Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-looking Statements

This report, including “Item 1. Business,” “Item 1A. Risk Factors,” and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains certain forward-looking statements that involve risks and uncertainties, including statements regarding our strategy, financial performance and revenue sources. We use words such as "anticipate," "believe," "plan," "expect," "future," "continue," "intend" and similar expressions to identify forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth under "Risk Factors," beginning at page 12 and elsewhere in this Form 10-K. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. We disclaim any obligation to update information contained in any forward-looking statement. These forward-looking statements include, without limitation, statements regarding the following:

• The impact of the COVID-19 pandemic on demand for our products;

• Our expectation that certain supply chain constraints will continue through the remainder of calendar year 2021 and possibly into calendar year 2022;

• That if the impact of COVID-19 cases continues or worsens, the pandemic could adversely impact our business in future periods;

• That local governments could require us or our suppliers to temporarily reduce production further or cease operations and we could experience constraints in fulfilling customer orders;

• Our belief that our actions to combat the spread of COVID-19 will help preserve the health of our team members, customers, suppliers, visitors to our facilities, people with whom we conduct business and our communities, and allow us to safely continue operations;

• Our inability to predict how the COVID-19 pandemic, and actions taken by others in response to it, will affect our business;

• The effects that uncertain global economic conditions and fluctuations in the global credit and equity markets may have on our financial condition and results of operations;

• The effects and amount of competitive pricing pressure on our product lines and modest pricing declines in certain of our more mature proprietary product lines;

• Our ability to moderate future average selling price declines;

• The effect of product mix, capacity utilization, yields, fixed cost absorption, competition and economic conditions on gross margin;

• The amount of, and changes in, demand for our products and those of our customers;

• The impact of national security protections, trade restrictions and changes in tariffs, including those impacting China;

• Our expectation that in the future we will acquire additional businesses that we believe will complement our existing businesses;

• Our expectation that in the future we will enter into joint development agreements or other strategic relationships with other companies;

• The level of orders that will be received and shipped within a quarter, including the impact of our product lead times;

• Our expectation that our days of inventory at June 30, 2021 will be flat to down 5 days compared to the March 31, 2021 levels;

• Our belief that customers recognize our products and brand name and use distributors as an effective supply channel;

• The accuracy of our estimates of the useful life and values of our property, assets and other liabilities;

• Our ability to increase the proprietary portion of our analog product line and the effect of such an increase;

• The impact of any supply disruption we may experience;

• Our ability to effectively utilize our facilities at appropriate capacity levels and anticipated costs;

• That we adjust capacity utilization to respond to actual and anticipated business and industry-related conditions;

• That manufacturing costs will be reduced by transition to advanced process technologies;

• Our ability to maintain manufacturing yields;

• Continuing our investments in new and enhanced products;

• The cost effectiveness of using our own assembly and test operations;

• Our expectation that foundry capacity will continue to be tight due to strong demand for wafers across the industry;

• Our expectation that we will continue to operate our manufacturing facilities at or above normal capacity if the current supply constraints relative to demand continue through fiscal 2022;

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• Our anticipated level of capital expenditures;

• Continuation and amount of quarterly cash dividends;

• The sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements, and the effects that our contractual obligations are expected to have on them;

• The impact of seasonality on our business;

• Our belief that our IT system compromise has not had a material adverse effect on our business or resulted in any material damage to us;

• Our expectation that we will continue to be the target of cyber-attacks, computer viruses, unauthorized access and other attempts to breach or otherwise compromise the security of our IT systems and data;

• The accuracy of our estimates used in valuing employee equity awards;

• That the resolution of legal actions will not have a material effect on our business, and the accuracy of our assessment of the probability of loss and range of potential loss;

• The accuracy of our estimated tax rate;

• Our belief that the expiration of any tax holidays will not have a material impact on our effective tax rate;

• The impact of the geographical dispersion of our earnings and losses on our effective tax rate;

• That we expect to be able to realize the future tax benefit resulting from certain intra-group asset transfers;

• Our belief that the estimates used in preparing our consolidated financial statements are reasonable;

• Our actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis;

• Our ability to obtain patents and intellectual property licenses and minimize the effects of litigation;

• The level of risk we are exposed to for product liability claims or indemnification claims;

• The effect of fluctuations in market interest rates on our income and/or cash flows;

• The effect of fluctuations in currency rates;

• That we could increase our borrowings or seek additional equity or debt financing to maintain or expand our facilities, or to fund cash dividends, share repurchases, acquisitions or other corporate activities, and that the timing and amount of such financing requirements will depend on a number of factors;

• Our intention to satisfy the lesser of the principal amount or the conversion value of our Convertible Debt in cash;

• Our intention to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts;

• Changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings;

• Our expectation that our reliance on third party contractors may increase over time as our business grows;

• Our ability to collect accounts receivable; and

• The impact of the legislative and policy changes implemented or which may be implemented by the new administration, on our business and the trading price of our stock.

Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth in "Item 1A. Risk Factors," and elsewhere in this Form 10-K. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. We disclaim any obligation to update the information contained in any forward-looking statement.

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Introduction

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including “Item 8. Financial Statements and Supplementary Data." For an overview of our business, refer to “Part I Item 1. Business."

We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a summary of COVID-19 developments followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our results of operations for fiscal 2021 compared to fiscal 2020, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled “Liquidity and Capital Resources.” Our liquidity and capital resources section generally discusses fiscal 2021 compared to fiscal 2020. For our discussion of our fiscal 2020 results compared to fiscal 2019 for both our results of operations and our liquidity and capital resources sections, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the SEC on May 22, 2020, which is incorporated by reference herein.

COVID-19 Developments

In the first half of fiscal 2021, the COVID-19 pandemic resulted in a global disruption in economic activity by adversely affecting production, creating supply chain and market disruption, and adversely impacting businesses and individuals. In the second half of fiscal 2021, business conditions were unexpectedly strong as businesses and individuals adapted to the effects of the pandemic. Supply chains, however, were stressed as they were not expecting the level of economic strength that occurred. The impact of the pandemic on individuals and in certain locations in which we operate remains uncertain and will depend on many factors, such as the effectiveness of containment efforts including the use and effectiveness of vaccines. We regularly monitor new information regarding the severity of COVID-19 and the ability to contain, treat, or prevent it.

Demand for our products that serve certain markets, such as consumer, automotive, and industrial increased in the second half of fiscal 2021, offsetting the adverse demand fluctuations in the early part of fiscal 2021 caused by the COVID-19 pandemic. Additionally, the markets that benefited earlier in fiscal 2021 from the stay-at-home economy, such as datacenters and communications reverted to normal demand levels by the second half of fiscal 2021 and remained at such levels at the end of fiscal 2021. While we have a diverse customer base operating in diverse industries, the extent of the impact of the COVID-19 pandemic on demand for our products depends on unpredictable future developments.

At this time, our global manufacturing sites and our logistics channels are fully operational and local restrictions related to the COVID-19 pandemic that impacted us in the first quarter of fiscal 2021 have eased. During the second half of fiscal 2021, we experienced strong demand and low levels of inventory on our balance sheet and at our external distribution channel partners, and we continued to experience constraints in all our internal and external factories and their related manufacturing supply chains. We started ramping up production at our internal factories in September 2020, as well as investing in capital additions to expand our internal capacity. We also worked closely with our wafer fabrication, assembly and test subcontractors to secure additional capacity. While we expect our overall capacity to grow every quarter in calendar 2021, we expect the wafer fabrication, assembly and test constraints to persist through the remainder of calendar 2021 and possibly into calendar 2022. As a result, lead times continue to increase for many of our products. If the impact of COVID-19 continues or worsens, the pandemic could adversely impact our business in future periods. In the future, local governments could require us or our suppliers to temporarily reduce production or cease operations and we could experience constraints in fulfilling customer orders.

In response to the early indications of the COVID-19 pandemic, we took proactive measures to safeguard the health of our employees, contractors, customers, suppliers, visitors to our facilities, other business partners, and our communities. We strategically implemented plans intended to ensure business continuity in the event severe outbreaks or government requirements were to impact our operations. We monitor governmental policies and CDC recommendations and take appropriate actions which are designed to prevent and control the spread of COVID-19.

We continuously assess our efforts to combat the COVID-19 pandemic which have included the following:

• We require social distancing, and have established distancing protocols at our facilities. We have suspended attendance at conferences and other gatherings and recently began to allow limited business travel. We generally require team members to work from home to the extent possible. Where work from home is not possible, all on-site team members are requested to take their temperatures before arriving to work, stay home if they do not feel well, stay home if they have been exposed to someone with COVID-19 or its symptoms, maintain a safe distance

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from others, wash their hands frequently, and wear a mask if they choose. We clean high touch surfaces at least daily.

• In partnership with our suppliers, we have evaluated our supply chain to identify gaps or weak points. In order to ensure continuity, in some cases, we have qualified alternative suppliers and increased our inventory of raw materials.

• We have added and continue to add assembly and test capacity to provide redundant manufacturing capability through our network of subcontractors.

• We implemented measures to help prepare for economic uncertainty, such as employee salary cuts, limiting hiring, reducing business travel costs, reducing discretionary spending, and limiting capital expenditures. In December 2020, we restored previous reductions in compensation, resumed hiring, and increased spending for certain capital expenditures to help meet business demands.

• We are working with government authorities in the areas where we have a significant footprint. We continue to update ourselves on government requirements, relevant regulations, industry standards, and best practices to help safeguard our team members across the globe.

We believe these actions are important and will help preserve the health of our team members, customers, suppliers, visitors to our facilities, people with whom we conduct business and our communities, and allow us to safely continue operations. However, we cannot predict how these actions, or the actions taken by government entities, suppliers, or customers in response to the COVID-19 pandemic will impact our business, revenues, or results of operations.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, business combinations, share-based compensation, inventories, income taxes, Convertible Debt and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. We review these estimates and judgments on an ongoing basis. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We generate revenue primarily from sales of our semiconductor products to distributors and non-distributor customers (direct customers) and, to a lesser extent, from royalties paid by licensees of our intellectual property. We apply the following five-step approach to determine the timing and amount of revenue recognition: (i) identify the contract with the customer, (ii) identify performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the performance obligation is satisfied.

Sales to our distributors are governed by a distributor agreement, a purchase order, and an order acknowledgment. Sales to distributors do not meet the definition of a contract until the distributor has sent in a purchase order, we have acknowledged the order, we have deemed the collectability of the consideration to be probable, and legally enforceable rights and obligations have been created; this generally occurs 30 days prior to the estimated ship date. As is customary in the semiconductor industry, we offer price concessions and stock rotation rights to many of our distributors. As these are forms of variable consideration, we estimate the amount of consideration to which we will be entitled using recent historical data and applying the expected value method. Usually, there is only a single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, we recognize revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with distributors is recognized at the time risk and title of the inventory transfers to the distributor.

Sales to our direct customers are generally governed by a purchase order and an order acknowledgment. Sales to direct customers usually do not meet the definition of a contract until shipment of the product occurs. Generally, the transaction price associated with contracts with direct customers is set at the standalone selling price and is not variable. Usually, there is only a

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single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, we recognize revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with direct customers is recognized at the time risk and title of the inventory transfers to the customer.

Revenue generated from our licensees is governed by licensing agreements. Our primary performance obligation related to these agreements is to provide the licensee the right to use the intellectual property. The final transaction price is determined by multiplying the usage of the license by the royalty, which is fixed in the licensing agreement. Revenue is recognized as usage of the license occurs.

Business Combinations

All of our business combinations are accounted for at fair value under the acquisition method of accounting. Under the acquisition method of accounting, (i) acquisition-related costs, except for those costs incurred to issue debt or equity securities, will be expensed in the period incurred; (ii) non-controlling interests will be valued at fair value at the acquisition date; (iii) in-process research and development will be recorded at fair value as an intangible asset at the acquisition date and amortized once the technology reaches technological feasibility; (iv) restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and (v) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will be recognized through income tax expense. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. The valuation of intangible assets, in particular, requires that we use valuation techniques such as the income approach. The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates: revenue, expenses, capital spending and other costs, and discount rates based on the respective risks of the cash flows. Under the acquisition method of accounting, the aggregate amount of consideration we pay for a company is allocated to net tangible assets and intangible assets based on their estimated fair values as of the acquisition date. The excess of the purchase price over the value of the net tangible assets and intangible assets is recorded to goodwill. On an annual basis, we test goodwill for impairment and through March 31, 2021, we have never recorded an impairment charge related to goodwill.

Share-based Compensation

We measure at fair value and recognize compensation expense for all share-based payment awards, including grants of employee stock options, RSUs and employee stock purchase rights, to be recognized in our financial statements based on their respective grant date fair values. We utilize RSUs as our primary equity incentive compensation instrument for employees. Share-based compensation cost is measured on the grant date based on the fair market value of our common stock discounted for expected future dividends and is recognized as expense on a straight-line basis over the requisite service periods. Total share-based compensation expense recognized during the fiscal 2021 was $198.3 million, of which $171.7 million was reflected in operating expenses and $26.6 million was reflected in cost of sales. Total share-based compensation included in our inventory was $10.2 million at March 31, 2021.

If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions.

Inventories

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. We write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. In estimating our inventory obsolescence, we primarily evaluate estimates of demand over a 12-month period and record impairment charges for inventory on hand in excess of the estimated 12-month demand. Estimates for projected 12-month demand are generally based on the average shipments of the prior three-month period, which are then annualized to adjust for any potential seasonality in our business. The estimated 12-month demand is compared to our most recently developed sales forecast to further reconcile the 12-month demand estimate. Management reviews and adjusts the estimates as appropriate based on specific situations. For example, demand can be adjusted up for new products for which historic sales are not representative of future demand. Alternatively, demand can be adjusted down to the extent any existing products are being replaced or discontinued.

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In periods where our production levels are substantially below our normal operating capacity, the reduced production levels of our manufacturing facilities are charged directly to cost of sales. As a result of production being below normal operating levels in our wafer fabrication facilities, approximately $29.6 million and $47.2 million was charged to cost of sales in fiscal 2021 and fiscal 2020, respectively.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and to the extent we believe that recovery is not likely, we must establish a valuation allowance. We provided valuation allowances for certain of our deferred tax assets, where it is more likely than not that some portion, or all of such assets, will not be realized.

Various taxing authorities in the U.S. and other countries in which we do business scrutinize the tax structures employed by businesses. Companies of our size and complexity are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be. We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is more than 50% likely to be realized upon ultimate settlement.

The accounting model related to the valuation of uncertain tax positions requires us to presume that the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information and that each tax position will be evaluated without consideration of the possibility of offset or aggregation with other positions. The recognition requirement for the liability exists even if we believe the possibility of examination by a taxing authority or discovery of the related risk matters is remote or where we have a long history of the taxing authority not performing an exam or overlooking an issue. We will record an adjustment to a previously recorded position if new information or facts related to the position are identified in a subsequent period. All adjustments to the positions are recorded through the income statement. Generally, adjustments will be recorded in periods subsequent to the initial recognition if the taxing authority has completed an audit of the period that results in the position being effectively settled or if the statute of limitation expires. Due to the inherent uncertainty in the estimation process and in consideration of the criteria of the accounting model, amounts recognized in the financial statements in periods subsequent to the initial recognition may significantly differ from the estimated exposure of the position under the accounting model.

Convertible Debt

Upon issuance, we separately account for the liability and equity components of our Convertible Debt by estimating the fair values of the i) liability component without a conversion feature and ii) the conversion feature. This results in a bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statements of income.

Upon settlement of our Convertible Debt instruments, we allocate the total consideration between the liability and equity components based on the fair value of the liability component without the conversion feature. The difference between the consideration allocated to the liability component and the net carrying value of the liability component is recognized as an extinguishment loss or gain. The remaining settlement consideration is allocated to the equity component and recognized as a reduction of additional paid-in capital in our consolidated balance sheets. In addition, if the terms of the settlement are different from the contractual terms of the original instrument, we recognize an inducement loss, which is measured as the difference between the fair value of the original terms of the instrument and the fair value of the settlement terms.

Determining the fair value of the liability component without the conversion feature upon issuance and settlement involves estimating the equivalent borrowing rate for a similar non-convertible instrument. Given the values of these transactions, fair value estimates are sensitive to changes in the equivalent borrowing rate conclusions. The measurement of the equivalent borrowing rate requires that we make estimates of volatility and credit spreads to align observable market inputs with the instrument being valued.

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Lastly, we include the dilutive effect of the shares of our common stock issuable upon conversion of the outstanding Convertible Debt in our diluted income per share calculation regardless of whether the market price triggers or other contingent conversion features have been met. We apply the treasury stock method as we have the intent and have adopted an accounting policy to settle the principal amount of the Convertible Debt in cash. This method results in incremental dilutive shares when the average fair value of our common stock for a reporting period exceeds the conversion prices per share and adjusts as dividends are recorded in the future.

Contingencies

In the ordinary course of our business, we are exposed to various liabilities as a result of contracts, product liability, customer claims, governmental investigations and other matters. Additionally, we are involved in a limited number of legal actions, both as plaintiff and defendant. Consequently, we could incur uninsured liability in any of those actions. We also periodically receive notifications from various third parties alleging infringement of patents or other intellectual property rights, or from customers requesting reimbursement for various costs. With respect to pending legal actions to which we are a party and other claims, although the outcomes are generally not determinable, we believe that the ultimate resolution of these matters will not have a material adverse effect on our financial position, cash flows or results of operations. Litigation, governmental investigations and disputes relating to the semiconductor industry are not uncommon, and we are, from time to time, subject to such litigation, governmental investigations and disputes. As a result, no assurances can be given with respect to the extent or outcome of any such litigation, governmental investigations or disputes in the future.

We accrue for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our matters and, where it is probable that a liability has been or will be incurred, we accrue for all probable and reasonably estimable losses. Where we can reasonably estimate a range of losses we may incur regarding such a matter, we record an accrual for the amount within the range that constitutes our best estimate. If we can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, we use the amount that is the low end of such range. Contingencies of an acquired company that exist as of the date of the acquisition are measured at fair value if determinable, which generally is based on a probability weighted model. If fair value is not determinable, contingencies of an acquired company are recognized when they become probable and reasonably estimable.

Results of Operations

The following table sets forth certain data as a percentage of net sales for fiscal 2021 and fiscal 2020:

															Fiscal Year Ended March 31,
																																	2021						2020
Net sales																																	100.0		%				100.0		%
Cost of sales																																	37.9						38.5
Gross profit																																	62.1						61.5
Research and development																																	15.4						16.6
Selling, general and administrative																																	11.2						12.8
Amortization of acquired intangible assets																																	17.1						18.9
Special charges and other, net																																	—						0.9
Operating income																																	18.4		%				12.3		%

Net Sales

We operate in two industry segments and engage primarily in the design, development, manufacture and sale of semiconductor products as well as the licensing of our SuperFlash and other technologies. We sell our products to distributors and OEMs in a broad range of markets, perform ongoing credit evaluations of our customers and generally require no collateral. In certain circumstances, a customer's financial condition may require collateral, and, in such cases, the collateral would be typically provided in the form of letters of credit.

The following table summarizes our net sales for fiscal 2021 and fiscal 2020 (dollars in millions):

																																													Fiscal Year Ended March 31,
																																																			2021						2020						Change
Net sales																																																			$	5,438.4					$	5,274.2					3.1		%

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The increase in net sales in fiscal 2021 compared to fiscal 2020 was primarily due to strength in our microcontroller product line. The net sales value of inventory at our distributor customers decreased $10.4 million during fiscal 2021 compared to a decrease of $68.2 million during fiscal 2020. Excluding the impact of changes in distributor inventory levels on net sales, net sales increased by 2.0% in fiscal 2021 compared to fiscal 2020 and was positively impacted by strength in our microcontroller product line. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the change other than net demand fluctuations in the end markets that we serve.

Other factors that we believe contributed to changes in our reported net sales for fiscal 2021 compared to fiscal 2020 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include:

• semiconductor industry conditions;

• our various new product offerings that have increased our served available market;

• customers’ increasing needs for the flexibility offered by our programmable solutions; and

• increasing semiconductor content in our customers’ products through our Total Systems Solutions.

We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in fiscal 2021 or fiscal 2020. The overall average selling price of our products is affected by pricing declines over the life of individual products; however, variations in our product and geographic mix of sales can cause wider fluctuations in our overall average selling price in any given period. Generally, selling prices of our products increased during fiscal 2021 compared to fiscal 2020 due to increased material costs and increased functionality of products.

Net sales by product line for fiscal 2021 and 2020 were as follows (dollars in millions):

												Fiscal Year Ended March 31,
																																																												2021						%						2020						%
Microcontrollers																																																												$	2,961.0					54.5						$	2,817.9					53.4
Analog																																																												1,519.8						27.9						1,511.1						28.7
Other																																																												957.6						17.6						945.2						17.9
Total net sales																																																												$	5,438.4					100.0						$	5,274.2					100.0

Microcontrollers

Our microcontroller product line represents the largest component of our total net sales. Microcontrollers and associated application development systems accounted for approximately 54.5% and 53.4% of our net sales in fiscal 2021 and fiscal 2020, respectively.

Net sales of our microcontroller products increased approximately 5.1% in fiscal 2021 compared to fiscal 2020. The increase in net sales was due primarily to strength in demand for our microcontroller products in end markets that we serve.

Historically, average selling prices in the semiconductor industry decrease over the life of any particular product. The overall average selling prices of our microcontroller products have remained relatively constant over time due to the proprietary nature of these products. We have experienced, and expect to continue to experience, moderate pricing pressure in certain microcontroller product lines, primarily due to competitive conditions. We have in the past been able to, and expect in the future to be able to, moderate average selling price declines in our microcontroller product lines by introducing new products with more features and higher prices. We may be unable to maintain average selling prices for our microcontroller products as a result of increased pricing pressure in the future, which would adversely affect our operating results. The average selling price of our microcontroller products is affected by these trends; however, variations in our product and geographic mix of sales can cause wider fluctuations in the average selling price of our microcontroller products in any given period.

Analog

Our analog product line includes analog, interface, mixed signal and timing products. Our analog product line accounted for approximately 27.9% and 28.7% of our net sales in fiscal 2021 and fiscal 2020, respectively.

Net sales from our analog product line increased approximately 0.6% in fiscal 2021 compared to fiscal 2020. The increase in net sales was primarily due to strength in demand for our analog products in end markets that we serve, partially offset by adverse general economic conditions and the impact of the COVID-19 pandemic.

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We consider a majority of the products in our analog product line to be proprietary in nature, where prices are relatively stable, similar to the pricing stability experienced in our microcontroller products. The non-proprietary portion of our analog product line will experience price fluctuations, driven primarily by the current supply and demand for those products. We may be unable to maintain the average selling prices of our analog product line as a result of increased pricing pressure in the future, which would adversely affect our operating results.

Other

Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and products for aerospace applications. Revenue from these services and products accounted for approximately 17.6% and 17.9% of our net sales in fiscal 2021 and fiscal 2020, respectively.

Net sales related to these products and services increased approximately 1.3% in fiscal 2021 compared to fiscal 2020. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, and manufacturing services (wafer foundry and assembly and test subcontracting).

Distribution

Distributors accounted for approximately 50% of our net sales in each of fiscal 2021 and fiscal 2020. With the exception of Arrow Electronics, our largest distributor, which represented 10% of our net sales in fiscal 2020, no other distributor or end customer accounted for more than 10% of our net sales in fiscal 2021 or fiscal 2020. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base. We believe that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.

Generally, we do not have long-term agreements with our distributors and we, or our distributors, may terminate our relationships with each other with little or no advance notice. The loss of, or the disruption in the operations of, one or more of our distributors could reduce our future net sales in a given quarter and could result in an increase in inventory returns.

At March 31, 2021, our distributors maintained 22 days of inventory of our products compared to 29 days at March 31, 2020. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 22 days and 47 days. Our distributor inventory days were at historic lows due to the imbalance between the supply of and the demand for our products in the current supply-constrained environment.

Sales by Geography

Sales by geography for fiscal 2021 and 2020 were as follows (dollars in millions):

															Fiscal Year Ended March 31,
																																																															2021						%						2020						%
Americas																																																															$	1,389.1					25.5						$	1,365.0					25.9
Europe																																																															1,042.9						19.2						1,163.1						22.1
Asia																																																															3,006.4						55.3						2,746.1						52.0
Total net sales																																																															$	5,438.4					100.0						$	5,274.2					100.0

Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 77% and 78% of our net sales in fiscal 2021 and fiscal 2020, respectively. Substantially all of our foreign sales are U.S. dollar denominated. In fiscal 2021, the COVID-19 pandemic and the responses to it significantly affected our net sales by geography. Sales to customers in Europe as a percentage of total sales decreased in fiscal 2021 compared to fiscal 2020 primarily due to high COVID-19 infection rates and extensive governmental restrictions, which constrained demand at various times during the fiscal year. High infection rates also constrained demand in the Americas at various times during fiscal 2021, however, less stringent governmental restrictions resulted in only a slight decrease in Americas sales as a percentage of total sales in fiscal 2021 compared to fiscal 2020. Sales to customers in Asia as a percentage of total sales increased significantly in fiscal 2021 compared to fiscal 2020 as the COVID-19 pandemic was largely under control in China and Taiwan in early fiscal 2021 and China and Taiwan represent the highest percentage of our net sales

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in Asia. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia.

Gross Profit

Our gross profit in fiscal 2021 was $3.38 billion or 62.1% of net sales, compared to $3.24 billion, or 61.5% of net sales, in fiscal 2020. The following table summarizes the material and primary drivers of our change in gross profit as a percentage of net sales, with the material factors discussed in more detail below the table (dollars in millions):

												Gross Profit						% of Net Sales
												$	3,242.1					61.5						Fiscal Year Ended March 31, 2020
												98.0						—						Increase in semiconductor net sales at prior year gross margins and excluding the impact of other factors quantified in this table
												17.6						0.3						Impact of unabsorbed capacity charges
												9.6						0.1						Net impact of product mix and average costs per unit
												6.0						0.1						Increase in net sales to licensing customers, which has no associated cost of sales
												5.5						0.1						Net impact of excess and obsolete inventories
												$	3,378.8					62.1						Fiscal Year Ended March 31, 2021

Unabsorbed capacity charges - When production levels are below normal capacity, which we measure as a percentage of the capacity of the installed equipment, we charge cost of sales for the unabsorbed capacity. We consider normal capacity at Fab 2 and Fab 4 to be 90% to 95%. We consider normal capacity at Fab 5 to be 70% to 75%. During fiscal 2021, we operated at below normal capacity levels primarily due to adverse general economic conditions and uncertainty from the COVID-19 pandemic resulting in unabsorbed capacity charges of $29.6 million, compared to unabsorbed capacity charges of $47.2 million in fiscal 2020. We adjust our wafer fabrication and assembly and test capacity utilization as required to respond to actual and anticipated business and industry-related conditions. By the end of fiscal 2021, our manufacturing facilities were operating at or above normal capacity and we expect this to continue if the current supply constraints relative to demand continue through fiscal 2022.

Net impact of product mix and average cost per unit - The net impact of product mix and average cost per unit may fluctuate over time due to sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. During fiscal 2021, product mix resulted in a decrease of $9.6 million in cost of goods sold and an increase in gross profit compared to fiscal 2020.

Our overall inventory levels were $665.0 million at March 31, 2021, compared to $685.7 million at March 31, 2020. We maintained 112 days of inventory on our balance sheet at March 31, 2021 compared to 122 days of inventory at March 31, 2020. We expect our days of inventory levels at June 30, 2021 to be flat to down 5 days compared to the March 31, 2021 levels.

We anticipate that our gross margins will fluctuate over time, driven primarily by capacity utilization levels, the overall product mix of microcontroller, analog, FPGA products, memory products, and technology licensing revenue and the percentage of net sales of each of these products in a particular quarter, as well as manufacturing yields, fixed cost absorption, and competitive and economic conditions in the markets we serve. We continue to transition products to more advanced process technologies to reduce future manufacturing costs.

During fiscal 2020, we announced our intention to re-purpose Fab 5 to manufacture discrete and specialty products in addition to a lower volume of a diversified set of standard products. In connection with these efforts, we reduced the clean room footprint and transferred certain higher volume products from Fab 5 to our 8-inch wafer fabrication facilities in Arizona and Oregon. During fiscal 2021 and fiscal 2020, we incurred $8.0 million and $18.0 million, respectively, in costs associated with these actions all of which have been recorded within the special charges and other, net line item in our statements of income. These restructuring efforts were substantially completed as of March 31, 2021, and we anticipate that these actions will result in significant cost savings over the next several years.

We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world. During fiscal 2021, approximately 53% of our assembly requirements were performed in our internal assembly facilities, compared to approximately 45% during fiscal 2020. During fiscal 2021, approximately 57% of our test requirements were performed in our internal test facilities, compared to approximately 54% during fiscal 2020. The increases in the percentage of assembly and test operations that were performed internally in fiscal 2021 compared to fiscal 2020 are primarily due to our investments in

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assembly and test equipment, which increased our internal capacity capabilities. Third-party contractors located primarily in Asia perform the balance of our assembly and test operations. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. We plan to continue to transition certain outsourced assembly and test capacity to our internal facilities.

We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. Approximately 61% of our net sales came from products that were produced at outside wafer foundries in each of fiscal 2021 and fiscal 2020.

Our use of third parties involves some reduction in our level of control over the portions of our business that we subcontract. While we review the quality, delivery and cost performance of our third-party contractors, our future operating results could suffer if any third-party contractor is unable to maintain manufacturing yields, assembly and test yields and costs at approximately their current levels.

Research and Development

R&D expenses for fiscal 2021 were $836.4 million, or 15.4% of net sales, compared to $877.8 million, or 16.6% of net sales, for fiscal 2020. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments.

R&D expenses decreased $41.4 million, or 4.7%, for fiscal 2021 compared to fiscal 2020. The primary reason for the decrease in R&D expenses in fiscal 2021 compared to fiscal 2020 was due to management of discretionary spending, including reduced headcount costs due to reductions in compensation and travel expenses, in response to uncertainty surrounding the COVID-19 pandemic.

R&D expenses fluctuate over time, primarily due to revenue and operating expense investment levels.

Selling, General and Administrative

Selling, general and administrative expenses for fiscal 2021 were $610.3 million, or 11.2% of net sales, compared to $676.6 million, or 12.8% of net sales, for fiscal 2020. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and ESEs who work remotely from sales offices worldwide to stimulate demand by assisting customers in the selection and use of our products.

Selling, general and administrative expenses decreased $66.3 million, or 9.8%, for fiscal 2021 compared to fiscal 2020. The primary reasons for the decrease in selling, general and administrative expenses were due to management of discretionary spending, including reduced headcount costs due to reductions in compensation and travel expenses, in response to uncertainty surrounding the COVID-19 pandemic as well as lower professional services and legal costs associated with our acquisitions and security remediation costs related to network compromises.

Selling, general and administrative expenses fluctuate over time, primarily due to revenue and operating expense investment levels.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets in fiscal 2021 was $932.3 million compared to $993.9 million in fiscal 2020. The primary reason for the decrease in acquired intangible asset amortization was lower amortization from our acquisition of Microsemi and from our prior acquisitions.

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Special Charges and Other, Net

During fiscal 2021, we incurred special charges and other, net of $1.7 million primarily related to the restructuring of our wafer fabrication operations partially offset by asset sales and other acquisition related activity. During fiscal 2020, we incurred special charges and other, net of $46.7 million comprised primarily of restructuring charges of $31.0 million and legal contingencies of $15.7 million. Restructuring expenses incurred during fiscal 2021 and fiscal 2020 include $15.0 million and $18.0 million, respectively, related to the restructuring of our wafer fabrication operations. Other restructuring expenses incurred during fiscal 2021 and fiscal 2020 were related to our most recent business acquisitions, and resulted from workforce, property and other operating expense rationalizations as well as combining product roadmaps and manufacturing operations.

Other Income (Expense)

Interest income in fiscal 2021 was $1.7 million compared to $2.8 million in fiscal 2020.

Interest expense in fiscal 2021 was $356.9 million compared to $497.3 million in fiscal 2020. The primary reason for the decrease in interest expense in fiscal 2021 compared to fiscal 2020 relates to the cumulative pay down of our debt and lower interest rates on our outstanding variable rate debt.

During fiscal 2021, we recognized losses of $299.6 million related to the settlement of a portion of our outstanding 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, and our 2017 Junior Convertible Debt as well as the payment of all amounts outstanding under our Bridge Loan Facility, and our Term Loan Facility. During fiscal 2020, we recognized losses of $5.4 million, consisting of $2.0 million primarily related to the voluntary prepayment of a portion of the outstanding balance on our Term Loan Facility and $3.4 million related to the settlement of $615.0 million in principal of our 2015 Senior Convertible Debt. The net losses recognized on the settlement of our Convertible Debt are comprised of two components (i) the inducement loss, which is the excess of the fair value of the consideration provided to the holder over the fair value of the debt and (ii) the extinguishment loss or gain, which is the difference between the fair value of the debt component and the carrying value on the settlement date.

Other loss, net, in fiscal 2021 was $3.8 million compared to other income, net of $3.2 million in fiscal 2020. The primary reason for the change in other (loss) income, net during fiscal 2021 compared to fiscal 2020 related to foreign currency exchange rate fluctuations.

Provision for Income Taxes

Our provision or benefit for income taxes is attributable to U.S. federal, state, and foreign income taxes. A comparison of our effective tax rates in fiscal 2021 and fiscal 2020 is not meaningful due to the amount of pre-tax income, and income tax benefits recorded during the period.

Our effective tax rate in fiscal 2021 includes a $48.4 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 14.3%; a $12.3 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 3.6%; a $4.4 million tax benefit related to audit closures and expirations of statute of limitations on various tax reserves, which reduced our effective tax rate by 1.3%; a $101.8 million tax expense for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII), net of credits, which increased our effective tax rate by 30.0%; a $48.1 million tax benefit related to the settlement of convertible debt, which reduced our effective tax rate by 14.2%; and a $63.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced our effective tax rate by 18.8%. The tax benefit for the intra-group asset transfers primarily consisted of $155.5 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre-existing deferred tax asset of $90.3 million, which represents the book and tax basis difference on the transferred assets measured based on the applicable statutory tax rate prior to the transfer. Over the next 15 years, we expect to be able to realize the future tax benefit of the deferred tax assets resulting from the intra-group asset transfers. It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied with respect to the valuation of intellectual property rights. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing the intellectual property rights transferred, which could increase our future effective income tax rate and harm our future results of operations.

Our effective tax rate in fiscal 2020 includes a $40.8 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 27.2%; an $11.1 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 7.4%; a $28.5 million tax benefit related to audit closures and expirations of the statute of

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limitations on various tax reserves, which reduced our effective tax rate by 19.0%; a $54.7 million tax expense for GILTI and FDII, net of credits, which increased our effective tax rate by 36.4%; and a $334.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced our effective tax rate by 222.9%. The tax benefit for the intra-group asset transfers primarily consisted of $78.0 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre-existing deferred tax liability of $259.9 million, which represents the book and tax basis difference on the transferred assets measured based on the applicable statutory tax rate prior to the transfer.

We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic statutory tax rate in each of fiscal 2021 and fiscal 2020 was approximately 22%. Our non-U.S. blended statutory tax rates in fiscal 2021 and fiscal 2020 were much lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors. Our effective tax rate has been, and will continue to be impacted by the geographical dispersion of our earnings and losses.

Our foreign tax rate differential benefit primarily relates to our operations and assets in Thailand, Malta and Ireland. Our Thailand manufacturing operations are currently subject to numerous tax holidays granted to us based on our investment in property, plant and equipment in Thailand. Our tax holiday periods in Thailand expire at various times in the future; however, we actively seek to obtain new tax holidays, otherwise we will be subject to tax at the statutory tax rate of 20%. We do not expect the future expiration of any of our tax holiday periods in Thailand to have a material impact on our effective tax rate. The remaining material components of foreign income taxed at a rate lower than the U.S. are earnings accrued in Ireland at a 12.5% statutory tax rate and earnings accrued in Malta at a 0% to 5% tax rate.

Various taxing authorities in the U.S. and other countries in which we do business are increasing their scrutiny of the tax structures employed by businesses. Companies of our size and complexity are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. For U.S. federal, and in general for U.S. state tax returns, our fiscal 2007 and later tax returns remain effectively open for examination by the taxing authorities. We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be. We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is more than 50% likely to be realized upon ultimate settlement.

In July 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. In November 2019, the en banc rehearing petition was denied, and Altera asked the U.S. Supreme Court for a judicial review. In June 2020, the U.S. Supreme Court declined to issue a writ of certiorari in Altera v Commissioner, leaving intact the decision reached by the Ninth Circuit of the U.S. Court of Appeals. Based on the Ninth Circuit Opinion, we recorded a cumulative income tax expense of $23.3 million in fiscal 2021.

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Liquidity and Capital Resources

We had $282.0 million in cash, cash equivalents and short-term investments at March 31, 2021, a decrease of $121.0 million from the March 31, 2020 balance.

Net cash provided by operating activities was $1.92 billion for fiscal 2021 compared to $1.54 billion for fiscal 2020. The increase in net cash provided by operating activities in fiscal 2021 compared to fiscal 2020 was primarily due to efforts focused on working capital and discretionary spending management.

Net cash used in investing activities was $173.3 million for fiscal 2021 compared to $133.2 million for fiscal 2020. Fiscal 2021 and fiscal 2020 investing cash flows primarily related to capital purchases and investments in other assets.

Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. Capital expenditures were $92.6 million and $67.6 million in fiscal 2021 and fiscal 2020, respectively. Capital expenditures, which were comparatively lower in fiscal 2020 and through the first half of fiscal 2021, related primarily to the expansion of production capacity and the addition of research and development equipment. Towards the second half of fiscal 2021 we started to invest more significantly to expand manufacturing capacity in response to supply constraints relative to current demand levels and we expect this to continue in fiscal 2022. We currently intend to invest between $225 million and $275 million in equipment and facilities during the next twelve months. We believe that the capital expenditures anticipated to be incurred over the next twelve months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced. We expect to finance our capital expenditures through our existing cash balances and cash flows from operations.

Net cash used in financing activities was $1.86 billion for fiscal 2021 compared to net cash used in financing activities of $1.44 billion for fiscal 2020. Significant transactions affecting our net financing cash flows include:

• in fiscal 2021, $1.41 billion of cash used to pay down certain principal of our debt, including our Revolving Credit Facility, Term Loan Facility and Bridge Loan Facility, and the cash portion of the settlement of our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, and our 2017 Junior Convertible Debt, partially funded by the issuance of our senior notes,

• in fiscal 2020, $1.07 billion of cash used to pay down certain principal of our debt, including our Revolving Credit Facility, our Term Loan Facility and the cash portion of the settlement of our 2015 Senior Convertible Debt, partially funded by term loans made under the Bridge Loan Facility, and

• in fiscal 2021 and fiscal 2020, we paid cash dividends to our stockholders of $388.3 million and $350.1 million, respectively.

In March 2020 and September 2019, we amended our Credit Agreement dated May 29, 2018, to, among other things, reduce the margin added to the interest rate on revolving loans under the Credit Agreement and amend certain negative covenants, including covenants that restrict our and our subsidiaries’ ability to, among other things, incur subsidiary indebtedness, grant liens and enter into certain restrictive agreements. The amendments also allow us the option to factor receivables and certain related assets. The amendments lowered the Revolving Credit Facility thereunder to $3.57 billion from $3.60 billion. The revolving loan commitments terminate in May 2023 and bear interest, at our option, at the base rate plus a spread of 0.00% to 0.75% or an adjusted LIBOR rate plus a spread of 1.00% to 1.75%, in each case, with such spread being determined based on the consolidated senior leverage ratio for the preceding four fiscal quarter period.

As of March 31, 2021, the principal amount of our outstanding indebtedness was $9.21 billion. At March 31, 2021, we had $2.35 billion of outstanding borrowings under the Revolving Credit Facility compared to $2.39 billion at March 31, 2020. During fiscal 2021, we used borrowings under our Revolving Credit Facility and proceeds from the issuance of our 0.972% 2024 Notes to repay all amounts outstanding under our Term Loan Facility. See Note 7 of the notes to our consolidated financial statements for more information regarding our contractual obligations related to our long-term debt.

The enactment of the TCJA imposed a tax on all previously untaxed earnings of non-U.S. subsidiaries of U.S. corporations. Due to this change, the jurisdiction in which our cash is at any given point in time no longer has a significant impact on our liquidity. Future distributions of a significant portion of our non-U.S. assets to the U.S. will no longer be subject to U.S. federal taxation. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts. During fiscal 2018, we recognized a one-time transition tax on accumulated unrepatriated foreign earnings, of which we expected cash payments of approximately $290.3 million. This tax is payable over a period of eight years, with 8% of the transition tax payable each year for fiscal 2019 through fiscal 2023, and 15%, 20%, and 25%,

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respectively, payable during fiscal 2024, fiscal 2025, and fiscal 2026. As of March 31, 2021, our transition tax payable was $220.6 million, of which $23.2 million is payable within the next 12 months.

We enter into derivative transactions from time to time in an attempt to reduce our exposure to currency rate fluctuations. Although none of the countries in which we conduct significant foreign operations has had a highly inflationary economy in the last five years, there is no assurance that inflation rates or fluctuations in foreign currency rates in countries where we conduct operations will not adversely affect our operating results in the future. At March 31, 2021, we had no foreign currency forward contracts outstanding.

There were no repurchases of common stock in fiscal 2021 and fiscal 2020. As of March 31, 2021, we held approximately 11.0 million shares as treasury shares.

On October 28, 2002, we announced that our Board of Directors had approved and instituted a quarterly cash dividend on our common stock. To date, our cumulative dividend payments have totaled approximately $4.5 billion. Cash dividends paid per share were $1.494 and $1.465 during fiscal 2021 and fiscal 2020, respectively. Total dividend payments amounted to $388.3 million and $350.1 million during fiscal 2021 and fiscal 2020, respectively. A quarterly dividend of $0.413 per share was declared on May 6, 2021 and will be paid on June 4, 2021 to stockholders of record as of May 21, 2021. We expect the aggregate cash dividend for the June 2021 quarter to be approximately $113.0 million. Our Board is free to change our dividend practices at any time and to increase or decrease the dividend paid, or not to pay a dividend on our common stock on the basis of our results of operations, financial condition, cash requirements and future prospects, and other factors deemed relevant by our Board. Our current intent is to provide for ongoing quarterly cash dividends depending upon market conditions, our results of operations, and potential changes in tax laws.

We believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our Revolving Credit Facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months. However, the semiconductor industry is capital intensive. In order to remain competitive, we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development. We may increase our borrowings under our Revolving Credit Facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes. The timing and amount of any such financing requirements will depend on a number of factors, including our level of dividend payments, changes in tax laws and regulations regarding the repatriation of offshore cash, demand for our products, changes in industry conditions, product mix, competitive factors and our ability to identify suitable acquisition candidates. We may from time to time seek to refinance certain of our outstanding notes or Convertible Debt through issuances of new notes or convertible debt, tender offers, exchange transactions or open market repurchases. Such issuances, tender offers or exchanges or purchases, if any, will depend on prevailing market conditions, our ability to negotiate acceptable terms, our liquidity position and other factors. There can be no assurance that any financing will be available on acceptable terms due to uncertainties resulting from the COVID-19 pandemic or other factors, and any additional equity financing would result in incremental ownership dilution to our existing stockholders.

Recently Issued Accounting Pronouncements

Refer to Note 1 to our consolidated financial statements regarding recently issued accounting pronouncements.