STOCK-BASED COMPENSATION BY TYPE OF AWARD (in thousands)

(Unaudited)

Three Months Ended June 30, 2012

  Stock Options

  Restricted Stock Units

  Employee Stock Purchase Plan

  Total

Cost of goods sold 

$                  462

$               2,206

$                  423

$               3,091

Research and development expense

1,607

8,331

1,413

11,351

Selling, general and administrative expense

1,468

4,518

462

6,448

       Total

$               3,537

$             15,055

$               2,298

$             20,890

Three Months Ended March 31, 2012

Cost of goods sold 

$                  470

$               2,217

$                  412

$               3,099

Research and development expense

1,742

8,203

1,602

11,547

Selling, general and administrative expense

1,836

5,072

484

7,392

       Total

$               4,048

$             15,492

$               2,498

$             22,038

Three Months Ended June 25, 2011

Cost of goods sold 

$                  516

$               2,101

$                  405

$               3,022

Research and development expense

2,016

8,472

1,434

11,922

Selling, general and administrative expense

1,485

4,543

436

6,464

       Total

$               4,017

$             15,116

$               2,275

$             21,408

Year Ended June 30, 2012

Cost of goods sold 

$               2,014

$               9,387

$               1,738

$             13,139

Research and development expense

7,844

35,699

5,525

49,068

Selling, general and administrative expense

6,436

19,493

1,731

27,660

       Total

$             16,294

$             64,579

$               8,994

$             89,867

Year Ended June 25, 2011

Cost of goods sold 

$               2,625

$               9,819

$               1,557

$             14,001

Research and development expense

11,325

36,926

5,435

53,686

Selling, general and administrative expense

6,120

18,944

1,546

26,610

       Total

$             20,070

$             65,689

$               8,538

$             94,297

CONSOLIDATED  BALANCE SHEETS

(Unaudited)

June 30,

March 31,

June 25,

2012

2012

2011

(in thousands) 

ASSETS

Current assets:

    Cash and cash equivalents

$           881,060

$           860,551

$           962,541

    Short-term investments

75,326

75,405

50,346

        Total cash, cash equivalents and short-term investments

956,386

935,956

1,012,887

    Accounts receivable, net 

317,461

296,255

297,632

    Inventories

242,162

220,153

237,928

    Deferred tax assets

98,180

105,298

113,427

    Other current assets

85,177

79,584

65,978

        Total current assets

1,699,366

1,637,246

1,727,852

Property, plant and equipment, net

1,353,606

1,361,300

1,308,850

Intangible assets, net

208,913

222,354

204,263

Goodwill

423,073

423,073

265,125

Other assets

52,988

26,264

21,653

              TOTAL ASSETS

$        3,737,946

$        3,670,237

$        3,527,743

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

    Accounts payable 

$           147,086

$           132,906

$           110,153

    Income taxes payable

22,589

21,807

3,912

    Accrued salary and related expenses

191,846

181,943

215,627

    Accrued expenses 

64,092

70,297

47,767

    Current portion of long term debt

303,496

1,945

-

    Deferred income on shipments to distributors

26,280

28,729

36,881

        Total current liabilities

755,389

437,627

414,340

Long term debt

5,592

308,700

300,000

Income taxes payable

212,389

192,842

96,099

Deferred tax liabilities

198,502

205,727

183,715

Other liabilities

27,797

22,143

22,771

        Total liabilities 

1,199,669

1,167,039

1,016,925

Stockholders' equity:

    Common stock

293

9,125

296

    Retained earnings 

2,553,418

2,507,298

2,524,790

    Accumulated other comprehensive loss

(15,434)

(13,225)

(14,268)

        Total stockholders' equity

2,538,277

2,503,198

2,510,818

              TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 

$        3,737,946

$        3,670,237

$        3,527,743

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

Year ended

June 30,

March 31,

June 25,

June 30,

June 25,

2012

2012

2011

2012

2011

(in thousands)

Cash flows from operating activities: 

Net income

$     110,634

$        54,517

$      125,593

$      386,727

$      489,009

Adjustments to reconcile net income to net cash provided by operating activities: 

      Stock-based compensation 

20,890

22,038

21,408

89,867

94,297

      Depreciation and amortization 

53,554

53,476

50,016

211,096

205,062

      Deferred taxes 

1,224

(9,942)

20,484

30,759

140,084

      In-process research and development

-

1,600

-

1,600

-

      (Gain) Loss from sale of property, plant and equipment

(1,412)

(6,487)

(1,797)

(7,648)

12,946

      Gain from discontinued operations

-

(45,372)

-

(45,372)

-

      Gain from sale of investments in privately-held companies

-

-

-

(1,811)

-

      Tax shortfall related to stock-based compensation plans

1,309

2,957

2,811

3,113

30,546

      Impairment of long-lived assets

22,933

7,712

-

30,645

-

      Excess tax benefit related to stock-based compensation 

(5,247)

(5,172)

(4,792)

(17,482)

(12,869)

      Changes in assets and liabilities: 

          Accounts receivable 

(21,206)

(50,026)

6,959

(19,262)

43,256

          Inventories 

(22,090)

12,412

(2,974)

(432)

(29,435)

          Other current assets 

(5,634)

2,332

16,031

(16,757)

53,255

          Accounts payable 

11,802

27,228

(8,621)

25,515

(4,746)

          Income taxes payable 

20,329

98,321

2,538

134,967

(45,318)

          Deferred income on shipments to distributors 

(2,449)

(2,407)

1,310

(10,601)

11,102

          Litigation Settlement

-

-

-

-

(173,000)

          All other accrued liabilities 

5,457

33,312

17,308

(38,202)

47,265

Net cash provided by operating activities 

190,094

196,499

246,274

756,722

861,454

Cash flows from investing activities: 

          Payments for property, plant and equipment

(76,610)

(70,053)

(48,063)

(264,348)

(175,253)

          Proceeds from sales of property, plant and equipment

1,400

13,774

2,295

16,883

27,624

          Acquisitions

(2,257)

-

(7,811)

(168,544)

(80,918)

          Discontinued operations

-

56,607

-

56,607

-

          Purchases of privately-held companies

(1,500)

(1,980)

-

(3,480)

-

          Purchases of available-for-sale securities

-

-

-

(25,108)

(49,787)

          Proceeds from sales of investments of privately-held companies

-

-

-

3,225

-

Net cash used in investing activities 

(78,967)

(1,652)

(53,579)

(384,765)

(278,334)

Cash flows from financing activities: 

         Excess tax benefit related to stock-based compensation 

5,247

5,172

4,792

17,482

12,869

          Mortgage liability

-

-

-

-

(3,237)

         Dividends paid

(64,408)

(64,384)

(62,077)

(257,731)

(249,145)

         Repayment of notes payable

(400)

-

-

(20,806)

(1,422)

         Repurchase of common stock

(56,282)

(28,970)

(59,008)

(246,412)

(231,012)

         Issuance of ESPP

18,807

-

16,281

33,772

28,850

         Net issuance of restricted stock units

(6,929)

(7,669)

(7,781)

(29,649)

(28,839)

         Proceeds from stock options exercised

13,347

20,395

8,716

49,906

24,845

Net cash used in financing activities 

(90,618)

(75,456)

(99,077)

(453,438)

(447,091)

Net increase (decrease) in cash and cash equivalents 

20,509

119,391

93,618

(81,481)

136,029

Cash and cash equivalents: 

          Beginning of period

860,551

741,160

868,923

962,541

826,512

          End of period

$     881,060

$      860,551

$      962,541

$      881,060

$      962,541

Total cash, cash equivalents, and short-term investments

$     956,386

$      935,956

$   1,012,887

$      956,386

$   1,012,887

ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL EXPENSE ITEMS DISCLOSURES

(Unaudited)

Three Months Ended

Year Ended

June 30,

March 31,

June 25,

June 30,

June 25,

2012

2012

2011

2012

2011

(in thousands, except per share data)

Reconciliation of GAAP gross profit to GAAP gross profit excluding special expense items:

GAAP gross profit

$           371,989

$              335,430

$           390,825

$        1,450,852

$        1,529,964

GAAP gross profit %

61.5%

58.7%

62.4%

60.4%

61.9%

Special expense items:

      Intangible asset amortization (1)

9,392

9,787

7,977

36,693

30,164

      Acquisition related inventory write up (2)

-

-

-

1,801

5,677

 Total special expense items 

9,392

9,787

7,977

38,494

35,841

 GAAP gross profit excluding special expense items 

$           381,381

$              345,217

$           398,802

$        1,489,346

$        1,565,805

 GAAP gross profit % excluding special expense items 

63.0%

60.4%

63.7%

62.0%

63.3%

Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special expense items:

GAAP operating expenses

$           235,968

$              223,544

$           212,903

$           916,055

$           856,925

Special expense (income) items:

      Intangible asset amortization (1)

4,049

4,029

4,200

16,737

18,752

      Impairment of long-lived assets (3)

22,383

7,712

-

30,095

-

     Severance and restructuring 

18

228

(423)

6,785

1,247

     Other operating (income) expenses, net (4) 

(4,469)

(2,511)

(1,984)

(11,214)

19,124

 Total special expense items 

21,981

9,458

1,793

42,403

39,123

 GAAP operating expenses excluding special expense items 

$           213,987

$              214,086

$           211,110

$           873,652

$           817,802

Reconciliation of GAAP net income to GAAP net income excluding special expense items:

GAAP net income

$           110,634

$                54,517

$           125,593

$           386,727

$           489,009

Special expense (income) items:

      Intangible asset amortization (1)

13,441

13,816

12,177

53,430

48,916

     Acquisition related inventory write up (2)

-

-

-

1,801

5,677

      Impairment of long-lived assets (3)

22,383

7,712

-

30,095

-

     Severance and restructuring 

18

228

(423)

6,785

1,247

     Other operating (income) expenses, net (4) 

(4,469)

(2,511)

(1,984)

(11,214)

19,124

     Interest and other expense (income), net (5) 

550

-

-

(1,226)

-

                     Pre-tax total special expense items 

31,923

19,245

9,770

79,671

74,964

     Tax effect of special items 

(10,613)

(5,445)

(3,315)

(25,579)

(26,481)

     Reversal of tax reserves (6) 

-

(2,272)

(1,624)

(2,272)

(38,947)

     International restructuring (7) 

2,751

65,293

6,791

65,389

21,801

    Discontinued operations, net of tax (8)

-

(31,809)

-

(31,809)

-

 GAAP net income excluding special expense items 

$           134,695

$                99,529

$           137,215

$           472,127

$           520,346

 GAAP net income per share excluding special expense items: 

    Basic 

$             0.46

$                0.34

$             0.46

$             1.61

$             1.75

    Diluted 

$             0.45

$                0.33

$             0.45

$             1.57

$             1.72

Shares used in the calculation of earnings per share excluding special expense items: 

    Basic

292,757

292,276

295,751

292,810

296,755

    Diluted 

299,793

300,221

303,944

300,002

303,377

(1) Includes intangible asset amortization related to acquisitions.

(2) Includes expense related to fair value write up of inventory acquired as part of acquisitions. 

(3) Includes impairment charges relating to land and buildings held for sale, wafer fab and end of line manufacturing equipment.

(4) Other operating (income) expenses, net are primarily for loss (gain) on sale of land and buildings, contingent consideration adjustments related to certain acquisitions, stock option related litigation, certain payroll taxes, interest and penalties and in-process research and development written off.

(5) Includes gain on sale and impairment of privately-held companies.

(6) Includes reversal of tax reserves related to audit completion and expiration of statute of limitations.

(7) Includes impact due to implementation of international restructuring.

(8) Includes gain on sale, net of tax relating to certain businesses divested.