What changed in Microchip Technology's 10-Q for the quarter ended December 31, 2025

[added] In January 2025, we received several assessments from the German Tax Authorities (GTA) regarding the German extraterritorial taxation of royalty payments between nonresidents (referred to as offshore receipts in respect of intangible property or ORIP) and intellectual property transfers by nonresidents (referred to as extraterritorial capital gains taxation or ETT). If the assessment is upheld, it could result in income taxes and penalties up to $92.0 million. The timing of adjudicating this matter is uncertain but could occur in the next 12 months.

[added] In March 2025, we issued 29.7 million Depositary Shares, representing approximately 1.5 million shares of our Series A Preferred Stock. The Series A Preferred Stock has a $1,000.00 per share liquidation preference and $0.001 per share par value. As a result of the transaction, we received cash proceeds of $1.45 billion, net of underwriting fees and other issuance costs.

[added] With respect to shares of our Series A Preferred Stock, dividends are cumulative at an annual rate of 7.50% on the liquidation preference of $1,000.00 per share of Series A Preferred Stock. A quarterly cash dividend of $18.750 per share of Series A Preferred Stock was paid to the holders of Series A Preferred Stock on December 15, 2025 in the aggregate amount of $27.8 million. To date, our cumulative dividend payments on our Series A Preferred Stock have totaled approximately $80.7 million. A quarterly cash dividend of $18.750 per share of Series A Preferred Stock was declared on February 5, 2026 and will be paid on March 16, 2026 to the holders of Series A Preferred Stock of record as of March 1, 2026.

[added] • in the first nine months of fiscal 2026, we paid cash dividends to our preferred stockholders of $80.7 million, and

We operate assembly and test facilities in Thailand and the Philippines. Approximately 64% and 67% of our assembly requirements were performed in our internal assembly facilities during the three and nine months ended December 31, 2025, respectively, compared to approximately 67% during each of the three and nine months ended December 31, 2024. Approximately 68% and 69% of our test requirements were performed in our internal facilities during the three and nine [added] months ended December 31, 2025, respectively, compared to approximately 67% during each of the three and nine months ended December 31, 2024. 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 third-party contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. In addition, we have specialized assembly and test facilities dedicated to our aerospace and defense products in Germany, France, Ireland, the United Kingdom, the Philippines, Thailand, and the United States. These facilities are designed to support the unique requirements of these sectors, helping to accelerate time to market and ensure consistent, high-quality products. We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities.

[added] • The benefits and risks of the use of artificial intelligence by us, our partners and customers, or malicious third parties and its impact on our products, our labor and technological needs, and regulatory or intellectual property compliance;

[added] • intense competition in our key markets;

[added] Interest income in the three and nine months ended December 31, 2025 was $1.3 million and $9.8 million, respectively, compared to $1.7 million and $6.5 million, respectively, for the three and nine months ended December 31, 2024.

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

In [added] March 2025, we entered into a Second Amended and Restated Credit Agreement (the Second Amended and Restated Credit Agreement) pursuant to which the Credit Agreement, was amended and restated [added] in its entirety. The Second Amended and Restated Credit Agreement provides for an unsecured revolving loan facility in an aggregate principal amount of up to $2.25 billion, with a $250.0 million foreign currency sublimit, a $25.0 million letter of credit sublimit and a $20.0 million swingline loan sublimit. The Second Amended and Restated Credit Agreement amended the maximum total leverage ratio financial covenant [added] to the following: 5.50 to 1.00 for period ending March 31, 2025, 5.50 to 1.00 for period ending June 30, 2025, 6.25 to 1.00 for period ending September 30, 2025, 5.75 to 1.00 for period ending December 31, [added] 2025, 4.75 to 1.00 for period ending March 31, 2026, 4.00 to 1.00 for period ending June 30, 2026, 3.75 to 1.00 for period ending September 30, 2026, and 3.50 to 1.00 for any such period ended after the Restatement Effective Date that is not a period ending during the Covenant Relief Period. The Covenant Relief Period means the period following the Restatement Effective Date to (but excluding) the earlier of (a) December 31, 2026 and (b) the date in which the Total Leverage Ratio for the most recently ended fiscal quarter shall not exceed 3.50 to 1.00 and certain other conditions are satisfied.

We had [added] $250.7 million in cash and cash equivalents at December 31, [added] 2025, a decrease of $521.0 million from the March 31, [added] 2025 balance.

• in the first nine months of fiscal [added] 2026, $1.20 billion of net cash used to [added] paydown our 4.25% 2025 Notes and $927.0 million of net proceeds generated from our Commercial [added] Paper program, and

We believe that our existing sources of liquidity combined with cash generated from operations, borrowings under our Revolving Credit Facility and proceeds from issuance of our Commercial Paper will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months. Our long-term liquidity requirements primarily arise from[added] working capital requirements, interest and principal repayments related to our outstanding indebtedness, capital expenditures, cash dividends, share repurchases, and income tax payments. For additional information regarding our cash requirements see "Note 10. Commitments and Contingencies", "Note 6. Debt" and "Note 11. Income Taxes" to our condensed consolidated financial statements. The semiconductor industry is capital intensive and 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 and to expand our existing facilities or potentially construct new facilities. We may increase our borrowings under our Revolving Credit Facility or our Commercial Paper program or seek additional equity or debt financing from time to time to refinance our existing debt, maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes.[added] In addition, the holders of our 2024 Senior Convertible Debt can require us to repurchase such debt on June 1, 2027 if the price per share of our common stock is less than the conversion price of such debt on the applicable measurement date. Our intention is to finance any required repurchase of the 2024 Senior Convertible Debt by using availability under our Revolving Credit Facility, our Commercial Paper program or other debt or equity financing. The timing and amount of any such financing requirements will depend on a number of factors, including the maturity dates of our existing debt, our level of dividend payments on our common stock and Series A Preferred Stock, 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 plan to refinance our existing notes as they mature and we may from time to time seek to refinance certain of our other outstanding debt or Convertible Debt through issuances of new notes or convertible debt, term loans, Commercial Paper, 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 economic uncertainty, tariffs, high interest rates, high inflation, instability in the banking sector, public health concerns, or other factors, and any additional equity financing or convertible debt financing would result in incremental ownership dilution to our existing stockholders.

Our manufacturing operations include wafer fabrication, wafer probe, assembly and test. [added] Due to high inventory levels and ample capacity, on December 2, 2024, we announced our [added] decision to close our Tempe, Arizona wafer fabrication facility that we refer to as Fab 2 and the closure of Fab 2 was completed in May 2025. We entered into an agreement to sell Fab 2 to a third party in October 2025 and the closing of the sale is still pending. Many of the process technologies that ran in Fab 2 also run in our Oregon and Colorado factories, which both have ample clean room space for expansion, and we are transferring production of many devices from Fab 2 to our Oregon and Colorado locations. The ownership of a substantial portion of our manufacturing resources is an important component of our business strategy, enabling us to maintain a high level of manufacturing control, resulting in us being one of the lowest cost producers in the embedded control industry. By owning wafer fabrication facilities and our assembly and test operations, and by employing statistical techniques (statistical process control, designed experiments and wafer level monitoring), we have been able to achieve and maintain high production yields. Direct control over manufacturing resources allows us to shorten our design and production [added] cycles and capture a portion of the wafer manufacturing and assembly and testing profit margin.