair market value on the date of exercise; or (iii) Payment by a combination of the methods of payment specified in subparagraph 6(c)(i) and 6(c)(ii) above. 4 5 (d) An option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the option is granted only by such person or by his guardian or legal representative. (e) (i) The options described in paragraph 5(a) shall become exercisable (vest) in installments as follows: eight and three hundred thirty-four thousandths percent (8.334%) of the shares covered by the option on the date three (3) months after the date of grant, and eight and three hundred thirty-four thousandths percent (8.334%) of the shares covered by the option at the end of every subsequent three-month period thereafter until all the shares have become vested on the date three (3) years from the date of grant; provided that shares shall become exercisable (vest) on any relevant vesting date only if the optionee is a Non-employee Director of the Company on that vesting date. (ii) The options described in paragraph 5(b) shall become exercisable (vest) in installments as follows: twenty-five percent (25%) of the shares covered by the option on the date three (3) months after all previously granted automatic options under this Plan have vested, and twenty-five percent (25%) of the shares covered by the option at the end of every subsequent three (3) month period thereafter until all the shares have become vested one year after all previously granted automatic options under this Plan have vested; provided that shares shall become exercisable (vest) on any relevant vesting date only if the optionee is Non-employee Director of the Company on that vesting date. (iii) Subject to the limitations contained herein including, without limitation, those contained in subparagraph 13(b), each option shall be exercisable with respect to each installment on or after the date of vesting applicable to such installment. 5 6 (f) The Company may require any optionee, or any person to whom an option is transferred under subparagraph 6(d), as a condition of exercising any such option: (i) to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if, as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then-applicable securities laws. (g) Notwithstanding anything to the contrary contained herein, an option may not be exercised unless the shares issuable upon exercise of such option are then registered under the Securities Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. 7. CONVENANTS OF THE COMPANY (a) During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such options. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the options granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan, or any stock issued or issuable pursuant to any such option. If the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company 6 7 deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such options. 8. USE OF PROCEEDS FROM STOCK Proceeds from the sale of stock pursuant to options granted under the Plan shall constitute general funds of the Company. 9. MISCELLANEOUS (a) Neither an optionee nor any person to whom an option is transferred under subparagraph 6(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such option unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms. (b) Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-employee Director any right to continue in the service of the Company or shall affect any right of the Company, its Board or stockholders to terminate the service of any Non-employee Director with or without cause. (c) No Non-employee Director, individually or as a member of a group, and no beneficiary or other person claiming under or through him, shall have any right, title or interest in or to any option reserved for the purposes of the Plan except as to such shares of common stock, if any, as shall have been reserved for him pursuant to an option granted to him. (d) In connection with each option made pursuant to the Plan, it shall be a condition precedent to the Company's obligation to issue or transfer shares to a Non-employee Director, or to evidence the removal of any restrictions on transfer, that such Non-employee Director make arrangements satisfactory to the Company to insure that the amount of any federal or other 7 8 withholding tax required to be withheld with respect to such sale or transfer, or such removal or lapse, is made available to the Company for timely payment of such tax. 10. ADJUSTMENTS UPON CHANGES IN STOCK (a) If any change is made in the stock subject to the Plan, or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding options will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options. (b) In the event of: (1) a dissolution or liquidation of the company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then all outstanding options shall become exercisable in full for a period of at least ten (10) days prior to such event. Outstanding options which have not been exercised prior to such event shall terminate on the date of such event unless assumed by a successor corporation. 11. AMENDMENT OF THE PLAN (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 10 relating to adjustments upon changes in stock, no amendment shall be 8 9 effective unless approved by the vote of a majority of the shares of the Company represented and voting at a duly held meeting within twelve (12) months before or after the adoption of the amendment, where the amendment will: (i) Materially increase the number of shares which may be issued under the Plan; (ii) Materially modify the requirements as to eligibility for participation in the Plan; or (iii) Materially increase the benefits accruing to participants under the Plan, whether by increasing the number of shares for which an option may be granted to an optionee or otherwise. (b) Rights and obligations under any option granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan, except with the consent of the person to whom the option was granted. 12. TERMINATION OR SUSPENSION OF THE PLAN (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the Board. No options may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted. (c) The Plan shall terminate upon the occurrence of any of the events described in Section 10(b) above. 13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE 9 10 The Plan shall become effective upon adoption by the Board of Directors, subject to the condition subsequent that the Plan is approved by the vote or written consent of the holders of a majority of the shares of the Company represented and voting at the next special or annual meeting of stockholders of the Company. No option granted under the Plan shall be exercised or exercisable unless and until the condition of paragraph 13 has been met. 10 EX-10.16 3 EXHIBIT 10.16 1 EXHIBIT 10.16 MAXIM INTEGRATED PRODUCTS, INC. 1996 STOCK INCENTIVE PLAN 1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of the Committees appointed to administer the Plan. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. (c) "Applicable Laws" means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to Options granted to residents therein. (d) "Board" means the Board of Directors of the Company. (e) "Change in Control" means a change in ownership or control of the Company effected through either of the following transactions: (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors. (f) "Code" means the Internal Revenue Code of 1986, as amended. (g) "Committee" means any committee appointed by the Board to administer the Plan. 1 2 (h) "Common Stock" means the common stock of the Company. (i) "Company" means Maxim Integrated Products, Inc., a Delaware corporation. (j) "Consultant" means any person who is a consultant, advisor, independent contractor, vendor, customer or other person having a past, current or prospective business relationship with the Company or any Parent or Subsidiary. (k) "Continuing Directors" means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. (l) "Continuous Status as an Employee, Director or Consultant" means that the employment, director or consulting relationship with the Company, any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an Employee, Director or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. (m) "Corporate Transaction" means any of the following stockholder-approved transactions to which the Company is a party: (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated, (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations) in connection with complete liquidation or dissolution of the Company, or (iii) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger. (n) "Covered Employee" means any person who is a "covered employee" under Section 162(m)(3) of the Code. (o) "Director" means a member of the Board. 2 3 (p) "Employee" means any person, including an Officer or Director, who is an employee of the Company or any Parent or Subsidiary of the Company for purposes of Section 422 of the Code. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (q) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (r) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) Where there exists a public market for the Common Stock, the Fair Market Value of a share of Common Stock shall be (A) the closing sale price of the Common Stock for the last market trading day prior to the date of the determination or on the date of the determination, as determined by the Administrator at the time of the determination (or, if no sales were reported on either such date, on the last trading date on which sales were reported) on the stock exchange determined by the Administrator to be the primary market for the Common Stock or the Nasdaq National Market, whichever is applicable or (B) if the Common Stock is not traded on any such exchange or national market system, the closing price of a Share on the Nasdaq Small Cap Market for the day prior to the time of the determination (or, if no such price was reported on that date, on the last date on which such price was reported), in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (ii) In the absence of an established market of the type described in (i), above, for the Common Stock, the Fair Market Value thereof shall be determined by the Administrator in good faith. (s) "Grantee" means an Employee, Director or Consultant who receives an Option under the Plan. (t) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. (u) "Non-Qualified Stock Option" means an Option not intended to qualify as an Incentive Stock Option. (v) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (w) "Option" means a stock option granted pursuant to the Plan. (x) "Option Agreement" means the written agreement evidencing the grant of an Option executed by the Company and the Grantee, including any amendments thereto. (y) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. 3 4 (z) "Performance-Based Compensation" means compensation qualifying as "performance-based compensation" under Section 162(m) of the Code. (aa) "Plan" means this 1996 Stock Incentive Plan. (bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor thereto. (cc) "Share" means a share of the Common Stock. (dd) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. (ee) "Subsidiary Disposition" means the disposition by the Company of its equity holdings in any subsidiary corporation effected by a merger or consolidation involving that subsidiary corporation, the sale of all or substantially all of the assets of that subsidiary corporation or the Company's sale or distribution of substantially all of the outstanding capital stock of such subsidiary corporation. 3. Stock Subject to the Plan. (a) Subject to the provisions of Section 10 below, the maximum aggregate number of Shares which may be issued pursuant to this Plan is 3,500,000 Shares; provided, however, that such maximum aggregate number of Shares shall be increased by the number of Shares or options returned to the Company's Incentive Stock Option Plan, 1987 Employee Stock Participation Plan, and Supplemental Nonemployee Stock Option Plan. Notwithstanding the foregoing, the maximum aggregate number of Shares available for grant of Incentive Stock Options shall be 3,500,000 Shares, and such number shall not be subject to adjustment as described above. The Shares to be issued pursuant to the Plan may be authorized, but unissued, or reacquired Common Stock. (b) If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option exchange program, or if any unissued Shares are retained by the Company upon exercise of an Option in order to satisfy the exercise price for such Option or any withholding taxes due with respect to such Option, such unissued or retained Shares shall become available for future grant under the Plan (unless the Plan has terminated). Shares that actually have been issued under the Plan pursuant to an Option shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. (a) Plan Administrator. (i) Administration with Respect to Directors and Officers. With respect to grants of Options to Directors or Employees who are also Officers or Directors of the 4 5 Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. (ii) Administration With Respect to Consultants and Other Employees. With respect to grants of Options to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Options and may limit such authority by requiring that such Options must be reported to and ratified by the Board or a Committee within six (6) months of the grant date, and if so ratified, shall be effective as of the grant date. (iii) Administration With Respect to Covered Employees. Notwithstanding the foregoing, grants of Options to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Options qualifying as Performance-Based Compensation. In the case of such Options granted to Covered Employees, references to the "Administrator" or to a "Committee" shall be deemed to be references to such Committee or subcommittee. (iv) Administration Errors. In the event an Option is granted in a manner inconsistent with the provisions of this subsection (a), such Option shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws. (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion: (i) to select the Employees, Directors and Consultants to whom Options may be granted from time to time hereunder; (ii) to determine whether and to what extent Options are granted hereunder; (iii) to determine the number of Shares or the amount of other consideration to be covered by each Option granted hereunder; (iv) to determine the Fair Market Value of the Common Stock in accordance with Section 2(r) of the Plan; (v) to approve forms of Option Agreement for use under the Plan; 5 6 (vi) to determine the terms and conditions of any Option granted hereunder; (vii) to amend the terms of any outstanding Option granted under the Plan, provided that any amendment that would adversely affect the Grantee's rights under an outstanding Option shall not be made without the Grantee's written consent; (viii) to reduce the exercise price of any Option to reflect a reduction in the Fair Market Value of the Common Stock since the grant date of the Option without a material adverse impact on the Grantee; provided, however, that (A) such reductions in the aggregate do not apply to Options covering more than five percent (5%) of the maximum aggregate number of Shares available under Section 3(a), above (as amended from time to time), in any twelve (12) month period, (B) such reduction is approved by a majority of the members of the Administrator, and (C) the Administrator determines in good faith and in writing that such reductions occur only infrequently and principally in response to conditions other than poor operating performance by the Company. For purposes of this subsection (viii), the issuance of an Option in replacement of an existing Option with a lower exercise price (or a lower base amount on which appreciation is measured) without a material adverse impact on the Grantee shall be deemed to be a reduction in the exercise price of the earlier granted Option; (ix) to construe and interpret the terms of the Plan and Options granted pursuant to the Plan; (x) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such laws; provided, however, that no Option shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and (xi) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate. (c) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be conclusive and binding on all persons. 5. Eligibility. Non-Qualified Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees. An Employee, Director or Consultant who has been granted an Option may, if otherwise eligible, be granted additional Options. Options may be granted to such Employees of the Company and its subsidiaries who are residing in foreign jurisdictions as the Administrator may determine from time to time. 6. Terms and Conditions of Options. (a) Designation of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares 6 7 subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is granted. (b) Conditions of Option. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms and conditions of each Option including, but not limited to, the Option vesting schedule, form of payment upon exercise of the Option and satisfaction of any performance criteria. (c) Individual Option Limit. The maximum number of Shares with respect to which Options may be granted to any individual in any fiscal year of the Company shall be 3,000,000. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation with respect to an individual, if any Option is canceled, the canceled Option shall continue to count against the maximum number of Shares with respect to which Options may be granted to the individual. For this purpose, the repricing of an Option shall be treated as the cancellation of the existing Option and the grant of a new Option. (d) Term of Option. The term of each Option shall be ten (10) years from the date of grant for all Grantees other than Directors who are not Employees, in whose case the term shall be five (5) years from the date of grant. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. (e) Transferability of Options. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Grantee only by the Grantee. Non-Qualified Stock Options shall be transferable to the extent provided in the Option Agreement. (f) Time of Granting Options. The date of grant of an Option shall for all purposes be the date on which the Administrator makes the determination to grant such Option, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. (g) Vesting During Leave of Absence. During any leave of absence from employment, directorship or consulting arrangement with the Company or any Parent or Subsidiary, vesting of such Grantee's Options shall cease, and shall resume upon the Grantee's 7 8 return to his or her relationship with the Company, Parent or Subsidiary. The dates on which such Grantee's Options vest shall thereafter be adjusted by the duration of the leave of absence. 7. Option Exercise Price, Consideration and Taxes. (a) Exercise Price. The exercise price for an Option shall be as follows: (i) In the case of an Incentive Stock Option: (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. (B) granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. (ii) In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than eighty-five percent (85%) of the Fair Market Value per Share on the date of grant unless otherwise determined by the Administrator; provided, however, that in the case the per Share exercise price is less than one hundred percent (100%) of the Fair Market Value per Share on the date of the grant, the Administrator determines in writing and in good faith that (A) such grants are made infrequently, (B) there is a good business reason for the grant that outweighs the normal presumption of a per Share exercise price of not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant, and (C) the aggregate number of Shares subject to such Options does not exceed five percent (5%) of the aggregate maximum number of Shares under Section 3(a), above, as amended from time to time. (iii) In the case of Options intended to qualify as Performance-Based Compensation, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise of an Option including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following: (i) cash; (ii) check; (iii) delivery of Grantee's promissory note with such recourse, interest, security, and redemption provisions as the Administrator determines as appropriate; 8 9 (iv) surrender of Shares (including withholding of Shares otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price unless otherwise determined by the Administrator); (v) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; or (vi) any combination of the foregoing methods of payment. (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any foreign, federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Option, the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations. 8. Exercise of Option. (a) Procedure for Exercise; Rights as a Stockholder. (i) Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Option Agreement. (ii) An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to an Option, notwithstanding the exercise of an Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in the Option Agreement or Section 10, below. (b) Exercise of Option Following Termination of Employment, Director or Consulting Relationship. (i) An Option may not be exercised after the termination date of such Option set forth in the Option Agreement and may be exercised following the termination of a 9 10 Grantee's Continuous Status as an Employee, Director or Consultant only to the extent that the Grantee was entitled to exercise it at the date of such termination (but in no event later than the expiration of the term of such option as set forth in the Option Agreement). Options shall be exercisable for a period of ninety (90) days following termination generally, and for a period of five hundred forty-seven (547) days following termination due to death of the Grantee or three hundred sixty-five (365) days following termination due to the disability of the Grantee (or, in each case, such other period of time as is determined by the Administrator, which such determination in the case of an Incentive Stock Option shall be made at the time of grant of the Option). (ii) All Options shall terminate to the extent not exercised on the last day of the period specified in paragraph (i) above or the last day of the original term of the Option, whichever occurs first. (iii) Any Option designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee's Continuous Status as an Employee, Director or Consultant shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Option Agreement. (c) Exercise of Option Following Termination of Employment, Director or Consulting Relationship. In the event of termination of a Grantee's Continuous Status as an Employee, Director or Consultant with the Company for any reason other than disability or death (but not in the event of an Grantee's change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only within ninety (90) days after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that the Grantee was entitled to exercise it at the date of such termination or to such other extent as may be determined by the Administrator. If the Grantee should die within ninety (90) days after the date of such termination, the Grantee's estate or the person who acquired the right to exercise the Option by bequest or inheritance may exercise the Option to the extent that the Grantee was entitled to exercise it at the date of such termination within five hundred forty-seven (547) days of the Grantee's date of death, but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement. In the event of an Grantee's change of status from Employee to Consultant, an Employee's Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the ninety-first (91st) day following such change of status. If the Grantee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (d) Disability of Grantee. In the event of termination of a Grantee's Continuous Status as an Employee, Director or Consultant as a result of his or her disability, Grantee may, but only within three hundred sixty-five (365) days from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination; provided, however, that if such disability is not a "disability" as 10 11 such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three (3) months and one day following such termination. To the extent that Grantee is not entitled to exercise the Option at the date of termination, or if Grantee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (e) Death of Grantee. In the event of the death of a Grantee, the Option may be exercised at any time within five hundred forty-seven (547) days following the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement), by the Grantee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the Grantee was entitled to exercise the Option at the date of death. If, at the time of death, the Grantee was not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after death, the Grantee's estate or a person who acquired the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate. (f) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Grantee at the time that such offer is made. 9. Conditions Upon Issuance of Shares. (a) Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws. 10. Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option, and the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other similar event resulting in an increase or decrease in the number of issued shares of Common Stock. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any 11 12 class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Option. 11. Corporate Transactions/Changes in Control/Subsidiary Dispositions. (a) The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction, Change in Control or Subsidiary Disposition or at the time of an actual Corporate Transaction, Change in Control or Subsidiary Disposition and exercisable at the time of the grant of an Option under the Plan or any time while an Option remains outstanding, to provide for the full automatic vesting and exercisability of one or more outstanding unvested Options under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Options in connection with a Corporate Transaction, Change in Control or Subsidiary Disposition, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Option vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Status as an Employee or Consultant of the Grantee within a specified period following the effective date of the Change in Control or Subsidiary Disposition. The Administrator may provide that any Options so vested or released from such limitations in connection with a Change in Control or Subsidiary Disposition, shall remain fully exercisable until the expiration or sooner termination of the Option. Effective upon the consummation of a Corporate Transaction, all outstanding Options under the Plan shall terminate unless assumed by the successor company or its Parent. (b) The portion of any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction, Change in Control or Subsidiary Disposition shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the extent such dollar limitation is exceeded, the accelerated excess portion of such Option shall be exercisable as a Non-Qualified Stock Option. 12. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated. 13. Amendment, Suspension or Termination of the Plan. (a) The Board may at any time amend, suspend or terminate the Plan. To the extent required to comply with Applicable Laws, the Company shall obtain stockholder approval of any Plan amendment in such manner and to such a degree as required. (b) No Option may be granted during any suspension of the Plan or after termination of the Plan. (c) Any amendment, suspension or termination of the Plan shall not affect Options already granted, and such Options shall remain in full force and effect as if the Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the 12 13 Grantee and the Administrator, which agreement must be in writing and signed by the Grantee and the Company. 14. Reservation of Shares. (a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. (b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 15. No Effect on Terms of Employment. The Plan shall not confer upon any Grantee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 13 EX-11.1 4 EXHIBIT 11.1 1 MAXIM INTEGRATED PRODUCTS, INC. EXHIBIT 11.1 - COMPUTATION OF INCOME PER SHARE Three Years Ended June 30, 1996 (amounts in thousands, except per share data)
1994 1995 1996 ---- ---- ---- Weighted average shares outstanding 56,569 57,852 60,102 Add weighted average shares from assumed exercise of options when treasury shares are reacquired at average stock market price 10,791 13,148 16,720 Less weighted average shares assumed repurchased from tax benefit from the assumed exercise of non-qualified stock options (3,732) (4,498) (5,895) ------ ------ ------ Weighted average shares outstanding applicable to computation of income per share 63,628 66,502 70,927 ====== ====== ====== Net income applicable to computation of income per share $24,082 $38,906 $123,345 ======= ======= ======== Income per share $ 0.38 $ 0.59 $ 1.74 ======= ======= ========
14 EX-13.1 5 EXHIBIT 13.1 1 Exhibit 13.1 Maxim Integrated Products 1996 Annual Report 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Net Revenues The Company reported net revenues of $421.6 million in fiscal 1996, up $170.8 million or 68.1% from fiscal 1995. Fiscal 1995 net revenues exceeded fiscal 1994 by $96.9 million or 63.0%. The increases related primarily to higher unit shipments as a result of continued introduction of new proprietary products and increased market acceptance of the Company's proprietary and second-source products. The increases also reflect the acquisition of the Tektronix Integrated Circuit Operation in May 1994. This acquisition contributed 10.6% and 13.5% of net revenues in fiscal 1996 and 1995, respectively. Approximately 57% of the Company`s net revenues were derived from customers outside the U.S., primarily in Europe and the Pacific Rim (49% in fiscal 1995 and 52% in fiscal 1994). While a majority of these sales are denominated in U.S. dollars, the Company purchases foreign currency forward contracts to mitigate its risk on firm commitments and net monetary assets denominated in foreign currencies, and as a result, the impact of changes in foreign currency on revenues and the Company's results of operations for 1996 was minimal. Gross Margin The Company's gross margin as a percentage of net revenues was 65.3%, 58.7%, and 58.3% in fiscal 1996, 1995, and 1994, respectively. The improvements in fiscal 1996 and 1995 were principally due to production efficiencies obtained through economies of scale. In addition to the factors above, gross margins were adversely affected in fiscal 1995 due to a $11.7 million charge related to the Company's program to modernize its equipment and manufacturing facilities. The charge relates to a cumulative adjustment for depreciation as a result of changing estimates of useful lives associated with equipment that management estimates will be replaced or substantially upgraded over the next three years. Gross margins were also adversely affected in fiscal 1995 due to approximately $2.3 million of other charges related to the Company's conversion to 6" wafers in the Beaverton, Oregon, manufacturing facility. Research and Development The Company is constantly working to introduce new products through its research and development efforts. Research and development expenses of 11.3%, 16.9%, and 14.7% of net revenues in fiscal 1996, 1995, and 1994, respectively, decreased as a percent of net revenues due to higher sales volume. In absolute dollars, research and development expenses increased 12.1%, 87.9%, and 37.3% in fiscal 1996, 1995, and 1994, respectively, due primarily to increased headcount and spending associated with new product development efforts. The percentage increase from fiscal 1994 to 1995 was due, in part, to $5.4 million of charges relating to the Company's program to modernize its equipment. Selling, General and Administrative Selling, general and administrative expenses were 9.9%, 19.0%, and 20.5% of net revenues in fiscal 1996, 1995, and 1994, respectively. The percentage decrease from fiscal 1995 to 1996 was due to increased sales volume and the Company's plan to control expenses. The percentage decrease from fiscal year 1994 to 1995 was also primarily due to increased sales volume, although actual expenses increased primarily due to the Company's international expansion and certain one-time costs associated with technology licensing matters. 2 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Interest income increased due to higher invested cash, cash equivalents, and short-term investments. Provision for Income Taxes The effective tax rate of 35% for fiscal 1996 remained unchanged when compared to fiscal 1995. The effective tax rate in fiscal 1994 was 36%. OUTLOOK: The Company ended fiscal 1996 with backlog scheduled for shipment in the next 12 months of $140 million. The decline during FY96 reflects the combination of the Company's success in increasing production to ship the backlog and a higher than normal rate of cancellations by the Company's distribution and OEM customers in the third and fourth quarters of fiscal 1996. Those cancellations were $28 million and $33 million in the third and fourth quarter, respectively. The Company believes the cancellations largely resulted from our customers' over-ordering in fiscal 1995 when industry-wide integrated circuit supply was seriously constrained and lead times were considerably longer than today. In the semiconductor industry, there is a close correlation between lead times and the amount of inventories and backlog coverage an equipment manufacturer must have. When lead times lengthen, bookings abnormally increase (as seen in FY95) and inventories increase to reflect the fact that it now takes end-market equipment manufacturers longer to receive the components they need to support their production run rates. When lead times decrease (as they did in the second half of FY96), equipment manufacturers do not have to place new orders until their inventories and outstanding purchase orders on their suppliers equal the level dictated by the shorter lead time. Although it is difficult to determine, the Company believes that end market consumption of its products at the end of Q4 exceeded the booking rates experienced by the Company in the second half of fiscal 1996. Until the Company's customers reduce their inventories of Maxim products, and net bookings on the Company increase beyond the rate experienced in the fourth quarter of fiscal 1996, the Company will have difficulty growing revenues and may in fact experience a decline in revenues and earnings from 1996 levels. FINANCIAL CONDITION: Overview Total assets grew to $417.8 million at the end of fiscal 1996, up from $256.1 million at the end of fiscal 1995. The increase is due to favorable operating results for the year. Accounts receivable increased to $80.7 million at the end of fiscal 1996 from $27.7 million at the end of fiscal 1995, primarily due to an overall increase in sales volume, and an increase in shipments occurring later in the quarter. Inventory increased to $30.5 million at the end of fiscal 1996 from $19.1 million at the end of fiscal 1995, because of higher manufacturing volumes and the extraordinarily low inventory level at the end of fiscal 1995 caused by efforts to meet a surge in demand at that time. 3 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Company's primary source of funds for fiscal 1996, 1995, and 1994 has been the net cash generated from operating activities of approximately $119.5 million, $86.9 million, and $48.2 million, respectively. In addition, the Company received approximately $19.7 million, $9.8 million, and $6.4 million of proceeds from the exercises of stock options during fiscal 1996, 1995, and 1994, respectively. The principal uses of funds for fiscal 1996 were purchases of property, plant and equipment of $75.1 million ($35.6 million in 1995 and $21.8 million in 1994) and repurchases of $27.4 million ($11.9 million in 1995 and $6.5 million in 1994) of the Company's common stock. As of June 30, 1996, the Company's available funds consisted of approximately $129.3 million in cash, cash equivalents and short-term U.S. Government-backed investments. The Company anticipates investing approximately $40 million in property, plant and equipment in fiscal 1997. Cash generated from operating activities will be used to finance these expenditures. The Company anticipates that the available funds and cash generated from operations will be sufficient to meet cash and working capital requirements through the end of fiscal 1997. FORWARD LOOKING INFORMATION: The statements contained in this annual report which are not purely historical are forward looking statements, including statements regarding the Company's expectations, plans, or intentions regarding the future. Forward looking statements include statements regarding growth of the market for integrated circuits under the heading "New Products and New Markets," statements regarding the Company's growth in revenues and earnings under the heading "Managing the Short Term: Laying the Foundation for Future Growth," and statements regarding the Company's backlog and growth in revenues under the heading "Outlook." All forward looking statements included in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward looking statement. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Forward looking statements in this annual report involve risk and uncertainty. Important factors, including overall economic conditions; demand for electronic products and semiconductors generally; demand for the Company's products in particular; availability of raw material, equipment, supplies and services; unanticipated manufacturing problems; technological and product development risks; competitors' actions; and other risk factors described in the Company's filings with the Securities and Exchange Commission could cause actual results to differ materially. 4 5 CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------- June 30, (Amounts in thousands, except share data) 1995 1996 - ----------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 54,966 $ 60,283 Short-term investments 37,329 68,970 - ----------------------------------------------------------------------------------- Total cash, cash equivalents and short-term investments 92,295 129,253 Accounts receivable (net of allowance for doubtful accounts of $1,145 in 1995 and $1,290 in 1996) 27,714 80,664 Inventories 19,105 30,471 Prepaid taxes and other current assets 22,708 24,163 - ----------------------------------------------------------------------------------- Total current assets 161,822 264,551 - ----------------------------------------------------------------------------------- Property, plant and equipment, at cost, less accumulated depreciation 87,925 147,068 Other assets 6,386 6,175 - ----------------------------------------------------------------------------------- $256,133 $417,794 - ----------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------- Current liabilities: Capital lease obligations $ 40 $ --- Accounts payable 24,785 29,738 Income taxes payable 1,805 19,323 Accrued salaries 9,795 12,897 Accrued expenses 16,358 11,880 Payable related to building acquisitions 5,550 --- Deferred income on shipments to distributors 7,511 14,531 - ----------------------------------------------------------------------------------- Total current liabilities 65,844 88,369 - ----------------------------------------------------------------------------------- Other Liabilities 6,000 4,000 Deferred income taxes 5,579 --- Commitments and Contingencies --- --- - ----------------------------------------------------------------------------------- Stockholders' equity: Preferred stock, $0.001 par value; Authorized: 2,000,000 shares; Issued and outstanding: none --- --- Common stock, $0.001 par value; Authorized: 120,000,000 shares; Issued and outstanding: 58,873,158 shares in 1995 and 61,445,519 shares in 1996 60 62 Additional paid-in capital 64,896 89,939 Retained earnings 113,451 236,796 Translation adjustment 303 (1,372) - ----------------------------------------------------------------------------------- Total stockholders' equity 178,710 325,425 - ----------------------------------------------------------------------------------- $256,133 $417,794 ===================================================================================
See accompanying notes. 5 6 CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------- For the years ended June 30, (Amounts in thousands, except per share data) 1994 1995 1996 - ------------------------------------------------------------------------------------------------------- Net revenues $153,932 $250,820 $421,626 Cost of goods sold 64,250 103,598 146,253 - ------------------------------------------------------------------------------------------------------- Gross margin 89,682 147,222 275,373 - ------------------------------------------------------------------------------------------------------- Operating expenses: Research and development 22,561 42,392 47,532 Selling, general and administrative 31,547 47,596 41,951 - ------------------------------------------------------------------------------------------------------- 54,108 89,988 89,483 - ------------------------------------------------------------------------------------------------------- Operating income 35,574 57,234 185,890 Interest income 2,109 2,646 4,604 Interest expense (55) (25) (37) - ------------------------------------------------------------------------------------------------------- Income before provision for income taxes 37,628 59,855 190,457 Provision for income taxes 13,546 20,949 67,112 - ------------------------------------------------------------------------------------------------------- Net income $ 24,082 $ 38,906 $123,345 - ------------------------------------------------------------------------------------------------------- Income per share $ 0.38 $ 0.59 $ 1.74 - ------------------------------------------------------------------------------------------------------- Common and common equivalent shares 63,628 66,502 70,927 - -------------------------------------------------------------------------------------------------------
See accompanying notes. 6 7 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------- Common For the years ended June 30, Stock Additional ----------------------- Paid-In Retained Translation (Amounts in thousands, except share data) Shares Par Value Capital Earnings Adjustment Total - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES, JUNE 30, 1993 55,677,512 $56 $ 47,507 $ 50,463 $ (690) $ 97,336 Exercise of stock options under the Stock Option and Purchase Plans 2,239,396 2 6,359 -- -- 6,361 Repurchase of common stock (570,000) -- (6,493) -- -- (6,493) Warrants -- -- 2,000 -- -- 2,000 Tax benefit on exercise of non-qualified stock options and disqualifying dispositions under stock plans -- -- 6,175 -- -- 6,175 Translation adjustment -- -- -- -- 731 731 Net income -- -- -- 24,082 -- 24,082 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES, JUNE 30, 1994 57,346,908 58 55,548 74,545 41 130,192 Exercise of stock options under the Stock Option and Purchase Plans 2,303,250 2 9,764 -- -- 9,766 Repurchase of common stock (777,000) -- (11,936) -- -- (11,936) Tax benefit on exercise of non-qualified stock options and disqualifying dispositions under stock plans -- -- 11,520 -- -- 11,520 Translation adjustment -- -- -- -- 262 262 Net income -- -- -- 38,906 -- 38,906 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES, JUNE 30, 1995 58,873,158 60 64,896 113,451 303 178,710 Exercise of stock options under the Stock Option and Purchase Plans 3,399,361 3 19,677 -- -- 19,680 Repurchase of common stock (827,000) (1) (27,370) -- -- (27,371) Tax benefit on exercise of non-qualified stock options and disqualifying dispositions under stock plans -- -- 32,736 -- -- 32,736 Translation adjustment -- -- -- -- (1,675) (1,675) Net income -- -- -- 123,345 -- 123,345 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES, JUNE 30, 1996 61,445,519 $62 $ 89,939 $236,796 $(1,372) $325,425 ===================================================================================================================================
See accompanying notes. 7 8 CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------- For the years ended June 30, Increase (decrease) in cash and cash equivalents (Amounts in thousands) 1994 1995 1996 - ---------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 24,082 $ 38,906 $ 123,345 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,901 11,617 12,899 Reduction of equipment value -- 18,046 1,344 Changes in assets and liabilities: Accounts receivable 1,227 (9,764) (52,950) Inventories (504) (775) (11,366) Prepaid taxes and other current assets (7,254) (7,938) (1,455) Accounts payable 561 14,090 4,953 Income taxes payable 7,692 8,150 50,254 Deferred income taxes 2,674 723 (5,579) Deferred income on shipments to distributors 2,172 465 7,020 All other accrued liabilities 9,650 13,426 (8,926) - ---------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 48,201 86,946 119,539 - ---------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Additions to property, plant and equipment (21,848) (35,553) (75,061) Other non-current assets (362) (5,224) 211 Purchase of held-to-maturity securities (16,821) (67,713) (137,882) Proceeds from maturities of held-to-maturity securities 16,937 50,781 106,241 Acquisition (26,000) -- -- - ---------------------------------------------------------------------------------------------------------- Net cash used in investing activities (48,094) (57,709) (106,491) - ---------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Issuance of common stock 6,361 9,766 19,680 Principal payments on capital lease obligations (508) (134) (40) Repurchase of common stock (6,493) (11,936) (27,371) - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (640) (2,304) (7,731) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (533) 26,933 5,317 Cash and cash equivalents: Beginning of year 28,566 28,033 54,966 - ---------------------------------------------------------------------------------------------------------- END OF YEAR $ 28,033 $ 54,966 $ 60,283 ========================================================================================================== Supplemental disclosures of cash flow information: Cash paid during the year for: - ---------------------------------------------------------------------------------------------------------- Interest $ 51 $ 24 $ 37 Income taxes $ 9,774 $ 25,680 $ 19,381 Noncash transactions: - ---------------------------------------------------------------------------------------------------------- Purchase of building in exchange for payable -- $ 5,550 -- ==========================================================================================================
See accompanying notes. 8 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Operations: Maxim Integrated Products, Inc., designs, develops, and manufactures linear and mixed-signal integrated circuits. Products include data converters, interface circuits, microprocessor supervisors, operational amplifiers, power supplies, multiplexers, switches, battery chargers, battery management circuits, RF circuits, fiber optic transceivers, and voltage references. Maxim Integrated Products, Inc., is a global company with manufacturing facilities in the United States and sales offices throughout the world. The Company's products are sold to customers in the data processing, telecommunications, networking, industrial control, instrumentation, and military markets. The Company derives more than half of its revenues from international sales. 2. Summary of Significant Accounting Policies: Basis of presentation: The consolidated financial statements include the accounts of Maxim Integrated Products, Inc., and all of its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated. Accounts denominated in foreign currencies have been translated using the local currency as the functional currency. Cash equivalents and short-term investments: For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments consist of U.S. Government obligations and Municipal Bond obligations collateralized by U.S. Government obligations with original maturities beyond three months and those that will mature within one year. At June 30, all debt securities, which consist of U.S. Treasury securities and various municipal bond obligations collaterized by U.S. Treasury Securities all maturing within one year, are designated as held-to-maturity and carried at amortized cost which approximates market value. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on held-to-maturity securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest on securities classified as held-to-maturity is included in investment income. Derivative financial instruments held for purposes other than trading: The Company enters into forward exchange contracts to hedge certain firm sales commitments denominated in foreign currencies and the net monetary assets and liabilities of its foreign subsidiaries. The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that the eventual dollar cash flows resulting from the sale of products to international customers and its subsidiaries will be adversely affected by changes in exchange rates. Gains and losses related to these contracts are deferred and matched with the overall gains or losses from the underlying transactions. 9 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Inventories: Inventories are stated at the lower of standard cost (which approximates first in, first out) or market. Property, plant and equipment: Property, plant and equipment are stated at cost and depreciation is computed on the straight line method over estimated useful lives of 1 to 40 years. Leased machinery and equipment and leasehold improvements are amortized over the lesser of their useful lives or the remaining term of the related lease. In 1995, the Financial Accounting Standards Board released the Statement of Financial Accounting Standard No.121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 121 requires recognition of impairment of long-lived assets in the event that the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. The Company is required to adopt SFAS 121 in the fiscal year ending June 28, 1997. Adoption of SFAS 121 is not expected to have a material impact on the Company's financial position or results of operations. Deferred income on shipments to distributors: A portion of the Company's sales are made to domestic distributors under agreements which provide for certain price rebates and limited product return privileges. As a result, the Company defers recognition of such sales until the merchandise is sold by the distributors. Foreign Currency Translation: Assets and liabilities of subsidiaries operating in foreign jurisdictions are translated to U.S. dollars at year-end exchange rates. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities are accumulated in a separate component of stockholders' equity. Results of operations in foreign jurisdictions are translated into U.S. dollars at average rates of exchange prevailing during the year. Employee stock plans: The Company accounts for its stock option and employee stock purchase plans in accordance with provisions of the Accounting Principles Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." In 1995, the Financial Accounting Standards Board released the Statement of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock Based Compensation." SFAS 123 provides an alternative to APB 25 and is effective for fiscal years beginning after December 15, 1995. The Company expects to continue to account for its employee stock plans in accordance with the provisions of APB 25. Accordingly, SFAS 123 is not expected to have a material impact on the Company's financial position or results of operations. 10 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock dividend/split: On November 16, 1995, the Company's Board of Directors authorized a two-for-one split of the Company's common stock effected in the form of a stock dividend, which was paid on December 13, 1995, to stockholders of record as of November 29, 1995. The stated par value of each share remained $0.001. A total of $30,000 was reclassified from the Company's additional paid-in capital account to the Company's common stock account. All shares and per share amounts have been retroactively restated to reflect the stock split. Income taxes: Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). The cumulative effect of the adoption of FAS 109 was not material. Income per share: Income per share is based upon the weighted number of common and common equivalent shares (stock options and stock warrants) outstanding during the period. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates relate to the useful lives of fixed assets, allowances for doubtful accounts and customer returns, inventory reserves, potential reserves relating to litigation matters, accrued liabilities, and other reserves. Actual results may differ from those estimates, and such differences may be material to the financial statements. Concentration of credit risk: Due to the Company's credit evaluation and collection process, bad debt expenses have been insignificant. Credit risk with respect to trade receivables is limited because a large number of geographically diverse customers make up the Company's customer base, thus spreading the credit risk. While a significant portion of the Company's revenues are made through domestic and international distributors, including five distributors which account for approximately 29% of revenues in fiscal 1996, no single customer has accounted for greater than 10% of net revenues in the last three fiscal years. The Company places its investments with government entities and high credit quality financial institutions and limits the amount of credit exposure to any one financial institution. 11 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Concentration of other risks: The semiconductor industry is characterized by rapid technological change, competitive pricing pressures, and cyclical market patterns. The Company's results of operations are affected by a wide variety of factors, including general economic conditions, both at home and abroad, economic conditions specific to the semiconductor industry, the timely implementation of new manufacturing technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market, and reliance on assembly and test subcontractors and independent distributors and sales representatives. As a result, the Company may experience substantial period-to-period fluctuations in future operating results due to the factors mentioned above or other factors. Financial presentation: Certain prior year amounts on the Consolidated Financial Statements have been reclassified to conform to the 1996 presentation. 3. Acquisition: On May 27, 1994, the Company acquired substantially all of the assets of the Tektronix Integrated Circuit Operation in exchange for $26,000,000 cash and warrants to purchase 600,000 shares of the Company's common stock at $15 per share (valued at $2,000,000). These warrants remain outstanding at June 30, 1996. The acquisition was accounted for as a purchase. 4. Investments: Investments in held-to-maturity securities at June 30 are as follows:
(Amounts in thousands) 1995 Cost 1996 Cost - -------------------------------------------------------------------------------------- U.S. Treasury Securities $13,321 $55,878 Municipal bonds collaterized by U.S. Treasury Securities 38,441 18,061 - ------------------------------------------------------------------------------------- $51,762 $73,939 - ------------------------------------------------------------------------------------- Amounts included in short-term investments $37,329 $68,970 Amounts included in cash and cash equivalents 14,433 4,969 - ------------------------------------------------------------------------------------- $51,762 $73,939 =====================================================================================
There are no gross realized gains or losses for the years ended June 30, 1995 and 1996. 12 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Inventories: The components of inventories at June 30 were:
(Amounts in thousands) 1995 1996 - -------------------------------------------------------- Raw materials $ 1,925 $ 3,720 Work in process 9,444 16,908 Finished goods 7,736 9,843 - -------------------------------------------------------- $19,105 $30,471 - --------------------------------------------------------
6. Foreign Exchange Contracts: At June 30, 1996, the Company held forward exchange contracts, all having maturities of less than one year, to exchange various foreign currencies for U.S. dollars in the amount of $51.3 million. Gains and losses related to these contracts are deferred and matched with the overall gains or losses from the underlying transactions. The table below summarizes, by currency, the contractual amounts of the Company's forward exchange contracts and net unrealized gain or loss at June 30, 1995 and 1996.
1995 1996 - ---------------------------------------------------------------------------------- Forward Unrealized Forward Unrealized (Amounts in thousands) Contracts Gain/(Loss) Contracts Gain/(Loss) - ---------------------------------------------------------------------------------- Currency: Yen $ 8,896 $ (933) $28,335 $1,632 Pound Sterling 1,651 (31) 9,921 (189) German Mark 844 (93) 8,745 449 French Franc 1,096 (53) 4,326 102 - ---------------------------------------------------------------------------------- $12,487 $(1,110) $51,327 $1,994 - ----------------------------------------------------------------------------------
13 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Property, Plant and Equipment and Other Assets:
Property, plant and equipment at June 30 consists of: (Amounts in thousands) 1995 1996 - ---------------------------------------------------------- Buildings $20,364 $ 20,410 Building improvements 13,581 13,739 Machinery and equipment 88,988 146,459 Leased machinery and equipment 591 -- - ---------------------------------------------------------- 123,524 180,608 - ---------------------------------------------------------- Less accumulated depreciation and amortization (43,784) (50,357) Land 8,185 16,817 - ---------------------------------------------------------- $87,925 $147,068 - ----------------------------------------------------------
At June 30, 1995, accumulated depreciation relating to assets recorded under capitalized leases was $546,000. In fiscal 1995 and 1996, the Company recorded a write-down of fixed assets of $18,046,000 and $1,344,000, respectively, relating to the Company's program to modernize its equipment and manufacturing facilities. The write-down relates to a cumulative adjustment for depreciation as a result of changing estimates of useful lives associated with equipment that management estimates will be replaced or substantially upgraded in the near future. In 1996, other assets consisted primarily of deferred tax assets of $3,835,000 and notes receivable of $2,277,000. In 1995, other assets consisted primarily of deferred tax assets of $4,450,000 and notes receivable of $1,872,000. 8. Commitments and Contingencies: The Company is subject to legal proceedings and claims that arise in the normal course of its business. In the opinion of Management, these proceedings will not have a material adverse effect on the financial position or results of operations of the Company. The Company leases certain facilities, including a wafer fabrication facility for which the lease expires in November 2003. Under that lease, the Company has a five-year lease extension option and is responsible for maintenance, taxes, and insurance on the facility. Future annual minimum lease payments for all leased facilities are as follows:
Fiscal Year ending (Amounts in thousands) - --------------------------------------------------- 1997 $1,202 1998 848 1999 617 2000 606 2001-2009 2,340 - --------------------------------------------------- $5,613 - ---------------------------------------------------
Rent expense was $725,000, $943,000, and $1,343,000 in fiscal 1994, 1995, and 1996, respectively. 14 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Stockholders' Equity: Stock option and purchase plans: As of June 30, 1996, the Company has reserved a total of 23,104,025 of its common shares for issuance to employees and certain others under its Incentive Stock Option Plan, Supplemental Plan, Employee Stock Participation Plan and Nonemployee Stock Option Plan, and has reserved a total of 250,000 of its common shares under the 1988 Nonemployee Director Stock Option Plan. Under the Incentive Stock Option Plan and the Nonemployee Stock Option Plan, options are granted at a price not less than fair market value as determined by the Board at the date of grant. Under the Supplemental Plan, options are granted ordinarily at a price not less than market value, but under the Plan, the Board has authority to make grants at a price not less than 85% of fair market value. Under the Participation Plan, employees of the Company may purchase shares of common stock at a price not less than the lesser of 85% of the fair market value of the stock either on the date the purchase right is granted or the date the right is exercised. Options granted under the Incentive Stock Option and Supplemental Plans expire from five to ten years from the date of the grant or such shorter term as may be provided in the agreement. During fiscal 1996, the Company received $32,736,000 of tax benefit on the exercise of non-qualified stock options and on disqualifying dispositions under stock plans ($11,520,000 in 1995 and $6,175,000 in 1994). Information with respect to activity under the stock option plans is set forth below:
- ----------------------------------------------------------------------------------- Outstanding Options - ----------------------------------------------------------------------------------- Shares Available Number of Price for Grant Shares Per Share - ----------------------------------------------------------------------------------- BALANCE, JUNE 30, 1993 533,840 17,102,192 $ 0.38 TO $ 8.07 - ----------------------------------------------------------------------------------- Shares reserved 6,316,000 -- -- Options granted (6,688,296) 6,688,296 $ 8.91 to $13.25 Options terminated 623,896 (623,896) $ 0.38 to $12.88 Options exercised -- (2,239,396) $ 0.38 to $10.44 - ----------------------------------------------------------------------------------- BALANCE, JUNE 30, 1994 785,440 20,927,196 $ 0.38 TO $13.25 Shares reserved 4,394,000 -- -- Options granted (5,119,830) 5,119,830 $10.36 to $23.38 Options terminated 441,262 (441,262) $ 0.38 to $22.88 Options exercised -- (2,303,250) $ 0.38 to $15.69 - ----------------------------------------------------------------------------------- BALANCE, JUNE 30, 1995 500,872 23,302,514 $ 0.38 TO $23.38 Shares reserved 2,950,000 -- -- Options granted (3,636,001) 3,636,001 $25.44 to $40.25 Options terminated 614,041 (614,041) $ 0.38 to $37.63 Options exercised (3,399,361) $ 0.38 to $33.88 - ----------------------------------------------------------------------------------- BALANCE, JUNE 30, 1996 428,912 22,925,113 $ 0.38 TO $40.25 - -----------------------------------------------------------------------------------
At June 30, 1996, options to purchase 8,131,602 shares of common stock were exercisable (7,451,566 at June 30, 1995). 15 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Income Taxes: The provision for income taxes consists of the following:
Year ending June 30, (Amounts in thousands) 1994 1995 1996 - ------------------------------------------------------- Federal Current $15,065 $ 28,006 $58,732 Deferred (3,712) (11,406) (3,730) State Current 2,287 5,473 9,113 Deferred (620) (2,018) (410) Foreign Current 526 894 3,407 - ------------------------------------------------------- Total $13,546 $ 20,949 $67,112 - -------------------------------------------------------
Pretax income from foreign operations was approximately $8.1 million, $2.0 million, and $1.0 million for the years ended June 30, 1996, 1995, and 1994 respectively. The provision for income taxes differs from the amount computed by applying the statutory rate as follows:
Year ending June 30 1994 1995 1996 - ----------------------------------------------------------- Federal statutory rate 35.0 % 35.0 % 35.0 % State tax, net of federal benefit 2.9 3.8 3.0 General business credits (2.3) (1.9) -- Exempt earnings of Foreign Sales Corporation (3.1) (2.2) (2.7) Other 3.5 0.3 (0.1) - ----------------------------------------------------------- Total 36.0 % 35.0 % 35.2 % - -----------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax assets and liabilities as of June 30, 1995 and 1996 are as follows:
(Amounts in thousands) 1995 1996 - ------------------------------------------------------------------------- Deferred tax assets: Inventory valuation and reserves $ 4,170 $ 5,820 Accrued compensation 2,736 3,188 Other reserves and accruals not currently deductible for tax reporting 14,593 12,248 Fixed assets cost recovery 4,450 3,254 - ------------------------------------------------------------------------- Total assets $25,949 $24,510 - ------------------------------------------------------------------------- Deferred tax liabilities-fixed assets cost recover $ 5,579 -- - -------------------------------------------------------------------------
16 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Segment Information: The Company designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits for the analog market, and its business falls into one industry segment. Operations of the Company`s overseas subsidiaries consist primarily of sales, marketing, and distribution. Approximately 57% of the Company`s net revenues (including both U.S. export sales and direct sales from subsidiaries, noted below) were derived from customers outside of the U.S., primarily in Europe and the Pacific Rim (49% in fiscal 1995 and 52% in fiscal 1994). Pacific Rim consists primarily of Japan. Intercompany transfers between geographic areas are accounted for at prices that approximate arm`s length transactions. Information regarding geographic areas at and for the years then ended is as follows:
June 30, 1994 Geographic Area - ----------------------------------------------------------------------------------------------------------- (Amounts in thousands) : United States Europe Pacific Rim Total - ----------------------------------------------------------------------------------------------------------- Net revenues from unaffiliated customers $135,336 $16,249 $2,347 $153,932 - ----------------------------------------------------------------------------------------------------------- Operating income $ 34,477 $ 746 $ 351 $ 35,574 Identifiable assets $160,254 $16,800 $1,469 $178,523 Liabilities $ 46,323 $ 1,665 $ 343 $ 48,331 - ----------------------------------------------------------------------------------------------------------- June 30, 1995 Geographic Area - ----------------------------------------------------------------------------------------------------------- (Amounts in thousands) : United States Europe Pacific Rim Total - ----------------------------------------------------------------------------------------------------------- Net revenues from unaffiliated customers $209,490 $33,620 $7,710 $250,820 - ----------------------------------------------------------------------------------------------------------- Operating income $ 56,096 $ (255) $1,393 $ 57,234 Identifiable assets $234,581 $17,405 $4,147 $256,133 Liabilities $ 75,604 $ 1,285 $ 534 $ 77,423 - ----------------------------------------------------------------------------------------------------------- June 30, 1996 Geographic Area - ----------------------------------------------------------------------------------------------------------- (Amounts in thousands) : United States Europe Pacific Rim Total - ----------------------------------------------------------------------------------------------------------- Net revenues from unaffiliated customers $344,922 $57,523 $19,181 $421,626 - ----------------------------------------------------------------------------------------------------------- Operating income $177,975 $ 4,871 $ 3,044 $185,890 Identifiable assets $373,341 $28,616 $15,837 $417,794 Liabilities $ 89,634 $ 1,835 $ 900 $ 92,369 - -----------------------------------------------------------------------------------------------------------
17 18 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Maxim Integrated Products, Inc. We have audited the accompanying consolidated balance sheets of Maxim Integrated Products, Inc., as of June 30, 1995 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Maxim Integrated Products, Inc., at June 30, 1995 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. /s/ Ernst and Young, LLP August 7, 1996 San Jose, California 18 19 SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------------------------------------- (Amounts in thousands, except per share data) - ------------------------------------------------------------------------------------------------------------- Fiscal Year 1992 1993 1994 1995 1996 - ------------------------------------------------------------------------------------------------------------- Net revenues $86,954 $110,184 $153,932 $250,820 $421,626 - ------------------------------------------------------------------------------------------------------------- Cost of goods sold $37,835 $ 46,841 $ 64,250 $103,598 $146,253 Gross margin % 56.5% 57.5% 58.3% 58.7% 65.3% - ------------------------------------------------------------------------------------------------------------- Operating income $20,466 $ 25,448 $ 35,574 $ 57,234 $185,890 % of net revenues 23.5% 23.1% 23.1% 22.8% 44.1% - ------------------------------------------------------------------------------------------------------------- Net income $13,673 $ 17,282 $ 24,082 $ 38,906 $123,345 Income per share $ 0.24 $ 0.29 $ 0.38 $ 0.59 $ 1.74 - ------------------------------------------------------------------------------------------------------------- Shares used in per share calculation 58,158 60,050 63,628 66,502 70,927 - ------------------------------------------------------------------------------------------------------------- Cash, cash equivalents and short-term investments $33,686 $ 49,079 $ 48,430 $ 92,295 $129,253 Working capital $47,680 $ 64,047 $ 56,045 $ 95,978 $176,182 Total assets $95,546 $126,902 $178,523 $256,133 $417,794 - ------------------------------------------------------------------------------------------------------------- Long-term debt, less current portion $ 683 $ 174 $ 40 $ -- $ -- Stockholders' equity $72,277 $ 97,336 $130,192 $178,710 $325,425 - -------------------------------------------------------------------------------------------------------------
19 20 FINANCIAL HIGHLIGHTS BY QUARTER
- --------------------------------------------------------------------------------------------------------- Unaudited (Amounts in thousands, except per share data) - --------------------------------------------------------------------------------------------------------- QUARTER ENDED 1996 9/30/95 12/31/95 3/31/96 6/30/96 - --------------------------------------------------------------------------------------------------------- Net revenues $96,443 $106,182 $109,001 $110,000 - --------------------------------------------------------------------------------------------------------- Cost of goods sold $38,597 $ 36,330 $ 35,356 $ 35,970 Gross margin % 60.0% 65.8% 67.6% 67.3% - --------------------------------------------------------------------------------------------------------- Operating income $34,777 $ 47,889 $ 51,441 $ 51,783 % of net revenues 36.1% 45.1% 47.2% 47.1% - --------------------------------------------------------------------------------------------------------- Net income $22,585 $ 31,874 $ 34,182 $ 34,704 Income per share $ 0.32 $ 0.45 $ 0.48 $ 0.49 - --------------------------------------------------------------------------------------------------------- Shares used in per share calculation 70,551 70,827 71,212 71,119 - --------------------------------------------------------------------------------------------------------- Market price range - High $ 40.50 $ 41.88 $ 43.75 $ 37.88 - Low $ 25.25 $ 27.75 $ 28.75 $ 24.00 - --------------------------------------------------------------------------------------------------------- QUARTER ENDED 1995 9/30/94 12/31/94 3/31/95 6/30/95 - ------------------------------------------------------------------------------------------------------- Net revenues $52,004 $ 56,184 $66,628 $76,004 - ------------------------------------------------------------------------------------------------------- Cost of goods sold $21,633 $ 23,316 $27,651 $30,998 Gross margin % 58.4% 58.5% 58.5% 59.2% - ------------------------------------------------------------------------------------------------------- Operating income $12,337 $ 13,186 $14,890 $16,821 % of net revenues 23.7% 23.5% 22.3% 22.1% - ------------------------------------------------------------------------------------------------------- Net income $ 8,304 $ 8,930 $10,124 $11,548 Income per share $ 0.13 $ 0.14 $ 0.15 $ 0.17 - ------------------------------------------------------------------------------------------------------- Shares used in per share calculation 65,089 66,116 66,502 68,301 - ------------------------------------------------------------------------------------------------------- Market price range - High $ 15.88 $ 17.88 $ 19.88 $ 26.75 - Low $ 11.75 $ 13.81 $ 14.13 $ 16.63 - -------------------------------------------------------------------------------------------------------
20 21 CORPORATE DATA STOCKHOLDER INFORMATION INDEPENDENT AUDITORS Ernst & Young LLP San Jose, California REGISTRAR/TRANSFER AGENT Boston Equiserve Boston, Massachusetts CORPORATE HEADQUARTERS 120 San Gabriel Drive Sunnyvale, California 94086 (408) 737-7600 FORM 10-K A copy of the Company's Form 10-K filed with the Securities & Exchange Commission, without exhibits, is available without charge upon writing to: Stockholder Relations Maxim Integrated Products, Inc. 120 San Gabriel Drive Sunnyvale, California 94086 STOCK LISTING At June 30, 1996, there were approximately 1,362 stockholders of record of the Company's common stock. Maxim common stock is traded on the NASDAQ National Market under the symbol MXIM. The Company has never paid cash dividends on its common stock and has no present plans to do so. ANNUAL MEETING The annual meeting of stockholders will be Thursday, November 14, 1996 at 11:00 a.m. at the Company's headquarters, 120 San Gabriel Drive, Sunnyvale, California 94086. 21 EX-21 6 EXHIBIT 21 1 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation - ------------------ ----------------------------- Maxim Integrated Products England UK Limited Maxim International Inc. Virgin Islands Maxim GmbH Germany Maxim SARL France Maxim Japan Japan Maxim Phil. Operating Corporation Philippines Maxim Phil. Holding Corporation Philippines These Subsidiaries are 100% owned by the Registrant. Maxtek Components Corporation Oregon This Subsidiary is 50% owned by the Registrant. Maxim Phil. Land Corporation Philippines This Subsidiary is 40% owned by the Registrant.
28 EX-23 7 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Maxim Integrated Products, Inc. of our report dated August 7, 1996, included in the 1996 Annual Report to Stockholders of Maxim Integrated Products, Inc. Our audits also included the consolidated financial statement schedule of Maxim Integrated Products, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based in our audits. In our opinion, the consolidated financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 Nos.33-57849, 33-72186, 33-54026, 33-44485, 33-37470, 33-37469, 33-34728 and 33-34519) pertaining to the 1993 Incentive Stock Option Plan, the 1983 Supplemental Nonemployee Stock Option Plan, the 1987 Supplemental Stock Option Plan, the 1987 Employee Stock Option Participation Plan, and the 1988 Nonemployee Director Stock Option Plan of our report dated August 7, 1996, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the consolidated financial statement schedule included in this Annual Report (Form 10-K) of Maxim Integrated Products, Inc. /s/ Ernst & Young LLP San Jose, California September 23, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 1 129,253 0 81,954 (1,290) 30,471 264,551 197,425 (50,357) 417,794 88,369 0 0 0 62 326,735 417,794 421,626 421,626 146,253 146,253 89,483 0 37 190,457 67,112 123,345 0 0 0 123,345 1.74 1.74
-----END PRIVACY-ENHANCED MESSAGE-----