NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended October 30, 2021, October 31, 2020 and November 2, 2019
(all tabular amounts in thousands except per share amounts)
1.Description of Business
Analog Devices, Inc. (Analog Devices or the Company) is a leading global high-performance semiconductor company dedicated to solving its customers' most complex engineering challenges. Since its inception in 1965, the Company has played a critical role at the intersection of the physical and digital world by providing the building blocks to sense, measure, interpret, connect and power. The Company designs, manufactures, tests and markets a broad portfolio of solutions, including integrated circuits (ICs), software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies. The Company's comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency ICs, edge processors and other sensors. The Company's focus is largely on the business-to-business end markets of Industrial, Automotive and Communications and related applications, as well as Consumer applications, with the goal of driving sustainable and profitable growth over the long term.
2. Summary of Significant Accounting Policies
a.Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. Certain amounts reported in previous years have been reclassified to conform to the presentation for the fiscal year ended October 30, 2021 (fiscal 2021). Such reclassified amounts are immaterial.
The Company’s fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2021, fiscal 2020 and fiscal 2019 were 52-week fiscal periods.
On August 26, 2021 (Acquisition Date), the Company completed the acquisition of Maxim Integrated Products, Inc. (Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies. Pursuant to the Agreement and Plan of Merger, dated as of July 12, 2020 (the Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company’s common stock as of the Acquisition Date for total consideration of approximately $28.0 billion of the Company's common stock. The acquisition of Maxim is referred to as the Acquisition. The consolidated financial statements included in this Annual Report on Form 10-K include the financial results of Maxim prospectively from the Acquisition Date. See Note 6, Acquisitions, of the Notes to Consolidated Financial Statements for additional information.
The Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), in the first quarter of fiscal 2019. See Note 2n, Revenue Recognition, of the Notes to Consolidated Financial Statements for the details of the Company’s revenue recognition policies. As shown in the table below, pursuant to the guidance in ASU 2014-09, the Company restated its historical financial results to be consistent with the standard.
The impact on the Company's previously reported Consolidated Statement of Shareholders' Equity line item is as follows:
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|
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|
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November 3, 2018
|
|
As Reported
|
|
Impact of Adoption of ASU 2014-09
|
|
As Adjusted
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
$
|
5,703,064
|
|
|
$
|
279,633
|
|
|
$
|
5,982,697
|
|
b.Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash and cash equivalents consist primarily of government and institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds, demand deposit accounts and bank time deposits.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company classifies its investments in readily marketable debt and equity securities as “held-to-maturity,” “available-for-sale” or “trading” at the time of purchase. There were no transfers between investment classifications in any of the fiscal years presented. Held-to-maturity securities, which are carried at amortized cost, include only those securities the Company has the positive intent and ability to hold to maturity. Securities such as bank time deposits, which by their nature are typically held to maturity, are classified as such. The Company’s other readily marketable cash equivalents are classified as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related tax, reported in accumulated other comprehensive (loss) income (AOCI). Adjustments to the fair value of investments classified as available-for-sale are recorded as an increase or decrease in AOCI, unless the adjustment is considered an other-than-temporary impairment, in which case the adjustment is recorded as a charge in the Consolidated Statements of Income.
The Company’s deferred compensation plan investments are classified as trading. See Note 2j, Fair Value and Note 11, Retirement Plans, of the Notes to Consolidated Financial Statements for additional information on these investments.
The Company periodically evaluates its investments for impairment. There were no other-than-temporary impairments of investments in any of the fiscal years presented.
Realized gains or losses on investments are determined based on the specific identification basis and are recognized in nonoperating (income) expense. There were no material net realized gains or losses from the sales of available-for-sale investments during any of the fiscal periods presented.
The components of the Company’s cash and cash equivalents as of October 30, 2021 and October 31, 2020 were as follows:
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|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Cash
|
$
|
1,314,967
|
|
|
$
|
239,607
|
|
Available-for-sale securities
|
662,997
|
|
|
816,253
|
|
|
|
|
|
Total cash and cash equivalents
|
$
|
1,977,964
|
|
|
$
|
1,055,860
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 2j, Fair Value, of the Notes to Consolidated Financial Statements for additional information on the Company’s cash equivalents.
c.Supplemental Cash Flow Statement Information
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|
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2021
|
|
2020
|
|
2019
|
Cash paid during the fiscal year for:
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|
|
|
|
|
Income taxes
|
$
|
388,115
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|
|
$
|
237,691
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|
|
$
|
205,762
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|
Interest
|
$
|
197,841
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|
|
$
|
185,854
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|
|
$
|
216,143
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|
Noncash issuance of common stock for the Acquisition
|
$
|
27,754,161
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|
|
$
|
—
|
|
|
$
|
—
|
|
Fair value of partially vested equity replacement awards issued for the Acquisition
|
$
|
194,890
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|
|
$
|
—
|
|
|
$
|
—
|
|
d.Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or market. The valuation of inventory requires the Company to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The Company employs a variety of methodologies to determine the net realizable value of its inventory. While a portion of the calculation to record inventory at its net realizable value is based on the age of the inventory and lower of cost or market calculations, a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products. If actual demand is less than the Company’s estimates, impairment charges, which are recorded to cost of sales, may need to be recorded in future periods. Inventory in excess of saleable amounts is not valued, and the remaining inventory is valued at the lower of cost or market.
Inventories at October 30, 2021 and October 31, 2020 were as follows:
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2021
|
|
2020
|
Raw materials
|
$
|
71,639
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|
|
$
|
33,806
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|
Work in process
|
858,627
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|
|
443,690
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|
Finished goods
|
270,344
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|
|
130,764
|
|
Total inventories
|
$
|
1,200,610
|
|
|
$
|
608,260
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|
|
|
|
|
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
e.Property, Plant and Equipment
Property, plant and equipment (PP&E) is recorded at cost, less allowances for depreciation. The straight-line method of depreciation is used for all classes of assets for financial statement purposes while both straight-line and accelerated methods are used for income tax purposes. Leasehold improvements are depreciated over the lesser of the term of the lease or the useful life of the asset. Repairs and maintenance charges are expensed as incurred. Depreciation is based on the following ranges of estimated useful lives:
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Buildings
|
Up to 30 years
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Machinery & equipment
|
3-10 years
|
Office equipment
|
3-10 years
|
Leasehold improvements
|
7-20 years
|
The Company reviews PP&E for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Recoverability of these assets is determined by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. If such assets are not impaired, but their useful lives have decreased, the remaining net book value is depreciated over the revised useful life.
PP&E is identified as held for sale when it meets the held for sale criteria of Accounting Standards Codification Topic 360, Property, Plant, and Equipment (ASC 360). Depreciation is not recorded for assets that are classified as held for sale. When an asset meets the held for sale criteria, the lower of its carrying value or fair value less costs to sell is reclassified from the relevant PP&E line items and into current assets on the balance sheet, where it remains until it is either sold or it no longer meets the held for sale criteria. If the assets held for sale were carried at fair value, it would be considered a Level 3 fair value measurement, and determined based on the use of appraisals and input from market participants.
During fiscal 2021, the Company ceased production at its Hillview wafer fabrication facility located in Milpitas, California and determined that this facility met the held for sale criteria specified in ASC 360. As of October 30, 2021, Prepaid expenses and other current assets includes the following assets held for sale recorded at the fair value of the asset group, less costs to sell:
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Land and buildings
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$
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40,070
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Less accumulated depreciation and amortization
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(13,634)
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Net property, plant and equipment reclassified to Prepaid expenses and other current assets
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$
|
26,436
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|
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f.Goodwill and Intangible Assets
Goodwill
The Company evaluates goodwill for impairment annually, as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable, utilizing either the qualitative or quantitative method. The Company tests goodwill for impairment at the reporting unit level, which the Company has determined is consistent with its identified operating segments, on an annual basis on the first day of the fourth quarter (on or about August 1) or more frequently if indicators of impairment exist or the Company reorganizes its operating segments or reporting units.
The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value. When using the qualitative method, the Company considers several factors, including the following:
–the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment;
–the carrying values of these reporting units as of the assessment date compared to the previously calculated fair values as of the date of the most recent quantitative impairment analysis;
–the Company's current forecasts as compared to the forecasts included in the most recent quantitative impairment analysis;
–public information from competitors and other industry information to determine if there were any significant adverse trends in the Company's competitors' businesses;
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
–changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of the Company's reporting units;
–changes in the Company's market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of its reporting units had significantly decreased; and
–whether there had been any significant increases to the weighted-average cost of capital rates for each reporting unit, which could materially lower the Company's prior valuation conclusions under a discounted cash flow approach.
If the Company elects not to use this option, or it determines that it is more likely than not that the fair value of a reporting unit is less than its net book value, then the Company performs the quantitative goodwill impairment test. The quantitative goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount. If fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, the Company considers income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Management determines the fair values of the reporting units using a weighting of the income and market approaches. Under the income approach, it uses a discounted cash flow methodology, which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates and long-term discount rates, among others. For the market approach, it uses the guideline public company method. Under this method management utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain its respective fair value. In order to assess the reasonableness of the calculated values, the aggregate fair values of the reporting units are reconciled to the Company's total market capitalization, allowing for a reasonable control premium.
During fiscal 2021 and fiscal 2020, the Company elected to use the quantitative method of assessing goodwill for all of its reporting units. In all periods presented, management concluded the reporting units' fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.
The Company’s next annual impairment assessment will be performed as of the first day of the fourth quarter of the fiscal year ending October 29, 2022 (fiscal 2022) unless indicators arise that would require the Company to reevaluate at an earlier date.
The following table presents the changes in goodwill during fiscal 2021 and fiscal 2020:
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2021
|
|
2020
|
Balance at beginning of year
|
$
|
12,278,425
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|
|
$
|
12,256,880
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|
Acquisition of Maxim (Note 6)
|
14,645,076
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|
|
—
|
|
Goodwill related to other acquisitions (1)
|
—
|
|
|
17,839
|
|
|
|
|
|
Foreign currency translation adjustment and other adjustments
|
(5,031)
|
|
|
3,706
|
|
Balance at end of year
|
$
|
26,918,470
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|
|
$
|
12,278,425
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_______________________________________
(1) Represents goodwill related to other acquisitions that were not material to the Company on either an individual or aggregate basis.
Intangible Assets
The Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable. If required, recoverability of these assets is determined by comparison of their carrying value to the estimated future undiscounted cash flows the assets are expected to generate over their remaining estimated useful lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their estimated fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.
In-process research and development (IPR&D) assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development (R&D) efforts. Upon completion of the projects, the IPR&D assets are reclassified to technology-based intangible assets and amortized over their estimated useful lives.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of October 30, 2021 and October 31, 2020, the Company’s intangible assets consisted of the following:
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|
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|
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|
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|
|
October 30, 2021
|
|
October 31, 2020
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
Customer relationships
|
$
|
10,336,477
|
|
|
$
|
2,191,729
|
|
|
$
|
4,700,454
|
|
|
$
|
1,703,299
|
|
Technology-based
|
7,559,503
|
|
|
819,204
|
|
|
1,136,742
|
|
|
518,328
|
|
Trade-name
|
72,200
|
|
|
47,803
|
|
|
72,200
|
|
|
37,489
|
|
Backlog
|
361,200
|
|
|
32,746
|
|
|
—
|
|
|
—
|
|
Assembled workforce
|
1,800
|
|
|
750
|
|
|
—
|
|
|
—
|
|
IPR&D
|
28,222
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total (1) (2)
|
$
|
18,359,402
|
|
|
$
|
3,092,232
|
|
|
$
|
5,909,396
|
|
|
$
|
2,259,116
|
|
_______________________________________
(1) Foreign intangible asset carrying amounts are affected by foreign currency translation.
(2) Increases in intangible assets primarily related to the Acquisition. See Note 6, Acquisitions, of the Notes to the Consolidated Financial Statements for further information.
Amortization expense related to intangible assets was $843.4 million, $577.1 million and $570.6 million in fiscal 2021, 2020 and 2019, respectively, and is recorded in Cost of sales and Amortization of intangibles on the Consolidated Statements of Income. The remaining amortization expense will be recognized over the remaining weighted average life of approximately 4.9 years.
The Company expects annual amortization expense for intangible assets as follows:
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|
|
|
|
Fiscal Year
|
Amortization Expense
|
2022
|
$
|
2,013,977
|
|
2023
|
$
|
1,956,113
|
|
2024
|
$
|
1,730,733
|
|
2025
|
$
|
1,569,470
|
|
2026
|
$
|
1,519,949
|
|
g.Grant Accounting
Certain of the Company’s foreign subsidiaries have received grants from governmental agencies. These grants include capital, employment and research and development grants. Capital grants for the acquisition of property, plant and equipment are netted against the related capital expenditures and amortized as a credit to depreciation expense over the estimated useful life of the related asset. Employment grants, which relate to employee hiring and training, and research and development grants are recognized in earnings in the period in which the related expenditures are incurred by the Company.
h.Translation of Foreign Currencies
The functional currency for certain of the Company’s foreign operations is the applicable local currency. Gains and losses resulting from translation of these foreign currencies into U.S. dollars are recorded in AOCI. Transaction gains and losses and re-measurement of foreign currency denominated assets and liabilities are included in income currently, including those at the Company’s principal foreign manufacturing operations where the functional currency is the U.S. dollar. Foreign currency transaction gains or losses are included in Other, net in the Consolidated Statements of Income.
i.Derivative Instruments and Hedging Agreements
Foreign Exchange Exposure Management — The Company enters into forward foreign currency exchange contracts to offset certain operational and balance sheet exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company’s operations, assets and liabilities that are denominated in currencies other than the U.S. dollar, primarily the Euro; other significant exposures include the British Pound, Philippine Peso, Thai Baht, South Korean Won and the Japanese Yen. Derivative instruments are employed to eliminate or minimize certain foreign currency exposures that can be confidently identified and quantified. These foreign currency exchange contracts are entered into to support transactions made in the normal course of business, and accordingly, are not speculative in nature. The contracts are for periods consistent with the terms of the underlying transactions, generally one year or less. Hedges related to anticipated transactions are matched with the underlying exposures at inception and designated and documented as cash flow hedges. They are qualitatively evaluated for effectiveness on a quarterly basis. The gain or loss on the derivatives are reported as a component
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of AOCI in shareholders’ equity and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction in the same period during which the hedged transaction affects earnings.
The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges as of October 30, 2021 and October 31, 2020 was $343.6 million and $202.7 million, respectively. The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Consolidated Balance Sheets as of October 30, 2021 and October 31, 2020 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value At
|
|
Balance Sheet Location
|
|
October 30, 2021
|
|
October 31, 2020
|
Forward foreign currency exchange contracts
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
5,550
|
|
Forward foreign currency exchange contracts
|
Accrued liabilities
|
|
$
|
7,113
|
|
|
$
|
—
|
|
Additionally, the Company enters into forward foreign currency contracts that economically hedge the gains and losses generated by the re-measurement of certain recorded assets and liabilities in a non-functional currency. Changes in the fair value of these undesignated hedges are recognized in other (income) expense immediately as an offset to the changes in the fair value of the asset or liability being hedged. As of October 30, 2021 and October 31, 2020, the total notional amount of these undesignated hedges was $120.0 million and $62.7 million, respectively.
The Company estimates that $10.0 million, net of tax, of settlements of forward foreign currency derivative instruments included in OCI will be reclassified into earnings within the next 12 months.
All of the Company’s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheets on a net basis. As of October 30, 2021 and October 31, 2020, none of the netting arrangements involved collateral.
The following table presents the gross amounts of the Company's forward foreign currency exchange contracts and the net amounts recorded in the Company's Consolidated Balance Sheets as of October 30, 2021 and October 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
October 31, 2020
|
Gross amount of recognized assets
|
$
|
319
|
|
|
$
|
6,114
|
|
Gross amounts of recognized liabilities offset in the Consolidated Balance Sheets
|
(8,404)
|
|
|
(687)
|
|
Net (liabilities) assets presented in the Consolidated Balance Sheets
|
$
|
(8,085)
|
|
|
$
|
5,427
|
|
Interest Rate Exposure Management — The Company's current and future debt may be subject to interest rate risk. The Company utilizes interest rate derivatives to alter interest rate exposure in an attempt to reduce the effects of the changes in interest rates. During fiscal 2019, the Company entered into an interest rate swap agreement which locked in the interest rate for up to $1 billion in future debt issuances. The interest rate swap was designated and qualified as a cash flow hedge. During fiscal 2021, the Company issued $1 billion of 2.100% Senior Notes due October 2031, and the swap was cash terminated in the amount of $153.2 million. The accumulated loss recorded in AOCI will be reclassified to interest expense on a straight-line basis over the 10-year term of such Senior Notes.
The market risk associated with the Company’s derivative instruments results from currency exchange rate or interest rate movements that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to the Company’s derivative instruments consist of a number of major international financial institutions with high credit ratings. Based on the credit ratings of the Company’s counterparties as of October 30, 2021 and October 31, 2020, nonperformance is not perceived to be a material risk. Furthermore, none of the Company’s derivatives are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company’s credit ratings from any credit rating agency. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Company’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the obligations of the Company to the counterparties. As a result of the above considerations, the Company does not consider the risk of counterparty default to be significant.
The Company records the fair value of its derivative financial instruments in its Consolidated Financial Statements in other current assets, other assets, accrued liabilities and other non-current liabilities, depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of the derivative financial instruments are
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
either recognized periodically in earnings or in shareholders’ equity as a component of OCI. Changes in the fair value of cash flow hedges are recorded in OCI and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction when the underlying contract matures. Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur.
For information on the unrealized holding gains (losses) on derivatives included in and reclassified out of AOCI into the Consolidated Statements of Income related to forward foreign currency exchange contracts, see Note 2o, Accumulated Other Comprehensive (Loss) Income, of the Notes to Consolidated Financial Statements.
j.Fair Value
The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.
The tables below, set forth by level, presents the Company’s financial assets and liabilities, excluding accrued interest components, that were accounted for at fair value on a recurring basis as of October 30, 2021 and October 31, 2020. The tables exclude cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value. As of October 30, 2021 and October 31, 2020, the Company held $1,315.0 million and $239.6 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
Fair Value measurement at
Reporting Date using:
|
|
|
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
Government and institutional money market funds
|
$
|
662,997
|
|
|
$
|
—
|
|
|
|
|
$
|
662,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation investments
|
71,301
|
|
|
—
|
|
|
|
|
71,301
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
$
|
734,298
|
|
|
$
|
—
|
|
|
|
|
$
|
734,298
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts (1)
|
$
|
—
|
|
|
$
|
8,085
|
|
|
|
|
$
|
8,085
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
$
|
—
|
|
|
$
|
8,085
|
|
|
|
|
$
|
8,085
|
|
(1) The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 2i, Derivative Instruments and Hedging Agreements, of the Notes to Consolidated Financial Statements for more information related to the
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company's master netting arrangements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2020
|
|
Fair Value measurement at
Reporting Date using:
|
|
|
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
Government and institutional money market funds
|
$
|
816,253
|
|
|
$
|
—
|
|
|
|
|
$
|
816,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts (1)
|
|
|
5,427
|
|
|
|
|
5,427
|
|
Deferred compensation investments
|
52,956
|
|
|
—
|
|
|
|
|
52,956
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
$
|
869,209
|
|
|
$
|
5,427
|
|
|
|
|
$
|
874,636
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
$
|
—
|
|
|
$
|
214,586
|
|
|
|
|
$
|
214,586
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
$
|
—
|
|
|
$
|
214,586
|
|
|
|
|
$
|
214,586
|
|
(1) The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 2i, Derivative Instruments and Hedging Agreements, of the Notes to Consolidated Financial Statements for more information related to the Company's master netting arrangements.
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash equivalents — These investments are adjusted to fair value based on quoted market prices or are determined using a yield curve model based on current market rates.
Deferred compensation plan investments — The fair value of these mutual fund, money market fund and equity investments are based on quoted market prices.
Interest rate derivatives — The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives.
Forward foreign currency exchange contracts — The estimated fair value of forward foreign currency exchange contracts, which includes derivatives that are accounted for as cash flow hedges and those that are not designated as cash flow hedges, is based on the estimated amount the Company would receive if it sold these agreements at the reporting date taking into consideration current interest rates as well as the creditworthiness of the counterparty for assets and the Company’s creditworthiness for liabilities. The fair value of these instruments is based upon valuation models using current market information such as strike price, spot rate, maturity date and volatility.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
Held for sale assets — The Company has classified the assets held for sale at fair value, which is determined based on the use of appraisals and input from market participants, and as such, is considered a Level 3 fair value measurement. See Note 2e, Property, Plant and Equipment, of the Notes to Consolidated Financial Statements for further discussion related to held for sale assets.
Debt — The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis. The carrying amounts of the term loan approximates fair value. The term loan is classified as Level 2 measurements according to the fair value hierarchy. The fair values of the senior unsecured notes are obtained from broker prices and are classified as Level 1 measurements according to the fair value hierarchy. See Note 14, Debt, of the Notes to Consolidated Financial Statements for further discussion related to outstanding debt.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
October 31, 2020
|
|
|
|
|
|
Principal Amount Outstanding
|
|
Fair Value
|
|
Principal Amount Outstanding
|
|
Fair Value
|
|
|
|
|
3-Year term loan, due March 2022
|
—
|
|
|
$
|
—
|
|
|
925,000
|
|
|
$
|
925,000
|
|
|
|
|
|
2021 Notes, due December 2021
|
—
|
|
|
—
|
|
|
400,000
|
|
|
408,565
|
|
|
|
|
|
Maxim 2023 Notes, due March 2023
|
500,000
|
|
|
520,236
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2023 Notes, due June 2023
|
—
|
|
|
—
|
|
|
500,000
|
|
|
526,855
|
|
|
|
|
|
2023 Notes, due December 2023
|
—
|
|
|
—
|
|
|
550,000
|
|
|
590,177
|
|
|
|
|
|
2024 Notes, due October 2024
|
500,000
|
|
|
500,482
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2025 Notes, due April 2025
|
400,000
|
|
|
423,265
|
|
|
400,000
|
|
|
434,919
|
|
|
|
|
2025 Notes, due December 2025
|
—
|
|
|
—
|
|
|
850,000
|
|
|
969,033
|
|
|
|
|
|
2026 Notes, due December 2026
|
900,000
|
|
|
986,243
|
|
|
900,000
|
|
|
1,017,505
|
|
|
|
|
|
Maxim 2027 Notes, due June 2027
|
500,000
|
|
|
542,942
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2028 Notes, due October 2028
|
750,000
|
|
|
743,109
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2031 Notes, due October 2031
|
1,000,000
|
|
|
996,702
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2036 Notes, due December 2036
|
144,278
|
|
|
176,960
|
|
|
250,000
|
|
|
298,153
|
|
|
|
|
|
2041 Notes, due October 2041
|
750,000
|
|
|
758,246
|
|
|
—
|
|
|
—
|
|
|
|
|
|
2045 Notes, due December 2045
|
332,587
|
|
|
469,592
|
|
|
400,000
|
|
|
538,788
|
|
|
|
|
|
2051 Notes, due October 2051
|
1,000,000
|
|
|
1,029,830
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Total Debt
|
$
|
6,776,865
|
|
|
$
|
7,147,607
|
|
|
$
|
5,175,000
|
|
|
$
|
5,708,995
|
|
|
|
|
|
k.Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates relate to the useful lives of fixed assets and identified intangible assets; allowances for doubtful accounts and customer returns; the net realizable value of inventory; potential reserves relating to litigation matters; accrued liabilities, including estimates of variable consideration related to distributor sales; accrued taxes; uncertain tax positions; deferred tax valuation allowances; assumptions pertaining to stock-based compensation payments and defined benefit plans; and fair value of acquired assets and liabilities, including inventory, property, plant and equipment, goodwill, and acquired intangibles; and other reserves. Actual results could differ from those estimates and such differences may be material to the financial statements.
l.Concentrations of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments and trade accounts receivable.
The Company maintains cash and cash equivalents with high credit quality counterparties, continuously monitors the amount of credit exposure to any one issuer and diversifies its investments in order to minimize its credit risk.
The Company sells its products to distributors and original equipment manufacturers (OEMs) involved in a variety of industries including industrial, communications, automotive and consumer end markets. The Company has adopted credit policies and standards to accommodate growth in these markets. The Company performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, the Company may require letters of credit from customers in certain circumstances. The Company provides reserves for estimated amounts of accounts receivable that may not be collected.
The Company's largest customer, which is a distributor rather than an end customer, accounted for approximately 26%, 29%, and 30% of net revenues in fiscal 2021, fiscal 2020 and fiscal 2019, respectively. The Company's next largest customer, which is also a distributor, accounted for approximately 11% and 10% of net revenues in fiscal 2021 and fiscal 2019, respectively. This next largest customer accounted for less than 10% of net revenues in fiscal 2020. No other customer accounted for greater than 10% of revenue in any period presented.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
m.Concentration of Other Risks
The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. The Company’s financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new manufacturing technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors, third-party wafer fabricators and independent distributors. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. The Company is exposed to the risk of obsolescence of its inventory depending on the mix of future business. Additionally, a large portion of the Company’s purchases of external wafer and foundry services are from a limited number of suppliers, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others. If these suppliers or any of the Company’s other key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components, on the time schedule and of the quality that the Company requires, the Company may be forced to engage additional or replacement suppliers, which could result in significant expenses and disruptions or delays in manufacturing, product development and shipment of product to the Company’s customers. Given the current demand environment in the semiconductor industry, the Company expects to face a constrained supply environment in the near term. Management is working to balance these constraints as it shifts the Company's global resources and adds capacity where appropriate.
n.Revenue Recognition
Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company recognizes revenue when all of the following criteria are met: (1) the Company has entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. The majority of the Company's shipping terms permit the Company to recognize revenue at point of shipment or delivery. Certain shipping terms require the goods to be through customs or be received by the customer before title passes. In those instances, the Company defers the revenue recognized until title has passed. Shipping costs are charged to selling, marketing, general and administrative expense as incurred. Sales taxes are excluded from revenue.
Revenue from contracts with the United States government, government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion. These measures are used to measure results directly and is generally the best measure of progress toward completion in circumstances in which a reliable measure of output can be established. Estimated revenue in excess of amounts billed is reported as unbilled receivables. Contract accounting requires judgment in estimating costs and assumptions related to technical issues and delivery schedule. Contract costs include material, subcontract costs, labor and an allocation of indirect costs. The estimation of costs at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract. Changes in contract performance, estimated gross margin, including the impact of final contract settlements, and estimated losses are recognized in the period in which the changes or losses are determined.
Performance Obligations: Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit products. Such sales represent a single performance obligation because the sale is one type of good or includes multiple goods that are neither capable of being distinct nor separable from the other promises in the contract. This performance obligation is satisfied when control of the product is transferred to the customer, which occurs upon shipment or delivery. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with an original expected duration of one year or less. The Company generally offers a twelve-month warranty for its products. The Company’s warranty policy provides for replacement of defective products. Specific accruals are recorded for known product warranty issues. Product warranty expenses during fiscal 2021, fiscal 2020 and fiscal 2019 were not material.
Transaction Price: The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts. Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period. Variable consideration includes sales in which the amount of consideration that the Company will receive is unknown as of the end of a reporting period. Such consideration primarily includes credits issued to the distributor due to price protection and sales made to distributors under agreements that allow certain rights of return, referred to as stock rotation. Price protection represents price discounts granted to certain distributors to allow the distributor to earn an appropriate
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
margin on sales negotiated with certain customers and in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor. Stock rotation allows distributors limited levels of returns in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory. A liability for distributor credits covering variable consideration is made based on the Company's estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the provisions the Company has made based on its historical estimates. For fiscal 2021 and fiscal 2020, sales to distributors were approximately $4.6 billion and $3.2 billion, respectively, net of variable consideration for which the liability balances as of October 30, 2021 and October 31, 2020 were $664.2 million and $229.8 million, respectively, and were recorded in Accrued liabilities on the Consolidated Balance Sheets.
Contract Balances: Accounts receivable represents the Company’s unconditional right to receive consideration from its customers. Payments are typically due within 30 to 45 days of invoicing and do not include a significant financing component. To date, there have been no material credit losses on accounts receivable. There were no material contract assets or contract liabilities recorded on the Consolidated Balance Sheets in any of the periods presented.
o.Accumulated Other Comprehensive (Loss) Income
Accumulated other comprehensive (loss) income (AOCI) includes certain transactions that have generally been reported in the Consolidated Statement of Shareholders’ Equity. The changes in components of AOCI at October 30, 2021 and October 31, 2020 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
Unrealized holding gains/losses on derivatives
|
|
Pension plans
|
|
Total
|
October 31, 2020
|
$
|
(26,852)
|
|
|
|
|
|
|
$
|
(172,670)
|
|
|
$
|
(49,939)
|
|
|
$
|
(249,461)
|
|
Other comprehensive income before reclassifications
|
1,057
|
|
|
|
|
|
|
56,034
|
|
|
9,307
|
|
|
66,398
|
|
Amounts reclassified out of other comprehensive loss
|
—
|
|
|
|
|
|
|
7,288
|
|
|
2,979
|
|
|
10,267
|
|
Tax
|
—
|
|
|
|
|
|
|
(14,406)
|
|
|
637
|
|
|
(13,769)
|
|
Other comprehensive income
|
1,057
|
|
|
|
|
|
|
48,916
|
|
|
12,923
|
|
|
62,896
|
|
October 30, 2021
|
$
|
(25,795)
|
|
|
|
|
|
|
$
|
(123,754)
|
|
|
$
|
(37,016)
|
|
|
$
|
(186,565)
|
|
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The amounts reclassified out of AOCI into the Consolidated Statements of Income, with presentation location during each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income Component
|
|
2021
|
|
2020
|
|
|
|
Location
|
Changes in unrealized holding gains/losses on derivatives
|
|
|
|
|
Currency forwards
|
|
$
|
(2,682)
|
|
|
$
|
(2,522)
|
|
|
|
|
Cost of sales
|
|
|
(1,622)
|
|
|
(127)
|
|
|
|
|
Research and development
|
|
|
(958)
|
|
|
112
|
|
|
|
|
Selling, marketing, general and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
|
12,550
|
|
|
1,856
|
|
|
|
|
Interest expense
|
|
|
7,288
|
|
|
(681)
|
|
|
|
|
Total before tax
|
|
|
(189)
|
|
|
(158)
|
|
|
|
|
Tax
|
Effect of Accounting Standards Update 2018-02
|
|
—
|
|
|
(2,379)
|
|
|
|
|
Retained earnings
|
|
|
$
|
7,099
|
|
|
$
|
(3,218)
|
|
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Amortization of pension components included in the computation of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
2,979
|
|
|
2,617
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339
|
|
|
651
|
|
|
|
|
Tax
|
|
|
$
|
3,318
|
|
|
$
|
3,268
|
|
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Total amounts reclassified out of AOCI, net of tax
|
|
$
|
10,417
|
|
|
$
|
50
|
|
|
|
|
|
_______________________________________
(1)The amortization of pension components is included in the computation of net periodic benefit cost. See Note 11, Retirement Plans, of the Notes to Consolidated Financial Statements for further information.
p.Income Taxes
The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of income tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of the recognition of certain expenses for tax and financial statement purposes. The likelihood of the realization of deferred tax assets is assessed and a corresponding valuation allowance is recorded as necessary if management determines those deferred tax assets may not be realized due to the uncertainty of the timing and amount to be realized of certain state and international tax credit carryovers. In reaching this conclusion, the Company evaluates certain relevant criteria including the existence of deferred tax liabilities that can be used to realize deferred tax assets, the taxable income in prior carryback years in the impacted state and international jurisdictions that can be used to absorb net operating losses and taxable income in future years. Judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to these deferred tax assets, which may result in an increase or decrease to the income tax provision in future periods.
The Company accounts for uncertain tax positions by first determining if it is “more likely than not” that a tax position will be sustained by the appropriate taxing authorities prior to recording any benefit in the Consolidated Financial Statements. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. For those tax positions where it is more likely than not that a tax position will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Management classifies interest and penalties related to uncertain tax positions within the (benefit from) provision for income taxes line of the Consolidated Statements of Income. Management reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in known facts or circumstances, changes in tax law, effectively settled issues under audit, and new guidance on legislative interpretations. A change in these factors could result in the recognition of an increase or decrease to the Company's income tax provision which could materially impact its consolidated financial position and results of operations.
In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities. Although the Company believes its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in the historical income tax provisions and income tax liabilities.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In the event management's assumptions are incorrect, the differences could have a material impact on its income tax provision and operating results in the period in which such determination is made. In addition to the factors described above, the current and expected effective tax rate is based on then-current tax law. Significant changes in enacted tax law could affect these estimates. See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements for further information related to income taxes.
q.Earnings Per Share of Common Stock
Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options and restricted stock units is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money and restricted stock units. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of in-the-money stock options. Potential shares related to certain of the Company’s outstanding stock options and restricted stock units were excluded because they were anti-dilutive. Those potential shares, determined based on the weighted average exercise prices during the respective periods, could be dilutive in the future.
In connection with the acquisition of Linear Technology Corporate (Linear), the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees. These restricted stock awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant. These unvested stock-based compensation awards are considered participating securities and the two-class method is used for purposes of calculating earnings per share. Under the two-class method, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of earnings per share allocated to common stock, as shown in the table below. The difference between the income allocated to participating securities under the basic and diluted two-class methods is not material.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Net income
|
$
|
1,390,422
|
|
|
$
|
1,220,761
|
|
|
$
|
1,363,011
|
|
Less: income allocated to participating securities (1)
|
—
|
|
|
—
|
|
|
3,229
|
|
Net income allocated to common shareholders
|
$
|
1,390,422
|
|
|
$
|
1,220,761
|
|
|
$
|
1,359,782
|
|
|
|
|
|
|
|
Basic shares:
|
|
|
|
|
|
Weighted-average shares outstanding
|
397,462
|
|
|
368,633
|
|
|
369,133
|
|
Earnings per common share basic
|
$
|
3.50
|
|
|
$
|
3.31
|
|
|
$
|
3.68
|
|
|
|
|
|
|
|
Diluted shares:
|
|
|
|
|
|
Weighted-average shares outstanding
|
397,462
|
|
|
368,633
|
|
|
369,133
|
|
Assumed exercise of common stock equivalents
|
3,826
|
|
|
3,340
|
|
|
3,738
|
|
Weighted-average common and common equivalent shares
|
401,288
|
|
|
371,973
|
|
|
372,871
|
|
Earnings per common share diluted
|
$
|
3.46
|
|
|
$
|
3.28
|
|
|
$
|
3.65
|
|
Anti-dilutive shares related to:
|
|
|
|
|
|
Outstanding stock options
|
424
|
|
|
460
|
|
|
826
|
|
_______________________________________
(1)For fiscal 2021 and fiscal 2020, the amount is not material.
r.Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards ultimately expected to vest and is recognized as an expense on a straight-line basis over the vesting period, which is generally four years for stock options and restricted stock units, or in annual installments of 25% on each of the first, second, third and fourth anniversaries of the date of grant. Restricted stock units with service and performance or market conditions generally vest in one installment on the third anniversary of the date of grant. For grants issued prior to fiscal 2018, the vesting period was generally five years for stock options, or in annual installments of 20% on each of the first, second, third, fourth and fifth
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
anniversaries of the date of grant and in one installment on the third anniversary of the date of grant for restricted stock units/awards. The maximum contractual term of all stock options is ten years.
Determining the amount of stock-based compensation expense to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of awards. These estimates may be based on different valuation models depending upon the type of award and may include assumptions, such as expected volatility, expected term, risk-free interest rate, expected dividend yield, forfeiture rate and others. The Company uses the Black-Scholes valuation model to calculate the grant-date fair value of stock option awards. The grant-date fair value of restricted stock units with a service condition and restricted stock units with both service and performance conditions are calculated using the value of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting. For restricted stock units with both service and performance conditions, this grant-date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability of achievement of that performance condition. If the Company determines that an award is unlikely to vest, any previously recorded stock-based compensation expense is reversed in the period of that determination. The grant date fair value of restricted stock units or performance-based stock options with both service and market conditions is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the performance condition stipulated in the award grant, including the possibility that the market condition may not be satisfied.
See Note 3, Stock-Based Compensation and Shareholders' Equity, of the Notes to Consolidated Financial Statements for additional information relating to stock-based compensation.
s.New Accounting Pronouncements
Standards Implemented During Current Fiscal Year
Financial Instruments
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief (ASU 2019-05) and ASU 2019-11, Codification Improvements to Topic 326 (ASU 2019-11). ASU 2019-05 allows an entity to irrevocably elect the fair value option for certain financial instruments. Once elected, an entity would recognize the difference between the carrying amount and the fair value of the financial instrument as part of the cumulative effect adjustments associated with the adoption of ASU 2016-13. ASU 2019-11 allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326.
The Company is exposed to credit losses through sales of its products and certain financial instruments. The Company determines if there is an expected loss on its accounts receivables using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. The Company adopted these standards effective November 1, 2020 using the modified retrospective approach, which did not have a material impact on the Company's financial position and results of operations. See Note 8, Fair Value, of the Notes to Consolidated Financial Statements for more information related to how the Company assesses credit losses on its available-for-sale debt securities.
Income taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASU-2019-12). ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 in the first quarter of fiscal 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's financial position and results of operations.
Retirement Benefits
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post-retirement plans. ASU
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted ASU 2018-14 in the first quarter of fiscal 2021. Upon adoption, ASU 2018-14 did not have a material impact on the Company's financial position and results of operations.
Standards to Be Implemented
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. The Company does not expect ASU 2020-04 to have a material impact on the Company's financial position and results of operations.
Acquired Contract Assets and Contract Liabilities
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities it would have recorded under ASC 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 is effective for the Company in the first quarter of fiscal 2024. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations.
3. Stock-Based Compensation and Shareholders’ Equity
Equity Compensation Plans
The Company grants, or has granted, stock options and other stock and stock-based awards under the Company's 2020 Equity Incentive Plan (2020 Plan), which was approved by shareholders in March 2020. The 2020 Plan provides for the grant of up to 21.2 million shares of the Company’s common stock, which includes shares under the Company’s previous equity compensation plans, including the Amended and Restated 2006 Stock Incentive Plan, the Linear Technology Corporation Amended and Restated 2005 Equity Incentive Plan and the Amended and Restated 2010 Equity Incentive Plan. The 2020 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Employees, officers, directors, consultants and advisors of the Company and its subsidiaries are eligible to be granted awards under the 2020 Plan. No award may be made under the 2020 Plan after March 11, 2030, but awards previously granted may extend beyond that date. The Company does not intend to grant further equity awards under any previous legacy Analog Devices' and Linear Technology Corporation's equity compensation plans. In connection with the Acquisition, the Company assumed the Maxim 1996 Stock Incentive Plan (1996 Plan) and may grant stock options and other stock and stock-based awards under the 1996 Plan. As of October 30, 2021, a total of 18.2 million common shares were available for future grant under the 2020 Plan and 9.0 million common shares were available for future grant under the 1996 Plan.
Maxim Replacement Awards
In connection with the Acquisition, the Company issued equity awards, consisting of restricted stock awards and restricted stock units (replacement awards), to certain Maxim employees in replacement of Maxim equity awards. The replacement awards consist of restricted stock and restricted stock unit awards for approximately 3.7 million shares of the Company's common stock with a weighted average grant date fair value of $161.63. The terms and intrinsic value of these replacement awards are substantially the same as the converted Maxim awards. The fair value of the replacement awards associated with services rendered through the Acquisition Date was recognized as a component of the total acquisition consideration, and the remaining fair value of the replacement awards associated with post-Acquisition services will be recognized as an expense on a straight-line basis over the remaining vesting period.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Modification of Awards
The Company has, from time to time, modified the terms of its equity awards to employees and directors. The modifications made to the Company’s equity awards in fiscal 2021, fiscal 2020 and fiscal 2019 did not result in significant incremental compensation costs, either individually or in the aggregate.
Grant-Date Fair Value of Stock Options
Information pertaining to the Company’s stock option awards and the related estimated weighted-average assumptions to calculate the fair value of stock options using the Black-Scholes valuation model granted in fiscal 2021, fiscal 2020 and fiscal 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Options granted (in thousands)
|
644
|
|
|
359
|
|
|
454
|
|
Weighted-average exercise price
|
$145.04
|
|
|
$94.41
|
|
|
$107.11
|
|
Weighted-average grant-date fair value
|
$33.35
|
|
|
$18.81
|
|
|
$23.29
|
|
Assumptions:
|
|
|
|
|
|
Weighted-average expected volatility
|
35.3
|
%
|
|
29.5
|
%
|
|
26.4
|
%
|
Weighted-average expected term (in years)
|
5.0
|
|
5.0
|
|
5.0
|
Weighted-average risk-free interest rate
|
0.8
|
%
|
|
0.7
|
%
|
|
2.4
|
%
|
Weighted-average expected dividend yield
|
1.9
|
%
|
|
2.6
|
%
|
|
2.0
|
%
|
Expected volatility — The Company is responsible for estimating volatility and has considered a number of factors, including third-party estimates. The Company currently believes that the exclusive use of implied volatility results in the best estimate of the grant-date fair value of employee stock options because it reflects the market’s current expectations of future volatility. In evaluating the appropriateness of exclusively relying on implied volatility, the Company concluded that: (1) options in the Company’s common stock are actively traded with sufficient volume on several exchanges; (2) the market prices of both the traded options and the underlying shares are measured at a similar point in time to each other and on a date close to the grant date of the employee share options; (3) the traded options have exercise prices that are both near-the-money and close to the exercise price of the employee share options; and (4) the remaining maturities of the traded options used to estimate volatility are at least one year.
Expected term — The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company believes that this historical data is currently the best estimate of the expected term of a new option, and that generally its employees exhibit similar exercise behavior.
Risk-free interest rate — The yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption is used as the risk-free interest rate.
Expected dividend yield — Expected dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors for the current quarter and dividing that result by the closing stock price on the date of grant. Until such time as the Company’s Board of Directors declares a cash dividend for an amount that is different from the current quarter’s cash dividend, the current dividend will be used in deriving this assumption. Cash dividends are not paid on options, restricted stock, replacement awards or restricted stock units. In connection with the acquisition of Linear, the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees. These restricted stock awards specific to legacy Linear awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant.
Stock-Based Compensation Expense
The amount of stock-based compensation expense recognized during a period is based on the value of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award. Based on an analysis of its historical forfeitures, the Company has applied an annual forfeiture rate of 5.0% to all unvested stock-based awards as of October 30, 2021. This analysis will be re-evaluated annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those awards that vest.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Total stock-based compensation expense recognized is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Cost of sales
|
|
$
|
22,028
|
|
|
$
|
17,684
|
|
|
$
|
20,628
|
|
Research and development
|
|
86,820
|
|
|
73,366
|
|
|
75,305
|
|
Selling, marketing, general and administrative
|
|
80,099
|
|
|
56,838
|
|
|
51,829
|
|
Special charges
|
|
54,664
|
|
|
1,630
|
|
|
2,538
|
|
Total stock-based compensation expense
|
|
$
|
243,611
|
|
|
$
|
149,518
|
|
|
$
|
150,300
|
|
As of October 30, 2021 and October 31, 2020, the Company capitalized $8.7 million and $5.8 million, respectively, of stock-based compensation in inventory.
Stock-Based Compensation Activity
A summary of the activity under the Company’s stock option plans as of October 30, 2021 and changes during the fiscal year then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
(in thousands)
|
|
Weighted-
Average Exercise
Price Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term in Years
|
|
Aggregate
Intrinsic
Value
|
Options outstanding at October 31, 2020
|
4,192
|
|
|
$70.73
|
|
|
|
|
|
Options granted
|
644
|
|
|
$145.04
|
|
|
|
|
|
Options exercised
|
(1,003)
|
|
|
$62.86
|
|
|
|
|
|
Options forfeited
|
(81)
|
|
|
$91.39
|
|
|
|
|
|
Options expired
|
(6)
|
|
|
$40.69
|
|
|
|
|
|
Options outstanding at October 30, 2021
|
3,746
|
|
|
$85.22
|
|
|
5.5
|
|
$330,652
|
|
Options exercisable at October 30, 2021
|
2,391
|
|
|
$66.44
|
|
|
4.1
|
|
$255,955
|
|
Options vested or expected to vest at October 30, 2021 (1)
|
3,661
|
|
|
$84.23
|
|
|
5.5
|
|
$326,809
|
|
_______________________________________
(1)In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.
The total intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) during fiscal 2021, fiscal 2020 and fiscal 2019 was $93.2 million, $76.3 million and $132.3 million, respectively.
A summary of the Company’s restricted stock unit and award activity as of October 30, 2021 and changes during the fiscal year then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units/Awards
Outstanding
(in thousands)
|
|
Weighted-
Average Grant-
Date Fair Value
Per Share
|
Restricted stock units/awards outstanding at October 31, 2020
|
3,637
|
|
|
$91.54
|
|
Units/Awards granted
|
4,826
|
|
|
$157.56
|
|
Restrictions lapsed
|
(2,212)
|
|
|
$111.95
|
|
Forfeited
|
(327)
|
|
|
$113.25
|
|
Restricted stock units/awards outstanding at October 30, 2021
|
5,924
|
|
|
$132.59
|
|
As of October 30, 2021, there was $560.6 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options, restricted stock awards and restricted stock unit awards. That cost is expected to be recognized over a weighted-average period of 1.4 years. The total grant-date fair value of awards that vested during fiscal 2021, fiscal 2020 and fiscal 2019 was approximately $207.0 million, $174.1 million and $150.6 million, respectively.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Common Stock Repurchases
In September 2021, the Company entered into accelerated share repurchase agreements (ASR) with third party financial institutions to repurchase $2.5 billion of the Company's common stock. The Company paid $2.5 billion and received an initial delivery of 12.3 million shares of common stock, which represented approximately 80% of the notional amount of the ASR. The Company recorded the remaining 20%, or $500.0 million, within Prepaid expenses and other current assets on the Consolidated Balance Sheet. The average price paid for all of the shares delivered under the ASR through October 30, 2021 was $163.27 per share. The final settlement of the transaction under the ASR is expected to occur in the first half of fiscal 2022.
The Company’s share repurchase program has been in place since August 2004. In the aggregate, the Board of Directors has authorized the Company to repurchase $16.7 billion of the Company’s common stock under the program, which includes the $8.5 billion authorization approved by the Board of Directors on August 25, 2021. The Company may repurchase outstanding shares of its common stock from time to time in the open market and through privately negotiated transactions. Unless terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized under the program. As of October 30, 2021, the Company had repurchased a total of approximately 171.6 million shares of its common stock for approximately $8.8 billion under this program, excluding the $500.0 million within Prepaid expenses and other current assets noted above. $7.4 billion remains available for repurchase of shares under the current authorized program in addition to the $500.0 million advance payment under the ASR. The repurchased shares are held as authorized but unissued shares of common stock. Future repurchases of common stock will be dependent upon the Company's financial position, results of operations, outlook, liquidity, and other factors deemed relevant by the Company.
The Company also, from time to time, repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options. The withholding amount is based on the employee's minimum statutory withholding requirement. Any future common stock repurchases will be dependent upon several factors, including the Company's financial performance, outlook, liquidity and the amount of cash the Company has available in the United States.
Analog Devices Foundation
During the first quarter of fiscal 2020, the Company contributed 335,654 shares of its common stock to the Analog Devices Foundation. As of the date of the charitable contribution, the shares had a fair value of approximately $40.0 million. This expense was recorded in Selling, marketing, general and administrative expense in the Consolidated Statement of Income.
Preferred Stock
The Company has 471,934 authorized shares of $1.00 par value preferred stock, none of which is issued or outstanding. The Board of Directors is authorized to fix designations, relative rights, preferences and limitations on the preferred stock at the time of issuance.
4. Industry, Segment and Geographic Information
The Company operates and tracks its results in one reportable segment based on the aggregation of its operating segments. The Company designs, develops, manufactures and markets a broad range of integrated circuits (ICs). The Chief Executive Officer has been identified as the Company's Chief Operating Decision Maker. The Company has determined that all of the Company's operating segments share the following similar economic characteristics, and therefore meet the criteria established for operating segments to be aggregated into one reportable segment, namely:
•The primary source of revenue for each operating segment is the sale of ICs.
•The ICs sold by each of the Company's operating segments are manufactured using similar semiconductor manufacturing processes and raw materials in either the Company’s own production facilities or by third-party wafer fabricators using proprietary processes.
•The Company sells its products to tens of thousands of customers worldwide. Many of these customers use products spanning all operating segments in a wide range of applications.
•The ICs marketed by each of the Company's operating segments are sold globally through a direct sales force, third-party distributors, independent sales representatives and via the Company's website to the same types of customers.
All of the Company's operating segments share a similar long-term financial model as they have similar economic characteristics. The causes for variation in operating and financial performance are the same among the Company's operating segments and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. Lastly, the number and composition of employees and the amounts and types of tools and materials required for production of products are proportionally similar for each operating segment.
Revenue Trends by End Market
The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the "ship to" customer information and the end customer product or application into which the Company’s product will be incorporated. As data systems for capturing and tracking this data and the Company's methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, the Company reclassifies revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within each end market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
2019
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
|
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
Industrial
|
$
|
4,011,485
|
|
|
55
|
%
|
|
|
|
$
|
2,998,259
|
|
|
54
|
%
|
|
$
|
3,014,890
|
|
|
50
|
%
|
Automotive
|
1,248,635
|
|
|
17
|
%
|
|
|
|
778,297
|
|
|
14
|
%
|
|
929,671
|
|
|
16
|
%
|
Communications
|
1,198,461
|
|
|
16
|
%
|
|
|
|
1,191,169
|
|
|
21
|
%
|
|
1,294,233
|
|
|
22
|
%
|
Consumer
|
859,705
|
|
|
12
|
%
|
|
|
|
635,331
|
|
|
11
|
%
|
|
752,271
|
|
|
13
|
%
|
Total revenue
|
$
|
7,318,286
|
|
|
100
|
%
|
|
|
|
$
|
5,603,056
|
|
|
100
|
%
|
|
$
|
5,991,065
|
|
|
100
|
%
|
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
Revenue by Sales Channel
The following tables summarize revenue by sales channel. The Company sells its products globally through a direct sales force, third party distributors, independent sales representatives and via its website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers (OEMs). Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
2019
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
|
Revenue
|
|
% of
Total
Revenue (1)
|
Distributors
|
$
|
4,589,944
|
|
|
63
|
%
|
|
|
$
|
3,216,302
|
|
|
57
|
%
|
|
$
|
3,409,161
|
|
|
57
|
%
|
Direct customers
|
2,600,353
|
|
|
36
|
%
|
|
|
2,300,493
|
|
|
41
|
%
|
|
2,506,065
|
|
|
42
|
%
|
Other
|
127,989
|
|
|
2
|
%
|
|
|
86,261
|
|
|
2
|
%
|
|
75,839
|
|
|
1
|
%
|
Total revenue
|
$
|
7,318,286
|
|
|
100
|
%
|
|
|
$
|
5,603,056
|
|
|
100
|
%
|
|
$
|
5,991,065
|
|
|
100
|
%
|
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Geographic Information
Geographic revenue information for fiscal 2021, fiscal 2020 and fiscal 2019 reflects the geographic location of the distributors or OEMs who purchased the Company's products. This may differ from the geographic location of the end customers. In all periods presented, the predominant countries comprising “Rest of North and South America” are Canada and Mexico; the predominant countries comprising “Europe” are Germany, Sweden, and the Netherlands; and the predominant countries comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Revenue
|
|
|
|
|
|
United States
|
$
|
2,389,439
|
|
|
$
|
1,887,443
|
|
|
$
|
2,020,886
|
|
Rest of North and South America
|
42,830
|
|
|
41,250
|
|
|
55,059
|
|
Europe
|
1,592,989
|
|
|
1,245,695
|
|
|
1,374,673
|
|
Japan
|
787,966
|
|
|
521,720
|
|
|
657,632
|
|
China
|
1,614,396
|
|
|
1,348,011
|
|
|
1,316,275
|
|
Rest of Asia
|
890,666
|
|
|
558,937
|
|
|
566,540
|
|
Subtotal all foreign countries
|
4,928,847
|
|
|
3,715,613
|
|
|
3,970,179
|
|
Total revenue
|
$
|
7,318,286
|
|
|
$
|
5,603,056
|
|
|
$
|
5,991,065
|
|
Property, plant and equipment
|
|
|
|
|
|
United States
|
$
|
956,624
|
|
|
$
|
579,755
|
|
|
$
|
592,591
|
|
Ireland
|
206,353
|
|
|
169,968
|
|
|
184,791
|
|
Philippines
|
524,128
|
|
|
256,470
|
|
|
247,823
|
|
Thailand
|
126,040
|
|
|
—
|
|
|
—
|
|
Singapore (1)
|
—
|
|
|
18,518
|
|
|
88,385
|
|
Malaysia
|
84,971
|
|
|
53,616
|
|
|
56,292
|
|
All other countries
|
80,935
|
|
|
42,234
|
|
|
50,107
|
|
Subtotal all foreign countries
|
1,022,427
|
|
|
540,806
|
|
|
627,398
|
|
Total property, plant and equipment
|
$
|
1,979,051
|
|
|
$
|
1,120,561
|
|
|
$
|
1,219,989
|
|
_______________________________________
(1)As further discussed in Note 5, Special Charges, of the Notes to Consolidated Financial Statements, the Company sold this facility in fiscal 2021.
5. Special Charges, net
The Company monitors global macroeconomic conditions on an ongoing basis and continues to assess opportunities for improved operational effectiveness and efficiency, as well as a better alignment of expenses with revenues. As a result of these assessments, the Company has undertaken various actions resulting in special charges over the past several years.
The following table summarizes activity included in special charges, net in the Company's Consolidated Statements of Income:
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Manufacturing Facilities
|
|
Repositioning Action
|
|
Other
|
|
Special Charges, Net
|
Fiscal 2019
|
|
|
|
|
|
|
|
Employee severance and benefit costs
|
$
|
7,556
|
|
|
$
|
71,397
|
|
|
$
|
—
|
|
|
$
|
78,953
|
|
Employee equity acceleration charge
|
—
|
|
|
2,538
|
|
|
—
|
|
|
2,538
|
|
Impairment charges
|
—
|
|
|
14,168
|
|
|
—
|
|
|
14,168
|
|
Total special charges, net
|
$
|
7,556
|
|
|
$
|
88,103
|
|
|
$
|
—
|
|
|
$
|
95,659
|
|
|
|
|
|
|
|
|
|
Fiscal 2020
|
|
|
|
|
|
|
|
Employee severance and benefit costs
|
$
|
—
|
|
|
$
|
47,326
|
|
|
$
|
—
|
|
|
$
|
47,326
|
|
Employee equity acceleration charge
|
—
|
|
|
2,093
|
|
|
—
|
|
|
2,093
|
|
|
|
|
|
|
|
|
|
Facility closure costs
|
2,918
|
|
|
—
|
|
|
—
|
|
|
2,918
|
|
Total special charges, net
|
$
|
2,918
|
|
|
$
|
49,419
|
|
|
$
|
—
|
|
|
$
|
52,337
|
|
|
|
|
|
|
|
|
|
Fiscal 2021
|
|
|
|
|
|
|
|
Employee severance and benefit costs
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
28,731
|
|
|
$
|
28,931
|
|
Employee equity acceleration charge
|
—
|
|
|
—
|
|
|
54,664
|
|
|
54,664
|
|
|
|
|
|
|
|
|
|
Facility closure costs
|
11,880
|
|
|
—
|
|
|
—
|
|
|
11,880
|
|
Fair value write-down of assets held for sale
|
2,538
|
|
|
—
|
|
|
—
|
|
|
2,538
|
|
(Gain) on sale of facility
|
(13,557)
|
|
|
—
|
|
|
—
|
|
|
(13,557)
|
|
Total special charges, net
|
$
|
1,061
|
|
|
$
|
—
|
|
|
$
|
83,395
|
|
|
$
|
84,456
|
|
Liabilities related to special charges, net are presented in Accrued Liabilities in the Consolidated Balance Sheets. The activity is detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Special Charges
|
|
Closure of Manufacturing Facilities
|
|
|
|
|
|
Repositioning Action
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 3, 2018
|
|
$
|
42,974
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Employee severance and benefit costs
|
|
7,556
|
|
|
|
|
|
|
71,397
|
|
|
—
|
|
|
Severance and benefit payments
|
|
—
|
|
|
|
|
|
|
(12,487)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency on accrual
|
|
(129)
|
|
|
|
|
|
|
(15)
|
|
|
—
|
|
|
Balance at November 2, 2019
|
|
$
|
50,401
|
|
|
|
|
|
|
$
|
58,895
|
|
|
$
|
—
|
|
|
Employee severance and benefit costs
|
|
—
|
|
|
|
|
|
|
47,326
|
|
|
—
|
|
|
Facility closure costs
|
|
2,918
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
Severance and benefit payments
|
|
(5,098)
|
|
|
|
|
|
|
(85,301)
|
|
|
—
|
|
|
Facility closure cost payments
|
|
(2,969)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency on accrual
|
|
(76)
|
|
|
|
|
|
|
(146)
|
|
|
—
|
|
|
Balance at October 31, 2020
|
|
$
|
45,176
|
|
|
|
|
|
|
$
|
20,774
|
|
|
$
|
—
|
|
|
Employee severance and benefit costs
|
|
200
|
|
|
|
|
|
|
—
|
|
|
28,731
|
|
|
Facility closure costs
|
|
11,880
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
Severance and benefit payments
|
|
(19,602)
|
|
|
|
|
|
|
(13,551)
|
|
|
(15,053)
|
|
|
Facility closure cost payments
|
|
(11,880)
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
Effect of foreign currency on accrual
|
|
—
|
|
|
|
|
|
|
164
|
|
|
—
|
|
|
Balance at October 30, 2021
|
|
$
|
25,774
|
|
|
|
|
|
|
$
|
7,387
|
|
|
$
|
13,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Manufacturing Facilities
The Company recorded special charges of $55.9 million on a cumulative basis through October 30, 2021 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations and one-time termination benefits for the impacted employees and other exit costs. These one-time termination benefits are being recognized over the future service period required for employees to earn these benefits.
During fiscal 2021, the Company ceased production at its Hillview wafer fabrication facility located in Milpitas, California and determined that this facility met the held for sale criteria specified in ASC 360. See Note 2e, Property, Plant and Equipment for amounts reclassified.
During fiscal 2021, the Company completed the sale of its facility and certain equipment in Singapore, which were previously classified as held for sale, for approximately $35.7 million, which resulted in a gain of $13.6 million. Concurrent with the sale, the Company entered into a short-term lease agreement to leaseback a portion of the facility while it completes its transition of related operations to its facilities in Penang, Malaysia and the Philippines, as well as to its outsourced assembly and test partners, which is expected to be competed in the fiscal 2022.
Repositioning Actions
The Company recorded special charges of $137.5 million on a cumulative basis through October 30, 2021 as a result of organizational initiatives to better align its global workforce with its long-term strategic plan. The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations, and the write-off of acquired intellectual property due to the Company's decision to discontinue certain product development strategies.
Other
The other special charges of $83.4 million recognized during fiscal 2021 included severance and benefit costs as well as charges recorded from acceleration of equity awards in connection with the termination of a limited number of employees as part of the integration of the Acquisition.
6. Acquisitions
Maxim Integrated Products, Inc.
On the Acquisition Date, the Company completed its acquisition of all of the voting interests of Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies. Under the terms of the agreement pursuant to which the Company acquired Maxim (Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company's common stock at the closing. The Company believes the combination creates an expanded suite of top-performing mixed-signal and power management technology offerings and complements the Company's legacy offerings. The results of operations of Maxim from the Acquisition Date are included in the Company’s Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and Consolidated Statement of Shareholders’ Equity for fiscal 2021. The amount of revenue attributable to Maxim included in the Company's Consolidated Statement of Income for fiscal 2021 was $558.8 million. The amount of Maxim's earnings included in the Consolidated Statement of Income for fiscal 2021 is impracticable to calculate.
The Acquisition Date fair value of the consideration transferred in the Acquisition consisted of the following:
|
|
|
|
|
|
Cash consideration (a)
|
$
|
47
|
|
Issuance of common stock (b)
|
27,754,161
|
|
Fair value of partially vested restricted stock and restricted stock unit replacement awards (c)
|
194,890
|
|
Total purchase consideration
|
$
|
27,949,098
|
|
____________________
(a)This reflects the cash paid for fractional shares of the Company’s common stock in respect of shares of Maxim common stock outstanding.
(b)The fair value is based on the issuance of approximately 169.2 million shares of the Company's common stock with a per share value of $164.00 on the Acquisition Date.
(c)In connection with the Acquisition, the Company issued equity awards, consisting of restricted stock and restricted stock units, to certain Maxim employees in replacement of Maxim equity awards that were cancelled at closing. The replacement awards consist of restricted stock and restricted stock unit awards for approximately 3.7 million shares of the Company's common stock with a weighted average grant date fair value of $161.63. This amount represents the portion of the fair value of the replacement equity awards associated with services rendered through the Acquisition Date and has been included as a component of the total purchase consideration.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The preliminary fair values of assets acquired and liabilities assumed as of the Acquisition Date are set forth in the table below. The excess of the purchase consideration over the aggregate Acquisition Date value of identifiable net assets acquired was recorded as goodwill. Substantially all of the goodwill is not expected to be deductible for tax purposes. These preliminary Acquisition Date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the Acquisition accounting is not complete and additional information that existed at the Acquisition Date may become known to the Company during the remainder of the measurement period. As of the filing date of this Annual Report on Form 10-K, the Company is still in the process of valuing Maxim's assets, including inventory, fixed assets, intangible assets, and liabilities, including related income tax accounting.
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,450,597
|
|
Accounts receivable
|
|
609,245
|
|
Inventories
|
|
858,300
|
|
Prepaid expenses and other current assets
|
|
59,310
|
|
Property, plant and equipment
|
|
759,544
|
|
Intangible assets (Note 2f)
|
|
12,429,100
|
|
Goodwill (Note 2f)
|
|
14,645,076
|
|
Other long-term assets
|
|
80,373
|
|
Total assets
|
|
$
|
31,891,545
|
|
Accounts payable
|
|
112,828
|
|
Income taxes payable
|
|
137,590
|
|
Accrued liabilities
|
|
590,855
|
|
Long-term debt
|
|
1,072,150
|
|
Deferred income taxes
|
|
1,665,356
|
|
Other non-current liabilities
|
|
363,668
|
|
Total liabilities
|
|
$
|
3,942,447
|
|
Total purchase consideration
|
|
$
|
27,949,098
|
|
The acquired intangible assets consisted of the following, which are being amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
Weighted Average Useful Life
(in Years)
|
Customer relationships
|
$
|
5,642,100
|
|
|
14
|
Developed technology
|
6,425,800
|
|
|
8
|
Backlog
|
361,200
|
|
|
2
|
Total amortizable intangible assets
|
$
|
12,429,100
|
|
|
10
|
The fair value of the intangible assets was determined through discounted cash flow models. The significant assumptions used to estimate the value of the intangible assets included annual revenue growth rates, developed technology obsolescence rates, customer attrition rates and discount rates.
The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and Maxim’s assembled workforce. Future technologies do not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business.
There were no significant contingencies assumed as part of the Acquisition.
The Company recognized $132.9 million of transaction-related costs, including legal, accounting and other related fees that were expensed in fiscal 2021 and fiscal 2020. These costs are included in the Consolidated Statements of Income in
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
operating expenses within Selling, marketing, general and administrative expenses (SMG&A). The Company may incur additional transaction-related costs in the future related to the Acquisition that will be expensed as incurred.
The following unaudited pro forma consolidated financial information for the twelve months ended October 30, 2021 combines the results of the Company for the year ended October 30, 2021 and the unaudited results of Maxim for the corresponding period through the Acquisition Date. The following unaudited pro forma consolidated financial information for the twelve months ended October 31, 2020 combines the results of the Company for fiscal 2020 and the unaudited results of Maxim for the corresponding period. The unaudited pro forma consolidated financial information assumes that the Acquisition, which closed on August 26, 2021, was completed on November 3, 2019 (the first day of fiscal 2020). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, fair value adjustments for acquired inventory, property, plant and equipment and long-term debt and compensation expense for ongoing share-based compensation arrangements that were replaced in conjunction with the Acquisition, together with the consequential tax effects. For fiscal 2020, non-recurring pro forma adjustments directly attributable to the Acquisition included pre-tax amounts of $602.5 million related to the acquisition accounting effect of inventories acquired and $54.2 million of accelerated stock-based compensation expense, together with the consequential tax effects. Additionally, $309.0 million of pre-tax transaction costs, together with the consequential tax effects, that were incurred related to the Acquisition are reflected in the pro forma results for fiscal 2020. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on November 3, 2019. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Twelve Months Ended
(unaudited)
|
|
|
October 30, 2021
|
|
October 31, 2020
|
|
|
|
|
|
Revenue
|
|
$
|
9,580,488
|
|
|
$
|
7,896,855
|
|
Net income (loss)
|
|
$
|
1,578,274
|
|
|
$
|
(144,198)
|
|
Basic net income (loss) per common share
|
|
$
|
2.94
|
|
|
$
|
(0.27)
|
|
Diluted net income (loss) per common share
|
|
$
|
2.91
|
|
|
$
|
(0.27)
|
|
Other Acquisitions
The Company has not provided pro forma results of operations for any other acquisitions completed in fiscal 2021, fiscal 2020 or fiscal 2019 herein as they were not material to the Company on either an individual or an aggregate basis. The Company included the results of operations of each acquisition in its Consolidated Statements of Income from the closing date of each acquisition.
7. Other Investments
Other investments consist of interests in venture capital funds and other long-term investments. Investments are accounted for using the equity method of accounting or cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. For equity method investments, realized gains and losses are reflected in nonoperating (income) expense based upon the Company's ownership share of the investee's financial results.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. Accrued Liabilities
Accrued liabilities at October 30, 2021 and October 31, 2020 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Distributor price adjustments and other revenue reserves
|
$
|
664,198
|
|
|
$
|
257,343
|
|
Accrued compensation and benefits
|
381,678
|
|
|
203,675
|
|
Interest rate swap
|
—
|
|
|
214,586
|
|
Accrued professional fees
|
152,689
|
|
|
2,077
|
|
Accrued interest
|
29,361
|
|
|
56,083
|
|
Accrued special charges
|
46,839
|
|
|
65,950
|
|
Lease liabilities
|
52,576
|
|
|
39,923
|
|
Other
|
150,189
|
|
|
115,996
|
|
Total accrued liabilities
|
$
|
1,477,530
|
|
|
$
|
955,633
|
|
9. Leases
The Company enters into operating leases which primarily relate to certain facilities. The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement. Lease assets represent the Company's right to use underlying assets for the lease term, and lease liabilities represent the obligation to make lease payments over the lease term. At lease commencement, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property. The Company has agreements with lease and non-lease components, which are accounted for as a single lease component. Non-lease components may include real estate taxes, insurance, maintenance, parking and other operating costs. If these costs are variable costs they are not included in the measurement of the right-of-use assets and lease liabilities, but are expensed when the event determining the amount of variable consideration to be paid occurs. The Company’s leases have remaining lease terms of less than one year to approximately twenty-four years, some of which may include options to extend the initial term of the lease. These options are included in determining the initial lease term at lease commencement only if the Company is reasonably certain to exercise the option. Lease costs are recognized on a straight-line basis as lease expense over the lease term. For leases with terms of twelve months or less the Company recognizes the related lease payments as expense either on a straight-line basis over the lease term or as incurred depending on whether the lease payments are fixed or variable.
The following table presents supplemental balance sheet information related to the Company's operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
October 31, 2020
|
Assets
|
|
|
|
Operating lease right-of-use assets in Other assets
|
$
|
279,542
|
|
|
$
|
256,625
|
|
Liabilities
|
|
|
|
Operating lease liabilities in Accrued liabilities
|
$
|
52,576
|
|
|
$
|
39,923
|
|
Operating lease liabilities in Other non-current liabilities
|
$
|
295,782
|
|
|
$
|
288,492
|
|
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Details of the Company's operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
October 31, 2020
|
Lease expense
|
|
|
$
|
50,799
|
|
|
$
|
45,892
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
|
Operating cash flows from operating leases
|
|
|
$
|
53,724
|
|
|
$
|
47,243
|
|
Lease assets obtained in exchange for new lease liabilities
|
|
|
$
|
25,946
|
|
|
$
|
54,392
|
|
Weighted average remaining lease term
|
|
|
7.9 years
|
|
9.2 years
|
Weighted average discount rate
|
|
|
2.9%
|
|
3.1%
|
The following table presents the maturities of the Company's operating lease liabilities as of October 30, 2021:
|
|
|
|
|
|
Fiscal year
|
Operating Leases
|
2022
|
$
|
61,855
|
|
2023
|
53,964
|
|
2024
|
49,454
|
|
2025
|
44,055
|
|
2026
|
40,004
|
|
Thereafter
|
143,670
|
|
Total future minimum operating lease payments
|
393,002
|
|
Less: imputed interest
|
(44,644)
|
|
Present value of operating lease liabilities
|
$
|
348,358
|
|
10. Commitments and Contingencies
From time to time, in the ordinary course of the Company’s business, various claims, charges and litigation are asserted or commenced against the Company arising from, or related to, among other things, contractual matters, acquisitions, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits. As to such claims and litigation, the Company can give no assurance that it will prevail. The Company does not believe that any current legal matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
In connection with the Acquisition, the Company acquired a supplier commitment of approximately $291.2 million for the purchase of materials and supplies in advance or with minimum purchase quantities through 2031.
11. Retirement Plans
The Company and its subsidiaries have various savings and retirement plans covering substantially all employees.
Defined Contribution Plans
The Company maintains a defined contribution plan for the benefit of its eligible U.S. employees. This plan provides for Company contributions of up to 5% of each participant’s total eligible compensation. In addition, the Company contributes an amount equal to each participant’s pre-tax contribution, if any, up to a maximum of 3% of each participant’s total eligible compensation. For former Maxim employees, the Company contributes an amount equal to each participant's pre-tax contribution, if any, up to a maximum of 3% of each participant's eligible compensation and an additional 50% match for the next 2% of each participant's eligible compensation. The total expense related to the defined contribution plans for all eligible U.S. employees was $52.1 million in fiscal 2021, $48.7 million in fiscal 2020 and $47.7 million in fiscal 2019.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Non-Qualified Deferred Compensation Plan
The Deferred Compensation Plan (DCP) allows certain members of management and other highly-compensated employees and non-employee directors to defer receipt of all or any portion of their compensation. The DCP was established to provide participants with the opportunity to defer receiving all or a portion of their compensation, which includes salary, bonus, commissions and director fees. Under the DCP, the Company provides all participants (other than non-employee directors) with Company contributions equal to 8% of eligible deferred contributions. The DCP is a non-qualified plan that is maintained in a rabbi trust. The fair value of the investments held in the rabbi trust are included within other investments, with the current portion of the investment included in prepaid expenses and other current assets in the Consolidated Balance Sheets. See Note 2j, Fair Value, of the Notes to Consolidated Financial Statements for further information on these investments. The deferred compensation obligation represents DCP participant accumulated deferrals and earnings thereon since the inception of the DCP net of withdrawals. The deferred compensation obligation is included within other non-current liabilities, with the current portion of the obligation in accrued liabilities in the Consolidated Balance Sheets. The Company’s liability under the DCP is an unsecured general obligation of the Company.
Defined Benefit Pension and Post Retirement Benefit Plans
The Company also has various defined benefit pension and other retirement plans for certain non-U.S. employees that are consistent with local statutory requirements and practices. The total expense related to the various defined benefit pension, contribution and other retirement plans for certain non-U.S. employees was $45.9 million in fiscal 2021, $37.6 million in fiscal 2020 and $35.8 million in fiscal 2019.
The Company’s funding policy for its foreign defined benefit pension plans is consistent with the local requirements of each country. The plans’ assets consist primarily of U.S. and non-U.S. equity securities, bonds, property and cash. The Company has elected to measure defined benefit plan assets and obligations as of October 31, which is the month-end that is closest to its fiscal year-ends, which were October 30, 2021 for fiscal 2021 and October 31, 2020 for fiscal 2020.
As a result of the Acquisition, the Company acquired a postretirement plan that provides postretirement medical expenses to certain former employees of a Maxim acquired company and certain former Maxim executives in the U.S.
Components of Net Periodic Benefit Cost
Net annual periodic benefit cost of the Company’s pension and postretirement benefit plans for fiscal 2021, fiscal 2020 and fiscal 2019 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Service cost
|
$
|
9,207
|
|
|
$
|
8,587
|
|
|
$
|
5,578
|
|
Interest cost
|
4,071
|
|
|
3,917
|
|
|
4,079
|
|
Expected return on plan assets
|
(3,759)
|
|
|
(5,296)
|
|
|
(5,279)
|
|
Amortization of prior service cost
|
—
|
|
|
—
|
|
|
3
|
|
|
|
|
|
|
|
Recognized actuarial loss
|
2,973
|
|
|
2,583
|
|
|
1,000
|
|
Subtotal
|
$
|
12,492
|
|
|
$
|
9,791
|
|
|
$
|
5,381
|
|
Curtailment impact
|
—
|
|
|
(203)
|
|
|
—
|
|
Settlement impact
|
$
|
(6)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
$
|
12,486
|
|
|
$
|
9,588
|
|
|
$
|
5,381
|
|
The service cost component of net periodic benefit cost above is recorded in Cost of sales, Research and development, Selling, marketing, general and administrative expenses within the Consolidated Statements of Income, while the remaining components are recorded to Other, net.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Benefit Obligations and Plan Assets
Obligation and asset data of the Company’s pension and postretirement benefit plans at October 30, 2021 and October 31, 2020 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Change in Benefit Obligation
|
|
|
|
Benefit obligation at beginning of year
|
$
|
186,735
|
|
|
$
|
169,648
|
|
Service cost
|
9,207
|
|
|
8,587
|
|
Interest cost
|
4,071
|
|
|
3,917
|
|
|
|
|
|
|
|
|
|
Curtailment
|
—
|
|
|
(705)
|
|
Settlement
|
(885)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Acquisition of Maxim benefit obligation
|
49,807
|
|
|
—
|
|
Actuarial (gain) loss
|
(4,005)
|
|
|
2,916
|
|
Benefits paid
|
(3,983)
|
|
|
(2,661)
|
|
Exchange rate adjustment
|
1,646
|
|
|
5,033
|
|
Benefit obligation at end of year
|
$
|
242,593
|
|
|
$
|
186,735
|
|
Change in Plan Assets
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
107,505
|
|
|
$
|
99,939
|
|
Actual return on plan assets
|
10,637
|
|
|
1,366
|
|
Employer contributions
|
11,035
|
|
|
6,943
|
|
Settlements
|
(885)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
(3,983)
|
|
|
(2,661)
|
|
Acquisitions
|
1,728
|
|
|
—
|
|
Exchange rate adjustment
|
2,246
|
|
|
1,918
|
|
Fair value of plan assets at end of year
|
$
|
128,283
|
|
|
$
|
107,505
|
|
Reconciliation of Funded Status
|
|
|
|
Funded status
|
$
|
(114,310)
|
|
|
$
|
(79,230)
|
|
Amounts Recognized in the Balance Sheet
|
|
|
|
|
|
|
|
Non-current assets
|
$
|
1,709
|
|
|
$
|
—
|
|
Current liabilities
|
$
|
(2,730)
|
|
|
$
|
(973)
|
|
Non-current liabilities
|
(113,289)
|
|
|
(78,257)
|
|
Net amount recognized
|
$
|
(114,310)
|
|
|
$
|
(79,230)
|
|
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Reconciliation of Amounts Recognized in the Statement of Financial Position
|
|
|
|
|
|
|
|
Prior service credit
|
(38)
|
|
|
(44)
|
|
Net loss
|
(43,662)
|
|
|
(55,942)
|
|
Accumulated other comprehensive loss
|
(43,700)
|
|
|
(55,986)
|
|
Accumulated contributions less than net periodic benefit cost
|
(70,610)
|
|
|
(23,244)
|
|
Net amount recognized
|
$
|
(114,310)
|
|
|
$
|
(79,230)
|
|
Changes Recognized in Other Comprehensive Income (Loss)
|
|
|
|
Changes in plan assets and benefit obligations recognized in other comprehensive income (loss)
|
|
|
|
|
|
|
|
Net gain/loss arising during the year
|
$
|
(10,884)
|
|
|
$
|
6,342
|
|
Effect of exchange rates on amounts included in AOCI
|
1,565
|
|
|
1,305
|
|
Amounts recognized as a component of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
Amortization or settlement recognition of net loss
|
(2,967)
|
|
|
(2,583)
|
|
Total recognized in other comprehensive gain/loss
|
$
|
(12,286)
|
|
|
$
|
5,064
|
|
Total recognized in net periodic cost and other comprehensive loss
|
$
|
200
|
|
|
$
|
14,652
|
|
Estimated amounts that will be amortized from AOCI over the next fiscal year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,413)
|
|
|
$
|
(2,845)
|
|
The accumulated benefit obligation for the Company’s pension and postretirement benefit plans was $178.2 million and $155.5 million at October 30, 2021 and October 31, 2020, respectively.
Information relating to the Company’s pension and postretirement benefit plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets at October 30, 2021 and October 31, 2020 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Plans with projected benefit obligations in excess of plan assets:
|
|
|
|
Projected benefit obligation
|
$
|
161,803
|
|
|
$
|
186,735
|
|
Fair value of plan assets
|
$
|
45,784
|
|
|
$
|
107,505
|
|
Plans with accumulated benefit obligations in excess of plan assets:
|
|
|
|
Projected benefit obligation
|
$
|
94,038
|
|
|
$
|
141,982
|
|
Accumulated benefit obligation
|
$
|
77,337
|
|
|
$
|
132,517
|
|
Fair value of plan assets
|
$
|
3,544
|
|
|
$
|
69,250
|
|
Assumptions
The range of assumptions used for the Company’s pension and postretirement benefit plans reflects the different economic environments within the various countries as well as the differences in the attributes of the participants.
The projected benefit obligation was determined using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Discount rate
|
2.77
|
%
|
|
2.15
|
%
|
Rate of increase in compensation levels
|
3.70
|
%
|
|
3.19
|
%
|
Net annual periodic benefit cost was determined using the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Discount rate
|
2.15
|
%
|
|
2.45
|
%
|
Expected long-term return on plan assets
|
3.32
|
%
|
|
5.22
|
%
|
Rate of increase in compensation levels
|
3.19
|
%
|
|
3.38
|
%
|
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The expected long-term rate of return on assets is a weighted-average of the long-term rates of return selected for the various countries where the Company has funded pension plans. The expected long-term rate of return on assets assumption is selected based on the facts and circumstances that exist as of the measurement date and the specific portfolio mix of plan assets. Management, in conjunction with its actuaries, reviewed anticipated future long-term performance of individual asset categories and considered the asset allocation strategy adopted by the Company and/or the trustees of the plans. While the review considered recent fund performance and historical returns, the assumption is primarily a long-term prospective rate.
The Company’s investment strategy is based on an expectation that equity securities will outperform debt securities over the long term. Investments within each asset class are diversified to reduce the impact of losses in single investments. The use of derivative instruments is permitted where appropriate and necessary to achieve overall investment policy objectives and asset class targets. The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for each significant asset class to obtain a prudent balance between return and risk. The interaction between plan assets and benefit obligations is periodically studied by the Company and its actuaries to assist in the establishment of strategic asset allocation targets.
Fair value of plan assets
The following table presents plan assets measured at fair value on a recurring basis by investment categories as of October 30, 2021 and October 31, 2020 using the same three-level hierarchy described in Note 2j, Fair Value, of the Notes to Consolidated Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2021
|
|
|
|
October 31, 2020
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using:
|
|
|
|
Fair Value Measurement at Reporting Date Using:
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
|
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
Total
|
Unit trust funds(1)
|
$
|
—
|
|
|
$
|
5,874
|
|
|
|
|
|
|
$
|
5,874
|
|
|
$
|
—
|
|
|
$
|
5,510
|
|
|
|
|
$
|
5,510
|
|
Equities(1)
|
8,010
|
|
|
24,613
|
|
|
|
|
|
|
32,623
|
|
|
7,134
|
|
|
12,733
|
|
|
|
|
19,867
|
|
Fixed income securities(2)
|
—
|
|
|
29,957
|
|
|
|
|
|
|
29,957
|
|
|
—
|
|
|
24,636
|
|
|
|
|
24,636
|
|
Property (3)
|
—
|
|
|
5,431
|
|
|
|
|
|
|
5,431
|
|
|
—
|
|
|
8,034
|
|
|
|
|
8,034
|
|
Investment Funds (4)
|
—
|
|
|
52,380
|
|
|
|
|
|
|
52,380
|
|
|
—
|
|
|
21,960
|
|
|
|
|
21,960
|
|
Cash and cash equivalents
|
2,018
|
|
|
—
|
|
|
|
|
|
|
2,018
|
|
|
27,498
|
|
|
—
|
|
|
|
|
27,498
|
|
Total assets measured at fair value
|
$
|
10,028
|
|
|
$
|
118,255
|
|
|
|
|
|
|
$
|
128,283
|
|
|
$
|
34,632
|
|
|
$
|
72,873
|
|
|
|
|
$
|
107,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________________________________
(1)The majority of the assets in these categories are invested in a mix of equities, including those from North America, Europe and Asia. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund. Due to the nature of the underlying assets of these funds, changes in market conditions and the economic environment may significantly impact the net asset value of these investments and, consequently, the fair value of the investments. These investments are redeemable at net asset value to the extent provided in the documentation governing the investments. However, these redemption rights may be restricted in accordance with governing documents. Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded.
(2)Consists of funds primarily concentrated in non-U.S. debt instruments. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund.
(3)Consists of funds that primarily invest in global real estate and infrastructure funds. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund.
(4)Consists of liability driven investment funds that may hold a range of low-risk hedging instruments including but not limited to government bonds, interest rate and inflation swaps, physical inflation-linked and nominal gilts, synthetic gilts, cash and money market instruments. The investment funds are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Estimated future cash flows
Expected fiscal 2022 Company contributions and estimated future benefit payments are as follows:
|
|
|
|
|
|
Expected Company Contributions
|
|
2022
|
$
|
12,108
|
|
Expected Benefit Payments
|
|
|
|
2023
|
$
|
5,655
|
|
2024
|
$
|
5,783
|
|
2025
|
$
|
5,897
|
|
2026
|
$
|
6,369
|
|
2027
|
$
|
7,190
|
|
2028 through 2032
|
$
|
48,160
|
|
12. Income Taxes
The Company's effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where the Company's income is earned. The reconciliation of income tax computed at the U.S. federal statutory rates to income tax expense for fiscal 2021, fiscal 2020 and fiscal 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
U.S. federal statutory tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
Income tax provision reconciliation:
|
|
|
|
|
|
Tax at statutory rate
|
$
|
279,030
|
|
|
$
|
275,439
|
|
|
$
|
312,003
|
|
Net foreign income subject to lower tax rate
|
(227,470)
|
|
|
(225,937)
|
|
|
(242,893)
|
|
State income taxes, net of federal benefit
|
(28,052)
|
|
|
(23,537)
|
|
|
(31,265)
|
|
Valuation allowance
|
13,263
|
|
|
13,655
|
|
|
34,069
|
|
Federal research and development tax credits
|
(37,902)
|
|
|
(31,055)
|
|
|
(50,769)
|
|
Change in uncertain tax positions
|
(1,061)
|
|
|
(13,304)
|
|
|
7,233
|
|
Amortization of purchased intangibles
|
146,094
|
|
|
101,906
|
|
|
111,547
|
|
Acquisition and integration costs
|
11,367
|
|
|
1,714
|
|
|
—
|
|
Taxes attributable to the Tax Cuts and Jobs Act of 2017
|
—
|
|
|
—
|
|
|
(7,500)
|
|
U.S. effects of international operations
|
(24,624)
|
|
|
11,903
|
|
|
19,782
|
|
Windfalls (under ASU 2016-09)
|
(26,365)
|
|
|
(16,240)
|
|
|
(28,677)
|
|
|
|
|
|
|
|
Intra-entity transfer of intangible assets
|
(188,804)
|
|
|
—
|
|
|
—
|
|
Other, net
|
22,816
|
|
|
(3,688)
|
|
|
(813)
|
|
Total income tax (benefit) provision
|
$
|
(61,708)
|
|
|
$
|
90,856
|
|
|
$
|
122,717
|
|
Income before income taxes for fiscal 2021, fiscal 2020 and fiscal 2019 includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes (1)
|
2021
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Domestic
|
$
|
508,100
|
|
|
$
|
355,442
|
|
|
$
|
484,876
|
|
Foreign
|
820,614
|
|
|
956,175
|
|
|
1,000,852
|
|
Income before income taxes
|
$
|
1,328,714
|
|
|
$
|
1,311,617
|
|
|
$
|
1,485,728
|
|
_______________________________________
(1)Income before income taxes reflects deemed intercompany royalties in all periods presented.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The components of the (benefit from) provision for income taxes for fiscal 2021, fiscal 2020 and fiscal 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Current:
|
|
|
|
|
|
Federal tax
|
$
|
134,652
|
|
|
$
|
64,876
|
|
|
$
|
74,049
|
|
State
|
7,772
|
|
|
4,882
|
|
|
2
|
|
Foreign
|
202,790
|
|
|
135,046
|
|
|
139,919
|
|
Total current
|
$
|
345,214
|
|
|
$
|
204,804
|
|
|
$
|
213,970
|
|
Deferred:
|
|
|
|
|
|
Federal
|
$
|
515,541
|
|
|
$
|
(159,229)
|
|
|
$
|
(158,472)
|
|
State
|
(12,444)
|
|
|
(12,684)
|
|
|
(3,627)
|
|
Foreign
|
(910,019)
|
|
|
57,965
|
|
|
70,846
|
|
Total deferred
|
$
|
(406,922)
|
|
|
$
|
(113,948)
|
|
|
$
|
(91,253)
|
|
(Benefit from) provision for income tax
|
$
|
(61,708)
|
|
|
$
|
90,856
|
|
|
$
|
122,717
|
|
U.S. Tax Legislation subjects a U.S. shareholder to tax on global intangible low-taxed income (GILTI). Under U.S. GAAP, an accounting policy election can be made to either treat taxes due on the GILTI inclusion as a current period expense or to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years. The Company elected the deferral method and recorded the corresponding GILTI deferred tax assets and liabilities on its Consolidated Balance Sheets.
The Company carries other outside basis differences in its subsidiaries, primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested. As of October 30, 2021, the Company has not recognized deferred income tax on $33.6 billion of outside basis differences because of its intent and ability to indefinitely reinvest these basis differences. These basis differences could be reversed through a sale of the subsidiaries or the receipt of dividends from the subsidiaries, as well as various other events, none of which are considered probable at this time. Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable.
The Company adopted ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16) in the first quarter of fiscal 2019 using the modified retrospective method with a cumulative-effect adjustment directly to retained earnings. The adoption of ASU 2016-16 resulted in a net cumulative-effect adjustment that resulted in an increase in retained earnings of $331.0 million, by recording new deferred tax assets from intra-entity transfers involving assets other than inventory, partially offset by a U.S. deferred tax liability related to GILTI. Adoption of the standard resulted in an increase in long-term deferred tax assets of $1.7 billion and an increase in long-term deferred tax liabilities of $1.3 billion.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The significant components of the Company’s deferred tax assets and liabilities for fiscal 2021 and fiscal 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Deferred tax assets:
|
|
|
|
Inventory reserves
|
$
|
—
|
|
|
$
|
17,074
|
|
|
|
|
|
Reserves for compensation and benefits
|
64,274
|
|
|
54,428
|
|
Tax credit carryovers
|
295,345
|
|
|
163,507
|
|
|
|
|
|
Stock-based compensation
|
26,541
|
|
|
12,758
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
62,876
|
|
|
8,546
|
|
Intra-entity transfer of intangible assets
|
2,002,041
|
|
|
1,479,944
|
|
Lease liability
|
60,954
|
|
|
55,250
|
|
Other
|
248,075
|
|
|
159,838
|
|
Total gross deferred tax assets
|
2,760,106
|
|
|
1,951,345
|
|
Valuation allowance
|
(315,434)
|
|
|
(154,130)
|
|
Total deferred tax assets
|
2,444,672
|
|
|
1,797,215
|
|
Deferred tax liabilities:
|
|
|
|
Inventory reserves
|
(18,570)
|
|
|
—
|
|
Depreciation
|
(91,846)
|
|
|
(7,409)
|
|
Deferred GILTI tax liabilities
|
(3,059,919)
|
|
|
(1,183,955)
|
|
Right of use asset
|
(53,686)
|
|
|
(51,055)
|
|
Acquisition-related intangible
|
(892,212)
|
|
|
(971,327)
|
|
|
|
|
|
Total gross deferred tax liabilities
|
(4,116,233)
|
|
|
(2,213,746)
|
|
Net deferred tax liabilities
|
$
|
(1,671,561)
|
|
|
$
|
(416,531)
|
|
The valuation allowances of $315.4 million and $154.1 million as of October 30, 2021 and October 31, 2020, respectively, are valuation allowances primarily for the Company’s foreign net operating loss and international credit carryforwards with additional amounts from the Acquisition for federal, state and international net operating losses and R&D credit carryforwards. The Company believes that it is more-likely-than-not that these credit carryovers will not be realized and as a result has recorded a partial valuation allowance.
The federal and state net operating losses of $137.5 million will begin to expire in fiscal 2022 while foreign net operating loss carryovers of $165.0 million have no expiration date. There are also $276.2 million of state credit carryovers and $14.2 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending November 1, 2025.
As of October 30, 2021 and October 31, 2020, the Company had gross unrealized tax benefits of $132.5 million and $21.3 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded. Liabilities for uncertain tax benefits are classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities may not occur within the next twelve months. As of October 30, 2021 and October 31, 2020, the Company had a liability of approximately $38.0 million and $3.4 million, respectively, for interest and penalties, which is included within the (benefit from) provision for taxes in the Consolidated Statements of Income.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the changes in the total amounts of unrealized tax benefits for fiscal 2019 through fiscal 2021:
|
|
|
|
|
|
|
Unrealized Tax Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, November 3, 2018
|
$
|
13,256
|
|
Additions for tax positions related to current year
|
3,398
|
|
|
|
Additions for tax positions related to prior years
|
18,613
|
|
Reductions due to lapse of applicable statute of limitations
|
(924)
|
|
Balance, November 2, 2019
|
$
|
34,343
|
|
Additions for tax positions related to current year
|
3,270
|
|
Reductions for tax positions related to prior years
|
(16,152)
|
|
Reductions due to lapse of applicable statute of limitations
|
(170)
|
|
Balance, October 31, 2020
|
$
|
21,291
|
|
Additions for tax positions related to current year
|
4,713
|
|
Additions for tax positions related to the Acquisition
|
91,179
|
|
Additions for tax positions related to prior years
|
19,790
|
|
Reductions due to lapse of applicable statute of limitations
|
(4,452)
|
|
Balance, October 30, 2021
|
$
|
132,521
|
|
In fiscal 2019, the Company reflected an unrealized tax benefit related to a refund claim of $11.4 million on a recently filed amended tax return that was previously under review by the Joint Committee on Taxation.
In fiscal 2020, the Company released reserves of $18.6 million, which included accrued interest as a result of the resolution of the amended tax return that was previously under review by the Joint Committee on Taxation, combined with other tax positions resolved by the closing of the Internal Revenue Service audit of Linear’s pre-acquisition federal income tax returns for fiscal 2015 through fiscal 2017.
In fiscal 2021, the Company acquired $125.5 million in reserves as part of the Acquisition consisting of $91.2 million in tax and $34.3 million in accrued interest. The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits, including accrued interest and penalties, could decrease up to $125.9 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $125.9 million primarily relates to matters involving federal taxation of international income and cross-border transactions.
The Company has numerous audits ongoing at any time throughout the world including: an IRS income tax audit for fiscal 2019 and fiscal 2018, a pre-acquisition IRS income tax audit related to Maxim for Maxim's fiscal years ended June 27, 2015 through June 24, 2017, various U.S. state and local tax audits and international audits. The Company’s U.S. federal tax returns prior to fiscal 2018 are no longer subject to examination, except for the Maxim pre-Acquisition fiscal years 2015 to 2017 noted above.
During the fourth quarter of fiscal 2018, the Company’s Irish tax resident subsidiary received an assessment, excluding any penalties and interest, for the fiscal year ended November 2, 2013 (fiscal 2013) of approximately €43.0 million, or approximately $51.0 million (as of October 30, 2021), from the Irish Revenue Commissioners (Irish Revenue). The assessment claimed that the Company’s Irish entity failed to conform to 2010 OECD Transfer Pricing Guidelines. During fiscal 2021, the Company settled the fiscal 2013 audit with Irish Revenue for an amount that was not material to the Company.
During fiscal 2019, Irish Revenue commenced transfer pricing audits of fiscal years ended November 1, 2014 (fiscal 2014) through the fiscal year ended November 3, 2017 (fiscal 2017). The Company settled the audits relating to fiscal 2014 through fiscal 2017 with either no assessment or for additional tax payments that were not material to the Company. The Company's Ireland tax returns prior to fiscal 2017 are no longer subject to examination.
The Company has a partial tax holiday in Malaysia whereby the local statutory rate is significantly reduced, if certain conditions are met. The tax holiday for Malaysia is effective through July 2025. The impact of the Malaysia tax holiday increased net income by approximately $5.3 million, $4.6 million and $14.9 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, resulting in increases in basic and diluted net income per common share by $0.01, $0.01 and $0.04 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. Revolving Credit Facility
On June 23, 2021, the Company entered into a Third Amended and Restated Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. as administrative agent and the other banks identified therein as lenders, which amended and restated its Second Amended and Restated Credit Agreement dated as of June 28, 2019. The Revolving Credit Agreement provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed $2.5 billion (subject to certain terms and conditions). Prior to the Acquisition, the aggregate principal amount which was available under the Revolving Credit Agreement was $1.25 billion. In September 2021, the Company borrowed $400.0 million under this revolving credit facility and utilized the proceeds for the repayment of existing indebtedness and working capital requirements. The Company repaid the $400.0 million plus interest in October 2021. As of October 30, 2021, the Company had no outstanding borrowings under this revolving credit facility but may borrow in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes.
Revolving loans under the Revolving Credit Agreement can be Eurocurrency Rate Loans or Base Rate Loans (each as defined in the Revolving Credit Agreement) at the Company's option. Each Eurocurrency Rate Loan will bear interest at a rate per annum equal to the applicable Eurocurrency Rate plus a margin based on the Company's Debt Ratings (as defined in the Revolving Credit Agreement) from time to time of between 0.690% and 1.175%. Each Base Rate Loan will bear interest at a rate per annum equal to the Base Rate plus a margin based on the Company's debt ratings from time to time of between 0.00% and 0.175%. In addition, the Company has agreed to pay a facility fee based on the Company's Debt Ratings from time to time of between 0.060% and 0.200% multiplied by the actual daily amount of the Commitments (as defined in the Revolving Credit Agreement) in effect. The Revolving Credit Agreement also contains a sustainability-linked pricing component which provides for interest rate and facility fee reductions or increases based on the Company meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage. The Revolving Credit Agreement includes a multicurrency borrowing feature for certain specified foreign currencies. The Company will guarantee the obligations of each subsidiary that is named a Designated Borrower under the Revolving Credit Agreement.
The Revolving Credit Agreement contains customary representations and warranties, and affirmative and negative covenants and events of default applicable to the Company and its subsidiaries. As of October 30, 2021, the Company was in compliance with these covenants.
14. Debt
On June 3, 2013, the Company issued $500.0 million aggregate principal amount of 2.875% senior unsecured notes due June 1, 2023 (the June 2023 Notes) with semi-annual fixed interest payments due on June 1 and December 1 of each year, commencing December 1, 2013. Prior to issuing the June 2023 Notes, on April 24, 2013, the Company entered into a treasury rate lock agreement with Bank of America. This agreement allowed the Company to lock a 10-year US Treasury rate of 1.7845% through June 14, 2013 for its anticipated issuance of the June 2023 Notes. The net proceeds of the offering were $493.9 million, after discounts and issuance costs. Debt discounts and issuance costs were amortized through interest expense over the term of the June 2023 Notes. On October 5, 2021 and October 7, 2021, $133.7 million, or 26.73%, of the $500.0 million aggregate principal amount of the June 2023 Notes at a price of $1,041.39 for each $1,000 principal amount of June 2023 Notes were tendered for redemption. On October 20, 2021, the remaining June 2023 Notes were redeemed for cash at a redemption price equal to $1,038.82 for each $1,000 principal amount of June 2023 Notes. In connection with the tender and subsequent redemption of the June 2023 Notes, the Company recognized a loss on extinguishment of $19.8 million.
On December 14, 2015, the Company issued $850.0 million aggregate principal amount of 3.9% senior unsecured notes due December 15, 2025 (the 2025 Notes) and $400.0 million aggregate principal amount of 5.3% senior unsecured notes due December 15, 2045 (the 2045 Notes) with semi-annual fixed interest payments due on June 15 and December 15 of each year, commencing June 15, 2016. The net proceeds of the offering were $1.2 billion, after discounts and issuance costs. Debt discounts and issuance costs will be amortized through interest expense over the term of the 2025 Notes and 2045 Notes. The indenture governing the 2025 Notes and 2045 Notes contains covenants that may limit the Company's ability to: incur, create, assume or guarantee any debt for borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of its assets to, any other party. As of October 30, 2021, the Company was compliant with these covenants. The 2025 Notes and 2045 Notes are subordinated to any future secured debt and to the other liabilities of the Company's subsidiaries. On October 5, 2021 and October 7, 2021, $325.5 million, or 38.3%, of the $850.0 million aggregate principal amount of the 2025 Notes at a price of $1,112.13 for each $1,000 principal amount of 2025 Notes, and $67.4 million, or 16.85%, of the $400.0 million aggregate principal amount of the 2045 Notes at a price of $1,400.67 for each $1,000 principal amount of 2045 Notes, were tendered for redemption. On October 20, 2021, the remaining 2025 Notes were redeemed for cash at a redemption price equal
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
to $1,103.81 for each $1,000 principal of 2025 Notes. In connection with the tender of the 2025 Notes and 2045 Notes and the subsequent redemption of the 2025 Notes, the Company recognized a loss on extinguishment of $136.6 million.
On December 5, 2016, the Company issued $400.0 million aggregate principal amount of 2.5% senior unsecured notes due December 5, 2021 (the 2021 Notes), $550.0 million aggregate principal amount of 3.125% senior unsecured notes due December 5, 2023 (the December 2023 Notes), $900.0 million aggregate principal amount of 3.5% senior unsecured notes due December 5, 2026 (the 2026 Notes) and $250.0 million aggregate principal amount of 4.5% senior unsecured notes due December 5, 2036 (the 2036 Notes) with semi-annual fixed interest payments due on June 5 and December 5 of each year, commencing June 5, 2017. The net proceeds of the offering were $2.1 billion, after discounts and issuance costs. Debt discounts and issuance costs will be amortized through interest expense over the term of the respective notes. The 2021 Notes, December 2023 Notes, 2026 Notes and 2036 Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture, and the indenture and supplemental indenture contain certain covenants, events of default and other customary provisions. As of October 30, 2021, the Company was compliant with these covenants. The 2021 Notes, December 2023 Notes, 2026 Notes and 2036 Notes rank without preference or priority among themselves and equally in right of payment with all other existing and future senior unsecured debt and senior in right of payment to all of the Company's future subordinated debt. On October 5, 2021, (i) $71.2 million, or 17.80%, of the $400.0 million aggregate principal amount of the 2021 Notes at a price of $1,001.77 for each $1,000 principal amount of 2021 Notes, (ii) $282.7 million, or 51.41%, of the $550.0 million aggregate principal amount of the December 2023 Notes at a price of $1,053.78 for each $1,000 principal amount of December 2023 Notes and (iii) $105.7 million, or 42.29%, of the $250.0 million aggregate principal amount of the 2036 Notes at a price of $1,239.96 for each $1,000 principal amount of 2036 Notes were tendered for redemption. On October 20, 2021, the remaining 2021 Notes and December 2023 Notes were redeemed for cash at a redemption price equal to $1,000.98 for each $1,000 principal amount of 2021 Notes and $1,050.17 for each $1,000 principal amount of December 2023 Notes. In connection with the tender of the 2021 Notes, December 2023 Notes and 2036 Notes and the subsequent redemption of the 2021 Notes and December 2023 Notes, the Company recognized a loss on extinguishment of $58.5 million.
On June 28, 2019, the Company entered into a term loan credit agreement (Term Loan Agreement) with the Company as the borrower and JPMorgan Chase Bank, N.A. as administrative agent and the other banks identified therein as lenders, under which the Company borrowed unsecured term loans in the aggregate principal amount of $1.25 billion, maturing on March 10, 2022. The Company made principal payments on the term loan of $925.0 million and $325.0 million in fiscal 2021 and fiscal 2019, respectively. These amounts were not contractually due under the terms of the Term Loan Agreement. As of October 30, 2021, the term loan has been repaid in full and is no longer outstanding. In connection with the repayment, the Company recognized a loss on extinguishment of $0.2 million.
On April 8, 2020, in an underwritten public offering, the Company issued its first green bond consisting of $400.0 million aggregate principal amount of 2.95% senior unsecured notes due April 1, 2025 (the April 2025 Notes). Interest on the April 2025 Notes is payable on April 1 and October 1 of each year, beginning on October 1, 2020. The Company intends to use the net proceeds of $395.6 million from the green bond offering to finance or refinance, in whole or in part, one or more new or existing eligible projects involving renewable energy, energy efficiency, green buildings, sustainable water and wastewater management, pollution prevention and control, clean transportation or eco-efficient and/or circular economy adapted products, production technologies and processes. Debt discount and underwriting fees will be amortized over the life of the debt. At any time prior to March 1, 2025, the Company may, at its option, redeem some or all of the April 2025 Notes at a redemption price equal to the greater of 100% of the principal amount of the April 2025 Notes being redeemed and the make-whole premium, plus accrued and unpaid interest on the April 2025 Notes being redeemed, if any, to but excluding the date of redemption. The April 2025 Notes are unsecured and rank equally in right of payment with all of the Company's other existing and future unsecured senior indebtedness. The April 2025 Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture, and the indenture and supplemental indenture contain certain covenants, events of default and other customary provisions. As of October 30, 2021, the Company was in compliance with these covenants.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In conjunction with the Acquisition, the Company recognized $500.0 million aggregate principal amount of Maxim’s 3.375% senior unsecured and unsubordinated notes due March 15, 2023 (the Maxim March 2023 Notes) and $500.0 million aggregate principal amount of Maxim’s 3.45% senior unsecured and unsubordinated notes due June 15, 2027 (the Maxim June 2027 Notes), which were recognized at fair value as of the Acquisition Date. The difference between the fair value at the Acquisition Date and the principal outstanding for the Maxim March 2023 Notes and Maxim June 2027 Notes will be amortized through interest expense over the term of the underlying debt. The amortization of the fair value adjustment reduced interest expense by $3.8 million for the year ended October 30, 2021. Semi-annual fixed interest payments on the Maxim March 2023 Notes are due on March 15 and September 15 of each year. Semi-annual fixed interest payments on the Maxim June 2027 Notes are due on June 15 and December 15 of each year, beginning on December 15, 2017. The Maxim March 2023 Notes and Maxim June 2027 Notes were issued pursuant to an indenture, and the indenture contains certain covenants, events of default and other customary provisions. As of October 30, 2021, Maxim was in compliance with these covenants. On October 5, 2021, Maxim gave notice that it would redeem the Maxim March 2023 Notes, and, subsequent to October 30, 2021, the Maxim March 2023 Notes were redeemed for cash. Accordingly, the Company classified the Maxim March 2023 Notes as a current liability as of October 30, 2021. See Note 15, Subsequent events, of these Notes to Consolidated Financial Statements for additional information on the redemption of the Maxim March 2023 Notes.
On September 28, 2021, in an underwritten public offering, the Company issued $500.0 million aggregate principal amount of floating rate senior notes due October 1, 2024 (the Floating Rate Notes), $750.0 million aggregate principal amount of 1.7% sustainability-linked senior notes due October 1, 2028 (the Sustainability-Linked Senior Notes), $1.0 billion aggregate principal amount of 2.1% senior notes due October 1, 2031 (the 2031 Notes), $750.0 million aggregate principal amount of 2.8% senior notes due October 1, 2041 (the 2041 Notes), and $1.0 billion aggregate principal amount of 2.95% senior notes due October 1, 2051 (the 2051 Notes, and, together with the Floating Rate Notes, the Sustainability-Linked Senior Notes, the 2031 Notes and the 2041 Notes, the Notes). The Floating Rate Notes bear interest at a floating annual rate equal to a benchmark rate, which initially is Compounded SOFR (as defined in the Supplemental Indenture) plus 25 basis points. As of October 30, 2021, the interest rate on the Floating Rate Notes was 0.3% per annum. Interest payments on the Floating Rate Notes are due on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2022. The Sustainability-Linked Senior Notes initially bear interest at a rate of 1.7% per annum and are subject to an increase of an additional 30 basis points from April 1, 2026 to the maturity date unless the Sustainability Performance Target (as defined in the Note) has been satisfied. Semi-annual fixed interest payments on the Sustainability-Linked Senior Notes, the 2031 Notes, the 2041 Notes and the 2051 Notes are due on April 1 and October 1 of each year, beginning on April 1, 2022.
At any time prior to August 1, 2028 in the case of the Sustainability-Linked Senior Notes, July 1, 2031 in the case of the 2031 Notes, April 1, 2041 in the case of the 2041 Notes and April 1, 2051 in the case of the 2051 Notes (each, a Par Call Date), the Company may, at its option, redeem some or all of the applicable series of Notes at a redemption price equal to the greater of (i) 100% of the principal amount of such series of Notes being redeemed and (ii) the make-whole redemption price (as described in the Supplemental Indenture). On and after the applicable Par Call Date, the Company may, at its option, redeem some or all of the applicable series of Notes at a redemption price equal to 100% of the principal amount of the Notes being redeemed. In each case, the Company will also pay the accrued and unpaid interest on the Notes being redeemed to, but excluding, the date of redemption. The Company may not redeem the Floating Rate Notes prior to their maturity. The Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. The net proceeds of the offering were $3.9 billion, after discounts and issuance costs, and a portion of the proceeds were used to pay the tender and redemption prices for, and accrued and unpaid interest on, the tender offers and redemptions described above. Debt discounts and issuance costs will be amortized through interest expense over the term of the respective Notes. The Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture, and the indenture and supplemental indenture contain certain covenants, events of default and other customary provisions. As of October 30, 2021, the Company was in compliance with these covenants.
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s debt consisted of the following as of October 30, 2021 and October 31, 2020:
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|
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|
|
|
|
|
|
|
October 30, 2021
|
|
October 31, 2020
|
|
Principal
|
|
Unamortized discounts, debt issuance costs and fair value adjustments
|
|
Principal
|
|
Unamortized discount and debt issuance costs
|
3-Year term loan, due March 2022
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
925,000
|
|
|
$
|
—
|
|
2021 Notes, due December 2021
|
—
|
|
|
—
|
|
|
400,000
|
|
|
1,009
|
|
2023 Notes, due June 2023
|
—
|
|
|
—
|
|
|
500,000
|
|
|
1,589
|
|
2023 Notes, due December 2023
|
—
|
|
|
—
|
|
|
550,000
|
|
|
2,741
|
|
2024 Notes, due October 2024
|
500,000
|
|
|
3,091
|
|
|
—
|
|
|
—
|
|
2025 Notes, due April 2025
|
400,000
|
|
|
3,029
|
|
|
400,000
|
|
|
3,916
|
|
2025 Notes, due December 2025
|
—
|
|
|
—
|
|
|
850,000
|
|
|
4,504
|
|
2026 Notes, due December 2026
|
900,000
|
|
|
6,534
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|
|
900,000
|
|
|
7,813
|
|
Maxim 2027 Notes, due June 2027
|
500,000
|
|
|
(51,646)
|
|
|
—
|
|
|
—
|
|
2028 Notes, due October 2028
|
750,000
|
|
|
10,419
|
|
|
—
|
|
|
—
|
|
2031 Notes, due October 2031
|
1,000,000
|
|
|
13,956
|
|
|
—
|
|
|
—
|
|
2036 Notes, due December 2036
|
144,278
|
|
|
1,814
|
|
|
250,000
|
|
|
3,375
|
|
2041 Notes, due October 2041
|
750,000
|
|
|
13,690
|
|
|
—
|
|
|
—
|
|
2045 Notes, due December 2045
|
332,587
|
|
|
3,952
|
|
|
400,000
|
|
|
4,951
|
|
2051 Notes, due October 2051
|
1,000,000
|
|
|
18,814
|
|
|
—
|
|
|
—
|
|
Total Long-Term Debt
|
$
|
6,276,865
|
|
|
$
|
23,653
|
|
|
$
|
5,175,000
|
|
|
$
|
29,898
|
|
|
|
|
|
|
|
|
|
Maxim 2023 Notes, due March 2023
|
500,000
|
|
|
(16,663)
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|
|
—
|
|
|
—
|
|
Total Current Debt
|
$
|
500,000
|
|
|
$
|
(16,663)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total Debt
|
$
|
6,776,865
|
|
|
$
|
6,990
|
|
|
$
|
5,175,000
|
|
|
$
|
29,898
|
|
15. Subsequent Events
As discussed in Note 14, Debt, of the Notes to Consolidated Financial Statements, on October 5, 2021, Maxim gave notice that it would redeem the Maxim March 2023 Notes in the aggregate principal amount of $500.0 million. Subsequently, on November 4, 2021, the Maxim March 2023 Notes were redeemed for cash and are no longer outstanding.
On November 22, 2021, the Board of Directors of the Company declared a cash dividend of $0.69 per outstanding share of common stock. The dividend will be paid on December 14, 2021 to all shareholders of record at the close of business on December 3, 2021 and is expected to total $362.5 million.