Analog Devices Inc 10-K for FY2024
Analog Devices Inc (ADI)
10-K
2024-11-26
For: 2024-11-02
View Original
Added on
April 02, 2026
About this 10-K
Analog Devices Inc filed this 10-K on November 26, 2024, covering the fiscal year ended November 2, 2024 (FY2024).
Headline figures
Fiscal year ended November 2, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $9.43B
- down 23.4% from $12.31B a year earlier
- Net income
- $1.64B
- down 50.7% from net income of $3.31B a year earlier
- Diluted EPS
- $3.28
- down 49.9% from $6.55 a year earlier
*Revenue for this distributor was not greater than 10% of total revenue for these periods.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended November 2 , 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 1-7819
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(781 ) 935-5565
(Registrant’s telephone number, including area code)
______________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☑ | Accelerated filer | ☐ | ||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $76,694,000,000 based on the last reported sale of the Common Stock on The Nasdaq Global Select Market on May 4, 2024. Shares of voting and non-voting stock beneficially owned by executive officers, directors and holders of more than 5% of the outstanding stock have been excluded from this calculation because such persons or institutions may be deemed affiliates. This determination of affiliate status is not a conclusive determination for other purposes.
As of November 2, 2024, there were 496,296,854 shares of Common Stock, $0.16 2/3 par value per share, outstanding.
Documents Incorporated by Reference
| Document Description | Form 10-K Part | |||||||
| Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held March 12, 2025 | III | |||||||
TABLE OF CONTENTS
Item 6. Reserved | |||||
Schedule II - Valuation and Qualifying Accounts | |||||
Note About Forward-Looking Statements
This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “potential,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance or results; our anticipated growth and trends in our businesses; the effects of business, economic, political, legal and regulatory impacts or conflicts upon our global operations; changes in demand for semiconductors and the related changes in demand and supply for our products, including the effects of customer inventory adjustments; manufacturing delays, product availability, and supply chain disruptions; our ability to recruit or retain our key personnel; our future liquidity, capital needs and capital expenditures; our development of technologies and processes and research and development investments; our future market position and expected competitive changes in the marketplace for our products; our plans to pay dividends or repurchase stock; servicing our outstanding debt; our plans to borrow under our third amended and restated revolving credit agreement, as amended, and issue notes under our commercial paper program and the planned use of proceeds from such borrowing and issuing; our expected tax rate; the effect of tax examinations and audits and changes in or the application of new or revised tax laws; expected cost savings; the effect of new accounting pronouncements; our plans to integrate or realize the benefits or synergies expected of acquired businesses and technologies; and other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part I, Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.
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PART I
ITEM 1. BUSINESS
Company Overview, Strategy and Mission
Analog Devices, Inc. (we, Analog Devices or the Company) is a global semiconductor leader dedicated to solving our customers’ most complex engineering challenges. We deliver innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense, measure, interpret, connect and power. We design, manufacture, test and market a broad portfolio of solutions, including integrated circuits (ICs), software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies. Our 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 (RF) ICs, edge processors and other sensors.
The Intelligent Edge is characterized by ubiquitous sensing, hyper-scale and edge computing, artificial intelligence (AI) and pervasive connectivity. These technological trends are driving a continuous evolution of new generations of applications that are increasing the demand for Analog Devices’ high-performance analog, mixed-signal, power and RF ICs. We have positioned our business to capitalize on the secular growth opportunities across our markets and to deliver innovative solutions. Central to our strategy is our focus on challenges that our customers have across the most impactful application areas. That is built around the following key priorities, which we believe will continue to drive our long-term success:
•Efficient use of capital. Research and development (R&D) is critical to continue our cycle of innovation, driven by a diverse array of engineering talent who “engineer good” for our planet and society. We are also deeply committed to realizing targeted shareholder value creation from our acquisitions to complement our R&D and drive long-term value creation. Through the development of cutting-edge innovations and our ability to solve difficult problems across a broad array of applications, we generate significant cash flow and are deeply committed to delivering strong shareholder returns.
•Deepening customer-centricity. Close customer relationships influence all aspects of our business: from our broad range of product portfolios and applications expertise to manufacturing capabilities in high-performance power management and precision and high-speed signal processing technologies. We believe that our engineering talent continues to be an important competitive differentiator in the semiconductor space that will enable us to continue to deepen our relationships with customers. We strive to be the destination for the world’s best engineering talent with a team of more than 13,000 engineers. Together, our products and our engineering talent enable us to partner with our customers, leveraging our analog domain expertise and receive the full benefit of our technology capabilities to develop complete and innovative solutions.
•Capitalizing on secular trends. We are positioned to capitalize on important secular growth trends to drive advancements in digitized factories, mobility and digital healthcare, combat climate change and reliably connect humans and the world. We are well-aligned with the key B2B markets driving the increase in data at the Intelligent Edge and we will continue to be a critical partner in the collection, creation and communication of our customers’ edge data. In addition, we are increasingly incorporating AI capabilities into the development of technologies and our business operations, and into our products and services.
We were incorporated in Massachusetts in 1965 with our corporate headquarters near Boston in Wilmington, Massachusetts. We have manufacturing facilities primarily in the United States, Ireland and Southeast Asia. Our common stock is listed on the Nasdaq Global Select Market under the symbol ADI and is included in the Standard & Poor’s 500 Index. Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October; November 2, 2024 (fiscal 2024) was a 53-week fiscal period, while the fiscal year ended October 28, 2023 (fiscal 2023) and the fiscal year ended October 29, 2022 (fiscal 2022) were 52-week fiscal periods. The additional week in fiscal 2024 is included in the first quarter ended February 3, 2024. Therefore, fiscal 2024 includes an additional week of operations as compared to fiscal 2023 and fiscal 2022.
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Available Information
We maintain a website with the address www.analog.com. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including exhibits), and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (SEC). We also make available on our website our by-laws, corporate governance guidelines, the charters for the committees of our Board of Directors and our code of business conduct and ethics which applies to our directors, officers and employees and other governance documents. Such information is available in print and free of charge to any shareholder of Analog Devices who requests it. In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC or Nasdaq.
We have included our website address in this Annual Report on Form 10-K as an inactive textual reference. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Products
Semiconductor components are the building blocks used in electronic systems and equipment. These components are classified as either discrete devices, such as individual transistors, or as ICs, in which a number of transistors and other elements are combined to form a more complicated electronic circuit.
Our ICs are designed to address a wide range of real-world signal processing applications. We sell our ICs to customers worldwide, many of whom use products spanning our core technologies in a wide range of applications. Our IC product portfolio includes both general-purpose products used by a broad range of customers and applications, as well as application-specific products designed for specific target markets. By using readily available, high-performance, general-purpose products in their systems, our customers can reduce the time they need to bring new products to market. Given the high cost of developing more customized ICs, our standard products often provide a cost-effective solution for many low to medium volume applications. Our analog ICs monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or motion, and play an important role in bridging real world phenomena to a variety of electronic systems. Our analog ICs also provide voltage regulation and power control to electronic systems.
We also work with customers to design application-specific solutions. We begin with our existing core technologies, which leverage our analog and mixed signal, power management, RF and microwave, edge processors and other sensors, and devise solutions that more closely meet the needs of a specific customer or group of customers. In certain cases, because we have already developed the core technology platform for our general-purpose products, we can create application-specific solutions quickly and efficiently.
Our analog and mixed-signal IC technology have been the foundation of our business for nearly six decades, and we are one of the world’s largest suppliers of high-performance analog ICs. Our analog signal processing ICs are primarily high-performance devices, offering higher dynamic range, greater bandwidth and other enhanced features. We believe that the principal advantages these products have as compared to competitors’ products include higher accuracy, higher speed, lower cost per function, smaller size, lower power consumption and fewer components, resulting in improved performance and reliability. Our product portfolio includes several thousand analog ICs, many of which can have several hundred end customers. Our analog ICs typically have long product life cycles. Our customers include original equipment manufacturers (OEMs) and customers who build electronic subsystems for integration into larger systems.
Our product offerings include more than 75,000 stock keeping units (SKUs) that can be aggregated into the following general categories:
•Analog and Mixed Signal—We are a leading supplier of data converter products. Data converters translate real-world analog signals into digital data and also translate digital data into analog signals. Data converters remain our largest and most diverse product family and an area where we are continuously innovating to enable our customers to redefine and differentiate their products. Our converter products combine sampling rates and accuracy with the low noise, power, price and small package size required by industrial, automotive, consumer, and communications electronics.
•Power Management & Reference—Power management and reference products, which include functions such as power conversion, driver monitoring, sequencing and energy management, provide efficient solutions for power management and conversion applications in the automotive, communications, industrial and high-end consumer markets. Our high-performance power ICs include powerful performance, integration and software design simulation tools to provide fast and accurate power supply designs.
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•Amplifiers/RF and Microwave—We are also a leading supplier of high-performance amplifiers which are used to condition analog signals. High performance amplifiers emphasize the performance dimensions of speed and precision. Within this product portfolio we provide precision, instrumentation, high speed, intermediate frequency/RF/microwave, broadband, and other amplifiers. Our analog product line also includes a broad portfolio of high-performance RF and microwave ICs covering the entire RF signal chain. Our high-performance RF and microwave ICs support the high-performance requirements of cellular infrastructure and a broad range of applications in our target markets, including instrumentation, aerospace and automotive.
•Sensors & Actuators—Our analog technology portfolio is comprised of sensor and actuator products, including products based on micro-electro-mechanical systems (MEMS) technology. MEMS technology enables us to build extremely small sensors that incorporate an electromechanical structure and the supporting analog circuitry for conditioning signals obtained from the sensing element. Our MEMS product portfolio includes accelerometers used to sense acceleration, gyroscopes used to sense rotation, inertial measurement units used to sense multiple degrees of freedom combining multiple sensing types along multiple axes, and broadband switches suitable for radio and instrument systems. We offer other high-performance sensors, from temperature to magnetic fields, that are deployed in a variety of systems. In addition to sensor products, our other analog product category includes isolators that enable designers to implement isolation in designs without the cost, size, power, performance, and reliability constraints found with optocouplers.
•Digital Signal Processing and System Products (DSPs)—DSPs are optimized for high-speed numeric calculations, which are essential for instantaneous, or real-time, processing of digital data generated, in most cases, from analog to digital signal conversion. Our DSPs are designed to be fully programmable and to efficiently execute specialized software programs, or algorithms, associated with processing digitized real-time, real-world data. Programmable DSPs are designed to provide the flexibility to modify the device’s function quickly and inexpensively using software. Our general-purpose DSP IC customers typically write their own algorithms using software development tools provided by us and third-party suppliers. Our DSPs are designed in families of products that share common architectures and therefore can execute the same software across a range of products.
•Interface—Includes general purpose analog ICs whose primary function is to modify or shape the signal in order to ensure signal integrity for transmission over a distance through a physical medium such as a wire, cable, waveguide, or tracks within a printed circuit board. These include devices that shape the signal for transmission over the medium or reconstruct the received signal after transmission to recover the intended signal integrity.
Sales Channel
We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website. We have direct sales offices, sales representatives and/or distributors in approximately 50 countries. We support our worldwide sales efforts through our website and with extensive promotional programs that include editorial coverage and paid advertising in online and printed trade publications, webinars, social media and communities, promotional and training videos, direct mail programs, technical seminars and participation in trade shows. We publish, share and distribute technical content such as data sheets, application guides and catalogs. We maintain a staff of field application engineers who aid customers in incorporating our products into their products. In addition, we offer a variety of web-based tools that ease product selection and aid in the design process for our customers.
We believe distributors provide a cost-effective means of reaching a broad range of customers while providing efficient logistics services. From time to time, we may add or terminate distributors in specific geographies, or move customers to a direct support or fulfillment model as we deem appropriate given our strategies, the level of distributor business activity and distributor performance and financial condition.
These distributors typically maintain an inventory of our products. Some of them also sell products that compete with our products, including those for which we are an alternate source. We make sales to distributors under agreements that allow certain distributors to receive price adjustment credits and to return qualifying products for credit, typically as determined by us, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory. These agreements limit such returns to a certain percentage of our shipments to that distributor during the prior quarter. In addition, certain distributors are allowed to return unsold products if we terminate the relationship with the distributor. Additional information relating to our revenue and customer concentration is set forth in Note 2l, Concentrations of Risk; Note 2n, Revenue Recognition; and Note 4, Industry, Segment and Geographic Information, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
We typically do not have long-term sales contracts with our customers. In some of our markets where end-user demand may be particularly volatile and difficult to predict, some customers place orders that require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding commitment to purchase all, or even
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any, of the product. In other instances, we manufacture product based on forecasts of customer demand. As a result, we may incur inventory and manufacturing costs in advance of anticipated sales and are subject to the risk of cancellation of orders leading to a sharp reduction of sales and backlog. Further, those orders or forecasts may be for products that meet the customer’s unique requirements such that those canceled orders would result in an inventory of unsaleable products, causing potential inventory write-offs.
Markets
The breakdown of our annual revenue by end market is set out in the table below:
| End Market* | Percent of Fiscal 2024 Revenue | Percent of Fiscal 2023 Revenue | Percent of Fiscal 2022 Revenue | |||||||||||||||||
| Industrial | 46% | 54% | 52% | |||||||||||||||||
| Automotive | 30% | 23% | 20% | |||||||||||||||||
| Communications | 11% | 13% | 15% | |||||||||||||||||
| Consumer | 13% | 10% | 13% | |||||||||||||||||
*The sum of the individual percentages may not equal 100% due to rounding.
The following describes some of the characteristics of, and customer products within, our major end markets of Industrial, Automotive, Communications and Consumer:
Industrial — Our industrial market includes the following sectors:
Industrial Automation — We are a leader in industrial automation because we deliver robust, high performance solutions from our deep motion and process control expertise and precision sensing measurement and interpretation to expansive connectivity and power capabilities. We take real-world phenomena in the most complex environments on the factory floor and translate them into valuable insights and outcomes. We co-create with customers to architect robotics systems and solutions that improve dynamic behavior and precision while enhancing worker safety, machine health, and manufacturing flexibility. Our industrial automation market includes applications such as:
| • Condition-based monitoring (CbM) | • Industrial power supplies | |||||||
| • Industrial robotics | • Industrial motion control | |||||||
| • Factory and process control | ||||||||
Instrumentation & Measurement — Trusted measurement is at the forefront of innovation. With the rapid pace of global transformation, from ubiquitous connectivity, to electrification, to AI, to human health and environmental sustainability — all of these trends require reliable and efficient test solutions from R&D to manufacturing to field deployment. We enable high performance measurement through our components and system solutions. Our RF, high-speed and power management products are designed to enable solutions for complying with evolving communications standards. Our high-voltage, isolation and precision products are a key part of the systems that are designed for safety, longevity and efficiency in electric vehicles and renewable energy. Beyond electrical testing, our precision and power technology enable analytical instruments for drug or vaccine R&D and manufacturing, food safety and quality and environmental monitoring. Our instrumentation and measurement market includes applications such as:
| • Automated test equipment | • Automotive and energy test | |||||||
| • Electronic test and measurement | • Life sciences and drug discovery | |||||||
| • Environmental and process analysis | ||||||||
Aerospace/Defense — The defense, commercial avionics and space markets all require high-performance ICs that meet rigorous environmental and reliability specifications. Many of our ICs can be supplied in versions that meet these standards. In addition, many products can be supplied to meet the standards required for broadcast satellites and other commercial space applications. Most of our products sold in this market are specially tested versions of products derived from our standard product offering. As end systems are becoming more complex, many of our customers in this market also look for us to provide higher levels of integration in order to minimize size, weight and power and to improve ease-of-use. As such, we also sell products in the form of system in package (SiPs), printed circuit board assemblies, modules, and subsystems. Customer products include applications such as:
| • Navigation systems | • Radar systems | |||||||
| • Space and satellite communications | • Security devices | |||||||
| • Communication systems | • Electronic surveillance and countermeasures | |||||||
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Healthcare — The healthcare market is evolving in response to the need for increased access to better and more affordable care, as well as a growing focus on preventative healthcare and the need to better and more cost effectively manage chronic conditions. To help achieve this, we are collaborating with customers and partners on innovative solutions that are designed to achieve better outcomes for patients and more efficient workflows for physicians at reduced costs. Our offerings include both standard and application-specific hardware, software and service-based products and are used in applications such as:
| • Ultrasound, PET and MRI systems | • Anesthesia equipment | |||||||
| • X-Ray equipment (CT and DX-Ray) | • Lab and point of care diagnostic equipment | |||||||
| • Image guided therapy | • Robotic surgery, surgical tools and instruments | |||||||
| • Multi-parameter vital signs monitors | • Blood analyzers and infusion pumps | |||||||
• Remote patient monitoring and wellness | • Renal therapy and organ transplant systems | |||||||
• Continuous glucose monitoring | • Insulin pumps | |||||||
Energy Management — The global drive towards improved energy efficiency, conservation, reliability and clean energy is driving investments in electrification across many different application areas, including electric vehicle charging infrastructure, renewable energy, power transmission and distribution systems, electric meters and other innovative areas. The common characteristic behind these efforts is the addition of sensing, measurement and communication technologies to electrical infrastructure. Our offerings include both standard and application-specific products and are used in applications such as:
| • Utility meters | • Wind turbines | |||||||
| • Electric vehicle charging infrastructure | • Solar inverters | |||||||
| • Substation relays and automation equipment | • Building energy automation/control | |||||||
Automotive — We develop differentiated high-performance signal processing solutions, which enable sophisticated transportation systems that span infotainment, electrification and autonomous applications. Through collaboration with manufacturers worldwide, we have developed a broad portfolio of analog, digital, power and sensor ICs that address the emerging needs of this evolving industry. Our focus is on audio/video applications that lead to an enriched in-cabin experience, electrification applications that improve vehicle range and reduce emissions, and mission-critical perception and navigation applications that enable vehicles to more clearly sense the external environment. Specifically, we have developed products used in applications such as:
| • | Car audio, voice processing and connectivity | • | Battery monitoring and management systems | |||||||||||
| • | Video processing and connectivity | |||||||||||||
Communications — The development of broadband, wireless and internet infrastructures around the world has created an important market for our communications products. Communications technology involves the processing of signals that are converted from analog to digital and digital to analog form during the process of transmitting and receiving data. The need for higher speed and reduced power consumption, coupled with more reliable, bandwidth-efficient communications, creates demand for our products, which are used in the full spectrum of signal processing for data, video, voice and machine-to-machine communications. In wireless and wireline communication applications, our products are incorporated into:
| • Cellular base station equipment | • Satellite and terrestrial broadband access equipment | |||||||
| • Microwave backhaul systems | • Optical and cable networking equipment for data center and carrier providers | |||||||
| • Data centers and data storage | ||||||||
Consumer — To address the market demand for state of the art personal and professional entertainment systems and the consumer demand for high quality user interfaces, music, movies and photographs, we have developed analog, digital and mixed-signal and power solutions that meet the rigorous cost and time-to-market requirements of the consumer electronics market. The emergence of high-performance, feature-rich consumer products has created a market for our high-performance ICs with a high level of specific functionality that enables best in class user experience and battery management. These products include:
| • Portable devices (smart phones, tablets and wearable devices) for media and vital signs monitoring applications | • Prosumer audio/video equipment | |||||||
See Note 4, Industry, Segment and Geographic Information, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information about our products by end market.
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Competition
We believe that competitive performance in the marketplace for integrated circuits depends upon multiple factors, including technological innovation, strength of brand, diversity of product portfolio, product performance, technical support, delivery capabilities, customer service quality, reliability and price, with the relative importance of these factors varying among products, markets, and customers. We compete with a number of semiconductor companies in markets that are highly competitive. Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products. Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers. Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the U.S., including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries.
We believe that our technical innovation emphasizing product performance and reliability, supported by our commitment to strong customer service and technical support, enables us to make a fundamental difference to our customers’ competitiveness in our chosen markets.
Seasonality
Our sales are subject to a varying degree of seasonality. Historically, sales to customers during our first fiscal quarter have been lower than other quarters due to plant shutdowns at some of our customers. In general, the seasonality for any specific period of time has not had a material impact on our results of operations. In addition, as explained in our risk factors contained in Item 1A of this Annual Report on Form 10-K, our revenue is more likely to be influenced on a quarter to quarter basis by cyclicality in the semiconductor industry.
We believe that a number of factors should be used to assess future customer demand, including backlog, macroeconomic trends, customer insights and current customer bookings as compared to billings (book-to-bill) ratio. We define backlog to mean firm orders from a customer or distributor with a requested delivery date within thirteen weeks. However, backlog may be impacted by the tendency of customers to rely on shorter lead times available from suppliers, including us, in periods of depressed demand. In periods of increased demand, there is a tendency towards longer lead times that has the effect of increasing backlog and, in some instances, we may not have manufacturing capacity sufficient to fulfill all orders. As is customary in the semiconductor industry, we allow most orders to be canceled within a reasonable notification period or deliveries to be delayed by customers without significant penalty, while also allowing certain distributors to receive price adjustment credits and to return qualifying products for credit, typically as determined by us, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.
Production Resources
Monolithic IC components are manufactured in a sequence of semiconductor production steps that include wafer fabrication, wafer testing, dicing the wafer into individual “chips,” or dice, assembly of the dice into packages and electrical testing of the devices in final packaged form. The raw materials used to manufacture these devices include silicon wafers, processing chemicals (including liquefied gases), precious metals laminates, ceramic and plastic used for packaging. We utilize, develop and employ a wide variety of manufacturing processes, primarily based on bipolar and complementary metal-oxide semiconductor (CMOS) transistors, which are specifically tailored for use in fabricating high-performance analog, DSP and mixed-signal ICs. Devices such as MEMS, iCoupler® isolators and various sensors are fabricated using specialized processes, which typically use substantially similar equipment as bipolar and CMOS processes.
Our IC products are fabricated on proprietary processes at our internal production facilities in Wilmington, Massachusetts; Camas, Washington; Beaverton, Oregon; and Limerick, Ireland and also on a mix of proprietary and non-proprietary processes at third-party wafer fabricators. We currently source more than half of our wafer requirements annually from third-party wafer fabrication foundries, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others, and the remainder is sourced internally. In addition, we operate an assembly, wafer sort and testing facility in Penang, Malaysia and wafer sort and test facilities in the Philippines and Thailand. We also make extensive use of third-party subcontractors for the assembly and testing of our products.
Our products require a wide variety of components, raw materials and external foundry services, most of which we purchase from third-party suppliers. We have multiple sources for many of the components and materials that we purchase and incorporate into our products. If any of our key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components to us on the time schedule and of the quality that we require, we may be forced to seek 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 our customers. Although we have experienced shortages of components, materials and external foundry services from time to time, we work to balance these constraints by shifting global resources and capacity where appropriate.
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Patents and Intellectual Property Rights
We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, mask works, trademarks and trade secrets. We have a program to file applications for and obtain patents, copyrights, mask works and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements. We have obtained a substantial number of patents and trademarks in the United States and in other countries. As of November 2, 2024, we held approximately 4,660 U.S. patents and approximately 470 published pending U.S. patent applications. There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction. While our patents, copyrights, mask works, trademarks and trade secrets provide some advantage and protection, we believe our competitive position and future success is largely determined by such factors as the system and application knowledge, innovative skills, technological expertise and management ability and experience of our personnel; the range and success of new products being developed by us; our market brand recognition and ongoing marketing efforts; and customer service and technical support. Although it is generally our policy to seek patent protection for significant inventions that may be patented, we may elect, in certain cases, not to seek patent protection even for significant inventions, if we determine other protection, such as maintaining the invention as a trade secret, to be more advantageous. We also have trademarks that are used in the conduct of our business to distinguish genuine Analog Devices products, and we maintain cooperative advertising programs to promote our brands and identify products containing genuine Analog Devices components.
Government Regulation
Our business activities are subject to various federal, state, local and foreign laws and regulations, including those related to financial and other disclosures, accounting standards, corporate governance, intellectual property, tax, trade, including import, export and customs, antitrust, environment, health and safety, employment, immigration and travel, cybersecurity, privacy, data protection and localization and anti-corruption. These laws and regulations may differ among jurisdictions, and compliance with them may have a materially adverse impact on our business and results of operations. For more information about these potential impacts, see the section titled “Risk Factors—Risks Related to Cyber, Artificial Intelligence, Intellectual Property, Legal and Regulatory” of this Annual Report on Form 10-K.
Environment, Social and Governance
We are a signatory to the United Nations Global Compact and the Business Ambition for 1.5°C campaign, as well as a member of the Responsible Business Alliance. Our Environment, Social and Governance (ESG) aspirations and programs, including our climate targets and our approach to ethical business conduct and ethics and applying fair labor standards, are communicated in our 2023 ESG Report. The ESG Report is available on our website at www.analog.com/corporate-responsibility. The contents of our website and the information contained in our ESG Report are not incorporated by reference into this Annual Report on Form 10-K.
To support our commitment to ESG, we have implemented an oversight structure which includes a quarterly reporting cadence both to senior management and the Nominating and Corporate Governance Committee of the Board of Directors. These quarterly reports include updates on programs, as well as updates on topics such as stakeholder value, risks and opportunities, regulatory preparedness and key ESG focus areas.
We have programs and management systems in place to protect the environment and the health and safety of our employees, customers and the public. We endeavor to adhere to applicable environment, health and safety (EHS) regulatory and industry standards across all of our facilities, and to encourage pollution prevention, reduce our water and energy consumption, manage waste streams to divert from landfills and strive towards continual improvement. We strive to achieve excellence in EHS management practices as an integral part of our total quality management system.
Our EHS management systems in all of our manufacturing facilities are certified to ISO 14001:2015 for environmental management and ISO 45001:2018 for occupation health and safety. Our industrial hygiene surveillance program is designed to minimize and prevent exposures in the workplace. We use two industry standard metrics to assess injury performance and trends worldwide. In fiscal 2024 and fiscal 2023, our global injury rates were lower than the U.S. semiconductor industry benchmark.
Our manufacturing facilities are subject to numerous and increasingly strict federal, state, local and foreign EHS laws and regulations, particularly with respect to the transportation, storage, handling, use, emission, discharge and disposal of certain chemicals used or produced in the semiconductor manufacturing process. Our products are subject to increasingly stringent regulations regarding substance content in jurisdictions where we do business. Contracts with many of our customers reflect these and additional EHS compliance standards. Substance content of our products includes materials that are subject to reporting requirements, including conflict minerals. Compliance with these laws and regulations has not had a material impact
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on our capital expenditures, earnings, financial condition or competitive position. There can be no assurance, however, that current or future environmental laws and regulations will not impose costly requirements upon us. Any failure by us to comply with applicable EHS laws, regulations and contractual obligations could result in fines, suspension of production, the need to alter manufacturing processes and legal liability.
Human Capital and Empowerment
Our company was founded on the principle that people are our greatest asset. Our future success depends in large part on the continued service of our key technical and senior management personnel, and on our ability to continue to attract, retain and motivate qualified employees, particularly highly-skilled engineers involved in the design, development, support and manufacture of new and existing products and processes. In order for us to attract the best talent, we aim to offer challenging work in an environment that enables our employees to learn, grow and reach their full potential.
Core to our empowerment strategy is embracing diversity and building a culture of inclusion across the organization. We are working to achieve this by expanding the diversity of our workforce, creating growth and development opportunities for our employees, embracing different perspectives and fostering an inclusive work environment for all. In addition, we encourage employees to develop different networks, which contribute to our broader diversity and inclusion initiatives. Our current employee networks include the Analog Veterans Network, Neurodiversity Network, People of Color and Allies Network, Pride Network, Women’s Leadership Network, Young Professionals Network, the Green Team and the Communities Activities Board. As noted in “Environment, Social and Governance” above, we published our 2023 ESG Report which details our sustainability efforts, operations efficiency, employee engagement and governance, and also provides a look at the state of our organization and an overview of some of the initiatives we have launched to drive continuous improvements across diversity and inclusion.
As of November 2, 2024, we had approximately 24,000 employees, of whom approximately 13,000 are in engineering roles. Approximately 62% of our workforce is male and 38% female. Our senior leadership team is 64% male and 36% female, while manager roles are approximately 75% male and 25% female. 36% of the members of our Board of Directors are female. For fiscal 2024, our voluntary employee turnover rate was approximately 8%.
Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees. We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial and emotional well-being. Our compensation philosophy is based on rewarding each employee’s individual contributions and striving to achieve equal pay for equal work regardless of gender, race or ethnicity. We use a combination of fixed and variable pay including base salary, bonuses, performance awards and equity compensation. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees and directors through the granting of stock-based compensation awards. We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace. Examples of benefits offered in the U.S. include a 401(k) plan with employer contributions; health benefits; life, business travel and disability insurance; additional voluntary insurance; paid time off and parental leave; education assistance; paid counseling assistance; backup child and adult care; adoption support; and family college planning. For further information concerning our equity incentive plans, see Note 3, Stock-based Compensation and Shareholders’ Equity, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
In order to ensure that we are meeting our human capital objectives we frequently utilize employee surveys to understand the effectiveness of our employee and compensation programs and where we can improve across the company. Our latest survey completed in fiscal 2024 had a 92% participation rate among all employees and the survey results indicated employee satisfaction in areas such as purpose, demonstrating culture, fostering belonging, aligning with our strategy and leadership commitment, while also supporting decision speed and reducing barriers to execution. Our dual focus of being a great place to work and providing industry-leading benefits and work culture has led to strong employee satisfaction and pride that has been recognized across the globe, as evidenced with the following awards: TIME World’s Best Companies (2024, 2023), Forbes America’s Best Large Employers (2024), Forbes America’s Best Employers for Diversity (2024), Forbes America’s Best Employers by State (2023), The Boston Globe’s Top Places to Work (2023), and Forbes World’s Top Female Friendly Companies (2022).
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ITEM 1A. RISK FACTORS
Set forth below and elsewhere in this report are descriptions of certain risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements in this report. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business. For more information, see the section titled “Note About Forward-Looking Statements” of this Annual Report on Form 10-K.
Risks Related to our Business, Operations, Industry and Partners
Global political and economic uncertainty and adverse conditions related to our international operations could materially and adversely affect our business, financial condition and results of operations.
We have significant operations and manufacturing facilities outside the United States, including in Ireland, the Philippines, Thailand and Malaysia. A significant portion of our revenue is derived from customers in international markets, and we expect that international sales will continue to account for a significant portion of our revenue in the future. As a result of our international operations, our business, financial condition and results of operations could be negatively impacted by, among others, the following factors:
•political, legal and economic changes, crises or instability and civil unrest that may impact markets in which we do business, such as macroeconomic weakness related to trade and political disputes between the United States and Europe or China, tensions across the Taiwan Strait that may adversely affect our operations in Taiwan, our customers and the technology industry supply chain, and the ongoing conflicts between Russia and Ukraine and in Israel and the Middle East;
•compliance requirements of customs and export regulations, including the Export Administration Regulations and the International Traffic and Arms Regulations;
•currency conversion risks and exchange rate and interest rate fluctuations, including the potential impact of elevated interest rates;
•instability of global credit and financial markets due to adverse macroeconomic conditions such as elevated inflation, high interest rates, bank failures and slower economic growth or recession that could, among other impacts, affect our ability to timely access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers, suppliers and distributors exposing us to late payments, cancelled orders and inventory challenges;
•trade policy, commercial, travel, export or taxation disputes or restrictions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S. government or by the governments of the countries in which we do business, particularly with respect to China;
•sanctions imposed by governments in countries in which we do business;
•complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax, price protection, competition practices, export control, customs, immigration, anti-boycott, AI, data privacy, cyber and product security, sustainability, climate and other ESG matters, intellectual property, anti-corruption, including the Foreign Corrupt Practices Act, and environmental compliance;
•economic disruption from terrorism and threats of terrorism and the response to them by the United States and its allies;
•increased managerial complexities, including different employment practices and labor issues;
•changes in immigration laws, regulations and procedures and enforcement practices of various government agencies;
•greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;
•natural disasters, public health emergencies, such as the COVID-19 pandemic, or other catastrophic events;
•transportation disruptions and delays and increases in labor and transportation costs;
•fluctuations in raw material costs and energy costs due to general market factors and conditions such as inflationary pressures and supply chain constraints;
•greater difficulty in accounts receivable collections and longer collection periods; and
•increased costs associated with our foreign defined benefit pension plans.
Many of these factors and risks are present and may be exacerbated within our business operations in China. For example, changes in U.S.-China relations, the political environment or international trade policies could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations or retaliatory actions, which have had and may continue to have an adverse effect on our business plans and operating results. The incoming administration has
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indicated that it intends to impose or significantly increase tariffs on imports to the United States, which could exacerbate many of these issues. In addition, expanded export restrictions limit our ability to sell to certain Chinese companies and to third parties that do business with those companies. These restrictions have created, and these and similar restrictions may continue to create, uncertainty and caution with our current or prospective customers and may cause them to amass large inventories of our products, replace our products with products from another supplier that is not subject to the export restrictions or focus on building indigenous semiconductor capacity to reduce reliance on U.S. suppliers. Furthermore, if these export restrictions cause our current or potential customers to view U.S. companies as unreliable, we could suffer reputational damage or lose business to foreign competitors who are not subject to such export restrictions, and our business could be materially harmed. We are continuing to evaluate the impact of these restrictions on our business, but these actions may have direct and indirect adverse impacts on our revenues and results of operations in China and elsewhere. In addition, our success may be adversely affected by China’s continuously evolving policies, laws and regulations, including those relating to imports and exports, antitrust, AI, cybersecurity, data protection and data privacy, the environment, indigenous innovation, the promotion of a domestic semiconductor industry, intellectual property rights and enforcement and protection of those rights.
The markets for semiconductor products are cyclical, and increased production may lead to overcapacity and lower prices, and conversely, we may not be able to satisfy unexpected demand for our products.
The cyclical nature of the semiconductor industry has resulted in periods when demand for our products has increased or decreased rapidly. The demand for our products may vary based on market conditions in our major end markets. Demand in these end markets can fluctuate significantly based upon, for example, consumer spending, consumer preferences, the development of new technologies and macroeconomic conditions. If we overbuild inventory in a period of decreased demand, or we expand our operations and workforce too rapidly or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, our operating results may be adversely affected as a result of underutilization of capacity, charges related to obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins. For example, we have experienced, and may in the future experience, periods of customer inventory adjustments and other customer behaviors that may adversely affect our operating results. Further, any capacity expansions by us or other semiconductor manufacturers could also lead to overcapacity in our target markets which could lead to price erosion that could adversely impact our operating results. Conversely, during periods of rapid increases in demand, our available capacity may not be sufficient to satisfy the demand. In addition, we may not be able to expand our workforce and operations in a sufficiently timely manner, procure adequate resources and raw materials, locate suitable third-party suppliers or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers, and our current or future business could be materially and adversely affected.
We rely on third parties for supply of raw materials and parts, semiconductor wafer foundry services, assembly and test services and transportation, among other things, and we generally cannot control their availability or conditions of supply or services.
We rely, and plan to continue to rely, on third-party suppliers and service providers, including raw material and components suppliers, semiconductor wafer foundries, assembly and test contractors and freight carriers (collectively, vendors), in manufacturing and shipping our products. This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, costs and supply chain allocations. We currently source more than half of our wafer requirements annually from third-party wafer foundries, including Taiwan Semiconductor Manufacturing Company (TSMC) and others. These foundries often provide wafer foundry services to our competitors and therefore periods of increased industry demand may result in capacity constraints. With respect to TSMC in particular, tensions across the Taiwan Strait or other geopolitical events could disrupt TSMC’s operations, which would adversely affect our ability to manufacture certain products and as a result, could adversely affect our business and results of operations.
Our manufacturing processes require availability of certain raw materials and supplies. Limited or delayed access to these items, including as a result of, global trade issues, supply chain constraints, difficulties obtaining import or export licenses, natural disasters, public health emergencies or changes in or new laws or regulations, could adversely affect our results of operations. In certain instances, one of our vendors may be the sole source of highly specialized processing services or materials. If such vendor is unable or unwilling to manufacture and deliver components to us on the time schedule and of the quality or quantity that we require, we may be forced to seek to engage an additional or replacement vendor, which could result in additional expenses and delays in product development or shipment of product to our customers. If additional or replacement vendors are not available, we may also experience delays in product development or shipment which could, in turn, result in reputational harm or the temporary or permanent loss of customers, and as a result could adversely affect our business and results of operations.
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Our industry faces challenges associated with products diverted from authorized distribution channels, which could result in reputational harm and have a material adverse effect on our business and results of operations.
We market and sell our products directly and through third-party distributors. In the past, certain of our products have been, and there is a risk that our products may continue to be, diverted from our authorized distribution channels and sold on the “gray market” in ways that are not in accordance with our established agreements, controls, policies and procedures. Purchasers that acquire our products via the gray market or through other unauthorized channels may resell or otherwise use our products for purposes for which they were not intended or that may be contrary to our ethical, legal and regulatory obligations. Organizations may also purchase counterfeit or substandard products, including products that have been altered, mishandled or damaged, or purchase used products presented as new, each of which could result in damage to property or persons and adversely affect our reputation and customer satisfaction. In addition, governments and regulatory bodies may inquire into our processes to mitigate risks related to product diversion. For example, during 2024, we participated in an inquiry from the U.S. Senate Permanent Subcommittee on Investigations related to the unauthorized misuse of U.S. chips in Russian weapon systems. As new challenges and information arise, our processes and policies will evolve, and we may be required to incur additional costs to continue to enhance our compliance efforts, which may include costs associated with distributor audits or responding to inquiries from governments and regulatory bodies. These situations could have a material adverse effect on our reputation and business and operating results.
A prolonged disruption of our or our third parties’ manufacturing operations could have a material adverse effect on our business, financial condition and results of operations.
In addition to leveraging an outsourcing model for certain manufacturing operations, we also rely on our internal manufacturing operations located in the United States, Ireland, the Philippines, Thailand and Malaysia. A prolonged disruption at, or inability to utilize, one or more of our or our third parties’ manufacturing facilities, loss of raw materials or damage to our or our third parties’ manufacturing equipment for any reason, including due to natural or man-made disasters, civil unrest or other events outside of our control, such as widespread outbreaks of illness, or the failure to maintain our labor force at one or more of these facilities, may disrupt our operations, delay production, shipments and revenue and result in us being unable to timely satisfy customer demand. As a result, we could forgo revenue opportunities, potentially lose market share and damage our customer relationships, all of which could materially and adversely affect our business, financial condition and results of operations.
Our operating results are dependent on the performance of independent distributors.
Sales to third-party distributors accounted for approximately 58% of our revenue in the year ended November 2, 2024. These independent distributors generally represent product lines offered by several companies and thus could reduce their sales efforts for our products. Further, our distributors could terminate their representation of us with little advance notice. In addition, we generally do not require letters of credit from our distributors, including our largest distributor, and are not protected against accounts receivable default or declarations of bankruptcy by these distributors. Our inability to collect open accounts receivable could adversely affect our operating results. Termination of a significant distributor or a group of distributors, whether at our initiative or the distributor’s initiative or through consolidation in the distribution industry, could disrupt our business, and if we are unable to find suitable replacements with the appropriate scale and resources, our operating results could be adversely affected.
We are required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor. If our estimates of such credits and rights are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period.
Our future success depends upon our ability to execute our business strategy, continue to innovate, improve our existing products, design, develop, produce and market new products and identify and enter new markets.
Our future success significantly depends on our ability to execute our business strategy, continue to innovate, improve our existing products and design, develop, produce and market innovative new products and system-level solutions, including those that may incorporate, or are based upon, software or AI technology. Product design, development, innovation and enhancement is often a complex, time-consuming and costly process involving significant investment in research and development with no assurance of return on investment. There can be no assurance that we will be able to develop and introduce new and improved products in a timely or efficient manner or that new and improved products, if developed, will achieve market acceptance. Our products generally must conform to various evolving and sometimes competing industry and regulatory standards, which may adversely affect our ability to compete in certain markets or require us to incur significant costs. In addition, our customers generally impose very high quality and reliability standards on our products, which often change and may be difficult or costly to satisfy. Any inability to satisfy customer quality and reliability standards or comply with industry and regulatory standards and technical requirements may adversely affect demand for our products and our results of operations.
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Our growth is also dependent on our ability to identify and penetrate new markets where we have limited experience yet require significant investments, resources and technological advancements in order to compete effectively, and there can be no assurance that we will achieve success in these markets. Further, there can be no assurance that the markets we serve and target based on our business strategy will grow in the future, that our existing and new products will meet the requirements of these markets, that our products, or the end-products in which our products are used, will achieve customer acceptance in these markets, that competitors will not force price reductions or take market share from us or that we can achieve or maintain adequate gross margins or profits in these markets.
Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may materially fluctuate.
Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may be materially affected by a number of factors, including:
•the effects of adverse economic or geopolitical conditions in the markets in which we sell our products, including inflationary pressures, which has resulted, and may continue to result, in increased interest rates, fuel prices, wages and other costs;
•changes in customer demand or order patterns for our products or for end products that incorporate our products;
•the timing, delay, reduction or cancellation of significant customer orders and our ability to manage inventory;
•our ability to accurately forecast distributor demand for our products;
•future distributor pricing credits or stock rotation rights;
•our ability to effectively manage our cost structure in both the short term and over a longer duration;
•changes in geographic, product or customer mix;
•changes in our effective tax rates, adverse tax decisions or new or revised tax legislation in the United States, Ireland or worldwide;
•the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions; changes in law, regulations or other restrictions, including executive orders; and changes in import and export regulations, including restrictions on exports to certain companies or to third parties that do business with such companies, export classifications, or duties and tariffs, including with respect to China;
•the timing of new product announcements or introductions, including products that may incorporate, or are based upon, software or AI technology, by us, our customers or our competitors and the market acceptance of such products;
•pricing decisions and competitive pricing pressures;
•fluctuations in manufacturing yields, adequate availability of wafers and other raw materials, and manufacturing, assembly and test capacity;
•the ability of our third-party suppliers, subcontractors and manufacturers to supply us with sufficient quantities of raw materials, products and components;
•a decline in infrastructure spending by foreign governments, including China;
•political changes in the United States, including those related to the incoming administration and executive offices of the U.S. government, a decline in the U.S. government defense budget, changes in spending or budgetary priorities, a prolonged U.S. government shutdown or delays in contract awards;
•a decline in our backlog;
•our ability to recruit, hire, retain and motivate adequate numbers of engineers and other qualified employees to meet the demands of our customers;
•our ability to generate new design opportunities and win competitive bid selection processes;
•the increasing costs of providing employee benefits worldwide, including health insurance, retirement and pension plan contributions and other retirement benefits;
•our ability to utilize our manufacturing facilities at efficient levels;
•fluctuations in foreign currency exchange rates;
•litigation-related costs or product liability, warranty and indemnity claims, including those not covered by our suppliers or insurers;
•the difficulties inherent in forecasting future operating expense levels, including with respect to costs associated with labor, utilities, transportation and raw materials;
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•the costs related to compliance with increasing worldwide complex government regulations and legal standards and requirements, including those related to ESG matters;
•new accounting pronouncements or changes in existing accounting standards and practices; and
•the effects of public health emergencies, civil unrest, natural disasters or other severe weather events, widespread travel disruptions, security risks, terrorist activities, international conflicts and other events beyond our control.
In addition, the semiconductor market has historically been cyclical and subject to significant economic upturns and downturns. Our business and certain of the end markets we serve are also subject to rapid technological changes and material fluctuations in demand based on end-user preferences. There can be no assurance that products stocked in our inventory will not be rendered obsolete before we ship them or that we will be able to design, develop and produce products in a timely fashion to accommodate changing customer demand.
As a result of these and other factors, we may experience material fluctuations in future revenue, gross margins, operating results, net income and earnings per share on a quarterly or annual basis. Our historical financial performance and results of operations should not be relied upon as indicators of future performance or results. In addition, if our revenue, gross margins, operating results, net income and earnings per share results or expectations do not meet the expectations of securities analysts or investors, the market price of our common stock may decline.
We may not be able to compete successfully in markets within the semiconductor industry in the future.
We face intense competition in the semiconductor industry, and we expect this competition to increase in the future, including from companies located outside of the United States. Competition is generally based on innovation, design, quality and reliability of products, product performance, features and functionality, product pricing, availability and capacity, technological service and support and the availability of integrated system solutions, with the relative importance of these factors varying among products, markets and customers. Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products. Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers. Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the United States, including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries. From time to time, governments around the world may provide incentives or make other investments that could benefit and give competitive advantages to our competitors. For example, in August 2022, the CHIPS and Science Act of 2022 (CHIPS Act) was signed into law to provide financial incentives to the U.S. semiconductor industry. Government incentives, including any that may be offered in connection with the CHIPS Act, may not be available to us on acceptable terms or at all, and to the extent that the incoming administration modifies or repeals the CHIPS Act, the availability of any such incentives may be even less certain. Further, such programs typically require companies to adhere to various performance obligations, which we may not achieve. If our competitors can benefit from such government incentives and we cannot, it could strengthen our competitors’ relative position and have a material adverse effect on our reputation and business. Existing or new competitors may develop products or technologies that more effectively address the demands of our customers and markets with enhanced performance, features and functionality, lower power requirements, greater levels of integration or lower cost, which may increase our obsolete or excess inventory and result in inventory write-offs. In addition, as we seek to expand our business, including the design and production of products and services for developing and emerging markets, we may encounter increased competition from our current and new competitors. Increased competition in certain markets has resulted in and may continue to result in declining average selling prices, reduced gross margins and loss of market share in those markets. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that our operating results will not be adversely affected by increased competition. In addition, the semiconductor industry has experienced significant consolidation over the past several years. Consolidation among our competitors could lead to a changing competitive landscape, which could negatively impact our competitive position and market share and harm our results of operations.
If we are unable to recruit or retain our key personnel, our ability to execute our business strategy will be adversely affected.
Our continued success depends to a significant extent upon the recruitment, retention and effective succession of our key personnel, including our leadership team, management and technical personnel, particularly our experienced engineers. The competition for these employees is intense and the labor market is tight. The loss of key personnel or the inability to attract, timely hire and retain key employees with critical technical skills to achieve our strategy, including as a result of changes to immigration policies, and the increased uncertainty surrounding such policies in light of the incoming administration’s expected immigration agenda, could cause business disruptions, increased expenses to address any disruptions and could have a material adverse effect on our business.
We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster innovation, teamwork and employee satisfaction. As we grow, including from the integration of employees and businesses
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acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.
We do not maintain any key person life insurance policy on any of our officers or other employees. The loss of one or more of our key employees, and any failure to have in place and execute an effective succession plan for key executives, could seriously harm our business and results of operations.
Our customers typically do not make long-term product purchase commitments, and incorrect forecasts or reductions, cancellations or delays in orders for our products could adversely affect our operating results.
We typically do not have sales contracts with our customers that include long-term product purchase commitments. In certain markets where end-user demand may be particularly volatile and difficult to predict, some customers place orders that require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding commitment to purchase all, or even any, of the product. In other instances, we manufacture product based on non-binding forecasts of customer demands, which may fluctuate significantly on a quarterly or annual basis and at times may prove to be inaccurate. Additionally, our U.S. government contracts and subcontracts may be funded in increments over a number of government budget periods and typically can be terminated by the government for its convenience. As a result, we may incur inventory and manufacturing costs in advance of anticipated sales, and we are subject to the risk of lower-than-expected orders or cancellations of orders, leading to a sharp reduction of sales and backlog. Further, if orders or forecasts for products that meet a customer’s unique requirements are canceled or unrealized, we may be left with an inventory of unsaleable products, causing potential inventory write-offs, and hindering our ability to recover our costs. The foregoing risks may be exacerbated in times of macroeconomic uncertainty, including as a result of elevated inflation, high interest rates, bank failures and slower economic growth or recession. Incorrect forecasts, or reductions, cancellations or delays in orders for our products, could adversely affect our operating results.
Our semiconductor products are complex and we may be subject to warranty, indemnity or product liability claims, which could result in significant costs and damage to our reputation and adversely affect customer relationships, the market acceptance of our products and our operating results.
Semiconductor products are highly complex and may contain defects that affect their quality or performance. Failures in our products and services or in the products of our customers could result in damage to our reputation for reliability and increase our legal or financial exposure to third parties. Certain of our products and services, including those that may incorporate, or are based upon, software or AI technology, could also contain security vulnerabilities, defects, bugs and errors, which could also result in significant data losses, security breaches and theft of intellectual property. We generally warrant that our products will meet their published specifications, and that we will repair or replace defective products, for one year from the date title passes from us to the customer. We invest significant resources in the testing of our products; however, if any of our products contain security vulnerabilities, defects, bugs or errors, we may be required to incur additional development and remediation costs pursuant to warranty and indemnification provisions in our customer contracts and purchase orders. These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others, including liability for costs and expenses associated with product defects, including recalls, which may adversely impact our reputation and operating results. We may also be subject to customer intellectual property indemnity claims. Our customers have on occasion been sued, and may be sued in the future, by third parties alleging infringement of intellectual property rights, or damages resulting from use of our products. Those customers may seek indemnification from us under the terms and conditions of our sales contracts with them. In certain cases, our potential indemnification liability may be significant.
Further, we sell to customers in industries such as automotive (including autonomous vehicles), aerospace, defense and healthcare, where failure of the systems in which our products are integrated could cause damage to property or persons. We may be subject to product liability claims if our products, or the integration of our products, cause system failures. Any product liability claim, whether or not determined in our favor, could result in significant expense, divert the efforts of our technical and management personnel, and harm our business. In addition, if any of our products contain defects, or have reliability, quality or compatibility problems not capable of being resolved, our reputation may be damaged, which could make it more difficult for us to sell our products to customers and which could also adversely affect our operating results.
The fabrication of integrated circuits is highly complex and precise, and our manufacturing processes utilize a substantial amount of technology. Minute impurities, contaminants in the manufacturing environment, difficulties in the fabrication process, defects in the masks used in the wafer manufacturing process, manufacturing equipment failures, wafer breakage or other factors can cause a substantial percentage of wafers to be rejected or numerous dice on each wafer to be nonfunctional. While we have significant expertise in semiconductor manufacturing, it is possible that some processes could become unstable. This instability could result in manufacturing delays and product shortages, which could have a material adverse effect on our operating results.
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Risks Related to Acquisitions and Strategic Transactions
To remain competitive, we may need to invest in or acquire other companies, purchase or license technology from third parties, or enter into other strategic transactions in order to introduce new products or enhance our existing products.
An element of our business strategy involves expansion through the acquisitions of businesses, assets, products or technologies that allow us to complement our existing product offerings, diversify our product portfolio, expand our market coverage, increase our engineering workforce, expand our technical skill sets or enhance our technological capabilities. We may not be able to identify businesses that have the technology or resources we need and, if we find such businesses, we may not be able to invest in, purchase or license the technology or resources on commercially favorable terms or at all. Acquisitions, investments and technology licenses are challenging to complete for a number of reasons, including difficulties in identifying potential targets, the cost of potential transactions, competition among prospective buyers and licensees, the need for regulatory approvals, and difficulties related to integration efforts. In addition, investments in companies are subject to a risk of a partial or total loss of our investment. Both in the United States and abroad, governmental regulation of acquisitions, including antitrust and other regulatory reviews and approvals, has become more complex, increasing the costs and risks of undertaking, and may prevent us from consummating, significant acquisitions. In order to finance a potential transaction, we may need to raise additional funds by issuing securities or borrowing money. We may not be able to obtain financing on favorable terms, and the sale of our stock may result in the dilution of our existing shareholders or the issuance of securities with rights that are superior to the rights of our common shareholders.
Acquisitions also involve a number of challenges and risks, including:
•diversion of management’s attention in connection with both negotiating the transaction and integrating the acquired assets and businesses;
•difficulty or delay integrating acquired technologies, operations, processes, policies, procedures, systems, technologies, infrastructure and personnel with our existing businesses;
•strain on managerial and operational resources as management oversees larger or more complex operations;
•future funding requirements for acquired companies, including research and development costs, employee compensation and benefits, and operating expenses, which may be significant;
•servicing significant debt that may be incurred in connection with acquisitions;
•potential loss of key employees;
•exposure to unforeseen liabilities or regulatory compliance issues of acquired companies;
•higher than expected or unexpected acquisition or integration costs;
•difficulty realizing expected cost savings, operating synergies and growth prospects of an acquisition in a timely manner or at all; and
•increased risk of costly and time-consuming legal proceedings.
If we are unable to successfully address these risks, we may not realize some or all of the expected benefits of our acquisitions, which may have an adverse effect on our business strategy, plans and operating results.
Risks Related to Cyber, Artificial Intelligence, Intellectual Property, Legal and Regulatory
Our computer systems and networks are subject to attempted security breaches and other cyber incidents and a significant disruption in, or breach in security of, our information technology systems or certain products could materially and adversely affect our business or reputation.
We rely on information technology systems throughout our company to keep financial records and customer data, process orders, manage inventory, coordinate shipments to customers, maintain confidential and proprietary information, assist in semiconductor engineering and other technical activities and operate other critical functions such as internet connectivity, network communications and email. In addition, we provide our confidential and proprietary information to our strategic partners in certain cases, who may maintain such information on their information technology systems. While in the past we have experienced cybersecurity attacks and incidents, we believe that they have not had a material impact on our business. Our security measures or those of our third-party service providers or strategic partners may not detect or prevent security breaches, cyberattacks, defects, bugs or errors. Further, geopolitical tensions and conflicts have escalated the volume and sophistication of cyberattacks. Because the tactics and techniques used by threat actors to obtain unauthorized access to or sabotage systems change frequently and, in some cases, are not recognized until they are launched or even later, we may be unable to anticipate these techniques or to implement adequate preventative measures in advance, and security breaches may remain undetected for an extended period of time. Our use of AI may also increase vulnerability to cybersecurity risks, including through unauthorized use or misuse of AI tools and bad inputs or logic or the introduction of malicious code incorporated into AI
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generated code. AI and machine learning also may be used for certain cybersecurity attacks, improving or expanding the existing capabilities of threat actors in manners we cannot predict at this time, resulting in greater risks of security incidents and breaches. We and our third-party service providers or strategic partners are susceptible to security breaches of information technology systems or certain products and other incidents such as unauthorized access, supply-chain attacks, exfiltration or destruction of data, disruption of service, viruses or other malicious code, illegal break-ins or hacking, sabotage, phishing attempts and other forms of social engineering, malware, ransomware and other forms of cyber extortion and similar events. These threats may come from cybercriminals, cyberterrorists and hacktivists, nation-state and nation-state-supported actors (including advanced persistent threat intrusions) and computer hackers. They also may result from the malicious or accidental acts of our employees, contractors or third-party providers. In the event of unauthorized access to, or a security breach of, our systems or those of our third-party service providers or strategic partners, our operations may be disrupted and our proprietary information or that of our employees, contractors, partners, customers, suppliers or other third parties may be misappropriated. In the event of a cybersecurity attack or incident, we could be exposed to potential liability, litigation, and regulatory action, as well as the loss of existing or potential customers, damage to our reputation and other financial loss. In addition, the cost and operational consequences of responding to breaches and implementing remediation measures could be significant. Furthermore, the continuing and evolving threat of cyberattacks has resulted in increased regulatory focus and we may be required to invest significant additional resources to comply with evolving cybersecurity regulations. For example, the SEC adopted rules requiring the disclosure of cybersecurity incidents that we determine to be “material,” to be made within four business days of such determination, which can be complex, requiring a number of assumptions based on several factors. It is possible that the SEC may not agree with our determinations, which could result in fines, civil litigation or damage to our reputation.
Our information technology systems and those of our third-party service providers and strategic partners may also be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, catastrophes or other unforeseen events. A prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
We face risks related to the use of AI in our business operations, products and services.
We are increasingly incorporating AI capabilities into the development of technologies and our business operations and into our products and services. The development and deployment of AI involves significant competitive, legal, regulatory and other risks. The implementation of AI is costly, requires a significant amount of data and there can be no assurance that AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability. In addition, we face significant competition from other companies that are incorporating AI into their products and technologies. These other companies may incorporate AI in products or technologies that are similar to, or that customers perceive as superior to, our technologies or are more cost-effective to develop and deploy. AI technology is complex and rapidly evolving, and if we are unable to innovate quickly enough to keep pace with these rapid technological developments, our business could be harmed.
AI technology may also give rise to significant legal and regulatory liability. Governments around the world have adopted, and may continue to adopt, laws and regulations related to AI, including the European Union’s AI Act, and several U.S. government agencies have increased investigations and enforcement efforts related to the use of AI technology, which could increase our compliance costs and limit our ability to use AI in the development of our products and services. While the incoming administration has signaled that AI policy will be a priority, the scope and impact of any such policies cannot yet be determined. In addition, the use of AI in the development of our products and services, or by our customers in end products that incorporate our products, could cause loss of intellectual property, or subject us to risks related to intellectual property infringement or misappropriation, data privacy or cybersecurity. AI algorithms or training methodologies may also be flawed, and datasets may contain irrelevant, insufficient or biased information. Further, AI technology has many applications, and our products could be used in applications that are not in accordance with our controls, policies and procedures. Any failure or perceived failure by us to comply with any legal or regulatory requirement could subject us to legal liabilities, damage our reputation or otherwise adversely affect our business.
We may be unable to adequately protect our proprietary intellectual property rights, which may limit our ability to compete effectively.
Our future success depends, in part, on our ability to protect our intellectual property. We primarily rely on patent, mask work, copyright, trademark and trade secret laws, as well as nondisclosure agreements, information security practices and other methods, to protect our proprietary information, technologies and processes. Despite our efforts to protect our intellectual property, it is possible that competitors or other unauthorized parties may obtain or disclose our confidential information, reverse engineer or copy our technologies, products or processes, make unlicensed copies or engage in unapproved distributions of our technology for unauthorized uses, or otherwise misappropriate our intellectual property. Moreover, the laws of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our intellectual property.
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There can be no assurance that the claims allowed in our issued patents will be sufficiently broad to protect our technology. In addition, any of our existing or future patents may be challenged, invalidated or circumvented. As such, any rights granted under these patents may not prevent others from exploiting our proprietary technology. We may not be able to obtain foreign patents or pending applications corresponding to our U.S. patents and applications. Even if patents are granted, we may not be able to effectively enforce our rights. If our patents and mask works do not adequately protect our technology, or if our registrations expire prior to end of life of our products, our competitors may be able to offer products similar to ours. Our competitors may also be able to develop similar technology independently or design around our patents.
We generally enter into confidentiality agreements with our employees, consultants and strategic partners. We also try to control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products or technology without our authorization. Also, former employees may seek employment with our business partners, customers or competitors, and may improperly use our proprietary information at their employer.
If we fail to comply with U.S. and foreign laws related to privacy, data security and data protection, it could adversely affect our operating results and financial condition.
We are or may become subject to a variety of laws and regulations such as the European Union’s General Data Protection Regulation (GDPR), China’s Personal Information Protection Law (PIPL), or California’s Consumer Privacy Act (CCPA) regarding privacy, data protection and data security. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws.
In particular, there are numerous U.S. federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. For example, the GDPR and PIPL include operational requirements for companies that receive or process personal data of residents of the European Union or China, as applicable, that are broader and more stringent than those in many other jurisdictions around the world. The GDPR includes significant penalties for non-compliance, and China’s PIPL imposes additional operational requirements relating to processing personal information and provides comprehensive penalty and enforcement mechanisms. In the United States, California enacted the CCPA that requires covered companies to provide additional disclosures and data rights to data subjects, including employees. The California Privacy Rights Act expands the CCPA and establishes the California Privacy Protection Agency to enforce Californians’ privacy rights under the CCPA. Since the CCPA was enacted, other states, including Virginia and Colorado, have enacted or are in the process of enacting comprehensive privacy schemes.
The costs of compliance with, and other burdens imposed by, the GDPR, CCPA and similar laws may limit the use and adoption of our products and services and require us to incur substantial compliance costs, which could have an adverse impact on our business. Further, our product offerings in the digital healthcare solutions space, which include the collection and processing of sensitive personal information, subject us to heightened requirements under data privacy laws, such as the Health Insurance Portability and Accountability Act.
Given that the scope, interpretation and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or third-party service providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation or negative publicity, and could have an adverse effect on our operating results and financial condition.
We are occasionally involved in litigation, administrative proceedings, and regulatory proceedings, which could be costly to resolve and could require us to redesign products, pay significant royalties or fines or refrain from engaging in specific conduct.
From time to time, we are involved in various legal, administrative and regulatory proceedings, claims, demands and investigations relating to our business, including inquiries from and discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations, which may result in claims, fines or penalties with respect to commercial, product liability, intellectual property, AI, cybersecurity, privacy, data protection, antitrust, breach of contract, employment, class action, whistleblower, mergers and acquisitions and other matters. We could also be subject to litigation or arbitration disputes arising under our contractual obligations, customer indemnity, warranty or product liability claims, or other matters that could lead to significant costs and expenses as we defend those claims or pay damage awards.
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Further, the semiconductor industry is characterized by frequent claims and litigation involving patent and other intellectual property rights. Other companies or individuals have obtained patents covering a variety of semiconductor designs and processes, and we might be required to obtain licenses under some of these patents or be precluded from making and selling infringing products, if those patents are found to be valid and infringed by us. In the event a third party makes a valid intellectual property claim against us and a license is not available to us on commercially reasonable terms, or at all, we could be forced either to redesign or to stop production of products incorporating that intellectual property, and our operating results could be materially and adversely affected. Litigation may be necessary to enforce our patents or other of our intellectual property rights or to defend us against claims of infringement.
These matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Allegations made in the course of regulatory or legal proceedings may also harm our reputation, regardless of whether there is merit to such claims. Because litigation and the outcome of regulatory proceedings are inherently unpredictable, our business, financial condition or operating results could be materially affected by one or more of these proceedings, claims, demands or investigations. There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters. An adverse outcome in litigation or arbitration could have a material adverse effect on our financial position or on our operating results or cash flows.
Environmental, social and governance matters may have an adverse effect on our business, financial condition and results of operations, and damage our brand and reputation.
There is an increasing focus from regulators, investors, customers, employees and potential talent, as well as other stakeholders, concerning ESG matters, including climate change and sustainability, human rights, support for local communities, Board of Directors’ and employee diversity, human capital management, employee health and safety practices, product quality, worker rights, supply chain management and corporate governance and transparency. If our ESG practices fail to meet our or the evolving expectations of investors, customers, employees or other stakeholders, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us. Current and prospective investors are increasingly utilizing ESG data to inform their decisions, including investment and voting decisions, using a multitude of evolving score and rating frameworks. Further, customers utilize ESG data to inform their purchasing decisions. Additionally, public interest and legislative and regulatory pressure related to companies’ ESG practices, including those related to sourcing practices, carbon emissions and human rights protections, continue to grow. This will require us to align our programs to such expectations and disclose an increasing amount of information and data to illustrate our position and progress and to support our customers to comply with regulations and other requirements. If we do not adapt our strategy or execution quickly enough to meet evolving regulatory requirements or the expectations of our investors, customers, employees, regulators or other stakeholders, or if our ESG disclosures, including data input, processing and reporting, are incomplete or inaccurate, our business, financial condition, results of operations, brand and reputation could be adversely affected.
We are subject to environment, health and safety standards and hazards which have the potential to adversely affect our business, increase our expenses and adversely affect our reputation.
Our industry is subject to EHS requirements and laws, particularly those that control and restrict the sourcing, use, transportation, emission, discharge, storage and disposal of certain substances and materials and those that help promote the health and safety of our employees and the communities in which we operate. For certain facilities, we are required to obtain environmental permits from governmental authorities for our operations, which may limit or restrict our operations. In addition, our operations may be interrupted or restricted by the phase-out or ban of certain substances, materials or processes, which may impact the sourcing, supply and pricing of materials used in manufacturing our products. For example, several jurisdictions have sought or may seek to restrict the use of per- and polyfluoroalkyl substances (PFAS), which may be found in process chemicals, parts, components and other materials used in semiconductor manufacturing and have limited technically and commercially feasible alternatives. Any such restriction in our ability to access supplies may adversely affect our results of operations. Further, public attention to environmental and social responsibility remains high, and our customers routinely include stringent environmental and other standards in their contracts with us. It is expected that there will be changes to EHS laws or regulations by the incoming administration, but the impacts of any such changes on us are not currently known. Changes in EHS laws or regulations, uncertainties about those laws or regulations, or customer requirements may require us to invest in equipment, make manufacturing process or material changes or re-assess current and planned expenditures and initiatives, any of which could adversely affect our business, financial condition and results of operations.
In addition, we use hazardous and other regulated materials that subject us to risks of liability for damages caused by potential or actual releases of such materials. Any failure to control such materials adequately or to comply with existing or future EHS statutory or regulatory standards, requirements or contractual obligations could result in any of the following, each of which could have a material adverse effect on our business and operating results:
•liability for damages and remediation;
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•the imposition of regulatory penalties and civil and criminal fines;
•the suspension or termination of the development, manufacture, sale or use of certain of our products;
•changes to our manufacturing processes or a need to substitute materials that may cost more or be less available;
•damage to our reputation; or
•increased expenses associated with compliance.
If we fail to comply with government contracting regulations, we could suffer a loss of revenue or incur price adjustments or other penalties.
Some of our revenue is derived from contracts with agencies of the United States government and subcontracts with its prime contractors. As a United States government contractor or subcontractor, we are subject to federal contracting regulations, including the Federal Acquisition Regulations, which govern the allowability of costs incurred by us in the performance of United States government contracts. Certain contract pricing is based on estimated direct and indirect costs, which are subject to change. Additionally, the United States government is entitled after final payment on certain negotiated contracts to examine all of our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that we failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract. Further, United States government contracts contain provisions and are subject to laws and regulations that may give the United States government rights and remedies not typically found in commercial contracts, including certain intellectual property rights and restrictions on future business.
In connection with our United States government business, we are subject to evolving procurement rules and regulations, as well as government audits and to review and approval of our policies, procedures, and internal controls for compliance with procurement regulations and applicable laws, such as the Cybersecurity Maturity Model Certification. In certain circumstances, if we do not comply with the terms of a government contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could in extreme circumstances be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period of time. Any such suspension or debarment or other sanction could have an adverse effect on our business and reputation.
Under some of our government subcontracts, we are required to maintain secure facilities and to obtain security clearances for personnel involved in performance of the contract, which can be time consuming and costly. If we are unable to comply with these requirements, or if personnel critical to our performance of these contracts are unable to obtain or maintain their security clearances, we may be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue.
Damage to our reputation can damage our business.
Our reputation is a critical factor in our relationships with customers, employees, governments, suppliers and other stakeholders. Our failure to address, or the appearance of our failure to address, issues that give rise to reputational risk, including those described in this Risk Factors section, could significantly harm our reputation and our brands. We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and services. It may also limit our ability to be seen as an employer of choice when competing for highly skilled employees and repairing our reputation and brands may be difficult, time-consuming, and expensive. To the extent we fail to respond quickly and effectively to address corporate and brand crises, the ensuing negative public reaction could significantly harm our reputation and our brands, which could lead to increases in litigation claims and asserted damages or subject us to regulatory actions or restrictions. If we fail to maintain, enhance and protect our brands, if we incur excessive expenses in this effort or if customers or potential customers are confused by others’ trademarks, our business, operating results and financial condition may be materially and adversely affected.
Increases in our effective tax rate, exposure to additional tax liabilities, or substantial changes in domestic or international corporate tax policies, regulations or guidance may adversely impact our results of operations.
Our effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where our income is earned. Our effective tax rate for the fiscal year ended November 2, 2024 was below the U.S. federal statutory rate of 21%. This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.
A number of factors may increase our future effective tax rate, including: new or revised tax laws or legislation or the interpretation of such laws or legislation by governmental authorities; increases in tax rates in various jurisdictions; variation in the mix of jurisdictions in which our profits are earned and taxed; deferred taxes arising from basis differences in investments in foreign subsidiaries; any adverse resolution of ongoing tax audits or adverse rulings from taxing authorities worldwide; changes
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in the valuation of our deferred tax assets and liabilities; adjustments to income taxes upon finalization of various tax returns; increases in expenses not deductible for tax purposes, including executive compensation subject to the limitations of Section 162(m) of the Internal Revenue Code and amortization of assets acquired in connection with strategic transactions; decreased availability of tax deductions for stock-based compensation awards worldwide; and changes in available tax credits. Any significant increase in our future effective tax rate could adversely impact our net income during future periods.
Tax legislation and regulation may require the collection of information not regularly produced by us, and therefore necessitate the use of estimates in our Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions, which may subject us to additional tax liability, tax examination and other risks. As regulations and guidance evolve with respect to tax legislation and regulation, and as more information is gathered and analyzed, our results may differ from previous estimates and may materially affect our Consolidated Financial Statements. Further, we are subject to, and are under tax examination and audit in various jurisdictions, including an IRS income tax audit for the fiscal years ended October 30, 2021, November 2, 2019 (fiscal 2019) and November 3, 2018; a pre-Acquisition IRS income tax audit for Maxim Integrated Products, Inc.’s (Maxim) fiscal years ended June 27, 2015 through August 26, 2021; and various U.S. state and local tax audits and international audits, including an Irish corporate tax audit for fiscal 2019. Such jurisdictions may assess additional income tax against us. The final determination of tax audits or any administrative appeals relating thereto could be materially different from our income tax provisions and accruals. The ultimate result of any current or future audit could have a material adverse effect on our results of operations and cash flows in the period or periods for which that determination is made.
We are also subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction. In the United States, for example, the Inflation Reduction Act (IRA) imposes a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion. We do not believe that the IRA will materially impact our effective tax rate. Corporate tax reform, anti-base-erosion rules and tax transparency continue to be high legislative or regulatory priorities in many jurisdictions. Changes in laws and regulations regarding these matters could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations. For example, the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Sharing Plans, which implement a minimum global effective tax rate of 15%, will apply to us beginning in fiscal year 2025. We continue to monitor potential impacts related to this legislation as countries implement it and the OECD provides additional guidance. As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase.
Risks Related to Financial Markets, Indebtedness and Capital Return
We have substantial existing indebtedness and the ability to incur significant additional indebtedness, which could limit our operations and our use of our cash flow and negatively impact our credit ratings.
As of November 2, 2024, we had approximately $7.6 billion in outstanding indebtedness, including $0.5 billion of short-term commercial paper. In addition, we had the ability to incur approximately $2.0 billion of additional indebtedness in direct borrowings under our outstanding commercial paper facility based on amounts available under our unsecured revolving credit facility that were not being used to backstop our outstanding commercial paper balance. Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions. Further, our net interest expense is exposed to changes in market interest rates. We may also incur additional debt, including debt with variable interest rates, in the future, which would exacerbate these risks.
Our ability to make payments of principal and interest on our indebtedness when due depends upon our future operating performance, which may be impacted by general economic conditions, industry cycles and other factors beyond our control. If we are unable to service or refinance our debt, we may be required to divert funds that would otherwise be invested in growing our business operations or returned to shareholders, repatriate earnings as dividends from foreign locations with potential negative tax consequences, or sell selected assets. Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results. In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms. In the case of financing or refinancing, favorable interest rates will depend on conditions in the debt capital markets. In addition, if our credit ratings are downgraded or put on watch for a potential downgrade, the applicable interest rate on borrowings under our current revolving credit facility and commercial paper issuances may rise and our ability to obtain additional financing or refinance our existing debt may be negatively affected.
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Restrictions in our revolving credit facility and outstanding debt instruments may limit our activities.
Our current revolving credit facility and outstanding debt instruments impose, and future debt instruments to which we may become subject may impose, restrictions that limit our ability to engage in activities that could otherwise benefit us, including to undertake certain transactions, to create certain liens on our assets and to incur certain subsidiary indebtedness. Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as changes in technology, government regulations and the level of competition in our markets. In addition, our revolving credit facility requires us to maintain compliance with specified financial ratios. If we breach any of the covenants under our revolving credit facility, the indentures governing our outstanding senior unsecured notes, or any future debt instruments to which we may become subject and do not obtain appropriate waivers, then, subject to applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable and we may be restricted from further borrowing under our revolving credit facility.
We may not meet expectations or targets in connection with our “green” financing arrangements, which could harm our reputation and business.
From time to time, we may enter into “green” financing arrangements that require us to use proceeds for environmental sustainability purposes or have targets related to environmental sustainability. For example, we entered into a revolving credit agreement on June 23, 2021, which, as amended, contains a sustainability-linked pricing component, which provides for interest rate and facility fee reductions or increases based on meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage. For calendar year 2023, we exceeded the target thresholds for greenhouse gas emissions and renewable energy usage related to this sustainability-linked pricing component, which resulted in immaterial adjustments to administrative and interest fees due under the facility. On October 5, 2021, we issued $750 million sustainability-linked senior notes (Sustainability-Linked Senior Notes). Our 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 per annum from April 1, 2026 to their maturity on October 1, 2028 unless the Sustainability Performance Target (as defined in the Sustainability-Linked Senior Notes) has been satisfied. Failing to use the net proceeds under green financing arrangements that satisfies investor criteria and expectations regarding environmental impact or achieve targets related to environmental sustainability under such financing arrangements could result in reputational harm and our business and operating results could be negatively impacted.
If we are not able to meet our U.S. cash requirements, it may be necessary for us to consider repatriation of foreign earnings, which could have a material adverse effect on our results of operations and financial condition.
We carry outside basis differences in certain of our subsidiaries, primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested. We intend to reinvest these funds in our international operations, and our current plans do not demonstrate a need to repatriate these earnings to fund our U.S. cash requirements. However, we require a substantial amount of cash in the United States for operating requirements, stock repurchases, cash dividends and acquisitions. If we are not able to meet our U.S. cash requirements through operations, borrowings under our current revolving credit facility, issuances under our commercial paper program, future debt or equity offerings or other sources of cash obtained at an acceptable cost, it may be necessary for us to consider repatriation of earnings that are indefinitely reinvested, and we may be required to pay additional taxes under current tax laws, which could have a material adverse effect on our results of operations and financial condition.
General Risk Factors
Our results of operations could be affected by natural disasters or other catastrophic events in the locations in which we or our key partners operate.
We, like many companies in the semiconductor industry, rely on supplies, services, internal manufacturing capacity, wafer fabrication foundries and other subcontractors in locations around the world that are susceptible to natural disasters and other significant disruptions. Earthquakes, fires, tsunamis, extreme precipitation and flooding, public health emergencies or other catastrophic events may disrupt local semiconductor-related businesses and adversely affect manufacturing capacity, availability and cost of key raw materials, utilities and equipment, and availability of key services, including transport of our products worldwide. Our insurance may not adequately cover losses resulting from such disruptions. Any prolonged inability to utilize one of our manufacturing facilities, or those of our subcontractors or third-party wafer fabrication foundries, or to access key raw materials, utilities and equipment as a result of fire, flood, natural disaster, unavailability of utilities or otherwise, could result in a temporary or permanent loss of customers for affected products, which could have a material adverse effect on our results of operations and financial condition. In addition, global climate change may result in certain natural disasters or other severe weather events occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, extreme temperatures and flooding, and could disrupt the availability of water necessary for the operation of our fabrication
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facilities. The long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear, but could be severe.
Our stock price may be volatile.
The market price of our common stock may be volatile, as it may be significantly affected by factors including:
•global economic conditions generally;
•crises in global credit, debt and financial markets;
•actual or anticipated fluctuations in our revenue and operating results;
•changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications, or our failure to perform in line with those estimates or statements or our published guidance;
•financial results and prospects of our customers;
•U.S. and foreign government actions, including with respect to trade, travel, export and taxation;
•changes in market valuations of other semiconductor companies;
•rumors and speculation in the press, investment community or on social media about us, our customers or other companies in our industry;
•announcements by us, our customers or our competitors of significant new products, technical innovations, material transactions, acquisitions or dispositions, litigation, capital commitments, including share repurchases and dividend policies, or revised earnings estimates;
•departures of key personnel;
•alleged noncompliance with laws, regulations or ethics standards by us or any of our employees, officers or directors; and
•negative media publicity targeting us or our suppliers, customers or competitors.
The stock market has historically experienced volatility, especially within the semiconductor industry, that often has been unrelated to the performance of particular companies, such as the response to elevated inflation and high interest rates. These market fluctuations may cause our stock price to fall regardless of our operating results.
Our directors and executive officers periodically buy or sell shares of our common stock in the market, including pursuant to Rule 10b5-1 trading plans. Regardless of the individual’s reasons for such purchases or sales, securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
As part of our enterprise security program, we perform risk assessments relating to cybersecurity and technology risks. Our enterprise security program has been developed based on industry standards, including those published by the International Organization for Standardization (ISO) and the National Institute of Standards and Technology. The program includes a comprehensive set of enterprise security policies and procedures that guide our protection strategy. Our policies, procedures and practices include, but are not limited to:
•identifying critical assets and high-risk threats and analyzing identified risks to determine the potential impact on the organization and the likelihood of occurrence;
•cybersecurity detection, controls and remediation practices, including vulnerability assessments, penetration testing and tabletop exercises;
•an incident response and recovery plan that includes escalation protocols, procedures for containment of incidents and investigation and remediation procedures;
•installation of and regular updates to antivirus software on all company managed systems and workstations to detect and prevent malicious code from impacting our systems;
•conducting regular workforce trainings for employees to identify cybersecurity concerns and educate employees on potential risks and best practices;
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•evaluating the effectiveness of our program by performing internal assessments;
•periodic external audits by an independent third party to test for the adequacy of, and compliance with, controls and standards; and
•regular collaboration with leading global security providers, intelligence and law enforcement communities and industry peers to exchange information on trends and best practices in order to address new and evolving cybersecurity risks.
We have in place a third-party risk management program to evaluate the cyber postures of our critical partners’ who handle the Company’s sensitive data in order to identify, monitor and address material cybersecurity risks that may arise from such third-party relationships.
While we have experienced cybersecurity incidents in the past, in the last three years we have not experienced any cybersecurity incidents that have materially affected or are currently viewed as reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. However, the scope and impact of any future incidents cannot be predicted and there can be no assurance that our enterprise security program will be effective in preventing material cybersecurity incidents in the future.
See the risk factor titled “Our computer systems and networks are subject to attempted security breaches and other cyber incidents and a significant disruption in, or breach in security of, our information technology systems or certain products could materially and adversely affect our business or reputation.” in Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K for further information.
Governance
Management is responsible for assessing and managing our day-to-day risks and control systems, and our Board is responsible for overseeing our enterprise risk management programs as a whole. The Board has delegated the oversight of cybersecurity risk assessment and management to the audit committee. As reflected in its charter, the audit committee is responsible for overseeing and reviewing the Company’s cybersecurity and information security programs, practices and risk mitigation efforts. The audit committee receives quarterly reports on cybersecurity risks, or more frequent reports if circumstances dictate.
We have established a cross-functional Cybersecurity Steering Committee, comprised of our Chief Information Officer (CIO), our Chief Information Security Officer (CISO) and other senior management. The Cybersecurity Steering Committee is charged with overseeing the management of our enterprise security program, including reviewing and prioritizing cybersecurity risks, monitoring potential incidents, establishing key mitigation initiatives, overseeing cybersecurity governance and promoting and supporting cybersecurity best practices. The Cybersecurity Steering Committee is chaired by our CISO, who reports to our CIO. Both our CISO and our CIO have extensive experience in assessing and managing cybersecurity programs and risk management through serving in various senior roles in information technology and cybersecurity, serving on external Boards of Directors and holding multiple industry-recognized certifications.
The prevention, detection, mitigation and remediation of cybersecurity incidents is accomplished pursuant to various policies, procedures and processes, including our incident response and recovery plan and the other elements of our enterprise security program described above under “Risk Management and Strategy.” These measures include escalation protocols through which the Cybersecurity Steering Committee is informed about cybersecurity and incidents by our CISO. As part of our enterprise security program, we have communication processes enabled for employees to identify and report threats or potential vulnerabilities.
Our CIO and CISO provide regular updates to the full Board on the performance of, and enhancements to, key information technology projects, our enterprise security program and risk mitigation efforts, including relevant findings of the Cybersecurity Steering Committee. The full Board also receives updates from the audit committee. In addition, there are protocols in place for immediate escalation in the event of any cybersecurity issues or developments that may require consideration between regularly scheduled audit committee or Board meetings. Our internal audit team also provides regular updates to the audit committee on the performance of our enterprise security program from an internal audit perspective. In addition, our Chief Compliance and Risk Officer, who oversees our overall enterprise risk management and compliance programs and chairs our Enterprise Risk Management Committee, provides regular reports to the full Board, including periodic updates on risk management.
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ITEM 2. PROPERTIES
Manufacturing and other operations are conducted in several locations worldwide. The following tables provide certain information about our significant general offices and manufacturing facilities:
| Properties | Approximate | |||||||||||||
| Owned: | Use | Total Sq. Ft. | ||||||||||||
| Cavite, Philippines | Wafer probe and testing, warehouse, engineering and administrative offices | 1,486,000 sq. ft. | ||||||||||||
| Wilmington, MA | Corporate headquarters, wafer fabrication, testing, engineering, sales, marketing and administrative offices | 826,000 sq. ft. | ||||||||||||
| Limerick, Ireland | Wafer fabrication, wafer probe and testing, warehouse and distribution, engineering and administrative offices | 708,500 sq. ft. | ||||||||||||
Penang, Malaysia (1) | Wafer probe and testing, assembly and engineering offices | 697,000 sq. ft. | ||||||||||||
| Beaverton, OR | Wafer fabrication, engineering and administrative offices | 458,000 sq. ft. | ||||||||||||
| San Jose, CA | Engineering, sales, marketing and administrative offices | 441,000 sq. ft. | ||||||||||||
| Chonburi Province, Thailand | Wafer probe and testing, warehouse, engineering and administrative offices | 194,000 sq. ft. | ||||||||||||
| Chelmsford, MA | Final assembly of certain module and subsystem-level products, testing, engineering and administrative offices | 174,000 sq. ft. | ||||||||||||
| Camas, WA | Wafer fabrication | 97,000 sq. ft. | ||||||||||||
| Lease | ||||||||||||||||||||||||||
| Properties | Approximate | Termination | ||||||||||||||||||||||||
| Leased: | Use | Total Sq. Ft. | (fiscal year) | Renewals | ||||||||||||||||||||||
| Bangalore, India | Engineering and administrative offices | 175,000 sq. ft. | 2027 | 1, five-yr. period | ||||||||||||||||||||||
Durham, NC | Testing, engineering, and administrative offices | 156,000 sq. ft. | 2035 | 2, five-yr. periods | ||||||||||||||||||||||
| San Jose, CA | Manufacturing, marketing and administrative offices | 102,000 sq. ft. | 2033 | 1, five-yr. period | ||||||||||||||||||||||
(1)Leases on the land used for this owned facility expire in 2054 through 2057.
In addition to the properties listed in the above tables, we also own or lease a number of other facilities in various locations in the United States and internationally that are used for manufacturing, engineering, sales and marketing and administration activities. Leases for these leased facilities expire at various dates through the year 2039. We do not anticipate experiencing significant difficulty in retaining occupancy of any of our facilities through lease renewals prior to expiration or through month-to-month occupancy, or in replacing them with equivalent facilities. For information concerning our obligations under all operating leases, see Note 9, Leases, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
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ITEM 3. LEGAL PROCEEDINGS
From time to time in the ordinary course of our business, we are involved in various claims, charges and litigation arising from, or related to, among other things, contractual matters, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employee benefits. As to such claims and litigation, we can give no assurance that we will prevail. We do not believe that any current legal matters will have a material adverse effect on our financial position, results of operations or cash flows. For information regarding material pending legal proceedings in which we are involved, see Note 10, Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on The Nasdaq Global Select Market under the symbol ADI. The number of holders of record of our common stock at November 22, 2024 was 2,230. This number does not include shareholders for whom shares are held in a “nominee” or “street” name. On November 1, 2024, the last reported sales price of our common stock on The Nasdaq Global Select Market was $225.48 per share.
On November 25, 2024, our Board of Directors declared a cash dividend of $0.92 per outstanding share of common stock. The dividend will be paid on December 20, 2024 to all shareholders of record at the close of business on December 9, 2024 and is expected to total approximately $456.6 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors. The payment of future dividends, if any, will be based on several factors, including our financial performance, outlook and liquidity.
Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Item 12 of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities
The table below summarizes the activity related to stock repurchases for the three months ended November 2, 2024. We have an ongoing authorization, originally approved by our Board of Directors in 2004, and subsequently amended, to repurchase shares of our common stock in open market or negotiated transactions. As of November 2, 2024, the Company had repurchased a total of approximately 207.7 million shares of its common stock for approximately $15.0 billion under our share repurchase program. An additional $1.7 billion remains available for repurchase of shares under the current authorized program. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.
| Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| August 4, 2024 through August 31, 2024 | 143,269 | $ | 219.84 | 95,944 | $ | 1,712,491,367 | ||||||||||||||||||||
| September 1, 2024 through September 28, 2024 | 109,336 | $ | 223.90 | 102,240 | $ | 1,689,594,092 | ||||||||||||||||||||
| September 29, 2024 through November 2, 2024 | 169,648 | $ | 227.53 | 163,568 | $ | 1,652,367,857 | ||||||||||||||||||||
| Total | 422,253 | $ | 223.98 | 361,752 | $ | 1,652,367,857 | ||||||||||||||||||||
_______________________________________
(1)Includes 60,501 shares withheld by us from employees to satisfy employee tax obligations upon vesting of restricted stock units/awards granted to our employees under our equity compensation plans.
(2)The average price paid for shares in connection with vesting of restricted stock units/awards are averages of the closing stock prices at the vesting dates which are used to calculate the number of shares to be withheld.
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Comparative Stock Performance Graph
The following graph compares cumulative total shareholder return on our common stock since November 2, 2019 with the cumulative total return of the Standard & Poor’s (S&P) 500 Index and the S&P Semiconductors Index. This graph assumes the investment of $100 on November 2, 2019 in our common stock, the S&P 500 Index and the S&P Semiconductors Index and assumes all dividends are reinvested. Measurement points are the last trading day for each respective fiscal year.
ITEM 6. RESERVED
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all tabular amounts in thousands except per share amounts)
The following discussion includes results of operations and financial condition for the fiscal year ended November 2, 2024 (fiscal 2024) and the fiscal year ended October 28, 2023 (fiscal 2023) and year-over-year comparisons between fiscal 2024 and fiscal 2023. For discussion on results of operations and financial condition for fiscal 2023 and the fiscal year ended October 29, 2022 (fiscal 2022) and year-over-year comparisons between fiscal 2023 and fiscal 2022, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2023 filed with the Securities and Exchange Commission on November 21, 2023. Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2024 was a 53-week fiscal period, while fiscal 2023 was a 52-week fiscal period. The additional week in fiscal 2024 is included in the first quarter ended February 3, 2024. Therefore, fiscal 2024 includes an additional week of operations as compared to fiscal 2023.
Results of Operations
Overview
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 9,427,157 | $ | 12,305,539 | $ | (2,878,382) | (23) | % | |||||||||||||||||||||||||||||||||
| Gross margin % | 57.1 | % | 64.0 | % | |||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,635,273 | $ | 3,314,579 | $ | (1,679,306) | (51) | % | |||||||||||||||||||||||||||||||||
| Net income as a % of revenue | 17.3 | % | 26.9 | % | |||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.28 | $ | 6.55 | $ | (3.27) | (50) | % | |||||||||||||||||||||||||||||||||
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 our product will be incorporated. As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, we reclassify 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.
Fiscal 2024 | Fiscal 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | % of Total Revenue (1) | Y/Y% | Revenue | % of Total Revenue (1) | |||||||||||||||||||||||||||||||||||||||||||
| Industrial | $ | 4,314,280 | 46 | % | (35) | % | $ | 6,611,794 | 54 | % | |||||||||||||||||||||||||||||||||||||
| Automotive | 2,827,439 | 30 | % | (2) | % | 2,876,140 | 23 | % | |||||||||||||||||||||||||||||||||||||||
| Communications | 1,080,496 | 11 | % | (33) | % | 1,606,426 | 13 | % | |||||||||||||||||||||||||||||||||||||||
| Consumer | 1,204,942 | 13 | % | (1) | % | 1,211,179 | 10 | % | |||||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 9,427,157 | 100 | % | (23) | % | $ | 12,305,539 | 100 | % | |||||||||||||||||||||||||||||||||||||
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
Revenue decreased 23% in fiscal 2024 as compared to fiscal 2023 primarily as a result of weaker macroeconomic trends. This was pronounced in our Industrial end market as customers decreased their inventory balances and in the Communications end market primarily due to the timing of infrastructure deployment cycles. The Automotive and Consumer end markets declined to a lesser extent as demand weakened driven by reduced consumer spending.
Revenue by Sales Channel
The following table summarizes revenue by sales channel. We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our 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.
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Fiscal 2024 | Fiscal 2023 | ||||||||||||||||||||||||||||||||||
| Revenue | % of Total Revenue (1) | Revenue | % of Total Revenue (1) | ||||||||||||||||||||||||||||||||
| Distributors | $ | 5,505,779 | 58 | % | $ | 7,534,894 | 61 | % | |||||||||||||||||||||||||||
| Direct customers | 3,772,945 | 40 | % | 4,603,166 | 37 | % | |||||||||||||||||||||||||||||
| Other | 148,433 | 2 | % | 167,479 | 1 | % | |||||||||||||||||||||||||||||
| Total Revenue | $ | 9,427,157 | 100 | % | $ | 12,305,539 | 100 | % | |||||||||||||||||||||||||||
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end market revenue trends. As a percentage of total revenue, the decrease in the distributor channel is primarily due to the decrease in revenue in our Industrial end market.
Revenue Trends by Geographic Region
Geographic revenue information for fiscal 2024 and fiscal 2023 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 particularly in cases where a third-party contract manufacturer purchases the Company’s products through distributors.
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change (1) | ||||||||||||||||||||||||||||||||||||||
| United States | $ | 2,840,426 | $ | 4,165,296 | $ | (1,324,870) | (32) | % | |||||||||||||||||||||||||||||||||
| Rest of North and South America | 62,318 | 88,579 | (26,261) | (30) | % | ||||||||||||||||||||||||||||||||||||
| Europe | 2,109,529 | 3,001,871 | (892,342) | (30) | % | ||||||||||||||||||||||||||||||||||||
| Japan | 1,085,631 | 1,397,119 | (311,488) | (22) | % | ||||||||||||||||||||||||||||||||||||
| China | 2,128,840 | 2,229,631 | (100,791) | (5) | % | ||||||||||||||||||||||||||||||||||||
| Rest of Asia | 1,200,413 | 1,423,043 | (222,630) | (16) | % | ||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 9,427,157 | $ | 12,305,539 | $ | (2,878,382) | (23) | % | |||||||||||||||||||||||||||||||||
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
In all periods presented, the predominant regions comprising “Rest of North and South America” are Canada and Mexico; the predominant regions comprising “Europe” are Germany, Sweden, Israel and the Netherlands; and the predominant regions comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.
Total revenue decreased in fiscal 2024 as compared to fiscal 2023 in all regions due to weaker macroeconomic conditions as discussed above under the heading Revenue Trends by End Market.
Gross Margin
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Gross margin | $ | 5,381,343 | $ | 7,877,218 | $ | (2,495,875) | (32) | % | |||||||||||||||||||||||||||||||||
| Gross margin % | 57.1 | % | 64.0 | % | |||||||||||||||||||||||||||||||||||||
Gross margin percentage in fiscal 2024 decreased by 690 basis points compared to fiscal 2023, primarily due to lower utilization of our factories due to decreased customer demand and unfavorable product mix.
Research and Development (R&D)
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| R&D expenses | $ | 1,487,863 | $ | 1,660,194 | $ | (172,331) | (10) | % | |||||||||||||||||||||||||||||||||
| R&D expenses as a % of revenue | 16 | % | 13 | % | |||||||||||||||||||||||||||||||||||||
R&D expenses decreased in fiscal 2024 as compared to fiscal 2023 primarily as a result of lower R&D employee related variable compensation expenses, partially offset by the impact of an additional week of operations in fiscal 2024 as compared to fiscal 2023.
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R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.
Selling, Marketing, General and Administrative (SMG&A)
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| SMG&A expenses | $ | 1,068,640 | $ | 1,273,584 | $ | (204,944) | (16) | % | |||||||||||||||||||||||||||||||||
| SMG&A expenses as a % of revenue | 11 | % | 10 | % | |||||||||||||||||||||||||||||||||||||
SMG&A expenses decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of lower variable compensation expenses, SMG&A employee related salary and benefit expenses and discretionary spending. The decrease was partially offset by an additional week of operations in fiscal 2024 as compared to fiscal 2023.
Amortization of Intangibles
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Amortization expenses | $ | 754,784 | $ | 959,618 | $ | (204,834) | (21) | % | |||||||||||||||||||||||||||||||||
| Amortization expenses as a % of revenue | 8 | % | 8 | % | |||||||||||||||||||||||||||||||||||||
Amortization expenses decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of a portion of our acquired intangible assets becoming fully amortized during fiscal 2023.
Special Charges, Net
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Special charges, net | $ | 37,258 | $ | 160,710 | $ | (123,452) | (77) | % | |||||||||||||||||||||||||||||||||
| Special charges, net as a % of revenue | — | % | 1 | % | |||||||||||||||||||||||||||||||||||||
Special charges, net decreased in fiscal 2024 as compared to fiscal 2023, primarily due to decreased charges related to our Q4 2023 Plan. See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information.
Operating Income
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 2,032,798 | $ | 3,823,112 | $ | (1,790,314) | (47) | % | |||||||||||||||||||||||||||||||||
| Operating income as a % of revenue | 21.6 | % | 31.1 | % | |||||||||||||||||||||||||||||||||||||
The decrease in operating income in fiscal 2024 as compared to fiscal 2023 was primarily the result of a decrease in revenue which contributed to a decrease in gross margin of $2,495.9 million, partially offset by a $204.9 million decrease in SMG&A expenses, a $204.8 million decrease in amortization expenses, a $172.3 million decrease in R&D expenses and a $123.5 million decrease in special charges, net, as more fully described above.
Nonoperating Expense (Income)
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||
Nonoperating expense (income) | $ | 255,458 | $ | 215,109 | $ | 40,349 | 19 | % | |||||||||||||||||||||
The year-over-year increase in nonoperating expense in fiscal 2024 as compared to fiscal 2023 was primarily the result of higher interest expense related to our debt obligations and lower net gains from other investments, partially offset by higher interest income.
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Provision for Income Taxes
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 142,067 | $ | 293,424 | $ | (151,357) | (52) | % | |||||||||||||||||||||||||||||||||
| Effective income tax rate | 8.0 | % | 8.1 | % | |||||||||||||||||||||||||||||||||||||
Our effective tax rates for fiscal 2024 and fiscal 2023 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income. For fiscal 2024 and fiscal 2023 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. Our effective tax rate for fiscal 2023 was also impacted by a discrete income tax benefit recorded of $81.7 million resulting from the approval granted by the Joint Committee on Taxation of our federal corporate income tax relief claim which reduced the amount of transition tax owed under the Tax Cuts and Jobs Act of 2017.
See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.
Net Income
| Fiscal Year | 2024 over 2023 | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,635,273 | $ | 3,314,579 | $ | (1,679,306) | (51) | % | |||||||||||||||||||||||||||||||||
| Net income, as a % of revenue | 17.3 | % | 26.9 | % | |||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.28 | $ | 6.55 | $ | (3.27) | (50) | % | |||||||||||||||||||||||||||||||||
The decrease in net income in fiscal 2024 as compared to fiscal 2023 was a result of a $1,790.3 million decrease in operating income and a $40.3 million increase in nonoperating expense, partially offset by a $151.4 million decrease in provision for income taxes.
Liquidity and Capital Resources
At November 2, 2024, our principal source of liquidity was $2.4 billion of cash, cash equivalents and short-term investments, of which approximately $1.3 billion was held in the United States, with the balance held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate and bank obligations. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
We believe that our existing sources of liquidity and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing, will be sufficient to fund operations, capital expenditures, research and development efforts and dividend payments (if any) in the immediate future and for at least the next twelve months.
| Fiscal Year | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Net cash provided by operating activities | $ | 3,852,529 | $ | 4,817,634 | |||||||||||||
| Net cash provided by operating activities as a % of revenue | 41 | % | 39 | % | |||||||||||||
Net cash used for investing activities | $ | (1,104,858) | $ | (1,266,385) | |||||||||||||
| Net cash used for financing activities | $ | (1,714,390) | $ | (4,063,760) | |||||||||||||
The following changes contributed to the net change in cash and cash equivalents from fiscal 2023 to fiscal 2024.
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Operating Activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. The decrease in cash provided by operating activities during fiscal 2024 as compared to fiscal 2023 was primarily a result of lower net income adjusted for noncash items partially offset by changes in working capital.
Investing Activities
Investing cash flows generally consist of capital expenditures and cash used for acquisitions. The decrease in cash used for investing activities during fiscal 2024 as compared to fiscal 2023 was primarily the result of a decrease in cash used for capital expenditures, partially offset by the net impact of purchases and maturities of short-term investments during fiscal 2024.
Financing Activities
Financing cash flows generally consist of payments of dividends to shareholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The decrease in cash used for financing activities during fiscal 2024 as compared to fiscal 2023 was primarily the result of lower common stock repurchases.
Working Capital
| Fiscal Year | ||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||||||
| Accounts receivable, net | $ | 1,336,331 | $ | 1,469,734 | $ | (133,403) | (9) | % | ||||||||||||
Days sales outstanding (1) | 54 | 48 | ||||||||||||||||||
| Inventory | $ | 1,447,687 | $ | 1,642,214 | $ | (194,527) | (12) | % | ||||||||||||
Days cost of sales in inventory (1) | 139 | 125 | ||||||||||||||||||
_______________________________________
(1)We use the average of the current year and prior year ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively. Cost of sales amounts used in the calculation of days cost of sales in inventory include accounting adjustments related to amortization of developed technology intangible assets acquired and depreciation related to the write-up of fixed assets to fair value as a result of the acquisition of Maxim.
The decrease in accounts receivable for fiscal 2024 compared to fiscal 2023 was primarily the result of variations in the timing of collections and billings and decreased revenue levels in the fourth quarter of fiscal 2024 as compared to the fourth quarter of fiscal 2023.
Inventory decreased in fiscal 2024 as compared to fiscal 2023, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.
Current liabilities decreased to $3.0 billion at November 2, 2024 from $3.2 billion recorded at the end of fiscal 2023, primarily due to decreases in accrued liabilities and current debt, partially offset by increases in income taxes payable.
Revolving Credit Facility
Our Third Amended and Restated Revolving Credit Agreement, dated as of June 23, 2021, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders, which was subsequently amended on December 20, 2022 and July 24, 2023 (as amended, 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).
We may borrow under this revolving credit facility in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. The terms of the Revolving Credit Agreement impose restrictions on our ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness. In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0. As of November 2, 2024, we were in compliance with these covenants. See Note 13, Revolving Credit Facility, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our revolving credit facility.
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Debt
As of November 2, 2024, we had approximately $7.0 billion of carrying value outstanding on our senior notes. The difference in the carrying value of the debt and the principal is due to the unamortized discount and issuance fees and other adjustments on these instruments. The indentures governing certain of our debt instruments contain covenants that may limit our ability to: incur, create, assume or guarantee any debt or 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 our assets to, any other party. As of November 2, 2024, we were compliant with these covenants. See Note 14, Debt of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our outstanding debt.
Commercial Paper Program
Under our commercial paper program, we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $2.5 billion outstanding at any time, with maturities of up to 397 days from the date of issuance. As of November 2, 2024, we had $547.7 million of outstanding borrowings under the commercial paper program recorded in the Consolidated Balance Sheet. We intend to use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.
Stock Repurchase Program
Our common stock repurchase program has been in place since August 2004. Since inception, our Board of Directors has authorized us to repurchase $16.7 billion of our common stock under the program, which includes the $8.5 billion authorization approved by the Board of Directors on August 25, 2021. Under the program, we may repurchase outstanding shares of our common stock from time to time in the open market and through privately negotiated transactions. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when the full dollar amount of the authorization has been used to repurchase shares under the program.
As of November 2, 2024, $1.7 billion remained available for repurchase under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.
Capital Expenditures
Net additions to property, plant and equipment were $730.5 million in fiscal 2024 as we invested to enhance our global resiliency and continue to diversify our global manufacturing footprint. We expect capital expenditures for fiscal 2025 to be between approximately 4% and 6% of fiscal 2025 revenue. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.
Dividends
On November 25, 2024, our Board of Directors declared a cash dividend of $0.92 per outstanding share of common stock. The dividend will be paid on December 20, 2024 to all shareholders of record at the close of business on December 9, 2024 and is expected to total approximately $456.6 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors. The payment of future dividends, if any, will be based on several factors, including our financial performance, outlook and liquidity.
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Contractual Obligations
The table below summarizes our material contractual obligations in specified periods as of November 2, 2024:
| Payment due by period | ||||||||||||||||||||||||||||||||
| Less than | More than | |||||||||||||||||||||||||||||||
| (thousands) | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||||||||||||||
Debt obligations (1) | $ | 7,664,815 | $ | 947,738 | $ | 1,340,212 | $ | 750,000 | $ | 4,626,865 | ||||||||||||||||||||||
| Interest payments associated with debt obligations | 3,169,308 | 232,301 | 433,714 | 343,339 | 2,159,954 | |||||||||||||||||||||||||||
Investment-related commitments (2) | 198,000 | 33,000 | 66,000 | 66,000 | 33,000 | |||||||||||||||||||||||||||
Transition tax (3) | 302,141 | 149,224 | 152,917 | — | — | |||||||||||||||||||||||||||
Operating leases (4) | 434,856 | 83,059 | 146,604 | 106,743 | 98,450 | |||||||||||||||||||||||||||
| Inventory-related purchase commitments (5) | 485,355 | 153,434 | 259,236 | 49,352 | 23,333 | |||||||||||||||||||||||||||
| Total | $ | 12,254,475 | $ | 1,598,756 | $ | 2,398,683 | $ | 1,315,434 | $ | 6,941,602 | ||||||||||||||||||||||
_______________________________________
(1)Debt obligations are assumed to be held to maturity.
(2)Commitments related to certain investments in venture funds directed to our strategic areas of targeted growth in digital biology, life sciences and sustainability, among others.
(3)Tax obligation relates to the one-time tax on deemed repatriated earnings under the Tax Cuts and Jobs Act.
(4)Certain of our operating lease obligations include escalation clauses. These escalating payment requirements are reflected in the table.
(5)We have supplier commitments for the purchase of materials and supplies in advance or with minimum purchase quantities.
As of November 2, 2024, our total liabilities associated with uncertain tax positions was $185.8 million, which are included in non-current income taxes payable in our Consolidated Balance Sheets contained in Item 8 of this Annual Report on Form 10-K. Due to the complexity associated with our tax uncertainties, we cannot make a reasonably reliable estimate of the period in which we expect to settle the non-current liabilities associated with these uncertain tax positions. Therefore, we have not included these uncertain tax positions in the above contractual obligations table.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition and results of operations. See Note 2s, New Accounting Pronouncements, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our financial condition and results of operations.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the financial condition and results of operations is based upon the Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future based on available information. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our financial statements. We also have other policies that we consider key accounting policies; however, the application of these policies does not require us to make significant estimates or judgments that are difficult or subjective.
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. We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services. We recognize revenue when all of the following criteria are met: (1) we have 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 our shipping terms permit us 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, we defer the revenue recognized until title and control of the promised goods
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have passed to the customer. 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 our contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (IC) 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. We generally warrant that our products will meet their published specifications, and that we will repair or replace defective products, for one year from the date title passes from us to the customer. Specific accruals are recorded for known product warranty issues.
Transaction Price: The transaction price reflects our expectations about the consideration we 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 we will receive is unknown as of the end of a reporting period. The vast majority of such consideration are credits issued to the distributor due to price protection, but also include 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 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 management’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 we have made based on our historical estimates.
Contract Balances: Accounts receivable represents our unconditional right to receive consideration from our 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 impairment 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.
Inventory Valuation
We value inventories at the lower of cost (first-in, first-out method) or net realizable value. Because of the cyclical nature of the semiconductor industry, changes in inventory levels, obsolescence of technology, and product life cycles, we write down inventories to net realizable value. We employ a variety of methodologies to determine the net realizable value of inventory. While a portion of the calculation is determined via reference to the age of inventory and lower of cost or net realizable value calculations, an element of the calculation is subject to significant judgments made by us about future demand for our inventory. If actual demand for our products is less than our estimates, additional adjustments to existing inventories may need to be recorded in future periods. To date, our actual results have not been materially different than our estimates.
Goodwill
Goodwill is subject to impairment tests annually or more frequently if events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable, utilizing either the qualitative or quantitative method. We test goodwill for impairment at the reporting unit level, which we determined is consistent with our identified operating segments, on an annual basis on the first day of the fourth quarter (on or about August 4th) or more frequently if we believe indicators of impairment exist or we reorganize our operating segments or reporting units.
We have 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, we consider several factors, including the following:
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–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 their previously calculated fair values as of the date of the most recent quantitative impairment analysis;
–the 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 our competitors’ businesses;
–changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting units;
–changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our 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 our prior valuation conclusions under a discounted cash flow approach.
If we elect not to use this option, or we determine that it is more likely than not that the fair value of a reporting unit is less than its net book value, then we perform 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, we consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We determine the fair value of our reporting units using a weighting of the income and market approaches. Under the income approach, we use 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, we use the guideline public company method. Under this method we utilize 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 their respective fair values. In order to assess the reasonableness of the calculated reporting unit fair values, we reconcile the aggregate fair values of our reporting units determined, as described above, to our total company market capitalization, allowing for a reasonable control premium.
During fiscal 2024 and fiscal 2023, we elected to use the qualitative method of assessing goodwill for all of our reporting units. In all periods presented, we concluded the reporting units’ fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.
Accounting for Income Taxes
We make 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. We assess the likelihood of the realization of deferred tax assets and record a corresponding valuation allowance as necessary if we determine 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 our conclusion, we evaluate 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. Our 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 our income tax provision in future periods.
We account 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 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, we have 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. We classify interest and penalties related to uncertain tax positions within the provision for income taxes line of the Consolidated Statements of Income. We reevaluate 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
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result in the recognition of an increase or decrease to our income tax provision, which could materially impact our 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 we believe our 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 our historical income tax provisions and income tax liabilities. In the event our assumptions are incorrect, the differences could have a material impact on our income tax provision and operating results in the period in which such determination is made. In addition to the factors described above, our current and expected effective tax rate is based on then-current tax law. Significant changes during the year in enacted tax law could affect these estimates.
See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Exposure
Our interest income and expense are sensitive to changes in the general level of interest rates. In this regard, changes in interest rates affect the interest earned or paid on our marketable securities and debt, as well as the fair value of our investments and debt.
Based on our floating rate debt outstanding as of November 2, 2024 and October 28, 2023, inclusive of our commercial paper notes and interest rate swap outstanding, as applicable, our annual interest expense would change by approximately $15.5 million and $20.5 million, respectively, for each 100 basis point increase in interest rates.
Based on our cash and marketable securities outstanding as of November 2, 2024 and October 28, 2023, our annual interest income would change by approximately $19.9 million and $9.6 million, respectively, for each 100 basis point increase in interest rates.
To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our investment portfolio assuming an immediate 100 basis point parallel shift in the yield curve. Based on investment positions as of November 2, 2024 and October 28, 2023, a hypothetical 100 basis point increase in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period. If significant, such losses would only be realized if we sold the investments prior to maturity.
As of November 2, 2024 we had $1.0 billion notional of fixed for floating interest rate swaps outstanding, with the swap payable having a fair value of $36.9 million. A hypothetical 100 basis point increase in interest rates would increase the swap payable by approximately $54.0 million with a corresponding adjustment to the carrying value of the related debt.
As of November 2, 2024, we had $7.1 billion in principal amount of senior unsecured notes outstanding, with a fair value of $6.3 billion. We also had $547.7 million of commercial paper notes outstanding. As commercial paper notes issuances are at then-current rates and with very short maturities, the carrying value will approximate the fair value. The fair value of our notes is subject to interest rate risk, market risk and other factors. Generally, the fair value of our notes will increase as interest rates fall and decrease as interest rates rise. The fair values of our notes as of November 2, 2024 and October 28, 2023, assuming a hypothetical 100 basis point increase in market interest rates, are as follows:
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||||||||||||||
| (thousands) | Principal Amount Outstanding | Fair Value | Fair Value given an increase in interest rates of 100 basis points | Principal Amount Outstanding | Fair Value | Fair Value given an increase in interest rates of 100 basis points | |||||||||||||||||||||||||||||
Commercial paper notes | $ | 547,738 | $ | 547,718 | $ | 547,532 | $ | 547,225 | $ | 547,185 | $ | 546,875 | |||||||||||||||||||||||
| 2024 Notes, due October 2024 | — | — | — | 500,000 | 499,473 | 495,058 | |||||||||||||||||||||||||||||
| 2025 Notes, due April 2025 | 400,000 | 397,027 | 395,418 | 400,000 | 385,231 | 380,013 | |||||||||||||||||||||||||||||
| 2026 Notes, due December 2026 | 900,000 | 882,795 | 865,439 | 900,000 | 851,023 | 826,888 | |||||||||||||||||||||||||||||
| 2027 Notes, due June 2027 | 440,212 | 421,077 | 410,868 | 440,212 | 408,595 | 395,208 | |||||||||||||||||||||||||||||
| 2028 Notes, due October 2028 | 750,000 | 673,316 | 648,856 | 750,000 | 628,999 | 600,812 | |||||||||||||||||||||||||||||
| 2031 Notes, due October 2031 | 1,000,000 | 843,766 | 792,665 | 1,000,000 | 773,404 | 721,064 | |||||||||||||||||||||||||||||
| 2032 Notes, due October 2032 | 300,000 | 287,172 | 268,903 | 300,000 | 269,828 | 251,153 | |||||||||||||||||||||||||||||
| 2034 Notes, due April 2034 | 550,000 | 553,375 | 514,043 | — | — | — | |||||||||||||||||||||||||||||
| 2036 Notes, due December 2036 | 144,278 | 136,718 | 124,895 | 144,278 | 118,554 | 108,085 | |||||||||||||||||||||||||||||
| 2041 Notes, due October 2041 | 750,000 | 534,435 | 472,539 | 750,000 | 479,078 | 422,949 | |||||||||||||||||||||||||||||
| 2045 Notes, due December 2045 | 332,587 | 322,942 | 285,905 | 332,587 | 292,248 | 259,323 | |||||||||||||||||||||||||||||
| 2051 Notes, due October 2051 | 1,000,000 | 655,668 | 560,843 | 1,000,000 | 590,666 | 507,297 | |||||||||||||||||||||||||||||
| 2054 Notes, due April 2054 | 550,000 | 541,912 | 470,255 | — | — | — | |||||||||||||||||||||||||||||
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Foreign Currency Exposure
As more fully described in Note 2i, Derivative and Hedging Agreements, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K, we regularly hedge our non-U.S. dollar-based exposures by entering into forward foreign currency exchange contracts. The terms of these contracts are for periods matching the duration of the underlying exposure and generally range from one to twelve months. Currently, our largest foreign currency exposure is the Euro, primarily because our European operations have the highest proportion of our local currency denominated expenses. Relative to the net unhedged foreign currency exposures existing at November 2, 2024 and October 28, 2023, an immediate 10% unfavorable movement in foreign currency exchange rates would result in approximately $32.2 million of losses and $66.5 million of losses, respectively, in changes in earnings or cash flows over the course of the year.
The market risk associated with our derivative instruments results from currency exchange rates that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to our foreign exchange instruments consist of a number of major international financial institutions with high credit ratings. Based on the credit ratings of our counterparties as of November 2, 2024, we do not believe that there is significant risk of nonperformance by them. 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 our 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 our obligations to the counterparties.
The following table illustrates the effect that an immediate 10% unfavorable or favorable movement in foreign currency exchange rates, relative to the U.S. dollar, would have on the fair value of our forward exchange contracts as of November 2, 2024 and October 28, 2023:
| November 2, 2024 | October 28, 2023 | ||||||||||
| Fair value of forward exchange contracts | $ | (8,961) | $ | (11,575) | |||||||
| Fair value of forward exchange contracts after a 10% unfavorable movement in foreign currency exchange rates asset | $ | 31,564 | $ | 49,284 | |||||||
| Fair value of forward exchange contracts after a 10% favorable movement in foreign currency exchange rates liability | $ | (45,922) | $ | (70,461) | |||||||
The calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, such changes typically affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency selling prices.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Analog Devices, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Analog Devices, Inc. (the Company) as of November 2, 2024 and October 28, 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended November 2, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at November 2, 2024 and October 28, 2023, and the results of its operations and its cash flows for each of the three years in the period ended November 2, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of November 2, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 26, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
| Revenue Recognition – Measuring Price Protection Credits | |||||
| Description of the Matter | As described in Note 2n to the consolidated financial statements, the Company’s sales contracts provide certain distributors with credits for price protection and rights of return, which results in variable consideration. During 2024, sales to distributors were $5.5 billion net of expected price protection credits and rights of return for which the liability balance as of November 2, 2024 was $508.7 million, of which the vast majority relates to the price protection credits. Auditing the Company’s measurement for price protection credits under distributor contracts involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of expected price protection credits. For example, estimated price protection credits included in the transaction price reflects management’s evaluation of contractual terms, historical experience and assumptions about future economic conditions. Changes in those assumptions can have a material effect on the amount recognized for price protection credits. | ||||
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to calculate the price protection credits. For example, we tested controls over the appropriateness of assumptions management used as well as controls over the completeness and accuracy of the data underlying estimates of expected price protection credits. Our audit procedures included, among others, inspecting contractual terms in distributor agreements and testing the underlying data used in management’s calculation for completeness and accuracy as well as evaluating the significant assumptions used in the estimation of the price protection credits. We evaluated the Company’s methods and assumptions used in the estimates, which included comparing the assumptions to historical trends. We inspected and tested the results of the Company’s retrospective review analysis of actual price protection credits claimed by distributors, evaluated the estimates made based on historical experience and performed sensitivity analyses of the Company’s significant assumptions to assess the impact on the price protection credits. We also evaluated whether the Company appropriately considered new information that could significantly change the estimated future price protection credits. | ||||
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1967.
Boston, Massachusetts
November 26, 2024
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
| (thousands, except per share amounts) | 2024 | 2023 | 2022 | ||||||||||||||
| Revenue | |||||||||||||||||
| Revenue | $ | $ | $ | ||||||||||||||
| Costs and Expenses | |||||||||||||||||
| Cost of sales | |||||||||||||||||
| Gross margin | |||||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | |||||||||||||||||
| Selling, marketing, general and administrative | |||||||||||||||||
| Amortization of intangibles | |||||||||||||||||
| Special charges, net | |||||||||||||||||
Total operating expenses | |||||||||||||||||
| Operating income: | |||||||||||||||||
| Nonoperating expense (income): | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Interest income | ( | ( | ( | ||||||||||||||
| Other, net | ( | ( | |||||||||||||||
Total nonoperating expense (income) | |||||||||||||||||
| Earnings | |||||||||||||||||
| Income before income taxes | |||||||||||||||||
Provision for income taxes | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Shares used to compute earnings per common share — basic | |||||||||||||||||
| Shares used to compute earnings per common share — diluted | |||||||||||||||||
| Basic earnings per common share | $ | $ | $ | ||||||||||||||
| Diluted earnings per common share | $ | $ | $ | ||||||||||||||
See accompanying Notes.
43
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
| (thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Change in unrecognized gains/losses on derivative instruments designated as cash flow hedges: | |||||||||||||||||
Changes in fair value of derivatives (net of tax of $ | ( | ||||||||||||||||
Adjustment for realized loss reclassified into earnings (net of tax of $ | |||||||||||||||||
| Total change in derivative instruments designated as cash flow hedges, net of tax | |||||||||||||||||
| Changes in accumulated other comprehensive loss — pension plans: | |||||||||||||||||
Change in actuarial (loss)/gain (net of tax of $ | ( | ( | |||||||||||||||
Other comprehensive income (loss) | ( | ||||||||||||||||
| Comprehensive income | $ | $ | $ | ||||||||||||||
See accompanying Notes.
44
ANALOG DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
November 2, 2024 and October 28, 2023
| (thousands, except per share amounts) | 2024 | 2023 | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
Accounts receivable less allowances of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Other Assets | |||||||||||
| Net property, plant and equipment | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred tax assets | |||||||||||
| Other assets | |||||||||||
Total non-current assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Income taxes payable | |||||||||||
Debt, current | |||||||||||
Commercial paper notes | |||||||||||
| Accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Non-current Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Income taxes payable | |||||||||||
| Other non-current liabilities | |||||||||||
| Total non-current liabilities | |||||||||||
| Shareholders’ Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Capital in excess of par value | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
See accompanying Notes.
45
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
| Capital in | Accumulated Other | ||||||||||||||||||||||||||||
| Common Stock | Excess of | Retained | Comprehensive | ||||||||||||||||||||||||||
| (thousands) | Shares | Amount | Par Value | Earnings | (Loss) Income | ||||||||||||||||||||||||
BALANCE, OCTOBER 30, 2021 | $ | $ | $ | $ | ( | ||||||||||||||||||||||||
Net Income — 2022 | |||||||||||||||||||||||||||||
Dividends declared and paid - $ | ( | ||||||||||||||||||||||||||||
Issuance of stock under stock plans | |||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ||||||||||||||||||||||||||||
| Common stock repurchased | ( | ( | ( | ||||||||||||||||||||||||||
BALANCE, OCTOBER 29, 2022 | ( | ||||||||||||||||||||||||||||
Net Income — 2023 | |||||||||||||||||||||||||||||
Dividends declared and paid - $ | ( | ||||||||||||||||||||||||||||
Issuance of stock under stock plans | |||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||
| Common stock repurchased | ( | ( | ( | ||||||||||||||||||||||||||
BALANCE, OCTOBER 28, 2023 | ( | ||||||||||||||||||||||||||||
Net Income — 2024 | |||||||||||||||||||||||||||||
Dividends declared and paid - $ | ( | ||||||||||||||||||||||||||||
Issuance of stock under stock plans | |||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||||||||
| Common stock repurchased | ( | ( | ( | ||||||||||||||||||||||||||
BALANCE, NOVEMBER 2, 2024 | $ | $ | $ | $ | ( | ||||||||||||||||||||||||
See accompanying Notes.
46
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
| (thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operations: | |||||||||||||||||
| Depreciation | |||||||||||||||||
| Amortization of intangibles | |||||||||||||||||
| Cost of goods sold for inventory acquired | |||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||
Non-cash impairment charge | |||||||||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||||||||
| Other | ( | ||||||||||||||||
| Change in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ||||||||||||||||
| Inventories | ( | ( | |||||||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||||||||
| Income taxes payable, current | ( | ( | |||||||||||||||
| Other assets | ( | ( | |||||||||||||||
| Other liabilities | ( | ( | |||||||||||||||
| Total adjustments | |||||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Purchases of short-term investments | ( | ||||||||||||||||
Maturities of short-term investments | |||||||||||||||||
| Additions to property, plant and equipment, net | ( | ( | ( | ||||||||||||||
| Other | ( | ( | |||||||||||||||
| Net cash used for investing activities | ( | ( | ( | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from debt | |||||||||||||||||
| Early termination of debt | ( | ( | |||||||||||||||
| Debt repayments | ( | ||||||||||||||||
| Payments on revolver | ( | ||||||||||||||||
| Proceeds from revolver | |||||||||||||||||
| Proceeds from commercial paper notes | |||||||||||||||||
| Payments of commercial paper notes | ( | ( | |||||||||||||||
| Dividend payments to shareholders | ( | ( | ( | ||||||||||||||
| Repurchase of common stock | ( | ( | ( | ||||||||||||||
| Proceeds from employee stock plans | |||||||||||||||||
| Other | ( | ( | |||||||||||||||
| Net cash used for financing activities | ( | ( | ( | ||||||||||||||
| Effect of exchange rate changes on cash | ( | ||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||||||||
| Cash and cash equivalents at beginning of year | |||||||||||||||||
| Cash and cash equivalents at end of year | $ | $ | $ | ||||||||||||||
See accompanying Notes.
47
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
(all tabular amounts in thousands except per share amounts)
1.Description of Business
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 November 2, 2024 (fiscal 2024). 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 2024 was a 53 -week fiscal period, while the fiscal year ended October 28, 2023 (fiscal 2023) and the fiscal year ended October 29, 2022 (fiscal 2022) were 52
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. The acquisition of Maxim is referred to as the Acquisition. See Note 6, Acquisitions, of the Notes to Consolidated Financial Statements for additional information.
b.Cash, Cash Equivalents and Short-term Investments
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. Short-term investments have original maturities of greater than ninety days at the time of acquisition. Cash, cash equivalents and short-term investments consist primarily of government and institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds, demand deposit accounts, money market deposit accounts, and bank time deposits.
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. The Company’s readily marketable cash equivalents and short-term investments 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 reviews available-for-sale securities and evaluates impairment whenever the fair value of the security is less than its amortized cost. If the Company intends to sell the security or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the Company will write down the security to its fair value at the reporting date, recognizing the difference as a charge in the Consolidated Statements of Income. If the impairment is partially or wholly due to a credit loss, the Company will recognize the portion of the fair value adjustment due to credit loss in the Consolidated Statements of Income.
48
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 and short-term investments as of November 2, 2024 and October 28, 2023 were as follows:
| 2024 | 2023 | ||||||||||
Cash and Cash Equivalents: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
| Available-for-sale securities | |||||||||||
| Total cash and cash equivalents | $ | $ | |||||||||
| Short-term investments: | |||||||||||
Available-for-sale securities | |||||||||||
| Total short-term investments | $ | $ | |||||||||
See Note 2j, Fair Value, of the Notes to Consolidated Financial Statements for additional information on the Company’s cash equivalents and short-term investments.
c.Supplemental Cash Flow Statement Information
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash paid during the fiscal year for: | |||||||||||||||||
| Income taxes | $ | $ | $ | ||||||||||||||
| Interest | $ | $ | $ | ||||||||||||||
d.Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. 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 net realizable value 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 net realizable value.
Inventories at November 2, 2024 and October 28, 2023 were as follows:
| 2024 | 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
49
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
e.Property, Plant and Equipment
The following table presents details of the Company’s property, plant and equipment (PP&E), net of accumulated depreciation:
| 2024 | 2023 (1) | ||||||||||
| Land and buildings | $ | $ | |||||||||
| Machinery and equipment | |||||||||||
| Office equipment | |||||||||||
| Leasehold improvements | |||||||||||
| Less accumulated depreciation and amortization | |||||||||||
| Net property, plant and equipment | $ | $ | |||||||||
_________________________________
(1) Certain amounts previously reported between land and buildings and machinery and equipment have been reclassified to conform to the current year presentation.
PP&E is recorded at cost, less allowances for depreciation and amortization. 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:
| Buildings | Up to | ||||
| Machinery & equipment | |||||
| Office equipment | |||||
| Leasehold improvements | |||||
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.
The Company determined its campus facility located in Milpitas, California met the held for sale criteria specified in Accounting Standards Codification (ASC) 360. No write-downs to fair value were required upon this determination as the fair value of the asset group, less costs to sell, was greater than the carrying value. As of November 2, 2024, prepaid expenses and other current assets includes the following assets held for sale:
| Land and buildings | $ | ||||||||||
| Less accumulated depreciation and amortization | ( | ||||||||||
| Net property, plant and equipment reclassified to Prepaid expenses and other current assets | $ | ||||||||||
50
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 4th) 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;
–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 2024 and fiscal 2023, the Company elected to use the qualitative 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.
51
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible Assets
As of November 2, 2024 and October 28, 2023, the Company’s intangible assets consisted of the following:
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
| Customer relationships | $ | $ | $ | $ | |||||||||||||||||||
| Technology-based | |||||||||||||||||||||||
| Trade-name | |||||||||||||||||||||||
| Backlog (1) | |||||||||||||||||||||||
| Assembled workforce | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
_________________________________
Amortization expense related to intangible assets was $1.7 billion, $2.0 billion and $2.0 billion in fiscal 2024, 2023 and 2022, 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 3.7 years.
The Company expects annual amortization expense for intangible assets as follows:
| Fiscal Year | Amortization Expense | ||||
| 2025 | $ | ||||
| 2026 | $ | ||||
| 2027 | $ | ||||
| 2028 | $ | ||||
| 2029 | $ | ||||
g.Grant Accounting
Certain of the Company’s 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.
In August 2022, the U.S. government enacted the CHIPS and Science Act of 2022 (CHIPS Act), which provides funding for manufacturing grants and research investments and establishes a 25% investment tax credit for certain investments in U.S. semiconductor manufacturing. As of November 2, 2024, the Company recorded $106.3 million and $174.5 million as offsets within and in , respectively, with a corresponding reduction to the carrying amounts of the qualifying manufacturing assets on the Consolidated Balance Sheet. As of October 28, 2023, the Company recognized $174.3 million in with a corresponding reduction to these fixed asset carrying amounts.
h.Translation of Foreign Currencies
52
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, Malaysian Ringgit 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 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 November 2, 2024 and October 28, 2023 was $257.0 million and $322.6 million, respectively. The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Consolidated Balance Sheets as of November 2, 2024 and October 28, 2023 were as follows:
| Fair Value At | |||||||||||||||||
| Balance Sheet Location | November 2, 2024 | October 28, 2023 | |||||||||||||||
| Forward foreign currency exchange contracts | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
| Forward foreign currency exchange contracts | Accrued liabilities | $ | $ | ||||||||||||||
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 November 2, 2024 and October 28, 2023, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $176.8 million and $334.7 million, respectively.
| Fair Value At | |||||||||||||||||
| Balance Sheet Location | November 2, 2024 | October 28, 2023 | |||||||||||||||
Undesignated hedges related to forward foreign currency exchange contracts | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
Undesignated hedges related to forward foreign currency exchange contracts | Accrued liabilities | $ | $ | ||||||||||||||
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. As of November 2, 2024 and October 28, 2023, none of the netting arrangements involved collateral.
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 changes in interest rates. During fiscal 2023, the Company entered into interest rate swap transactions related to its outstanding $1.0 billion aggregate principal amount of 2.1 % senior unsecured notes (the 2031 Notes) where the Company swapped the notional amount of its $1.0 billion of fixed rate debt at 2.1 % into floating interest rate debt through April 1, 2031. The fair value of the swaps at inception was zero and subsequent changes in the fair value of the interest rate swaps were reflected in the carrying value of the interest rate swaps on the balance sheet. The carrying value of the debt on the balance sheet was adjusted by an equal and offsetting amount. The interest rate swaps were designated and qualified as fair value hedges. The Company does not consider the risk of counterparty default to be significant. The gain or loss on the hedged item attributable to the hedged benchmark interest rate risk and the offsetting gain or loss on the related interest rate swaps were recorded as follows:
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||
| Balance Sheet Location | Loss on Swaps | Gain on Note | Loss on Swaps | Gain on Note | |||||||||||||||||||
| Accrued liabilities | $ | $ | $ | $ | |||||||||||||||||||
Long-term debt | $ | $ | $ | $ | |||||||||||||||||||
53
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 November 2, 2024 and October 28, 2023, 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, other non-current liabilities and long-term debt, depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of cash flow hedges are recorded in AOCI 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 value of designated fair value hedges are recorded on the Consolidated Balance Sheets as a swap asset or an accrued liability with an offsetting increment/decrement to the long-term debt balance, which is the underlying item being hedged. 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 November 2, 2024 and October 28, 2023. 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 November 2, 2024 and October 28, 2023, the Company held $1.4 billion and $642.1 million, respectively, of cash that was
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
excluded from the tables below.
| November 2, 2024 | |||||||||||||||||||||||
| 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 | $ | $ | $ | ||||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| Available-for-sale: | |||||||||||||||||||||||
| Securities with one year or less to maturity: | |||||||||||||||||||||||
| Corporate obligations (1) | |||||||||||||||||||||||
| Bank obligations (1) | |||||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| Forward foreign currency exchange contracts (2) | |||||||||||||||||||||||
| Deferred compensation investments | |||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | ||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Forward foreign currency exchange contracts (2) | $ | $ | $ | ||||||||||||||||||||
| Interest rate derivatives (3) | |||||||||||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | ||||||||||||||||||||
(1) The amortized cost of the Company’s investments classified as available-for-sale as of November 2, 2024 was $382.9 million.
(2) 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.
(3) The carrying value of the related debt was adjusted by an equal and offsetting amount. The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives. See Note 2i, Derivative Instruments and Hedging Agreements, of the Notes to Consolidated Financial Statements.
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ANALOG DEVICES, INC.
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| October 28, 2023 | |||||||||||||||||||||||
| 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 | $ | $ | $ | ||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| Forward foreign currency exchange contracts (1) | |||||||||||||||||||||||
| Deferred compensation investments | |||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | ||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Forward foreign currency exchange contracts (1) | $ | $ | $ | ||||||||||||||||||||
Interest rate derivatives (2) | |||||||||||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | ||||||||||||||||||||
(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.
(2) The carrying value of the related debt was adjusted by an equal and offsetting amount. The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives. See Note 2i, Derivative Instruments and Hedging Agreements, of the Notes to Consolidated Financial Statements.
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash equivalents and short-term investments — 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.
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 exchange 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, forward points, and maturity date.
Interest rate derivative — The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives.
Assets and Liabilities Not Recorded at Fair Value on a Recurring Basis
Santa Clara, California leased property asset group — As a result of a sublease transaction involving a leased property in Santa Clara, California during fiscal 2022, the Company estimated the fair value of the sublease assets using discounted cash flows from the estimated net sublease rental income discounted at a market rate and recorded an impairment charge which represented the excess carrying value of the asset group associated with the Santa Clara, California leased property over its estimated fair value. These assets are considered a Level 2 fair value measurement. See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements for additional information.
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Held for sale assets — The Company has classified the assets held for sale at carrying value. However, if they were to be carried at fair value, they would be considered a Level 3 fair value measurement and would be determined based on the use of appraisals and input from market participants.
Debt — The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis. Given the short tenure of the Company’s commercial paper notes, the carrying value of the outstanding commercial paper notes approximates the fair values, and therefore, are excluded from the table below ($547.7 million and $547.2 million as of November 2, 2024 and October 28, 2023, respectively). 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.
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||
| Principal Amount Outstanding | Fair Value | Principal Amount Outstanding | Fair Value | ||||||||||||||||||||
| 2024 Notes, due October 2024 | $ | $ | $ | $ | |||||||||||||||||||
| 2025 Notes, due April 2025 | |||||||||||||||||||||||
| 2026 Notes, due December 2026 | |||||||||||||||||||||||
| 2027 Notes, due June 2027 | |||||||||||||||||||||||
| 2028 Notes, due October 2028 | |||||||||||||||||||||||
| 2031 Notes, due October 2031 | |||||||||||||||||||||||
| 2032 Notes, due October 2032 | |||||||||||||||||||||||
| 2034 Notes, due April 2034 | |||||||||||||||||||||||
| 2036 Notes, due December 2036 | |||||||||||||||||||||||
| 2041 Notes, due October 2041 | |||||||||||||||||||||||
| 2045 Notes, due December 2045 | |||||||||||||||||||||||
| 2051 Notes, due October 2051 | |||||||||||||||||||||||
| 2054 Notes, due April 2054 | |||||||||||||||||||||||
| Total Debt | $ | $ | $ | $ | |||||||||||||||||||
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, cash equivalents and short-term investments 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.
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue attributable to significant distributors whose revenue as a percentage of total revenue was 10% or greater of total revenue is presented in the following table:
Year Ended | ||||||||||||||||||||
| November 2, 2024 | October 28, 2023 | October 29, 2022 | ||||||||||||||||||
Distributor 1 | ||||||||||||||||||||
Distributor 2 | ||||||||||||||||||||
Distributor 3 | * | * | ||||||||||||||||||
___________________________________________________________
*Revenue for this distributor was not greater than 10% of total revenue for these periods.
No other customer accounted for greater than 10% of total revenue in any period presented.
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, more than half 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.
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 and control of the promised goods have passed to the customer. 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
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 2024, fiscal 2023 and fiscal 2022 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. The vast majority of such consideration are credits issued to the distributor due to price protection, but also include 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 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 2024 and fiscal 2023, sales to distributors were approximately $5.5 billion and $7.5 billion, respectively, net of variable consideration for which the liability balances as of November 2, 2024 and October 28, 2023 were $508.7 million and $525.4 million, respectively, and were recorded in accrued liabilities on the Consolidated Balance Sheets.
o.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 November 2, 2024 and October 28, 2023 consisted of the following:
| Foreign currency translation adjustment | Unrealized holding gains/losses on derivatives | Pension plans | Total | ||||||||||||||||||||||||||||||||
| October 28, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | |||||||||||||||||||||||||||||||||
| Amounts reclassified out of other comprehensive loss | |||||||||||||||||||||||||||||||||||
| Tax | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive income | ( | ||||||||||||||||||||||||||||||||||
| November 2, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
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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 | 2024 | 2023 | Location | |||||||||||||||||||||||
| Changes in unrealized holding gains/losses on derivatives | ||||||||||||||||||||||||||
| Currency forwards | $ | ( | $ | Cost of sales | ||||||||||||||||||||||
| ( | Research and development | |||||||||||||||||||||||||
| ( | ( | Selling, marketing, general and administrative | ||||||||||||||||||||||||
| Interest rate derivatives | Interest expense | |||||||||||||||||||||||||
| Total before tax | ||||||||||||||||||||||||||
| ( | ( | Tax | ||||||||||||||||||||||||
| $ | $ | Net of tax | ||||||||||||||||||||||||
| Amortization of pension components included in the computation of net periodic benefit cost | ||||||||||||||||||||||||||
| Actuarial losses (1) | $ | $ | Net of tax | |||||||||||||||||||||||
| Total amounts reclassified out of AOCI, net of tax | $ | $ | ||||||||||||||||||||||||
_______________________________________
(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 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. 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
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
The following table sets forth the computation of basic and diluted earnings per share:
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Basic shares: | |||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||
| Earnings per common share basic | $ | $ | $ | ||||||||||||||
| Diluted shares: | |||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||
| Assumed exercise of common stock equivalents | |||||||||||||||||
| Weighted-average common and common equivalent shares | |||||||||||||||||
| Earnings per common share diluted | $ | $ | $ | ||||||||||||||
| Anti-dilutive shares related to: | |||||||||||||||||
| Outstanding stock options | |||||||||||||||||
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 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 is 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 and performance-based stock options with both service and market conditions is calculated using the Monte Carlo simulation model to estimate the probability of
61
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
satisfying the performance condition stipulated in the award grant, including the possibility that the market condition may not be satisfied.
The fair value of shares issued under the Company’s employee stock purchase plan (ESPP) is computed using the Black-Scholes model at the commencement of an offering period in June and December of each year and the related expense is recorded over the offering period.
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
Acquired Contract Assets and Contract Liabilities
In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under this 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. The Company adopted ASU 2021-08 in the first quarter of fiscal 2024. Upon adoption, ASU 2021-08 did not have a material impact on the Company’s financial position and results of operations.
Standards to Be Implemented
Segment Reporting
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosure requirements for reportable segments. ASU 2023-07 requires segment disclosure to include significant segment expense categories and amounts, and qualitative detail of other segment items. Disclosure of multiple measures of segment profit and loss may also be reported. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its financial position and results of operations.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires the disaggregation of information in existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its financial position and results of operations.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring public companies to disaggregate key expense categories such as inventory purchases, employee compensation and depreciation in their financial statements. This aims to improve investor insights into company performance. ASU 2024-03 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating 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 issuance of up to 21.2 million shares of the Company’s common stock, which includes shares that remained available or became available under the Company’s previous equity compensation plans, including the Amended and Restated 2006 Stock
62
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 equity compensation plans. Additionally, in connection with the Acquisition, the Company assumed the Maxim 1996 Stock Incentive Plan (1996 Plan), which expired by its terms in July 2024. As of November 2, 2024, a total of 13.5 million shares of the Company’s common stock were available for future issuance under the 2020 Plan.
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 2024, fiscal 2023 and fiscal 2022 did not result in significant incremental compensation costs, either individually or in the aggregate.
Employee Stock Purchase Plan
The Company offers an ESPP to eligible employees, providing the opportunity to purchase shares of the Company’s common stock at a discount through payroll deductions. Offering periods begin in June and December each year. U.S. employees are allowed to purchase the Company’s common stock at the lesser of 85 % of the fair market value of the common stock at either the beginning or end of the offering period. Eligible employees outside of the U.S. are allowed to purchase the Company’s common stock at the lesser of 80 % of the fair market value of the common stock at either the beginning or end of the offering period. As of November 2, 2024, a total of 4.1 million shares of the Company’s common stock were available for future grant under the ESPP.
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 November 2, 2024. 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.
Total stock-based compensation expense recognized is as follows:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Cost of sales | $ | $ | $ | |||||||||||||||||
| Research and development | ||||||||||||||||||||
| Selling, marketing, general and administrative | ||||||||||||||||||||
| Special charges, net | ||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | |||||||||||||||||
As of November 2, 2024 and October 28, 2023, the Company capitalized $10.4 million and $12.9 million, respectively, of stock-based compensation in inventory.
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock-Based Compensation Activity
A summary of the stock option activity as of November 2, 2024 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 28, 2023 | $ | ||||||||||||||||||||||
| Options exercised | ( | $ | |||||||||||||||||||||
| Options forfeited | ( | $ | |||||||||||||||||||||
Options outstanding at November 2, 2024 | $ | $ | |||||||||||||||||||||
Options exercisable at November 2, 2024 | $ | $ | |||||||||||||||||||||
Options vested or expected to vest at November 2, 2024 (1) | $ | $ | |||||||||||||||||||||
_______________________________________
(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 2024, fiscal 2023 and fiscal 2022 was $93.9 million, $95.0 million and $56.2 million, respectively.
A summary of the Company’s restricted stock unit and award activity as of November 2, 2024 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 28, 2023 | $ | ||||||||||
| Units/Awards granted | $ | ||||||||||
| Restrictions lapsed | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
Restricted stock units/awards outstanding at November 2, 2024 | $ | ||||||||||
As of November 2, 2024, there was $607.8 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 1.5 years. The total grant-date fair value of awards that vested during fiscal 2024, fiscal 2023 and fiscal 2022 was approximately $309.0 million, $298.2 million and $283.0 million, respectively.
Common Stock Repurchases
In fiscal 2021, the Company entered into accelerated share repurchase agreements (ASR) with third-party financial institutions, 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. As of October 30, 2021, the Company recorded the remaining 20 %, or $500.0 million, within Prepaid expenses and other current assets on the Consolidated Balance Sheets, which was utilized during the first quarter of fiscal 2022. During the first quarter of fiscal 2022, the ASR was completed and an additional 2.1 million shares of common stock were received by the Company as final settlement of the ASR. In total, the Company repurchased 14.4 million shares of common stock under the ASR at an average price per share of $173.77 .
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 November 2, 2024, the Company had repurchased a total of approximately 207.7 million shares of its common stock for approximately $15.0 billion under this program. An additional $1.7 billion remains available for repurchase of shares under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock.
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
Preferred Stock
4. Industry, Segment and Geographic Information
The Company operates and tracks its results in one one
•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 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.
| 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||
| Revenue | % of Total Revenue (1) | Revenue | % of Total Revenue (1) | Revenue | % of Total Revenue (1) | ||||||||||||||||||||||||||||||||||||
| Industrial | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||
| Automotive | % | % | % | ||||||||||||||||||||||||||||||||||||||
| Communications | % | % | % | ||||||||||||||||||||||||||||||||||||||
| Consumer | % | % | % | ||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||
_______________________________________
(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
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
| Revenue | % of Total Revenue (1) | Revenue | % of Total Revenue (1) | Revenue | % of Total Revenue (1) | |||||||||||||||||||||||||||||||||
| Distributors | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
| Direct customers | % | % | % | |||||||||||||||||||||||||||||||||||
| Other | % | % | % | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
_______________________________________
(1)The sum of the individual percentages may not equal the total due to rounding.
Geographic Information
Geographic revenue information for fiscal 2024, fiscal 2023 and fiscal 2022 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 particularly in cases where a third-party contract manufacturer purchases the Company’s products through distributors. In all periods presented, the predominant regions comprising “Rest of North and South America” are Canada and Mexico; the predominant regions comprising “Europe” are Germany, Sweden, Israel and the Netherlands; and the predominant regions comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenue | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Rest of North and South America | |||||||||||||||||
| Europe | |||||||||||||||||
| Japan | |||||||||||||||||
| China | |||||||||||||||||
| Rest of Asia | |||||||||||||||||
Subtotal all foreign regions | |||||||||||||||||
| Total revenue | $ | $ | $ | ||||||||||||||
| Property, plant and equipment | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Ireland | |||||||||||||||||
| Philippines | |||||||||||||||||
| Thailand | |||||||||||||||||
| Malaysia | |||||||||||||||||
All other regions | |||||||||||||||||
Subtotal all foreign regions | |||||||||||||||||
| Total property, plant and equipment | $ | $ | $ | ||||||||||||||
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.
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Liabilities related to special charges, net are presented in accrued liabilities and other non-current liabilities on the Consolidated Balance Sheets. The activity is detailed below:
| Accrued Special Charges | Global Repositioning Actions | Q4 2023 Plan | |||||||||||||||||||||||||||||||||||||||
Balance at October 30, 2021 | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Employee severance and benefit costs | |||||||||||||||||||||||||||||||||||||||||
| Facility closure costs | |||||||||||||||||||||||||||||||||||||||||
| Severance and benefit payments, net | ( | ||||||||||||||||||||||||||||||||||||||||
| Facility closure cost payments | |||||||||||||||||||||||||||||||||||||||||
| Effect of foreign currency on accrual | ( | ||||||||||||||||||||||||||||||||||||||||
Balance at October 29, 2022 | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Employee severance and benefit costs | |||||||||||||||||||||||||||||||||||||||||
| Severance and benefit payments, net | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at October 28, 2023 | $ | (1) | $ | ||||||||||||||||||||||||||||||||||||||
| Employee severance and benefit costs | ( | ||||||||||||||||||||||||||||||||||||||||
| Severance and benefit payments, net | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at November 2, 2024 | $ | $ | |||||||||||||||||||||||||||||||||||||||
_________________________________________________________
(1) As of October 28, 2023, this balance was comprised of $13.8 million and $23.1 million recorded in Accrued liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheet.
Q4 2023 Plan
The Company recorded net special charges of $155.9 million on a cumulative basis through November 2, 2024 related to the Q4 2023 Plan. In fiscal 2023, the Company committed to a plan to reorganize its business (the Q4 2023 Plan). The Q4 2023 Plan, consisting of voluntary and involuntary reductions-in-force and other cost-savings initiatives, was commenced to adjust the Company’s cost structure and business activities to better align with weaker market demand and continued economic uncertainty in its end markets, as well as to make certain strategic shifts in its workforce necessary to achieve its long-term vision. The reductions-in-force impacted positions in manufacturing, engineering and selling, marketing, general and administrative functions.
Global Repositioning Actions
The Company recorded net special charges of $527.6 million on a cumulative basis through November 2, 2024, as part of the integration of the Acquisition and continued organizational initiatives to consolidate its global footprint related to certain manufacturing, engineering, sales, marketing and administrative offices and to better align its global workforce with the Company’s 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.
In connection with the Company’s decision during fiscal 2022 to transition its engineering, sales, marketing and administrative activities from its leased property in Santa Clara, California to its owned property in San Jose, California, the Company entered into a sublease agreement for a portion of the leased property and intends to sublease the remainder of this property. As a result of the sublease transaction, the Company recorded an impairment charge of $91.9 million in net special charges which represented the excess carrying value of the associated asset group over its estimated fair value. The Company estimated fair value using cash flows from the estimated net sublease rental income discounted at a market rate. The Company allocated $60.6 million, $28.1 million and $3.2 million of the impairment charge to right of use assets, leasehold improvements and office equipment, respectively.
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, Maxim stockholders received, for each outstanding share of Maxim common stock,
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7. Other Investments
8. Accrued Liabilities
Accrued liabilities at November 2, 2024 and October 28, 2023 consisted of the following:
| 2024 | 2023 | ||||||||||
| Distributor price adjustments and other revenue reserves | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Lease liabilities | |||||||||||
| Accrued interest | |||||||||||
| Interest rate swap | |||||||||||
| Accrued withholdings related to ESPP | |||||||||||
| Accrued taxes | |||||||||||
| Accrued special charges | |||||||||||
| Other | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
9. Leases
The Company enters into operating leases which primarily relate to certain facilities and, to a lesser extent, finance leases. Finance leases were not a material component of the Company’s lease portfolio in the periods presented. 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-one 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 Company subleases certain properties that are not used in its core business operations (See Note 5, Special Charges, Net, of the Notes to Consolidated Financial Statements). Sublease income was $12.8 million and $12.9 million in fiscal 2024 and fiscal 2023, respectively.
68
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents supplemental balance sheet information related to the Company’s operating leases:
| November 2, 2024 | October 28, 2023 | ||||||||||
| Assets | |||||||||||
| $ | $ | ||||||||||
| Liabilities | |||||||||||
| $ | $ | ||||||||||
| $ | $ | ||||||||||
Details of the Company’s operating leases are as follows:
November 2, 2024 | October 28, 2023 | ||||||||||||||||
| Lease expense | $ | $ | |||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | |||||||||||||||||
Cash flows from operating leases | $ | $ | |||||||||||||||
| Lease assets obtained in exchange for new lease liabilities | $ | $ | |||||||||||||||
| Weighted average remaining lease term | |||||||||||||||||
| Weighted average discount rate | |||||||||||||||||
The following table presents the maturities of the Company’s operating lease liabilities as of November 2, 2024:
| Fiscal year | |||||
2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total future minimum operating lease payments | |||||
| Less: imputed interest | ( | ||||
| Present value of operating lease liabilities | $ | ||||
The following table presents the future minimum cash receipts as a result of subleases as of November 2, 2024:
| Fiscal year | |||||
2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total future minimum cash receipts | $ | ||||
10. Commitments and Contingencies
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. The total expense related to the defined contribution plans for all eligible U.S. employees was $74.3 million in fiscal 2024, $76.0 million in fiscal 2023 and $65.2 million in fiscal 2022.
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 these plans was $56.9 million in fiscal 2024, $55.3 million in fiscal 2023 and $51.4 million in fiscal 2022.
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 November 2, 2024 for fiscal 2024 and October 28, 2023 for fiscal 2023.
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 2024, fiscal 2023 and fiscal 2022 is presented in the following table:
| 2024 | 2023 | 2022 | |||||||||||||||
| Service cost | $ | $ | $ | ||||||||||||||
| Interest cost | |||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ||||||||||||||
| Recognized actuarial loss | |||||||||||||||||
| Subtotal | $ | $ | $ | ||||||||||||||
| Settlement impact | ( | ||||||||||||||||
| Net periodic benefit cost | $ | $ | $ | ||||||||||||||
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 .
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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 November 2, 2024 and October 28, 2023 is presented in the following table:
| 2024 | 2023 | ||||||||||
| Change in Benefit Obligation | |||||||||||
| Benefit obligation at beginning of year | $ | $ | |||||||||
| Service cost | |||||||||||
| Interest cost | |||||||||||
Plan combinations | ( | ||||||||||
| Settlement | ( | ( | |||||||||
| Actuarial gain | |||||||||||
| Benefits paid | ( | ( | |||||||||
| Exchange rate adjustment | |||||||||||
| Benefit obligation at end of year | $ | $ | |||||||||
| Change in Plan Assets | |||||||||||
| Fair value of plan assets at beginning of year | $ | $ | |||||||||
| Actual return on plan assets | ( | ||||||||||
| Employer contributions | |||||||||||
Plan combinations | |||||||||||
| Settlements | ( | ( | |||||||||
| Benefits paid | ( | ( | |||||||||
| Exchange rate adjustment | |||||||||||
| Fair value of plan assets at end of year | $ | $ | |||||||||
| Reconciliation of Funded Status | |||||||||||
| Funded status | $ | ( | $ | ( | |||||||
| Amounts Recognized in the Balance Sheet | |||||||||||
| Non-current assets | $ | $ | |||||||||
| Current liabilities | ( | ( | |||||||||
| Non-current liabilities | ( | ( | |||||||||
| Net amount recognized | $ | ( | $ | ( | |||||||
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ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| 2024 | 2023 | ||||||||||
| Reconciliation of Amounts Recognized in the Statement of Financial Position | |||||||||||
| Net loss | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated contributions less than net periodic benefit cost | ( | ( | |||||||||
| Net amount recognized | $ | ( | $ | ( | |||||||
| 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 | $ | $ | |||||||||
| Plan combinations | |||||||||||
| Effect of exchange rates on amounts included in AOCI | ( | ||||||||||
| Amounts recognized as a component of net periodic benefit cost | |||||||||||
| Amortization or settlement recognition of net loss | ( | ( | |||||||||
| Total recognized in other comprehensive gain/loss | $ | $ | |||||||||
| Total recognized in net periodic cost and other comprehensive loss | $ | $ | |||||||||
| Estimated amounts that will be amortized from AOCI over the next fiscal year | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
The accumulated benefit obligation for the Company’s pension and postretirement benefit plans was $132.7 million and $120.1 million at November 2, 2024 and October 28, 2023, 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 November 2, 2024 and October 28, 2023 is presented in the following table:
| 2024 | 2023 | ||||||||||
| Plans with projected benefit obligations in excess of plan assets: | |||||||||||
| Projected benefit obligation | $ | $ | |||||||||
| Fair value of plan assets | $ | $ | |||||||||
| Plans with accumulated benefit obligations in excess of plan assets: | |||||||||||
| Projected benefit obligation | $ | $ | |||||||||
| Accumulated benefit obligation | $ | $ | |||||||||
| Fair value of plan assets | $ | $ | |||||||||
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:
| 2024 | 2023 | ||||||||||
| Discount rate | % | % | |||||||||
| Rate of increase in compensation levels | % | % | |||||||||
Net annual periodic benefit cost was determined using the following weighted average assumptions:
| 2024 | 2023 | ||||||||||
| Discount rate | % | % | |||||||||
| Expected long-term return on plan assets | % | % | |||||||||
| Rate of increase in compensation levels | % | % | |||||||||
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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 November 2, 2024 and October 28, 2023 using the same three-level hierarchy described in Note 2j, Fair Value, of the Notes to Consolidated Financial Statements:
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Equities(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed income securities(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property (3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Funds (4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pooled Funds (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
_______________________________________
(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.
73
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Estimated future cash flows
Expected fiscal 2025 Company contributions and estimated future benefit payments are as follows:
| Expected Company Contributions | |||||
| 2025 | $ | ||||
| Expected Benefit Payments | |||||
| 2025 | $ | ||||
| 2026 | $ | ||||
| 2027 | $ | ||||
| 2028 | $ | ||||
| 2029 | $ | ||||
2030 through 2034 | $ | ||||
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 2024, fiscal 2023 and fiscal 2022 is as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| U.S. federal statutory tax rate | % | % | % | ||||||||||||||
| Income tax provision reconciliation: | |||||||||||||||||
| Tax at statutory rate | $ | $ | $ | ||||||||||||||
| Net foreign income subject to lower tax rate | ( | ( | ( | ||||||||||||||
| State income taxes, net of federal benefit | ( | ( | |||||||||||||||
| Valuation allowance | ( | ||||||||||||||||
| Federal research and development tax credits | ( | ( | ( | ||||||||||||||
| Change in uncertain tax positions | ( | ||||||||||||||||
| Amortization of purchased intangibles | |||||||||||||||||
| Taxes attributable to the Tax Cuts and Jobs Act of 2017 | ( | ( | |||||||||||||||
| U.S. effects of international operations | ( | ( | ( | ||||||||||||||
| Windfalls (under ASU 2016-09) | ( | ( | ( | ||||||||||||||
| Other, net | ( | ||||||||||||||||
Total income tax provision | $ | $ | $ | ||||||||||||||
Income before income taxes for fiscal 2024, fiscal 2023 and fiscal 2022 includes the following components:
| Income before income taxes (1) | 2024 | 2023 | 2022 | ||||||||||||||
| Domestic | $ | $ | $ | ||||||||||||||
| Foreign | |||||||||||||||||
| Income before income taxes | $ | $ | $ | ||||||||||||||
_______________________________________
(1)Income before income taxes reflects deemed intercompany royalties in all periods presented.
74
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The components of the provision for income taxes for fiscal 2024, fiscal 2023 and fiscal 2022 are as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal tax | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Total current | $ | $ | $ | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | ( | $ | ( | $ | ( | |||||||||||
| State | ( | ||||||||||||||||
| Foreign | |||||||||||||||||
| Total deferred | $ | ( | $ | ( | $ | ( | |||||||||||
| Provision for income tax | $ | $ | $ | ||||||||||||||
The Company’s effective tax rate for fiscal 2023 was impacted by a discrete income tax benefit recorded of $81.7 million resulting from the approval granted by the Joint Committee on Taxation of its federal corporate income tax relief claim which reduced the amount of transition tax owed under the Tax Cuts and Jobs Act.
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 November 2, 2024, 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.
75
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The significant components of the Company’s deferred tax assets and liabilities for fiscal 2024 and fiscal 2023 are as follows:
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Inventory reserves | $ | $ | |||||||||
| Reserves for compensation and benefits | |||||||||||
| Tax credit carryovers | |||||||||||
| Stock-based compensation | |||||||||||
| Net operating losses | |||||||||||
| Intangible assets | |||||||||||
| Lease liability | |||||||||||
Capitalization of R&D expenses (1) | |||||||||||
| Other | |||||||||||
| Total gross deferred tax assets | |||||||||||
| Valuation allowance | ( | ( | |||||||||
| Total deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | ( | ( | |||||||||
| Deferred GILTI tax liabilities | ( | ( | |||||||||
| Right of use asset | ( | ( | |||||||||
| Acquisition-related intangibles | ( | ( | |||||||||
| Total gross deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | |||||||
_______________________________________________
(1) The Company included the effects of the mandatory capitalization and amortization of research and development expenses which began in fiscal 2023 under the Tax Cuts and Jobs Act.
The valuation allowances of $343.1 million and $332.5 million as of November 2, 2024 and October 28, 2023, respectively, are primarily for the Company’s state R&D credit carryforwards, foreign net operating losses and international 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 $89.1 million will begin to expire in fiscal 2035 while foreign net operating loss carryovers of $145.5 million have no expiration date. There are also $304.8 million of federal and state credit carryovers and $13.7 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending October 31, 2026.
As of November 2, 2024 and October 28, 2023, the Company had unrealized tax benefits, net of indirect tax benefits, of $162.7 million and $187.4 million, respectively, which if settled in the Company’s favor, would lower the Company’s effective tax rate in the period recorded. Liabilities for unrealized tax benefits are primarily classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities will not occur within the next twelve months. As of November 2, 2024 and October 28, 2023, the Company had liabilities of approximately $73.7 million and $70.7 million, respectively, for interest and penalties, which is included within the provision for income taxes in the Consolidated Statements of Income.
76
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 2022 through fiscal 2024:
| Unrealized Tax Benefits | |||||
Balance, October 30, 2021 | $ | ||||
| Additions for tax positions related to the Acquisition | |||||
| Additions for tax positions related to current year | |||||
Additions for tax positions related to prior years | |||||
| Reductions due to lapse of applicable statute of limitations | ( | ||||
Balance, October 29, 2022 | $ | ||||
| Additions for tax positions related to current year | |||||
Additions for tax positions related to prior years | |||||
| Reductions due to lapse of applicable statute of limitations | ( | ||||
Balance, October 28, 2023 | $ | ||||
| Additions for tax positions related to current year | |||||
Reductions for tax positions related to prior years | ( | ||||
| Reductions due to lapse of applicable statute of limitations | ( | ||||
Balance, November 2, 2024 | $ | ||||
In fiscal 2024, the Company continued to engage in discussions with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of unrealized tax benefits, including accrued interest and penalties, could decrease by up to $140.0 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $140.0 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 the fiscal years ended October 30, 2021 (fiscal 2021), November 2, 2019 (fiscal 2019) and November 3, 2018 (fiscal 2018); a pre-Acquisition IRS income tax audit for Maxim’s fiscal years ended June 27, 2015 through August 26, 2021; and various U.S. state and local tax audits and international audits, including an Irish corporate tax audit for fiscal 2019. The Company’s U.S. federal tax returns prior to fiscal 2018 are no longer subject to examination, except for the applicable Maxim pre-Acquisition fiscal years noted above.
13. Revolving Credit Facility
On June 23, 2021, the Company entered into a Third Amended and Restated Credit Agreement with Bank of America, N.A. as administrative agent and the other banks identified therein as lenders, which was subsequently amended on December 20, 2022 and July 24, 2023 (as amended, the Revolving Credit Agreement). 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).
In the first quarter of fiscal 2023, the Company amended the Revolving Credit Agreement, replacing the LIBOR interest rate provisions with interest rate provisions based on a forward-looking term rate based on the Secured Overnight Financing Rate (SOFR) plus a 10 basis point credit spread adjustment. After the amendment, revolving loans under the Revolving Credit Agreement can be Term SOFR Loans or Base Rate Loans (each as defined in the Revolving Credit Agreement) at the Company’s option. Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable adjusted term SOFR 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 %. As of November 2, 2024, 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.
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. For calendar year 2023, the Company exceeded the target thresholds for greenhouse gas emission and renewable energy usage, which resulted in immaterial adjustments to administrative and interest fees due under the facility. The Revolving Credit Agreement includes a multicurrency
77
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 November 2, 2024, the Company was in compliance with these covenants.
14. Debt
On December 14, 2015, the Company issued $850.0 million aggregate principal amount of 3.9 % senior unsecured notes due December 15, 2025 (the December 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 2045 Notes. The 2045 Notes are subordinated to any future secured debt and to the other liabilities of the Company’s subsidiaries. The 2045 Notes were issued pursuant to a base indenture (the ADI Base Indenture) between the Company and The Bank of New York Mellon Trust Company as trustee, as supplemented by a supplemental indenture, which contain certain covenants, events of default and other customary provisions. The covenants applicable to the 2045 Notes limit the Company’s ability to incur, create, assume or guarantee any debt 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 November 2, 2024, the Company was in compliance with these covenants.
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. 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. Debt discounts and issuance costs will be amortized through interest expense over the term of the respective notes. The 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. The 2026 Notes and 2036 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of November 2, 2024, the Company was in compliance with these covenants.
On April 8, 2020, in an underwritten public offering of green bonds, the Company issued $400.0 million aggregate principal amount of 2.95 % senior unsecured notes due April 1, 2025 (the April 2025 Notes), with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing on October 1, 2020. The Company used the net proceeds of $395.6 million from the green bond offering to finance or refinance new and existing eligible projects involving renewable energy, green buildings, and eco-efficient products, production technologies and processes. Debt discounts and underwriting fees will be amortized through interest expense over the term of the April 2025 Notes. 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 the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of November 2, 2024, the Company was in compliance with these covenants.
78
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In conjunction with the Acquisition, $500.0 million aggregate principal amount of Maxim’s 3.375 % senior unsecured and unsubordinated notes due March 15, 2023 (the Maxim 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 2027 Notes), were recognized by the Company at fair value as of the Acquisition Date. In November 2021 (fiscal 2022), the Maxim 2023 Notes were redeemed for cash.
On October 5, 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 bore interest at a floating annual rate equal to a benchmark rate, which initially is Compounded SOFR (as defined in the supplemental indenture governing such notes) plus 25 basis points. On October 1, 2024 the Floating Rate Notes were paid in full at maturity. 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 Sustainability-Linked Senior Notes) 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 governing such notes). 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 Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. 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 November 2, 2024, the Company was in compliance with these covenants.
On September 15, 2022, in an underwritten public offering, the Company issued $300.0 million aggregate principal amount of 4.250 % senior notes due October 1, 2032 (the 2032 Notes) with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing April 1, 2023. The net proceeds of the offering were $296.1 million, after discounts and issuance costs. Prior to July 1, 2032 (three months prior to the maturity date), the Company may, at its option, redeem the 2032 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the notes matured on July 1, 2032) on a semi-annual basis at the Treasury Rate plus 20 basis points less (b) interest accrued to the date of redemption, and (2) 100 % of the principal amount of the notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date. On or after July 1, 2032, the Company may, at its option, redeem the 2032 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100 % of the principal amount of the 2032 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date. The 2032 Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. The 2032 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of November 2, 2024, the Company was in compliance with these covenants.
79
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On October 7, 2022, the Company completed an offer to exchange any and all outstanding Maxim 2027 Notes, for new 3.450 % Senior Notes due June 15, 2027 to be issued by the Company (the Unregistered 2027 Notes) and cash. Pursuant to the exchange offer, $440.2 million aggregate principal amount of the Maxim 2027 Notes were tendered and subsequently accepted for exchange, and the Company retired and canceled all Maxim 2027 Notes accepted for exchange. In exchange for the tendered Maxim 2027 Notes, the Company issued approximately $440.2 million aggregate principal amount of Unregistered 2027 Notes pursuant to a private exchange offer exempt from, or not subject to, registration under the Securities Act of 1933, as amended (the Securities Act) and $0.5 million in cash. Following settlement of the exchange offer, $59.8 million aggregate principal amount of the Maxim 2027 Notes remained outstanding, The Unregistered 2027 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain certain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. The Unregistered 2027 Notes bear interest at a rate of 3.450 % per annum, with semi-annual fixed interest payments due on June 15 and December 15 of each year, commencing on December 15, 2022 and will mature on June 15, 2027. On April 26, 2023, the Company redeemed for cash the $59.8 million aggregate principal amount of Maxim 2027 Notes that remained outstanding at a redemption price equal to $1,012.55 for each $1,000 principal of the Maxim 2027 Notes and included accrued interest. On September 19, 2023, the Company completed a registered exchange offer in which the Company exchanged the Unregistered 2027 Notes for a like principal amount of new notes registered under the Securities Act with the same interest rates and maturity dates as the Unregistered 2027 Notes (the 2027 Notes). As of October 28, 2023, the Company was in compliance with the covenants contained in the indenture and supplemental indenture governing the 2027 Notes.
On April 14, 2023, the Company established a commercial paper program under which the Company may issue short-term, unsecured commercial paper notes (CP Notes) in amounts up to a maximum aggregate face amount of $2.5 billion outstanding at any time, with maturities up to 397 days from the date of issuance. The CP Notes will be sold under customary market terms in the U.S. commercial paper market at a discount from par or at par and bear interest at rates determined at the time of issuance. The net proceeds of the CP Notes are used for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital. As of November 2, 2024, the Company had $547.7 million of outstanding borrowings under the commercial paper program recorded in the Consolidated Balance Sheets. The carrying value of the outstanding CP Notes approximated fair value at November 2, 2024.
On April 3, 2024, in an underwritten public offering, the Company issued $550.0 million aggregate principal amount of
On April 3, 2024, in an underwritten public offering, the Company issued $550.0 million aggregate principal amount of 5.300 % senior notes due April 1, 2054 (the 2054 Notes) with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing October 1, 2024. The net proceeds of the offering were $542.3 million, after discounts and issuance costs. Prior to October 1, 2053 (six months prior to the maturity date of the 2054 Notes), the Company may, at its option, redeem the 2054 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the 2054 Notes matured on October 1, 2053) on a semi-annual basis at the applicable treasury rate plus 15 basis points less (b) interest accrued to the date of redemption, and (2) 100 % of the principal amount of the 2054 Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date. On or after October 1, 2053, the Company may, at its option, redeem the 2054 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100 % of the principal amount of the 2054 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date. The 2054 Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. The 2054 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of November 2, 2024, the Company was in compliance with these covenants.
80
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s debt consisted of the following as of November 2, 2024 and October 28, 2023:
| November 2, 2024 | October 28, 2023 | ||||||||||||||||||||||
| Principal | Unamortized discounts, debt issuance costs and fair value adjustments | Principal | Unamortized discount and debt issuance costs | ||||||||||||||||||||
| 2025 Notes, due April 2025 | $ | $ | $ | $ | |||||||||||||||||||
| 2026 Notes, due December 2026 | |||||||||||||||||||||||
| 2027 Notes, due June 2027 | ( | ( | |||||||||||||||||||||
| 2028 Notes, due October 2028 | |||||||||||||||||||||||
| 2031 Notes, due October 2031 (1) | |||||||||||||||||||||||
| 2032 Notes, due October 2032 | |||||||||||||||||||||||
| 2034 Notes, due April 2034 | |||||||||||||||||||||||
| 2036 Notes, due December 2036 | |||||||||||||||||||||||
| 2041 Notes, due October 2041 | |||||||||||||||||||||||
| 2045 Notes, due December 2045 | |||||||||||||||||||||||
| 2051 Notes, due October 2051 | |||||||||||||||||||||||
| 2054 Notes, due April 2054 | |||||||||||||||||||||||
| Total Long-Term Debt | |||||||||||||||||||||||
| 2024 Notes, due October 2024 | |||||||||||||||||||||||
| 2025 Notes, due April 2025 | |||||||||||||||||||||||
| Commercial paper notes | |||||||||||||||||||||||
| Total Current Debt | |||||||||||||||||||||||
| Total Debt | $ | $ | $ | $ | |||||||||||||||||||
_________________________________
15. Subsequent Events
On November 25, 2024, the Board of Directors of the Company declared a cash dividend of $0.92 456.6 million.
81
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of Analog’s disclosure controls and procedures as of November 2, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of November 2, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
(b) Management’s Report on Internal Control Over Financial Reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of November 2, 2024. In making this assessment, the company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated 2013 Framework.
Based on this assessment, our management concluded that, as of November 2, 2024, our internal control over financial reporting is effective based on those criteria.
Our independent registered public accounting firm that audited the financial statements included in this annual report has issued an attestation report on our internal control over financial reporting. This report appears below.
82
(c) Attestation Report of the Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Analog Devices, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Analog Devices, Inc.’s internal control over financial reporting as of November 2, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Analog Devices, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of November 2, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of November 2, 2024 and October 28, 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended November 2, 2024, and the related notes and schedule listed in the Index at Item 15(a)(2) and our report dated November 26, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 26, 2024
83
(d) Changes in Internal Controls over Financial Reporting. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during the fiscal quarter ended November 2, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
The following table describes contracts, instructions or written plans for the sale or purchase of our securities adopted by our directors or officers during the fourth quarter of fiscal 2024 that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (Rule 10b5-1 trading arrangement).
| Name and Title | Date of Adoption | Duration of Rule 10b5-1 Trading Arrangement | Aggregate Number of Securities to Be Purchased or Sold | ||||||||
Until | Sale of up to | ||||||||||
None of our officers or directors terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter of fiscal 2024.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
84
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item will be included in our 2025 proxy statement to be filed with the SEC within 120 days after November 2, 2024 and is incorporated herein by reference.
We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and have posted it in the Corporate Governance section of our website which is located at www.analog.com. To the extent permitted by Nasdaq and SEC regulations, we intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding any amendments to, or waivers from, our code of business conduct and ethics by posting such information on our website which is located at www.analog.com.
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and any applicable listing standards.
During fiscal 2024, we made no material change to the procedures by which shareholders may recommend nominees to our Board of Directors, as described in our 2024 proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will be included in our 2025 proxy statement to be filed with the SEC within 120 days after November 2, 2024 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this item will be included in our 2025 proxy statement to be filed with the SEC within 120 days after November 2, 2024 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item will be included in our 2025 proxy statement to be filed with the SEC within 120 days after November 2, 2024 and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent registered accounting firm is Ernst & Young , Boston, Massachusetts (PCAOB ID: 42 ).
Information required by this item will be included in our 2025 proxy statement to be filed with the SEC within 120 days after November 2, 2024 and is incorporated herein by reference.
85
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following are filed as part of this Annual Report on Form 10-K:
| 1. | Financial Statements | ||||
The following consolidated financial statements are included in Item 8 of this Annual Report on Form 10-K:
| — | Consolidated Statements of Income for the years ended November 2, 2024, October 28, 2023 and October 29, 2022 | |||||||
| — | Consolidated Statements of Comprehensive Income for the years ended November 2, 2024, October 28, 2023 and October 29, 2022 | |||||||
| — | Consolidated Balance Sheets as of November 2, 2024 and October 28, 2023 | |||||||
| — | Consolidated Statements of Shareholders’ Equity for the years ended November 2, 2024, October 28, 2023 and October 29, 2022 | |||||||
| — | Consolidated Statements of Cash Flows for the years ended November 2, 2024, October 28, 2023 and October 29, 2022 | |||||||
2. Financial Statement Schedules
Schedule II — Valuation and Qualifying Accounts
All other schedules have been omitted since the required information is not present, or not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements or the Notes thereto.
3. Exhibits
| Exhibit No. | Description | ||||||||||
| 3.1 | Restated Articles of Organization of Analog Devices, Inc., as amended, filed as exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2008 as filed with the Commission on May 20, 2008 and incorporated herein by reference. | ||||||||||
| 3.2 | Amendment to Restated Articles of Organization of Analog Devices, Inc., filed as exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 8, 2008 and incorporated herein by reference. | ||||||||||
| 3.3 | Amended and Restated By-Laws of Analog Devices, Inc., filed as exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 8, 2022 and incorporated herein by reference. | ||||||||||
4.1 | Indenture, dated as of June 3, 2013, by and between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, filed as exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the Commission on June 3, 2013 and incorporated herein by reference. | ||||||||||
| 4.2 | Supplemental Indenture, dated December 14, 2015, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the forms of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on December 14, 2015 and incorporated herein by reference. | ||||||||||
| 4.3 | Supplemental Indenture, dated December 5, 2016, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the forms of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on December 5, 2016 and incorporated herein by reference. | ||||||||||
| 4.4 | Supplemental Indenture, dated April 8, 2020, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on April 8, 2020 and incorporated herein by reference. | ||||||||||
| 4.5 | Supplemental Indenture, dated October 5, 2021, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the forms of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on October 5, 2021 and incorporated herein by reference. | ||||||||||
86
| Exhibit No. | Description | ||||||||||
| 4.6 | Supplemental Indenture, dated September 15, 2022, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on September 15, 2022 and incorporated herein by reference. | ||||||||||
| 4.7 | Supplemental Indenture, dated as of October 7, 2022, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on October 7, 2022 and incorporated herein by reference. | ||||||||||
| 4.8 | Supplemental Indenture, dated as of April 3, 2024, between Analog Devices, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (including the form of note contained therein), filed as exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the Commission on April 3, 2024 and incorporated herein by reference. | ||||||||||
| 4.9 | Description of the Registrant’s Securities, filed as exhibit 4.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 2, 2019 as filed with the Commission on November 26, 2019 and incorporated herein by reference. | ||||||||||
| *10.1 | Analog Devices, Inc. Amended and Restated Deferred Compensation Plan, filed as exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2023 as filed with the Commission on November 21, 2023 and incorporated herein by reference. | ||||||||||
| *10.2 | Trust Agreement for Deferred Compensation Plan dated as of October 1, 2003 between Analog Devices, Inc. and Fidelity Management Trust Company, filed as exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 as filed with the Commission on December 23, 2003 and incorporated herein by reference. | ||||||||||
| *10.3 | First Amendment to Trust Agreement for Deferred Compensation Plan between Analog Devices, Inc. and Fidelity Management Trust Company dated as of January 1, 2005, filed as exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2006 as filed with the Commission on November 20, 2006 and incorporated herein by reference. | ||||||||||
| *10.4 | Second Amendment to Trust Agreement for Deferred Compensation Plan between Analog Devices, Inc. and Fidelity Management Trust Company dated as of December 10, 2007, filed as exhibit 10.41 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 1, 2008 as filed with the Commission on November 25, 2008 and incorporated herein by reference. | ||||||||||
| *10.5 | Amended and Restated 2006 Stock Incentive Plan of Analog Devices, Inc., filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 1, 2014 as filed with the Commission on February 18, 2014 and incorporated herein by reference. | ||||||||||
| *10.6 | Form of Global Non-Qualified Stock Option Agreement for Employees for usage under the Company’s Amended and Restated 2006 Stock Incentive Plan, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 2, 2019 as filed with the Commission on February 20, 2019 and incorporated herein by reference. | ||||||||||
| *10.7 | Form of Non-Qualified Stock Option Agreement for Directors for usage under the Company’s Amended and Restated 2006 Stock Incentive Plan, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2017 as filed with the Commission on February 15, 2017 and incorporated herein by reference. | ||||||||||
| *10.8 | Analog Devices, Inc. 2020 Equity Incentive Plan, filed as Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the Commission on January 24, 2020 and incorporated herein by reference. | ||||||||||
| *10.9 | Form of Global Non-Qualified Stock Option Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 1, 2020 as filed with the Commission on February 19, 2020 and incorporated herein by reference. | ||||||||||
| *10.10 | Non-Qualified Performance Stock Option Agreement – CEO Performance Stock Option Award, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 17, 2020 and incorporated herein by reference. | ||||||||||
| *10.11 | Form of Global Non-Qualified Stock Option Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 8, 2020, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 30, 2021 as filed with the Commission on February 17, 2021 and incorporated herein by reference. | ||||||||||
| *10.12 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 8, 2020, filed as exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 30, 2021 as filed with the Commission on February 17, 2021 and incorporated herein by reference. | ||||||||||
| Exhibit No. | Description | ||||||||||
| *10.13 | Form of Financial Metric Performance Restricted Stock Unit Agreement for China Employees for usage under the 2020 Equity Stock Incentive Plan adopted December 8, 2020, filed as exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 30, 2021 as filed with the Commission on February 17, 2021 and incorporated herein by reference. | ||||||||||
| *10.14 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 7, 2021, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 29, 2022 as filed with the Commission on February 16, 2022 and incorporated herein by reference. | ||||||||||
| *10.15 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 7, 2021, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 29, 2022 as filed with the Commission on February 16, 2022 and incorporated herein by reference. | ||||||||||
| *10.16 | Form of Financial Metric Performance Restricted Stock Unit Agreement for Employees for usage under the Company's 2020 Equity Incentive Plan adopted December 7, 2021, filed as exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 29, 2022 as filed with the Commission on February 16, 2022 and incorporated herein by reference. | ||||||||||
| *10.17 | Form of EVP Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted March 7, 2022, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2022 as filed with the Commission on May 18, 2022 and incorporated herein by reference. | ||||||||||
| *10.18 | Form of EVP Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted March 7, 2022, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2022 as filed with the Commission on May 18, 2022 and incorporated herein by reference. | ||||||||||
| *10.19 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted April 4, 2022, filed as exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2022 as filed with the Commission on May 18, 2022 and incorporated herein by reference. | ||||||||||
| *10.20 | Form of Executive Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted June 6, 2022, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2022 as filed with the Commission on August 17, 2022 and incorporated herein by reference. | ||||||||||
| *10.21 | Form of Executive Financial Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted June 6, 2022, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2022 as filed with the Commission on August 17, 2022 and incorporated herein by reference. | ||||||||||
| *10.22 | Form of Global Non-Qualified Stock Option Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 5, 2022, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.23 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 5, 2022, filed as exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.24 | Form of Financial Metric Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 5, 2022, filed as exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.25 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 5, 2022, filed as exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.26 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted April 3, 2023, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2023 as filed with the Commission on May 24, 2023 and incorporated herein by reference. | ||||||||||
| *10.27 | RSU Equity Award Conversion Agreement, filed as exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| Exhibit No. | Description | ||||||||||
| *10.28 | Form of Restricted Stock Unit Agreement for Non-Employee Directors for usage under the Company’s 2020 Equity Incentive Plan adopted December 11, 2023, filed as exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.29 | Form of Global Non-Qualified Stock Option Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 11, 2023, filed as exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.30 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 11, 2023, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.31 | Form of Financial Metric Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 11, 2023, filed as exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.32 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted December 11, 2023, filed as exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.33 | Form of Relative Total Shareholder Return Performance Restricted Stock Unit Agreement for Employees for usage under the Company’s 2020 Equity Incentive Plan adopted April 3, 2023, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2023 as filed with the Commission on May 24, 2023 and incorporated herein by reference. | ||||||||||
| *10.34 | Amended and Restated 1996 Stock Incentive Plan, filed as exhibit 10.36 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 2021 as filed with the Commission on December 3, 2021 and incorporated herein by reference. | ||||||||||
| *10.35 | Form of Global Restricted Stock Unit Agreement for usage under the Amended and Restated 1996 Stock Incentive Plan, filed as exhibit 10.37 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 2021 as filed with the Commission on December 3, 2021 and incorporated herein by reference. | ||||||||||
| *10.36 | Form of Global Non-Qualified Stock Option Agreement for usage under the Amended and Restated 1996 Stock Incentive Plan, filed as exhibit 10.38 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 2021 as filed with the Commission on December 3, 2021 and incorporated herein by reference. | ||||||||||
| *10.37 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s 1996 Stock Incentive Plan adopted December 7, 2021, filed as exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 29, 2022 as filed with the Commission on February 16, 2022 and incorporated herein by reference. | ||||||||||
| *10.38 | Form of Global Non-Qualified Stock Option Agreement for usage under the Company’s Amended and Restated 1996 Stock Incentive Plan adopted December 5, 2022, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.39 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s Amended and Restated 1996 Stock Incentive Plan adopted December 5, 2022, filed as exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| *10.40 | Form of Global Non-Qualified Stock Option Agreement for usage under the Company’s Amended and Restated 1996 Stock Incentive Plan adopted December 11, 2023, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.41 | Form of Global Restricted Stock Unit Agreement for Employees for usage under the Company’s Amended and Restated 1996 Stock Incentive Plan adopted December 11, 2023, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| *10.42 | Form of Employee Retention Agreement, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 5, 2012 as filed with the Commission on May 22, 2012 and incorporated herein by reference. | ||||||||||
| *10.43 | Employee Change in Control Severance Policy of Analog Devices, Inc., as amended, filed as exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 1999 as filed with the Commission on January 28, 2000 and incorporated herein by reference. | ||||||||||
| Exhibit No. | Description | ||||||||||
| *10.44 | Senior Management Change in Control Severance Policy of Analog Devices, Inc., as amended, filed as exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 1999 as filed with the Commission on January 28, 2000 and incorporated herein by reference. | ||||||||||
| *10.45 | Form of Indemnification Agreement for Directors and Officers, filed as exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 1, 2008 as filed with the Commission on November 25, 2008 and incorporated herein by reference. | ||||||||||
| 10.46 | Third Amended and Restated Credit Agreement, dated as of June 23, 2021, among Analog Devices, Inc., as Borrower, Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and each lender from time to time party thereto, filed as exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on June 23, 2021 and incorporated herein by reference. | ||||||||||
| 10.47 | Amendment No. 1 to Third Amended and Restated Credit Agreement, dated as of December 20, 2022, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2023 as filed with the Commission on February 15, 2023 and incorporated herein by reference. | ||||||||||
| 10.48 | Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of July 24, 2023, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2023 as filed with the Commission on August 23, 2023 and incorporated herein by reference. | ||||||||||
*10.49 | Analog Devices, Inc. Amended & Restated 2022 Employee Stock Purchase Plan, filed as exhibit 10.63 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2023 as filed with the Commission on November 21, 2023 and incorporated herein by reference. | ||||||||||
| *10.50 | Offer Letter for Gregory Bryant dated December 14, 2021, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2022 as filed with the Commission on May 18, 2022 and incorporated herein by reference. | ||||||||||
| *10.51 | Executive Performance Incentive Plan effective May 1, 2022, filed as exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2022 as filed with the Commission on May 18, 2022 and incorporated by reference herein. | ||||||||||
| †*10.52 | |||||||||||
| *10.53 | Maxim Integrated Products, Inc. Form of Global Restricted Stock Unit Agreement effective July 12, 2020, filed as exhibit 10.28 to Maxim Integrated Products, Inc.’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020 as filed with the Commission on August 19, 2020 and incorporated herein by reference. | ||||||||||
| *10.54 | Maxim Integrated Products, Inc. Form of Global Restricted Stock Unit Agreement, filed as exhibit 10.5 to Maxim Integrated Products, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2020 as filed with the Commission on October 28, 2020 and incorporated herein by reference. | ||||||||||
| *10.55 | Offer Letter for Richard C. Puccio, Jr. dated January 17, 2024, filed as exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 3, 2024 as filed with the Commission on February 21, 2024 and incorporated herein by reference. | ||||||||||
| †*10.56 | |||||||||||
| †*10.57 | |||||||||||
†*10.58 | |||||||||||
| †19 | |||||||||||
| †21 | |||||||||||
| †23 | |||||||||||
| †31.1 | |||||||||||
| †31.2 | |||||||||||
††32.1 | |||||||||||
††32.2 | |||||||||||
97 | Analog Devices, Inc. Compensation Recovery Policy, filed as exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2023 as filed with the Commission on November 21, 2023 and incorporated herein by reference. | ||||||||||
| 101. INS | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.** | ||||||||||
| 101. SCH | Inline XBRL Schema Document.** | ||||||||||
| 101. CAL | Inline XBRL Calculation Linkbase Document.** | ||||||||||
| Exhibit No. | Description | ||||||||||
| 101. LAB | Inline XBRL Labels Linkbase Document.** | ||||||||||
| 101. PRE | Inline XBRL Presentation Linkbase Document.** | ||||||||||
| 101. DEF | Inline XBRL Definition Linkbase Document** | ||||||||||
| 104 | Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). | ||||||||||
_______________________________________
| † | Filed herewith. | |||||||
†† | Furnished herewith. | |||||||
| * | Management contracts and compensatory plan or arrangements required to be filed as an Exhibit pursuant to Item 15(b) of Form 10-K. | |||||||
| ** | Submitted electronically herewith. | |||||||
ANALOG DEVICES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED NOVEMBER 2, 2024
FINANCIAL STATEMENT SCHEDULE
92
ANALOG DEVICES, INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Years ended November 2, 2024, October 28, 2023 and October 29, 2022
(dollar amounts in thousands)
| Description | Balance at Beginning of Period | Additions (Reductions) Charged to Income Statement | Other | Balance at End of Period | ||||||||||||||||||||||||||||
| Valuation Allowance for Deferred Tax Asset: | ||||||||||||||||||||||||||||||||
| Year ended October 29, 2022 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Year ended October 28, 2023 | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||
| Year ended November 2, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
93
ITEM 16. FORM 10-K SUMMARY
None.
94
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ANALOG DEVICES, INC. | |||||||||||
Date: November 26, 2024 | By: | /s/ Vincent Roche | |||||||||
| Vincent Roche Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) | |||||||||||
95
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||||||||||||
| /s/ Vincent Roche | Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) | November 26, 2024 | ||||||||||||
| Vincent Roche | ||||||||||||||
/s/ Richard C. Puccio, Jr. | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | November 26, 2024 | ||||||||||||
Richard C. Puccio, Jr. | ||||||||||||||
| /s/ Michael Sondel | Corporate Vice President and Chief Accounting Officer (Principal Accounting Officer) | November 26, 2024 | ||||||||||||
| Michael Sondel | ||||||||||||||
| /s/ André Andonian | Director | November 26, 2024 | ||||||||||||
| André Andonian | ||||||||||||||
| /s/ James A. Champy | Director | November 26, 2024 | ||||||||||||
| James A. Champy | ||||||||||||||
| /s/ Edward H. Frank | Director | November 26, 2024 | ||||||||||||
| Edward H. Frank | ||||||||||||||
| /s/ Laurie H. Glimcher | Director | November 26, 2024 | ||||||||||||
| Laurie H. Glimcher | ||||||||||||||
| /s/ Karen M. Golz | Director | November 26, 2024 | ||||||||||||
| Karen M. Golz | ||||||||||||||
| /s/ Peter B. Henry | Director | November 26, 2024 | ||||||||||||
| Peter B. Henry | ||||||||||||||
| /s/ Stephen M. Jennings | Director | November 26, 2024 | ||||||||||||
| Stephen M. Jennings | ||||||||||||||
| /s/ Mercedes Johnson | Director | November 26, 2024 | ||||||||||||
| Mercedes Johnson | ||||||||||||||
| /s/ Ray Stata | Director | November 26, 2024 | ||||||||||||
| Ray Stata | ||||||||||||||
| /s/ Susie Wee | Director | November 26, 2024 | ||||||||||||
| Susie Wee | ||||||||||||||
96
Exhibit 10.52
ADI Executive Performance Incentive Plan
On September 10, 2024, the Compensation and Talent Committee of the Board of Directors of Analog Devices, Inc. (the “Company”) approved the terms of the ADI Executive Performance Incentive Plan effective November 3, 2024. The Chief Executive Officer and the direct reports of the Chief Executive Officer who are Senior Vice President levels and above will participate in the ADI Executive Performance Incentive Plan. Bonus payments under the ADI Executive Performance Incentive Plan are calculated and paid as follows:
1. Each participant’s Bonus Target is obtained by multiplying his or her Base Salary by his or her Individual Target Bonus Percentage:
•Base Salary – the individual’s base pay during the applicable bonus period.
•Individual Target Bonus Percentage — a percentage of the individual’s Base Salary, determined individually for each participant by the Compensation and Talent Committee up to 200%, in the Compensation and Talent Committee’s sole discretion.
2. Each participant’s Bonus Target is then multiplied by the Bonus Payout Factor. The Bonus Payout Factor is equal to (A) 50% of the Bonus Payout Factor (as shown in the table below) based on the Company’s operating profit before tax (OPBT) as a percentage of revenue (OPBT margin) for the applicable fiscal year plus (B) 50% of the Bonus Payout Factor (as shown in the table below) based on the Company’s revenue growth for the applicable fiscal year compared to the prior fiscal year. For purposes of the ADI Executive Performance Incentive Plan, revenue will be measured on a sell-in basis (commonly referred to as POA revenue). The calculations of revenue growth and OPBT as a percentage of revenue are adjustable by the Compensation and Talent Committee in its sole discretion to take account of special items, including but not limited to: restructuring-related expense, acquisition- or disposition-related items, non-recurring royalty payments or receipts, and other similar non-cash or non-recurring items. If OPBT margin is equal to or less than 40% of revenue for the applicable fiscal year, the Bonus Payout Factor shall be zero for that fiscal year, even if the Company has revenue growth for that fiscal year. The Bonus Payout Factor can range from 0% to 250%, provided that the Bonus Payout Factor for the fiscal year does not exceed the annualized bonus payout factor under the ADI Corporate Bonus Plan reached by calculating the average of the payout factors for the four quarters of the fiscal year. In such case, the Bonus Payout Factor under this ADI Executive Performance Incentive Plan shall be reduced to the annualized bonus payout factor under the ADI Corporate Bonus Plan.
1
The following Bonus Payout Factor tables apply under the ADI Executive Performance Incentive Plan:
| ADI Executive Performance Incentive Plan Targets | ||||||||||||||
| OPBT Margin | REVENUE | |||||||||||||
| OPBT Margin for the Fiscal Year | Annual Payout Factor | YTY Growth for the Fiscal Year | Annual Payout Factor | |||||||||||
≤ 40.0 % | 0 | ≤ 0 % | 0 | |||||||||||
| 42.0 % | 1.0 x | 8.0 % | 1.0 x | |||||||||||
| 45.0 % | 2.0 x | 15.0 % | 2.0 x | |||||||||||
≥ 50.0 % | 2.5 x | ≥ 22% | 2.5x | |||||||||||
If OPBT margin <= 40% the entire bonus will pay at 0% regardless of revenue attainment | ||||||||||||||
1 In order to facilitate a comparison of fiscal years for purposes of the revenue growth element of the plan, all 53-week fiscal years will be normalized to a 52-week fiscal year.
The Bonus Payout Factor is determined on a fiscal annual basis and will be linearly interpolated between the values specified in the tables above. For example, if OPBT margin for a fiscal year is 43.5% of revenue (which would result in a Bonus Payout Factor of 150% for that element) and revenue growth for the fiscal year compared to the prior fiscal year was 4.0% (which would result in a Bonus Payout Factor of 50% for that element), then the Bonus Payout Factor for the fiscal year would be 100% which is the sum of 50% of the OPBT payout factor of 150% and 50% of the revenue growth payout factor of 50%.
A participant’s bonus payment for a fiscal year shall be equal to the product obtained by multiplying a participant’s Bonus Target for the fiscal year by the Bonus Payout Factor for that fiscal year. Each participant’s bonus payment can range from zero to 250% of their Bonus Target, provided that the Bonus Payout Factor for the fiscal year does not exceed the annualized bonus payout factor under the ADI Corporate Bonus Plan reached by calculating the average of the payout factors for the four quarters of the fiscal year. In such case, the Bonus Payout Factor under this ADI Executive Performance Incentive Plan shall be reduced to the annualized bonus payout factor under the ADI Corporate Bonus Plan.
3. The ADI Executive Performance Incentive Plan is a discretionary plan, and the Compensation and Talent Committee reserves the right to modify it or reduce a Bonus Payout Factor (including the right not to make bonus payments at all) or terminate it at any time, with or without notice, subject to and in
2
accordance with applicable local law. After the Bonus Payout Factor is determined in accordance with the criteria set forth above, it may be further adjusted in the Company’s sole and absolute discretion in order to calculate the bonus payout.
In deciding whether to adjust the Bonus Payout Factor and the level of such adjustment, the Company may take into account additional factors which include but are not limited to, extraordinary events or circumstances, changes in economic conditions, applicable laws, or accounting principles, discontinued operations, recapitalization, restructurings, reorganizations, mergers or acquisitions, divestitures, other similar corporate transaction or any other events which impact or is anticipated to impact the Company’s current or future business. The Bonus Payout Factor in accordance with the formulas above is not guaranteed.
This Plan remains in effect until otherwise changed, amended, suspended, or terminated by the Company in accordance with applicable law. Executives eligible to participate in this Plan are not eligible to participate in the ADI Corporate Bonus Plan.
4. Bonus payments, if any, under the ADI Executive Performance Incentive Plan will be calculated at the end of each fiscal year and distributed after the end of the fiscal year on or before December 31.
5. Participants are eligible for a bonus payment if they are actively employed by the Company on the applicable bonus payment date. This means no bonus payment is earned until the payout date, which is determined by the Compensation and Talent Committee, at its sole discretion. Bonus payments, if any, are prorated based on start date. If a participant's role changes, which results in a Target Bonus Percentage change during the bonus period, the bonus payment for the fiscal quarter in which the job change takes effect will be based on the original Target Bonus Percentage. The new Target Bonus Percentage will be applied to calculations of the Target Bonus Percentage starting the first full fiscal quarter following the effective date of the change.
6. Any payments under the ADI Executive Performance Incentive Plan will be subject to recovery in accordance with any clawback policy, including without limitation the Company’s Compensation Recovery Policy, as amended from time to time (if applicable to the participant), or any other policy which the Company may be required to adopt.
3
Exhibit 10.56
November 1, 2024
Katsu Nakamura
Dear Katsu,
It is a great pleasure to offer you the role of Senior Vice President, Chief Customer Officer. You will be reporting to the Chief Executive Officer, Vincent Roche (“CEO”), at our Wilmington, MA location.
Your start date in your new role on November 3rd, 2024.
I am pleased to advise you of the following adjustments to your compensation.
Cash Compensation.
•Base Salary. You will be paid at the bi-weekly rate of $19,230.77, which is annualized at $500,000.
•Bonus. You will participate in the Executive Performance Incentive Plan (the “Plan”). Your bonus target under the Plan will be 100% of your base salary. Your eligibility for a Bonus payment and the terms of the bonus are governed by the Plan, as it may be amended from time to time by our Board of Directors or the Compensation and Talent Committee of the Board.
Equity Compensation.
Ongoing Equity Grants (Focal Equity Awards). At the Company’s next focal program in Fiscal Year 2025, you will be recommended for an equity award(s) having an aggregate grant date value of $3.0 million. The equity award(s) will be comprised of the same types of equity received by other executives reporting to the CEO. The timing and structure of the awards is subject to review and approval by the Compensation and Talent Committee who has full discretion in determining the composition of annual executive equity awards. There is no guarantee that the value or composition of equity awards in ADI’s Fiscal Year 2026 (or in subsequent years) will be the same as what is described for Fiscal Year 2025 above.
Relocation
The Company will facilitate your repatriation from Japan back to Massachusetts, USA per the terms of your current international assignment under the Company’s relocation policy. Your repatriation will need to be completed within 6 months of the effective date of your new role.
As a member of ADI’s executive leadership team, ADI will offer you its standard agreements with executives, including a Retention Agreement and Indemnification Agreement, each as approved by the Board of Directors and/or the Compensation and Talent Committee of the Board.
Subject to confirmation by our Board of Directors, the position you are being offered would qualify you as a "Section 16 officer" of ADI.
Further, you will be subject to our executive stock ownership guidelines, which are subject to review by our Board of Directors from time to time. Under the executive stock ownership guidelines, you will be expected
1
to own at least a number of ADI shares having a value equal to three times your base salary, valued at the current market value of ADI shares. Shares counted toward these guidelines include any shares you hold directly, or that are beneficially held by you, any vested or unvested time-based RSUs and unvested performance-based RSUs whose performance has been certified by the Compensation and Talent Committee.
Your employment relationship with ADI will be on an “at will” basis. This means either you or ADI may terminate the employment relationship at any time, for any reason, or without a reason, and without prior notice.
This offer letter is not a contract guaranteeing employment for any specified period of time. ADI reserves the right to amend or terminate any of the above-described programs, plans or policies at any time and from time to time. This means that policies, compensation, and benefits applicable to its executives and employees generally may be amended or terminated at ADI’s discretion.
Other than the agreements signed contemporaneously herewith, this letter sets forth the complete and sole understanding between the parties regarding your employment and supersedes any and all other offers, agreements or understandings, whether oral or written, between you and the Company.
We believe you will be an excellent addition to the ADI executive leadership team and look forward to working with us in that capacity. We are certain you will find this new role both challenging and rewarding.
Sincerely,
/s/ Mariya Trickett | ||
Mariya Trickett | ||
Senior Vice President & Chief People Officer | ||
I accept the above offer.
Signature: | /s/ Katsu Nakamura | Date: | November 3, 2024 | |||||||||||
Katsu Nakamura | ||||||||||||||
2
Exhibit 10.57
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Private & Confidential (Addressee Only)
Participant Name
Employee ID
Employee ID
Grant ID: Client Grant ID
We are pleased to advise you (the “Participant”) that Analog Devices, Inc., a Massachusetts corporation (the “Company”), has granted to the Participant that number of Performance Restricted Stock Units (“Performance RSUs”) set forth below, subject to the terms and conditions of the Analog Devices, Inc. 2020 Equity Incentive Plan (the “Plan”) and this Performance Restricted Stock Unit Agreement, including Appendix A, which includes additional performance-based vesting conditions, and Appendix B, which includes any applicable country-specific provisions. This Performance Restricted Stock Unit Agreement, together with Appendix A and Appendix B, is referred to as the “Agreement.” The grant of Performance RSUs reflects the Company’s confidence in the Participant’s commitment and contributions to the success and continued growth of the Company. All terms not defined in this Agreement shall have the meaning set forth in the Plan.
1.Performance Restricted Stock Unit.
Subject to the terms and conditions of the Plan and this Agreement, the Company has granted to the Participant that number of Performance RSUs (the “Award”) effective on the Date of Grant set forth below:
Date of Grant: Grant Date
Number of Performance RSUs (“Initial Grant Number”): Number of Awards Granted
Vesting Date: Cliff Vesting Date
If the Participant resides in Australia, Canada, China, a European Economic Area or European Union member state, Hong Kong, Israel, Japan, Serbia, Switzerland, Taiwan, Turkey, or the United Kingdom, due to local legal requirements the Participant must accept this Agreement no later than Grant Custom 4 or this Award shall terminate and will become null and void. For purposes of this Agreement, the Participant is deemed to reside in the country where his or her Employer is located. In addition, if the Participant resides in Israel, written consent may be required by Grant Custom 3, the Participant should refer to Appendix B for details.
If the Participant resides in the United States or any other country listed in Appendix B and not listed in the paragraph above and does not accept this Agreement by Grant Custom 4, or such other date that may be communicated, the Company will automatically accept the Agreement on the Participant’s behalf. If the Participant declines this Agreement, this Award shall terminate and will become null and void. The Participant may not decline this Agreement on or after Grant Custom 4.
Each one (1) Performance RSU shall, if and when it vests in accordance with this Agreement, automatically convert into one (1) share of Common Stock, issuable as provided below. The Performance RSUs are subject to the vesting provisions set forth in Section 2 (including any performance-based vesting conditions set forth in Appendix A), the restrictions on transfer set forth in Section 3, and the right of the Company to retain Shares (as defined below) pursuant to Section 7.
2.Vesting and Conversion.
(a)Subject to the terms of the Plan and this Agreement, the Performance RSUs shall vest and be settled in accordance with the vesting conditions set forth in this Section 2 and the performance-based vesting conditions set forth in Appendix A. For purposes of this Agreement, Performance RSUs that have not vested as of the Vesting Date in accordance with this Section 2 and Appendix A are referred to as “Unvested Performance RSUs.” The shares of Common Stock that are issuable upon the vesting and conversion of the Performance RSUs are referred to in this Agreement as “Shares.” As soon as administratively practicable after the vesting and conversion of Performance RSUs (and in any event within sixty (60) days of the Vesting Date or vesting event, as applicable), and subject to the terms and conditions set forth in the Agreement, the Company shall deliver or cause to be delivered evidence (which may include a book entry by the Company’s transfer agent) of the Shares so issued in the name of the Participant to the brokerage firm designated by the Company to maintain the brokerage account established for the Participant or the Participant’s heirs, in the case of Section 2(c). Notwithstanding the foregoing, the Company shall not be obligated to issue Shares to or in the name of the Participant upon the vesting and conversion of any Performance RSUs unless the issuance of such Shares shall comply with all relevant provisions of law and other legal requirements including, without limitation, any applicable securities laws and the requirements of any stock exchange upon which shares of Common Stock may then be listed.
(b)In the event the Participant’s employment with the Company or the Employer (as defined in Section 2(e)) is terminated either by the Participant, the Company, or the Employer for any reason or no reason (other than due to death or Disability), then in each
1
such case, all of the Unvested Performance RSUs as of the date of termination shall terminate and be cancelled immediately and automatically and the Participant shall have no further rights with respect to such Unvested Performance RSUs.
(c)In the event of the Participant’s death prior to the end of the Performance Period, the Unvested Performance RSUs shall vest immediately upon death based on an attainment level equal to 100% for the Performance Period. In the event of the Participant’s death after the end of the Performance Period but prior to the Vesting Date, the Unvested Performance RSUs shall vest, on the date that the attainment level is determined, with respect to the number of Shares underlying the Performance RSUs that become eligible to vest based on the attainment level determined by the Compensation Committee of the Board.
(d)In the event the Participant becomes Disabled prior to the end of the Performance Period, the Unvested Performance RSUs shall vest immediately as of the date the Participant is determined to be Disabled (regardless of whether the Participant terminates employment prior to the Vesting Date) based on an attainment level equal to 100% for the Performance Period. In the event the Participant is determined to be Disabled after the end of the Performance Period but prior to the Vesting Date, the Unvested Performance RSUs shall vest, on the date that the attainment level is determined, with respect to the number of Shares underlying the Performance RSUs that become eligible to vest based on the attainment level determined by the Compensation Committee of the Board. “Disabled” with respect to the Participant shall have the meaning set forth in Section 409(a)(2)(C) of the Code.
(e)For purposes of this Agreement, employment shall include being an employee with the Company. Employment shall also include being an employee with any direct or indirect parent or subsidiary of the Company, or any successor to the Company or any such parent or subsidiary of the Company (the “Employer”). Should a Participant transfer employment to become a director, consultant or advisor to the Company or the Employer following the Date of Grant, he or she will still be considered employed for vesting purposes until he or she ceases to provide services to the Company or any direct or indirect parent or subsidiary of the Company, or any successor to the Company or any such parent or subsidiary of the Company.
(f)For the avoidance of doubt, the Performance RSUs granted to the Participant under this Agreement are expressly excluded from any Equity Award Policy for Acceleration of Vesting in the Event of a Change in Control that was previously adopted by Maxim Integrated Products, Inc.
3.Restrictions on Transfer.
(a)The Participant shall not sell, assign, transfer, pledge or otherwise encumber any Performance RSUs, either voluntarily or by operation of law.
(b)The Company shall not be required (i) to transfer on its books any of the Performance RSUs which have been transferred in violation of any of the provisions set forth herein or (ii) to treat as the owner of such Performance RSUs any transferee to whom such Performance RSUs have been transferred in violation of any of the provisions contained herein.
4.Not a Shareholder. The Performance RSUs represent an unfunded, unsecured promise by the Company to deliver Shares upon vesting and conversion of the Performance RSUs, and until vesting of the Performance RSUs and issuance of the Shares, the Participant shall not have any of the rights of a shareholder with respect to the Shares underlying the Performance RSUs. For the avoidance of doubt, the Participant shall have no right to receive any dividends and shall have no voting rights with respect to the Shares underlying the Performance RSUs for which the record date is on or before the date on which the Shares underlying the Performance RSUs are issued to the Participant.
5.Provisions of the Plan. The Performance RSUs and Shares, including the grant and issuance thereof, are subject to the provisions of the Plan. A copy of the Plan prospectus is available on the Company’s Intranet at https://thecircuit.web.analog.com/Pages/CircuitHome.aspx. (From The Circuit home page, click Knowledge Centers, HR, Employee Stock Programs. The related documents can be found in the right-hand column). If the Participant is unable to access this information via the Intranet, the Company’s Stock Plan Administrator can provide the Participant with copies (Stock_Plan_Admin@Analog.com).
6.Withholding Taxes.
(a)Regardless of any action the Company and/or the Employer, if different, takes with respect to any or all income tax (including U.S. federal, state and local taxes and/or non-U.S. taxes), social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items legally applicable to the Participant is and remains the Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance RSUs, including the grant of the Performance RSUs, the vesting of the Performance RSUs, the subsequent sale of any Shares acquired pursuant to the Performance RSUs and the receipt of any dividends; and (ii) do not commit to structure
2
the terms of the grant or any aspect of the Performance RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant becomes subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b)In connection with any relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Company to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations, if any, with regard to all Tax-Related Items by one or a combination of the methods set forth below:
(i)the Company may withhold a sufficient number of Shares otherwise issuable upon the vesting of the Performance RSUs that have an aggregate Fair Market Value (as defined under the Plan) sufficient to pay the minimum Tax-Related Items required to be withheld with respect to the Shares. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items (determined by reference to the closing price of the Common Stock on the Nasdaq Global Select Market on the applicable vesting date); or
(ii)the Company may, in its discretion, withhold any amount necessary to pay the Tax-Related Items from the Participant’s salary or other amounts payable to the Participant; or
(iii)the Company may withhold from proceeds of the sale of Shares either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization).
provided, however, that if the Participant is an officer of the Company subject to Section 16 of the Exchange Act, then the Company will withhold a sufficient number of Shares otherwise issuable upon the vesting of the Performance RSUs pursuant to (i) above, unless the use of such withholding method is problematic under applicable tax or securities law or has materially adverse accounting consequences, in which case, the obligation for Tax-Related Items will be satisfied pursuant to (iii); or
(iv)any other method determined by the Company, to the extent permitted under the Plan and applicable laws.
The Company may withhold or account for Tax-Related Items by considering statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in the Participant’s jurisdiction(s). If the Company and/or the Employer withhold more than the amount necessary to satisfy the liability for Tax-Related Items, the Participant may receive a refund of the over-withheld amount in cash (with no entitlement to the equivalent in Shares or, if not refunded, the Participant may be able to seek a refund from the applicable tax authorities. If the Company and/or the Employer withhold less than the amount necessary to satisfy the liability for Tax-Related Items, the Participant may be required to pay additional Tax-Related Items directly to the applicable tax authorities or to the Company and/or the Employer. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant will be deemed to have been issued the full number of Shares subject to the vested Performance RSU, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items.
In the event the withholding requirements are not satisfied through the withholding of Shares or through the Participant’s salary or other amounts payable to the Participant, no Shares will be issued upon vesting of the Performance RSUs unless and until satisfactory arrangements (as determined by the Compensation Committee of the Board) have been made by the Participant with respect to the payment of any Tax-Related Items which the Company and/or the Employer determine, in each of its sole discretion, must be withheld or collected with respect to such Performance RSUs. By accepting this grant of Performance RSUs, the Participant expressly consents to the withholding of Shares and/or cash as provided for hereunder. All other Tax-Related Items related to the Performance RSUs and any Shares delivered in payment thereof are the Participant’s sole responsibility.
7.Option of Company to Deliver Cash. Notwithstanding any of the other provisions of this Agreement, and except as set forth in Appendix B, where settlement in Shares is otherwise prohibited under local law or may present adverse tax consequences to the Participant, at the time the Performance RSUs vest, the Company may elect, in the sole discretion of the Compensation Committee of the Board, to deliver by wire transfer to the Participant in lieu of Shares an equivalent amount of cash (determined by reference to the closing price of the Common Stock on the Nasdaq Global Select Market on the applicable vesting date). If the Company elects to deliver cash to the Participant, the Company is authorized to retain such amount as is sufficient in the opinion of the Company to satisfy the Tax-Related Items withholding obligations of the Company and/or the Employer pursuant to Section 6 herein.
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8.Repatriation and Other Legal Requirements. The Participant agrees as a condition of the grant of the Performance RSUs, as applicable, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the Shares acquired pursuant to the Performance RSUs) in accordance with all foreign exchange rules and regulations applicable to the Participant. In addition, the Participant also agrees to take any and all actions, and consent to any and all actions taken by the Company and its subsidiaries, as may be required to allow the Company and its subsidiaries to comply with all laws, rules and regulations applicable to the Participant. Finally, the Participant agrees to take any and all actions as may be required to comply with the Participant’s personal legal and tax obligations under all laws, rules and regulations applicable to the Participant.
9.Miscellaneous.
(a)No Rights to Employment. The grant of the Performance RSUs shall not confer upon the Participant any right to continue in the employ of the Company or the Employer, nor limit in any way the right of the Company or the Employer to terminate the Participant’s employment at any time. Except in the event of Disability or a termination of employment due to death, the vesting of the Performance RSUs pursuant to Section 2 and Appendix A, is earned only by satisfaction of the performance-based vesting conditions and continuing service as an employee at the will of the Company or the Employer through the Vesting Date (not through the act of being hired or engaged or being granted the Performance RSUs hereunder).
(b)Discretionary Nature. The Participant acknowledges and agrees that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Company at any time, to the extent permitted under the Plan. The Participant’s participation in the Plan is voluntary. The grant of the Performance RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of Performance RSUs or any other award under the Plan or other benefits in lieu thereof in the future. Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of any grant, the number of Shares subject to the grant, and the vesting provisions. Any amendment, modification or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company or the Employer. The Performance RSUs and income from such Performance RSUs shall not be included in any calculation of severance, resignation, redundancy, end of service payments, bonuses, long-service awards, holiday pay, pension, or retirement benefits or similar payments. The Performance RSUs should in no event be considered as compensation for, or relating in any way to, past services for the Company or the Employer.
(c)Exclusion from Termination Indemnities and Other Benefits. This Section 9(c) applies if the Participant resides outside the U.S.: The value of the Performance RSUs and any other awards granted under the Plan is an extraordinary item of compensation outside the scope of the Participant’s employment with the Company or the Employer (and the Participant’s employment contract, if any). Any grant under the Plan, including the grant of the Performance RSUs and the income and value of same, is not part of normal or expected compensation or salary. Further, the Performance RSUs and the Shares, and the income and value of same, are not intended to replace any pension rights or compensation.
(d)No Entitlement. This Section 9(d) applies if the Participant resides outside the U.S. and/or the Company is not the Participant's employer: In consideration of the grant of Performance RSUs, no claim or entitlement to compensation or damages shall arise from (i) forfeiture of the Performance RSUs resulting from termination of the Participant’s employment with the Company or the Employer (regardless of the reason for such termination and whether or not later to be found invalid or in breach of applicable laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment contract, if any) or (ii) forfeiture of the Performance RSUs or the recoupment of any financial gain from the Performance RSUs as described in Section 9(n) hereof.
(e)Exchange Rates. This Section 9(e) applies if the Participant resides outside the U.S.: The Participant acknowledges and agrees that neither the Company nor the Employer shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Performance RSUs or of any amounts due to the Participant pursuant to the vesting and settlement of the Performance RSUs or the subsequent sale of any Shares.
(f)Future Value of Shares. The future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty.
(g)Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.
(h)Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and his or her respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement.
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(i)Notice. Each notice relating to this Award shall be in writing (which shall include electronic form) and delivered in person, electronically or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts, 01887, Attention: Chief Financial Officer. Each notice to the Participant shall be addressed to the Participant at the Participant’s last known mailing or email address, as applicable, on the records of the Company.
(j)Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.
(k)Entire Agreement. This Agreement and the Plan constitute the entire understanding between the parties, and supersede all prior agreements and understandings, relating to the subject matter of these documents.
(l)Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the Commonwealth of Massachusetts without regard to any applicable conflicts of laws.
(m)Compliance with Laws. Notwithstanding any other provision of the Plan or this Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any Shares prior to the completion of any registration or qualification of the Shares under any U.S. or non-U.S. federal, state, or local securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any U.S. or non-U.S. federal, state, or local governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. The Participant understands that the Company is under no obligation to register or qualify the Shares with the SEC or any state or non-U.S. securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. The Participant also understands and agrees that the Awards granted under the Plan, including the Performance RSUs and the underlying Shares, are subject to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and any SEC regulations, as now or hereafter in effect. Further, the Participant agrees that the Company shall have unilateral authority to amend the Plan and the Agreement without the Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares.
(n)Clawback/Recoupment. The Performance RSUs and any cash payment or Shares delivered pursuant to the Performance RSUs are subject to forfeiture, recovery by the Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time, including without limitation the Company’s Compensation Recovery Policy, as amended from time to time (if applicable to the Participant), or any other policy which the Company may be required to adopt under the Dodd-Frank Act and implementing rules and regulations thereunder, or as otherwise required by law (collectively, the “Clawback Policy”). Further, the Performance RSUs, and any Shares issued upon vesting of the Performance RSUs, shall be subject to deduction, clawback or forfeiture to the extent required to comply with any recoupment requirement imposed under applicable laws, rules, regulations or stock exchange listing standards. In order to satisfy any recoupment obligation arising under the Clawback Policy, among other things, the Participant expressly and explicitly authorizes the Company to issue instructions, on the Participant’s behalf, to any brokerage firm or stock plan service provider engaged by the Company to hold any Shares or other amounts acquired pursuant to the Performance RSUs to re-convey, transfer or otherwise return such Shares and/or other amounts to the Company upon the Company’s enforcement of the Clawback Policy.
(o)Interpretation. The interpretation and construction of any terms or conditions of this Agreement or the Plan, or other matters related to the Plan, by the Compensation Committee of the Board shall be final and conclusive.
(p)Participant’s Acceptance. The Participant is urged to read this Agreement carefully and to consult with his or her own legal counsel regarding the terms and consequences of this Agreement and the legal and binding effect of this Agreement. By virtue of his or her acceptance (including deemed acceptance) of this Award, the Participant is deemed to have accepted and agreed to all of the terms and conditions of this Agreement and the provisions of the Plan.
(q)Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Performance RSUs or other awards granted to the Participant under the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
(r)English Language. The Participant acknowledges and agrees that it is the Participant’s express intent that this Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Performance RSUs,
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be drawn up in English. If the Participant has received this Agreement, the Plan or any other documents related to the Performance RSUs translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version shall control, unless otherwise required by applicable laws.
(s)Appendix B. Notwithstanding any provisions herein to the contrary, if the Participant transfers the Participant’s residence and/or employment to a country other than the United States, the Performance RSUs shall be subject to any additional terms and conditions for such country as may be set forth in Appendix B to this Agreement. Moreover, if the Participant relocates to one of the countries included in Appendix B, the additional terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. Appendix B constitutes part of this Agreement.
(t)Additional Requirements. The Company reserves the right to impose other requirements on the Performance RSUs, any Shares acquired pursuant to the Performance RSUs, and the Participant’s participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable for legal or administrative reasons. Such requirements may include (but are not limited to) requiring the Participant to sign any agreements or undertakings that may be necessary to accomplish the foregoing.
(u)Private Placement. The Company has submitted filings in the United States in connection with the Plan. The Company has not submitted any registration statement, prospectus or other filings with other local securities authorities (unless otherwise required under such local law), and the grant of the Award is not intended to be a public offering of securities in any other jurisdiction or subject to the supervision of other local securities authorities.
(v)Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any non-cash distribution to holders of Common Stock, the number of Performance RSUs, and Shares issuable upon vesting and conversion thereof, shall be appropriately adjusted in such manner as shall be determined by the Compensation Committee of the Board.
(w)No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of Shares. The Participant is encouraged to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
(x)Insider Trading Restrictions/Market Abuse Laws. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions which may affect the Participant’s ability to accept, acquire, sell, or otherwise dispose of Common Stock, rights to Common Stock (e.g., Performance RSUs), or rights linked to the value of Common Stock (e.g., phantom awards, futures) under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws or regulations in the Participant’s country). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before possessing inside information. Furthermore, the Participant could be prohibited from (i) disclosing the inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Keep in mind third parties includes fellow employees. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant acknowledges that it is his or her responsibility to comply with any applicable restrictions, and the Participant should speak to his or her personal advisor on this matter.
(y)Foreign Asset/Account, Exchange Control, and Tax Reporting. The Participant may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the vesting of the Performance RSUs, the acquisition, holding, and/or transfer of Shares or cash resulting from participation in the Plan and/or the opening and maintenance of a brokerage or bank account in connection with the Plan. The Participant may be required to report such assets, accounts, account balances and values and/or related transactions to the applicable authorities in his or her country. The Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to the Participant’s country through a designated broker or bank and/or within a certain time after receipt. The Participant acknowledges that he or she is responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements. The Participant further understands that he or she should consult the Participant’s personal legal advisor on these matters.
(z)Waiver. The Participant acknowledges that a waiver by the Company or breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant.
(aa)Section 409A. The parties intend that this Agreement and the benefits provided hereunder be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury
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Regulation Section 1.409A-1(b)(4) or otherwise. However, to the extent that the Performance RSUs (or any portion thereof) may be subject to Section 409A, the parties intend that this Agreement and such benefits comply with the deferral, payout, and other limitations and restrictions imposed under Section 409A and this Agreement shall be interpreted, operated and administered in a manner consistent with such intent.
| By: | /s/ Vincent Roche | ||||
| Vincent Roche | |||||
Chief Executive Officer & Chair | |||||
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APPENDIX A TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
1.Performance Period. The three-year period beginning on the first day of the fourth quarter of the Company’s fiscal year 2024 and ending on the last day of the third quarter of the Company’s fiscal year 2027 (the “Performance Period”).
2.Vesting Date. Cliff Vesting Date.
3.Determination Date: The date the Compensation Committee of the Board determines the level of attainment of the Operating Profit Goals for the Performance Period, which date shall be as soon as practicable following the last day of the Performance Period.
Subject to Section 2(a) through 2(d) of the Performance Restricted Stock Unit Agreement, the Participant shall vest on the Vesting Date in the number of Performance RSUs, if any, that the Compensation Committee of the Board determines to be eligible to vest based on the attainment level of the Operating Profit Goal and the attainment of the Minimum Profit Margin described in Section 4 below, provided the Participant continues to provide services to the Company or the Employer, or their respective successors, through the Vesting Date.
4.Performance Parameter. The Performance Parameter is based on the attainment of the Operating Profit Goals established for the Performance Period and the Minimum Profit Margin for the Performance Period. The attainment level, ranging from 0% to 200%, of the Operating Profit Goal applicable to the Performance Period shall be measured on the Determination Date. For the avoidance of doubt, a 0% attainment level shall be applied to the Performance Period if the Minimum Profit Margin with respect to the Performance Period has not been attained. The number of Performance RSUs that shall vest shall be equal to a number of Performance RSUs that is between 0% and 200% of the Initial Grant Number. Attainment among the Operation Profit Goal attainment levels is subject to interpolation on a linear basis.
(a)“Operating Profit Goal” shall mean the goal related to Non-GAAP Operating Profit Before Taxes for the Performance Period approved by the Compensation Committee of the Board in connection with the grant of the Award.
(b)“Minimum Profit Margin” means the minimum Profit Margin, as approved by the Compensation Committee of the Board in connection with the grant of the Award, that shall apply to the total Performance Period as a condition to recognizing and applying the attainment level of the Operating Profit Goal for the Performance Period. “Profit Margin” means the quotient obtained by dividing Non-GAAP Operating Profit Before Taxes by Revenue for the Performance Period.
(c)“Non-GAAP Operating Profit Before Taxes” means Non-GAAP Operating Profit Before Taxes, as reported by the Company in its earnings press release furnished to the U.S. Securities and Exchange Commission, which shall be determined in accordance with GAAP and disclosed non-GAAP adjustments and further adjusted for the results of any acquisitions or divestitures of significant materiality to be reported in the Company’s 10-Q/10-K filings.
(d)“Revenue” means non-GAAP Revenue, as reported by the Company in its earnings press release furnished to the U.S. Securities and Exchange Commission, which shall be determined in accordance with GAAP and disclosed non-GAAP adjustments.
(e)The definition of or method of determining Non-GAAP Operating Profit Before Taxes for purposes of ascertaining the attainment level of the Operating Profit Goal may, in the discretion of the Compensation Committee of the Board, be adjusted to eliminate the impact of any one or more of the following unanticipated events:
(i)items related to a change in Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time;
(ii)items relating to unusual or extraordinary corporate transactions, events or developments, or
(iii)items relating to gains or losses for material litigation, arbitration and contractual settlements.
Examples illustrating the application of the Performance Parameters are set forth below, providing that the Minimum Profit Margin is met for the Performance Period:
APPENDIX A - 1
Payout Percent | Number of Potential Shares Attained | Performance Parameters | ||||||
0% | 0 | Company Operating Profit Goal does not meet minimum threshold approved by the Compensation Committee of the Board | ||||||
100% | Number of Awards Granted | Company Operating Profit Goal meets target approved by Compensation Committee of the Board | ||||||
200% | Grant Custom 2 | Company Operating Profit Goal meets or exceeds the maximum target approved by the Compensation Committee of the Board | ||||||
APPENDIX A - 2
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
This Appendix B includes additional terms and conditions that govern the Performance RSUs granted to the Participant if the Participant resides and/or works in one of the countries listed herein. These terms and conditions are in addition to, or, if so indicated, in place of, the terms and conditions set forth in the Agreement. Capitalized terms used but not defined in this Appendix B shall have the meanings set forth in the Plan and/or the Agreement.
This Appendix B also includes certain issues of which the Participant should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control, income tax and other laws in effect in the respective countries as of August 2024. Such laws are often complex and change frequently. As a result, the Company strongly recommends that the Participant not rely on the information noted herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date when the Performance RSUs vest or Shares acquired under the Plan subsequently are sold.
In addition, the information is general in nature and may not apply to the Participant’s particular situation, and the Company is not in a position to assure the Participant of any particular result. Therefore, the Participant should seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to his or her situation.
Finally, the Participant understands that if he or she is a citizen or resident of a country other than the one in which the Participant is currently residing and/or working, transfers employment after the Date of Grant, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Participant, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
TERMS AND CONDITIONS APPLICABLE TO PARTICIPANTS OUTSIDE THE U.S.
Data Privacy Information and Consent. The Company is located at One Analog Way, Wilmington, Massachusetts, 01887 U.S.A. and grants employees of the Company and its subsidiaries Performance RSUs, at the Company’s sole discretion. If the Participant would like to participate in the Plan, please review the following information about the Company’s data processing practices and declare the Participant’s consent.
(a)Data Collection and Usage. The Company collects, processes and uses personal data of Participants, including, name, home address and telephone number, date of birth, social insurance number or other identification number, salary, citizenship, job title, any shares of stock or directorships held in the Company, and details of all Performance RSUs, canceled, vested, or outstanding in the Participant’s favor, which the Company receives from the Participant or the Employer. If the Company offers the Participant a grant of Performance RSUs under the Plan, then the Company will collect the Participant’s personal data for purposes of allocating stock and implementing, administering and managing the Plan. The Company’s legal basis for the processing of the Participant’s personal data would be his or her consent.
(b)Stock Plan Administration Service Providers. The Company transfers participant data to Fidelity Stock Plan Services LLC and certain of its affiliates (“Fidelity”), an independent service provider based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share the Participant’s data with another company that serves in a similar manner. The Company’s service provider will open an account for the Participant to receive and trade shares of Common Stock. The Participant will be asked to agree on separate terms and data processing practices with the service provider, which is a condition to the Participant’s ability to participate in the Plan.
(c)International Data Transfers. The Company and its service providers are based in the United States. If the Participant is outside the United States, the Participant should note that his or her country has enacted data privacy laws that are different from the United States and that the United States might not provide a level of protection of personal data equivalent to the level of protection in the Participant's country. In order to ensure an appropriate level of protection for the transfer of the Participant’s personal data to the Company in the United States, the Company has implemented the EU Standard Contractual Clauses. However, the onward transfer of the Participant’s personal data by the Company to its service provider is not subject to appropriate safeguards such as the EU Standard Contractual Clauses and is based solely on the Participant’s consent. The Participant understands and acknowledges that this might result in certain risks to the protection of his or her personal data due to the lack of legal principles governing the processing of the personal data, oversight by a supervisory authority or enforceable data subject rights in the United States.
APPENDIX B - 1
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
(d)Data Retention. The Company will use the Participant’s personal data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan or as required to comply with applicable laws, exercise or defense of legal rights, and archiving, deletion, and backup purposes. This means the Participant’s personal data may be retained beyond the termination of the Participant’s employment with the Employer.
(e)Voluntariness and Consequences of Consent Denial or Withdrawal. The Participant’s participation in the Plan and the Participant’s grant of consent is purely voluntary. The Participant may deny or withdraw his or her consent at any time. If the Participant does not consent, or if the Participant withdraws his or her consent, the Participant cannot participate in the Plan. This would not affect the Participant’s salary from or employment with the Employer; the Participant would merely forfeit the opportunities associated with the Plan.
(f)Data Subject Rights. The Participant has a number of rights under data privacy laws in his or her country. Depending on where the Participant is based, the Participant’s rights may include the right to (a) request access or copies of personal data the Company processes, (b) rectification of incorrect data, (c) deletion of data, (d) restrictions on processing, (e) portability of data, (f) lodge complaints with competent authorities in the Participant’s country, and/or (g) a list with the names and addresses of any potential recipients of the Participant’s personal data. To receive clarification regarding the Participant’s rights or to exercise the Participant’s rights please contact the Company at Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts, 01887 U.S.A., Attention: Stock Plan Administrator.
If the Participant resides in a European Economic Area, European Union member state or the United Kingdom and agrees with the data processing practices described in this notice, the Participant declares his or her consent by clicking “Accept Your Grant” on the Accepting Your Grants page on Fidelity’s participant website.
Language. The Participant acknowledges that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, to understand the terms and conditions of this Agreement, unless otherwise required by applicable laws.
AUSTRALIA
Securities Law Information. This offer of Performance RSUs is being made under Division 1A Part 7.12 of the Australian Corporations Act 2001 (Cth).
Tax Information. The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act (Cth) applies (subject to the conditions in the Act).
AUSTRIA
Exchange Control Information. If the Participant holds securities (including Shares acquired under the Plan) or cash (including proceeds from the sale of Shares) outside Austria, he or she may be subject to reporting obligations to the Austrian National Bank. If the value of the Shares meets or exceeds a certain threshold, the Participant must report the securities held on a quarterly basis to the Austrian National Bank as of the last day of the quarter, on or before the 15th day of the month following the end of the calendar quarter. Where the cash amounts held outside Austria meet or exceed a certain threshold, monthly reporting obligations apply as explained in the next paragraph.
If the Participant sells Shares, or receives any cash dividends, the Participant may have exchange control obligations if he or she holds the cash proceeds outside Austria. If the transaction volume of all the Participant’s accounts abroad meets or exceeds a certain threshold, the Participant must report to the Austrian National Bank the movements and balances of all accounts on a monthly basis, as of the last day of the month, on or before the 15th day of the following month, using the form “Meldungen SI-Forderungen und/oder SI-Verpflichtungen.”
BELGIUM
Foreign Asset / Account Reporting Information. The Participant is required to report any securities (e.g., Shares) or bank accounts opened and maintained outside Belgium on his or her annual tax return. In a separate report, certain details regarding such foreign accounts (including the account number, bank name and country in which such account was opened) must be provided to the Central Contact Point of the National Bank of Belgium. The forms to complete this report are available on the website of the National Bank of Belgium.
APPENDIX B - 2
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Stock Exchange Tax. A stock exchange tax applies to transactions executed by a Belgian resident through a financial intermediary, such as a bank or broker. If the transaction is conducted through a Belgian financial intermediary, it may withhold the stock exchange tax, but if the transaction is conducted through a non-Belgian financial intermediary, the Belgian resident may need to report and pay the stock exchange tax directly. The stock exchange tax likely will apply when Shares acquired under the Plan are sold. Belgian residents should consult with a personal tax or financial advisor for additional details on their obligations with respect to the stock exchange tax.
Annual Securities Accounts Tax. An annual securities accounts tax may be payable if the total average value of securities held in a Belgian or foreign securities account (e.g., Shares) exceeds a certain threshold on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). In such case, the tax will be due on the value of the qualifying securities held in such account. The Participant should consult with his or her personal tax or financial advisor for additional details.
CANADA
Issuance of Shares: This provision supplements Section 2 of the Agreement:
Notwithstanding any discretion in the Plan or the Agreement to the contrary, upon vesting of the Performance RSUs, Shares will be issued as set forth in this section. In no event will the Performance RSUs be paid to the Participant in the form of cash.
Securities Law Information. The Participant is permitted to sell Shares acquired through the Plan through the designated broker appointed under the Plan, if any (or any other broker acceptable to the Company), provided the resale of Shares acquired under the Plan takes place outside Canada through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the Nasdaq Global Select Market.
Termination of Employment. The following supplements Section 2 of the Agreement (except Section 2(d) regarding disability) as well as any other section required to give effect to the same:
In the event of termination of the Participant’s employment for any reason (other than by reason of death), either by the Participant or by the Employer, with or without cause, the Participant’s right to vest or to continue to vest in the Performance RSUs and receive Shares under the Plan, if any, will terminate as of the actual Date of Termination. For this purpose, the “Date of Termination” shall mean the date the Participant is no longer actually providing service. The Date of Termination shall not include or be extended by any period following such day during which the Participant is in receipt of or eligible to receive any notice of termination, pay in lieu of notice of termination, severance pay or any other payments or damages, whether arising under statute, contract, common/civil law or otherwise. For greater certainty, the Participant will not earn or be entitled to any pro-rated vesting for that portion of time before the date on which the Participant’s right to vest terminates, nor will Participant be entitled to any compensation for lost vesting.
Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, the Participant’s right to vest in the Performance RSUs under the Plan, if any, will terminate effective as of the last day of the Participant’s minimum statutory notice period, but the Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of the Participant’s statutory notice period, nor will the Participant be entitled to any compensation for lost vesting.
Foreign Asset / Account Reporting Information. Foreign specified property (including cash held outside Canada or Shares) held by Canadian residents must be reported annually on Form T1135 (Foreign Income Verification Statement) if the cost of such foreign specified property exceeds C$100,000 at any time during the year. Foreign specified property may also include the unvested portion of the Performance RSUs. The Performance RSUs must be reported (generally at a nil cost) if the $100,000 cost threshold is exceeded because of other foreign specified property the Participant holds. If Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB would normally equal the fair market value of the Shares at exercise, but if the Participant owns other shares, this ACB may have to be averaged with the ACB of the other shares. If due, the Form must be filed by April 30 of the following year. The Participant should consult with his or her personal tax advisor to determine the reporting requirements.
The following terms and conditions apply if the Participant is in Quebec:
Data Privacy. This provision supplements the Data Privacy Information and Consent provision in the Terms and Conditions for Participants Outside the U.S. set forth above:
APPENDIX B - 3
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company and the administrator of the Plan to disclose and discuss the Plan with their advisors. The Participant acknowledges and agrees that the Participant’s personal information, may be transferred or disclosed outside the Province of Quebec, including to the United States. The Participant further authorizes the Company and any parent, subsidiary or affiliate of the Company to record such information and to keep such information in the Participant’s employee file. The Participant also acknowledges that the Company, Fidelity, and the Employer use technology of profiling purposes and to make automated decisions that may have an impact on the Participant or the administration of the Plan.
CHINA
The following provision applies if the Participant is subject to exchange control restrictions and regulations in the People's Republic of China (“PRC”), including the requirements imposed by the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole discretion:
Vesting. Notwithstanding anything to the contrary in the Plan or the Agreement, the Performance RSUs will not vest and no Shares will be issued to the Participant unless and until all necessary exchange control or other approvals with respect to the Performance RSUs under the Plan have been obtained from the SAFE or its local counterpart (“SAFE Approval”). In the event that SAFE Approval has not been obtained prior to any date(s) on which the Performance RSUs are scheduled to vest in accordance with the vesting schedule set forth in the Agreement, the Performance RSUs will not vest until the seventh day of the month following the month in which SAFE Approval is obtained (the “Actual Vesting Date”). If the Participant’s status as a service provider terminates prior to the Actual Vesting Date, the Participant shall not be entitled to vest in any portion of the Performance RSUs and the Performance RSUs shall be forfeited without any liability to the Company, the Employer or any subsidiary or affiliate of the Company.
Exchange Control Requirements. Due to exchange control laws in the PRC, Shares acquired through Performance RSU vestings must be maintained in the Fidelity (or any successor broker designated by the Company) brokerage account until the Shares are sold. When the Shares are sold, all proceeds must be repatriated to the PRC and held in a special exchange control account maintained by the Company, the Employer or one of the Company’s subsidiaries in the PRC. To the extent that the Participant holds any Shares on the date that is three (3) months (or such other period as may be required by the SAFE) after the date of the Participant’s termination of employment with the Company or the Employer, the Participant authorizes Fidelity (or any successor broker designated by the Company) to sell such Shares on the Participant’s behalf at that time or as soon as is administratively practical thereafter. The Participant understands and agrees that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay the Participant the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.
The Participant further is required to repatriate to the PRC any dividends or dividend equivalents paid to the Participant in relation to Performance RSUs through a special exchange control account established by the Company, the Employer, or one of the Company’s subsidiaries in the PRC. The Participant hereby agrees that any cash proceeds from the Participant’s participation in the Plan may be transferred to such special account prior to being delivered to the Participant.
The Participant also understands and agrees that there will be a delay between the date the Shares are sold and the date the cash proceeds are distributed to the Participant. The Participant agrees to bear any currency fluctuation risk between the time the Shares are sold and the time the cash proceeds are distributed to the Participant through the special account described above. The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in the PRC.
DENMARK
Danish Stock Option Act. By participating in the Plan, the Participant acknowledges that he or she received an Employer Statement translated into Danish, which is being provided to comply with the Danish Stock Option Act, as amended effective January 1, 2019, and is attached hereto as Appendix C.
Exclusion from Termination Indemnities and Other Benefits. This provision supplements Section 9(c) in the Agreement:
APPENDIX B - 4
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
By accepting the Performance RSUs, the Participant acknowledges that he or she understands and agrees that this grant relates to future services to be performed and is not a bonus or compensation for past services.
Foreign Asset / Account Reporting Information. If the Participant establishes an account holding Shares or cash outside Denmark, the Participant must report the account to the Danish Tax Administration. The form which should be used in this respect can be obtained from a local bank.
EGYPT
Exchange Control Information. If the Participant transfers funds into Egypt in connection with the sale of Shares, the Participant is required to transfer the funds through a registered bank in Egypt.
ESTONIA
Responsibility for Taxes. This provision supplements Section 6 of the Agreement:
The Participant understands that he or she would generally not be subject to taxation in Estonia when Performance RSUs vest and Shares are issued under the Plan, and that the Employer would generally be subject to fringe benefits tax (“FBT”) due, unless an exemption applies. Notwithstanding the foregoing, as a condition to the Participant’s participation in the Plan, the Participant agrees and consents that the Company and/or the Employer may in their discretion seek indemnification / reimbursement from the Participant for any FBT the Employer is required to pay, has paid or will pay. If the Company and/or the Employer exercise such discretion and choose to seek indemnification / reimbursement from the Participant, they will reduce the number of Shares otherwise issuable to the Participant by an amount determined by the Company to be appropriate to offset the FBT, and may otherwise recover the FBT by any other means referred to in Section 6 of the Agreement. The Participant further acknowledges that the discretion of the Company and/or Employer to seek indemnification for the FBT is not imbalanced or harmful to the Participant, and the Participant unconditionally and irrevocably waives any rights to amend or dispute its validity on the basis of any law or regulation of Estonia or any other jurisdiction.
Language Consent. Võttes vastu piiratud aktsiaühikute (Performance RSUs) pakkumise, kinnitab Osaleja, et ta on ingliskeelsena esitatud pakkumisega seotud dokumendid (Optsioonilepingu ja Plaani) läbi lugenud ja nendest aru saanud ning et ta ei vaja nende tõlkimist eesti keelde. Sellest tulenevalt Osaleja nõustub viidatud dokumentide tingimustega.
By accepting the grant of the Performance RSUs, the Participant confirms having read and understood the documents related to the grant (the Agreement and the Plan), which were provided in the English language, and that he or she does not need the translation thereof into the Estonian language. The Participant accepts the terms of those documents accordingly.
FINLAND
There are no country-specific provisions.
FRANCE
French-Qualified Performance RSUs. The Performance RSUs are intended to qualify for the favorable tax and social security regime in France under Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59 and L. 22-10-60 of the French Commercial Code, as amended. Certain events may affect the status of the Performance RSUs as French-qualified Performance RSUs, and the French-qualified Performance RSUs may be disqualified in the future. The Company does not make any undertaking or representation to maintain the qualified status of the Performance RSUs. If the Performance RSUs no longer qualify as French-qualified Performance RSUs, the favorable tax and social security treatment will not apply, and the Participant will be required to pay his or her portion of social security contributions resulting from the Performance RSUs (as well as any income tax that is due).
Plan Terms. The Performance RSUs are subject to the terms and conditions of the Plan and the Rules of the Analog Devices, Inc. 2020 Equity Incentive Plan for Grants to Participants in France (the “French Sub-plan”). To the extent that any term is defined in both the Plan and the French Sub-plan, for purposes of this grant of a French-qualified Performance RSUs, the definitions in the French Sub-plan shall prevail.
APPENDIX B - 5
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Vesting. This provision supplements Section 2 in the Agreement:
Except in the event of the Participant’s death or Disability (as defined in the French Sub-plan) to benefit from the favorable tax and social security regime, no vesting shall occur prior to the first anniversary of the Date of Grant, or such other minimum period as required for the vesting period applicable to French-qualified Performance RSUs under Section L. 225-197-1 of the French Commercial Code, as amended, or relevant Sections of the French Tax Code or the French Social Security Code, as amended.
Disability. This provision supplements Section 2(d) in the Agreement:
In the event the Participant becomes Disabled (as defined in the French Sub-plan), the Unvested Performance RSUs as of the date of the Participant’s termination shall vest in full as of the date of the termination, as determined under Section 2(d) of the Agreement.
Restriction on Transfer and Sale of Shares. This provision supplements Section 3 in the Agreement:
The Participant may not sell or transfer the Shares issued at vesting of the Performance RSUs prior to the second anniversary of the Grant Date, or such other period as is required to comply with the minimum mandatory holding period applicable to French-qualified Performance RSUs under Section L. 225-197-1 of the French Commercial Code, the relevant sections of the French Tax Code or of the French Social Security Code, as amended, to benefit from the favorable tax and social security regime. Notwithstanding the above, the Participant’s heirs, in the case of the Participant’s death, or the Participant, in the case of Disability (as defined under the French Sub-plan), are not subject to this restriction on the sale of Shares. To ensure compliance with these restrictions, the Shares the Participant receives at vesting of the Performance RSUs will be held with a broker designated by the Company (or according to any procedure implemented by the Company to ensure compliance with the restrictions) until such Shares are sold. These restrictions will apply even after the Participant is no longer employed by the Employer, the Company or one its subsidiaries.
Further, as long as the Performance RSUs and the Shares acquired at vesting of the Performance RSUs maintain their French-qualified status, the Shares cannot be sold during certain “Closed Periods” as provided for by Section L. 22-10-59 of the French Commercial Code, as amended, and as interpreted by the French administrative guidelines, so long as these Closed Periods are applicable to Shares issued pursuant to French-qualified Performance RSUs, and to the extent applicable. Notwithstanding the above, the Participant’s heirs, in the case of the Participant’s death, or the Participant, in the case of disability (as defined under the French Sub-plan), are not subject to the restriction on the sale of Shares during Closed Periods.
Changes in Capitalization. This provision supplements Section 9(u) in the Agreement:
Certain adjustments may disqualify the Performance RSUs, in which case they may no longer benefit from favorable tax and social security treatment in France.
Language Consent. If the Participant received this Agreement or any other document related to the Plan or the French Sub-plan translated into French and if the translated version differs from the English version, the English version shall control.
By accepting this grant, the Participant confirms having read and understood the documents relating to the grant (the Plan, the French Sub-plan, and this Agreement) which were provided in English language. The Participant accepts the terms of those documents accordingly.
Consentement a la Langue. En acceptant cette attribution, le Participant confirme ainsi avoir lu et compris les documents relatifs à l’attribution (le Plan, le Sous-plan pour la France, et ce Contrat) qui ont été communiqués en langue anglaise. Le Participant accepte les termes en connaissance de cause.
Foreign Asset/Account Reporting Information. French residents holding Shares outside of France or maintaining a foreign bank account are required to report such to French tax authorities when filing his or her annual tax return. Failure to comply may trigger significant penalties.
GERMANY
Exchange Control Information. Cross-border payments in excess of a certain threshold (currently, €12,500) must be reported to the German Federal Bank (Bundesbank). If the Participant otherwise makes or receives a payment in excess of this amount (including if the
APPENDIX B - 6
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Participant acquires Shares under the Plan with a value in excess of this amount or sells Shares via a foreign broker, bank or service provider and receives proceeds in excess of this amount) and/or if the Company withholds of sells Shares with a value in excess of this amount to cover Tax-Related Items, the Participant must report the payment and/or the value of the Shares withheld or sold to the Bundesbank. Such reports must be filed either electronically by accessing the electronic General Statistics Reporting Portal (“Allgemeines Meldeportal Statistik”) via the Bundesbank’s website (www.bundesbank.de), or by such other method (e.g., email or telephone) and within such other timing as permitted or required by the Bundesbank. The report must be submitted monthly or within such timing as it permitted or required by the Bundesbank. It is the Participant’s responsibility to comply with this reporting obligation and the Participant should consult with his or her personal legal advisor in this regard.
HONG KONG
Sale of Shares. In the event the Performance RSUs vest within six months of the Date of Grant, the Participant agrees not to sell any Shares acquired upon vesting of the Performance RSUs prior to the six-month anniversary of the Date of Grant.
Securities Law Notice. WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. The Participant should exercise caution in relation to the offer. If the Participant is in doubt about any of the contents of this Agreement or the Plan, the Participant should obtain independent professional advice. Neither the grant of the Performance RSUs nor the issuance of Shares upon vesting constitutes a public offering of securities under Hong Kong law and is available only to employees of the Company and its subsidiaries. The Agreement, the Plan and other incidental materials (i) have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee of the Company and its subsidiaries and may not be distributed to any other person.
HUNGARY
There are no country-specific provisions.
INDIA
Exchange Control Notification. The Participant understands that he or she must repatriate any proceeds from the sale of Shares acquired under the Plan and any dividends received in relation to the Shares to India and convert the funds into local currency within ninety (90) days of receipt, or such other period of time as required under applicable regulations. The Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where the Participant deposits the foreign currency and maintains the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation. The Participant agrees to provide any information that may be required by the Company or the Employer to make any applicable filings under exchange control laws in India.
Foreign Asset / Account Reporting Information. The Participant is required to declare any foreign bank accounts and assets (including Shares acquired under the Plan) on his or her annual tax return. The Participant should consult with his or her personal tax advisor to determine his or her reporting requirements.
IRELAND
Manner of Payment. This provision replaces Section 7 of the Agreement:
Notwithstanding any discretion in the Plan or the Agreement to the contrary, upon vesting of the Performance RSUs, Shares will be issued to the Participant. In no event will the Award be paid to the Participant in the form of cash.
Exclusion from Termination Indemnities and Other Benefits. This provision supplements Section 9(c) of the Agreement:
By accepting the Performance RSUs, the Participant acknowledges, understands, and agrees that the benefits received under the Plan will not be taken into account for any redundancy or unfair dismissal claim.
ISRAEL
APPENDIX B - 7
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Trust Arrangement. The Participant hereby understands and agrees that the Performance RSUs are offered subject to and in accordance with the terms of the Israeli Sub-Plan (the “Israeli Sub-Plan”) under the 102 Capital Gains Track (as defined in the Israeli Sub-Plan), the Trust Agreement between the trustee appointed by Analog Devices, (Israel) Ltd. (the “Trustee”), the Agreement, and the Plan. In the event of any inconsistencies among the Israeli Sub-Plan, the Agreement and/or the Plan, the Participant agrees that the Sub-Plan will govern the Performance RSUs granted to the Participant in Israel.
Vesting. This provision supplements Section 2(a) in the Agreement:
The Shares issued upon vesting of the Performance RSUs will be registered in the name of the Trustee as required by law to qualify under Section 102 (as defined under the Sub-plan), for the benefit of the Participant, unless otherwise approved in writing by the Israeli Tax Authority. Furthermore, the Participant hereby understands and agrees he or she will not require the Trustee to release or sell the Shares during the Holding Period (as defined under the Sub-Plan), unless permitted under Israeli tax law.
Restrictions on Transfer. This provision supplements Section 3(a) in the Agreement:
The Trustee shall not alienate, sell, exchange, transfer, assign, pledge, or otherwise encumber the Performance RSUs or the Shares for the Participant, except as permitted under the Sub-Plan and the terms of Section 102 (as defined in the Sub-Plan), or in the case of death, the Participant’s heirs, except by will or by the laws of descent and distribution.
Manner of Payment. This provision replaces Section 7 of the Agreement:
Notwithstanding any discretion in the Plan or the Agreement to the contrary, upon vesting of the Performance RSUs, Shares will be issued to the Participant. In no event will the Award be paid to Participant in the form of cash.
Securities Law Information. This grant does not constitute a public offering under the Securities Law, 1968.
ITALY
Plan Document Acknowledgment. By accepting the Performance RSUs, the Participant acknowledges that a copy of the Plan was made available to the Participant, and that the Participant has reviewed the Plan and the Agreement, including Appendix A, in their entirety and fully understands and accepts all provisions of the Plan, the Agreement and Appendix A.
The Participant further acknowledges that he or she has read and specifically and expressly approves the following provision in the Agreement: Vesting and Conversion, Withholding Taxes, and Miscellaneous.
Foreign Asset Tax. The value of any Shares (and other financial assets) held outside Italy by individuals resident of Italy may be subject to a foreign asset tax. The taxable amount will be the fair market value of the financial assets (e.g., Shares) assessed at the end of the calendar year. The value of financial assets held abroad must be reported in Form RM of the annual return. The Participant should consult his or her personal tax advisor for additional information on the foreign asset tax.
Foreign Asset / Account Reporting Information. If the Participant holds investments abroad or foreign financial assets (e.g., cash, Shares, Performance RSUs) that may generate income taxable in Italy, the Participant is required to report them on his or her annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due, irrespective of their value. The same reporting duties apply to the Participant if he or she is a beneficial owner of the investments, even if the Participant does not directly hold investments abroad or foreign assets.
JAPAN
Foreign Asset / Account Reporting Information. The Participant will be required to report details of any assets held outside Japan as of December 31st to the extent such assets have a total net fair market value exceeding a certain threshold (currently, ¥50,000,000). This report is due by March 15th each year. The Participant should consult with his or her personal tax advisor as to whether the reporting obligation applies to him or her and whether the requirement extends to any outstanding Performance RSUs or Shares acquired under the Plan.
APPENDIX B - 8
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
KOREA
Exchange Control Notification. If a Korean resident sells Shares and deposits sale proceeds in excess of a certain threshold (currently, US $5,000) into a non-Korean bank account, the Korean resident must file a report with a Korean foreign exchange bank. This reporting is not required if sale proceeds are instead deposited into a non-Korean brokerage account. It is the Participant's responsibility to comply with any applicable exchange control reporting obligations in Korea and the Participant should consult with a personal legal advisor to determine the Participant's reporting obligations.
Foreign Asset / Account Reporting Information. Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, and so on) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency). The Participant should consult with his or her personal tax advisor to determine any personal reporting obligations.
MALAYSIA
Director Notification. If the Participant is a director of a subsidiary or other related company in Malaysia, then the Participant is subject to certain notification requirements under the Malaysian Companies Act, 2016. Among these requirements is an obligation to notify the Malaysian subsidiary in writing when the Participant receives an interest (e.g., Performance RSUs, Shares) in the Company or any related companies. In addition, the Participant must notify the Malaysian subsidiary when he or she sells Shares of the Company or any related company (including when the Participant sells Shares acquired under the Plan). These notifications must be made within fourteen (14) days of acquiring or disposing of any interest in the Company or any related company.
APPENDIX B - 9
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Data Privacy. This provision replaces the Data Privacy Information and Consent provision in the Terms and Conditions for Participants Outside the U.S. set forth above:
The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in this document by and among, as applicable, the Employer, and the Company and its subsidiaries for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, his or her name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Performance RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). The source of the Data is the Employer as well as information the Participant is providing to the Company and the Employer in connection with the Performance RSUs. The Participant understands that Data may be transferred to Fidelity or any other third parties as may be selected by the Company in the future, which are assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Participant’s country or elsewhere and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Participant may elect to deposit any Shares acquired upon settlement of the Award. | The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in this document by and among, as applicable, the Employer, and the Company and its subsidiaries for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, his or her name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Performance RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). The source of the Data is the Employer as well as information the Participant is providing to the Company and the Employer in connection with the Performance RSUs. The Participant understands that Data may be transferred to Fidelity or any other third parties as may be selected by the Company in the future, which are assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Participant’s country or elsewhere and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Participant may elect to deposit any Shares acquired upon settlement of the Award. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. | ||||
APPENDIX B - 10
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. The Participant understands, however, that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of a refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her regional stock plan administrator at Stock_Plan_Admin@Analog.com. | The Participant understands, however, that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of a refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her regional stock plan administrator at Stock_Plan_Admin@Analog.com. | ||||
Acknowledgment of the Agreement. By participating in the Plan, Participant acknowledges that the Participant has received a copy of the Plan, has reviewed the Plan in its entirety and fully understands and accepts all provisions of the Plan. The Participant further acknowledges that the Participant has read and expressly approves the terms and conditions set forth in Section 9(b) of the Agreement, in which the following is clearly described and established: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in the Plan are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) the Company and its subsidiaries are not responsible for any decrease in the value of the underlying Shares.
Labor Law Policy and Acknowledgment. By participating in the Plan, the Participant expressly recognizes that Analog Devices, Inc., with registered offices at One Analog Way, Wilmington, Massachusetts, 01887 U.S.A., is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan and acquisition of Shares does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis. Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from participation in the Plan do not establish any rights between the Participant and the Company and do not form part of the employment conditions and/or benefits provided by the Company and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant's employment.
The Participant further understands that the Participant’s participation in the Plan is as a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant's participation at any time without any liability to the Participant.
Finally, the Participant hereby declares that Participant does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and the Participant therefore grants a full and broad release to the Company, its subsidiaries, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.
Reconocimiento del Contrato. Al participar en el Plan, usted reconoce que ha recibido una copia del Plan, que ha revisado el Plan en su totalidad, y que entiende y acepta en su totalidad, todas y cada una de las disposiciones del Plan. Asimismo reconoce que ha leído y aprueba expresamente los términos y condiciones señalados en Sección 9(b) del Convenio, en lo que claramente se describe y establece lo siguiente: (i) su participación en el Plan no constituye un derecho adquirido; (ii) el Plan y su participación en el Plan son ofrecidos por la Compañía sobre
APPENDIX B - 11
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
una base completamente discrecional; (iii) su participación en el Plan es voluntaria; y (iv) la Compañía y sus afiliadas no son responsables de ninguna por la disminución en el valor de las Acciones subyacentes.
Política de Legislación Laboral y Reconocimiento. Al participar en el Plan, usted reconoce expresamente que Analog Devices, Inc., con oficinas registradas en One Analog Way, Wilmington, Massachusetts, 01887 EE.UU, es la única responsable por la administración del Plan, y que su participación en el Plan, así como la adquisición de las Acciones, no constituye una relación laboral entre usted y la Compañía, debido a que usted participa en el plan sobre una base completamente mercantil. Con base en lo anterior, usted reconoce expresamente que el Plan y los beneficios que pudiera obtener por su participación en el Plan, no establecen derecho alguno entre usted y la Compañía, y no forman parte de las condiciones y/o prestaciones laborales que la Compañía ofrece, y que las modificaciones al Plan o su terminación, no constituirán un cambio ni afectarán los términos y condiciones de su relación laboral.
Asimismo usted entiende que su participación en el Plan es el resultado de una decisión unilateral y discrecional de la Compañía; por lo tanto, la Compañía se reserva el derecho absoluto de modificar y/o suspender su participación en cualquier momento, sin que usted incurra en responsabilidad alguna.
Finalmente, usted declara que no se reserva acción o derecho alguno para interponer reclamación alguna en contra de la Compañía, por concepto de compensación o daños relacionados con cualquier disposición del Plan o de los beneficios derivados del Plan, y por lo tanto, usted libera total y ampliamente de toda responsabilidad a la Compañía, a sus afiliadas, sucursales, oficinas de representación, sus accionistas, funcionarios, agentes o representantes legales, con respecto a cualquier reclamación que pudiera surgir.
Securities Law Information. The Performance RSUs granted, and any Shares acquired, under the Plan have not been registered with the National Register of Securities maintained by the Mexican National Banking and Securities Commission and cannot be offered or sold publicly in Mexico. In addition, the Plan, Agreement and any other document relating to the Performance RSUs may not be publicly distributed in Mexico. These materials are addressed to the Participant because of the Participant’s existing relationship with the Company and these materials should not be reproduced or copied in any form. The offer contained in these materials does not constitute a public offering of securities, but rather a private placement of securities addressed specifically to certain employees of the Company and its subsidiaries and are made in accordance with the provisions of the Mexican Securities Market Law. Any rights under such offering shall not be assigned or transferred.
NETHERLANDS
There are no country-specific provisions.
NORWAY
There are no country-specific provisions.
PHILIPPINES
Securities Law Information. The securities being offered or sold herein have not been registered with the Philippines Securities and Exchange Commission (“PSEC”) under its Securities Regulation Code (the “SRC”).
The grant of Performance RSUs is being made pursuant to an exemption from registration under Section 10.2 of the SRC that has been approved by the PSEC.
The Participant should be aware of the risks of participating in the Plan, which include (without limitation) the risk of fluctuation in the price of the Shares on the Nasdaq Global Select Market (“Nasdaq”) and the risk of currency fluctuations between the U.S. Dollar and his or her local currency. In this regard, the Participant should note that the value of any Shares he or she may acquire under the Plan may decrease, and fluctuations in foreign exchange rates between his or her local currency and the U.S. Dollar may affect the value of the Shares or any amounts due to the Participant pursuant to the vesting of the Performance RSUs or the subsequent sale of any Shares acquired by the Participant. The Company is not making any representations, projections or assurances about the value of the Shares now or in the future.
APPENDIX B - 12
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
For further information on risk factors impacting the Company’s business that may affect the value of the Shares, the Participant should refer to the risk factors discussion in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company’s website at http://investor.analog.com/sec.cfm.
The Participant should also note that the sale or disposal of Shares acquired under the Plan may be subject to certain restrictions under Philippines securities laws. Those restrictions should not apply if the offer and resale of Shares takes place outside of the Philippines through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on Nasdaq. The Company’s designated broker should be able to assist the Participant in the sale of Shares on Nasdaq. If the Participant has questions with regard to the application of Philippines securities laws to the disposal or sale of Shares acquired under the Plan the Participant should consult with his or her legal advisor.
POLAND
Foreign Asset/Account Reporting Information. If the Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside Poland, the Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds a certain threshold (currently, PLN 7,000,000). If required, such reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland.
Exchange Control Information. The transfer of funds in excess of a certain threshold (currently €15,000, unless the transfer of funds is considered to be connected with the business activity of an entrepreneur, in which case a lower threshold may apply) into or out of Poland must be made through a bank account in Poland. The Participant understands that he or she is required to store all documents connected with any foreign exchange transactions for a period of five years, as measured from the end of the year in which such transaction occurred. The Participant should consult with his or her personal legal advisor to determine what he or she must do to fulfill any applicable reporting/exchange control duties.
ROMANIA
Exchange Control Information. If the Participant deposits the proceeds from the sale of Shares issued at vesting and settlement of the Performance RSUs in a bank account in Romania, the Participant may be required to provide the Romanian bank with appropriate documentation explaining the source of the funds. The Participant should consult his or her personal advisor to determine whether he or she will be required to submit such documentation to the Romanian bank.
SERBIA
Securities Law Information. The grant of Performance RSUs and the issuance of any Shares are not subject to the regulations concerning public offers and private placements under the Law on Capital Markets.
Exchange Control Information. Pursuant to the Law on Foreign Exchange Transactions, the Participant is permitted to acquire Shares under the Plan, but a report may need to be made of the acquisition of such Shares, the value of the Shares at vesting, and, on a quarterly basis, any changes in the value of the Shares. As the exchange control regulations in Serbia may change without notice, the Participant should consult with his or her personal advisor with respect to all applicable reporting obligations.
SINGAPORE
Securities Law Information. The Performance RSUs are granted to the Participant pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Agreement and the Plan have not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the Participant’s Performance RSUs are subject to section 257 of the SFA and the Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA and in accordance with any other applicable provision of the SFA.
Director Notification. If the Participant is a director, associate director or shadow director of a subsidiary or other related company in Singapore, the Participant is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is
APPENDIX B - 13
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
an obligation to notify the Singapore subsidiary in writing when the Participant receives an interest (e.g., Performance RSUs, Shares) in the Company or any related company. In addition, the Participant must notify the Singapore subsidiary when the Participant sells Shares of the Company or any related company (including when the Participant sells Shares acquired under the Plan). These notifications must be made within two (2) business days of (i) acquiring or disposing of any interest in the Company or any related company, or (ii) any change in a previously-disclosed interest (e.g. upon vesting of the Performance RSUs or when Shares are subsequently sold). In addition, a notification must be made of the Participant’s interests in the Company or any related company within two (2) business days of becoming a director, associate director, or shadow director. If the Participant is the Chief Executive Officer (“CEO”) of a Singapore subsidiary and the above notification requirements are determined to apply to the CEO of a Singapore subsidiary, the above notification requirements also may apply to the Participant.
SPAIN
No Entitlement. This provision supplements Section 9(d) of the Agreement:
By accepting the Performance RSUs, the Participant acknowledges that he or she consents to participation in the Plan and has received a copy of the Plan. The Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant Performance RSUs under the Plan to individuals who may be employees of the Company or its subsidiaries throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that (i) any Performance RSUs will not economically or otherwise bind the Company or any of its subsidiaries on an ongoing basis; (ii) the Performance RSUs or the Shares acquired upon settlement shall not become a part of any employment contract (either with the Company or any of its subsidiaries) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever; and (iii) the Performance RSUs will cease vesting upon the Participant’s termination of employment except in the event the Participant dies or becomes Disabled, as detailed in the following paragraph. In addition, the Participant understands that the Performance RSU grant would not be made to the Participant but for the assumptions and conditions referred to above; thus, the Participant acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any Performance RSUs shall be null and void.
Further, and except as provided in Section 2(d) of the Agreement in the event the Participant becomes Disabled, the vesting of the Performance RSUs is expressly conditioned on the Participant’s continued rendering of service, such that if the Participant’s employment terminates for any reason whatsoever, the Performance RSUs will cease vesting immediately, in whole or in part, effective on the date of the Participant’s termination of employment (unless otherwise specifically provided in Section 2 of the Agreement in the event of death). This will be the case, for example, even if (1) the Participant is considered to be unfairly dismissed without good cause (i.e., subject to a “despido improcedente”); (2) the Participant is dismissed for disciplinary or objective reasons or due to a collective dismissal; (3) the Participant terminates service due to a change of work location, duties or any other employment or contractual condition; (4) the Participant terminates service due to a unilateral breach of contract by the Company or a subsidiary; or (5) the Participant’s employment terminates for any other reason whatsoever. Consequently, upon termination of the Participant’s employment for any of the above reasons, the Participant will automatically lose any rights to Performance RSUs that were not vested on the date of the Participant’s termination of employment, as described in the Plan and the Agreement. The Participant understands that the RSU grant would not be made to the Participant but for the assumptions and conditions referred to above; thus, the Participant acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any RSU grant shall be null and void.
The Participant acknowledges that he or she has read and specifically accepts the conditions referred to in Section 2 of the Agreement.
Securities Law Notification. The grant of Performance RSUs and the Shares issued upon vesting of the Performance RSUs are considered a private placement outside the scope of Spanish laws on public offerings and issuances of securities. No “offer of securities to the public”, as defined under Spanish law, has taken place or will take place in the Spanish territory. This Agreement has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Exchange Control Notification. The Participant is required to declare to the Bank of Spain any securities accounts (including brokerage accounts held abroad), as well as the securities held in such accounts if the value of the transactions for all such accounts during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds a certain threshold. Different thresholds and deadlines to file this declaration apply. However, if neither such transactions during the immediately preceding year nor the balances / positions as of December 31 exceed a certain threshold, no such declaration must be filed unless expressly required by the Bank of Spain. If any of such thresholds were exceeded during the current year, the Participant may be required to file the relevant declaration corresponding
APPENDIX B - 14
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
to the prior year, however, a summarized form of declaration may be available. The Participant should consult a personal tax or legal advisor for further information regarding these exchange control reporting obligations.
Foreign Asset / Account Reporting Information. To the extent that the Participant holds assets (e.g., cash or Shares held in a bank or brokerage account) outside Spain with a value in excess of a certain threshold (currently, €50,000) per type of asset (e.g., Shares, cash, and so on) as of December 31 each year, the Participant will be required to report information on such assets on his or her tax return for such year (tax form 720). After such assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported assets increases by more than a certain threshold (currently, €20,000). If applicable, the reporting must be completed by March 31. Failure to comply with this reporting requirement may result in penalties to the Participant. Accordingly, the Participant should consult with his or her personal tax and legal advisors to ensure that he or she is properly complying with his or her reporting obligations.
SWEDEN
Authorization to Withhold. This provision supplements Section 6 of the Agreement:
Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as set forth in Section 6 of the Agreement, by accepting the Performance RSUs, the Participant authorizes the Company and/or the Employer to withhold Shares or to sell Shares otherwise deliverable to the Participant upon settlement/vesting to satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such Tax-Related Items.
SWITZERLAND
Securities Law Information. The grant of Performance RSUs and the issuance of any Shares are not intended to be a public offering in Switzerland and are therefore not subject to registration in Switzerland. Neither this document nor any materials relating to the Performance RSUs (i) constitutes a prospectus according to articles 35 et. seq. of the Swiss Federal Act on Financial Services (“FinSA”) (ii) may be publicly distributed nor otherwise made publicly available in Switzerland to any person other than an employee of the Company or a subsidiary, or (iii) has been or will be filed with, approved or supervised by any Swiss regulatory authority (in particular, the Swiss Financial Supervisory Authority (FINMA)).
TAIWAN
Data Privacy. The Participant acknowledges that he or she has read and understands the terms regarding collection, processing and transfer of Data contained in the Data Privacy Information and Consent provision of the Terms and Conditions for Participants outside the U.S. and agrees that, upon request of the Company or the Employer, the Participant will provide any executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. The Participant understands he or she will not be able to participate in the Plan if the Participant fails to execute any such consent or agreement.
Securities Law Information. The Performance RSUs and participation in the Plan is made available only to employees of the Company and its subsidiaries. It is not a public offer of securities by a Taiwanese company. Therefore, it is exempt from registration in Taiwan.
Exchange Control Information. Individuals may acquire foreign currency (including proceeds from the sale of Shares) into Taiwan up to a certain threshold (currently, US$5,000,000) per year without justification.
There is no need to aggregate all remittances into Taiwan when calculating the limitation. If the transaction amount equals a certain threshold (currently, TWD$500,000) or more in a single transaction, the Participant must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank.
THAILAND
Exchange Control Information. If the Participant is a Thai resident and the Participant realizes sale proceeds equal to or in excess of a specified threshold (currently US$1,000,000) in a single transaction, the Participant is required to repatriate the cash proceeds to Thailand immediately following the receipt of such proceeds and then either convert such repatriation proceeds into Thai Baht or deposit the
APPENDIX B - 15
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
proceeds into a foreign currency account opened with any commercial bank in Thailand within 360 days of repatriation, unless the Participant can rely on any applicable exemptions (e.g., where the funds will be used offshore for any permissible purposes under exchange control regulations and the relevant form and supporting documents have been submitted to a commercial bank in Thailand). Further, for repatriated amounts equal to or in excess of the specified threshold, the Participant understands he or she must specifically report the inward remittance to the Bank of Thailand on a Foreign Exchange Transaction Form. The Participant is responsible for ensuring compliance with all exchange control laws in Thailand.
TURKEY
Securities Law Information. Under Turkish law, the Participant is not permitted to sell any Shares acquired under the Plan in Turkey. The Shares are currently traded on the Nasdaq Global Select Market, under the ticker symbol “ADI” and the Shares may be sold through this exchange.
Exchange Control Information. The Participant may be required to engage a Turkish financial intermediary to assist with the sale of Shares acquired under the Plan. As the Participant is solely responsible for complying with any applicable financial intermediary requirements, the Participant should consider consulting his or her personal legal advisor prior to the vesting of the Performance RSUs or any sale of Shares to ensure compliance.
UNITED KINGDOM
Responsibility for Taxes. This provision supplements Section 6 of the Agreement:
Without limitation to Section 6 of the Agreement, the Participant agrees that the Participant is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items, as and when requested by the Company or the Employer or by HM Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). The Participant also agrees to indemnify and keep indemnified the Company and the Employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on the Participant’s behalf.
Notwithstanding the foregoing, if the Participant is a director or executive officer (within the meaning of Section 13(k) of the Exchange Act), the Participant understands that he or she may not be able to indemnify the Company for the amount of any Tax-Related Items not collected from or paid by the Participant in case the indemnification could be considered to be a loan. In this case, the Tax-Related Items not collected or paid may constitute a benefit to the Participant on which additional income tax and National Insurance contributions (“NICs”) may be payable. The Participant understands that he or she will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of any employee NICs due on this additional benefit, which may also be collected from the Participant by any of the means referred to in Section 6 of the Agreement.
Manner of Payment. This provision replaces Section 7 of the Agreement:
Notwithstanding any discretion in the Plan or the Agreement to the contrary, upon vesting of the Performance RSUs, Shares will be issued to the Participant. In no event will the Award be paid to Participant in the form of cash.
Furthermore, notwithstanding any provision of the Plan or the Agreement to the contrary, the Participant will not be entitled to receive any Shares pursuant to the vesting of the Performance RSUs unless and until the Participant has executed a Joint Election (as defined below) in connection with the Performance RSUs.
Joint Election. As a condition of the grant of Performance RSUs, the Participant agrees to accept any liability for secondary Class 1 National Insurance contributions (the “Employer NICs”) which may be payable by the Company or the Employer with respect to the vesting of the Performance RSUs or otherwise payable with respect to a benefit derived in connection with the Performance RSUs.
Without limitation to the foregoing, the Participant agrees to execute a joint election between the Company and/or the Employer and Participant (the “Joint Election”), the form of such Joint Election being formally approved by HMRC, and any other consent or election required to accomplish the transfer of the Employer NICs to the Participant. The Participant further agrees to execute such other joint elections as may be required between the Participant and any successor to the Company and/or the Employer. If the Participant does not
APPENDIX B - 16
APPENDIX B TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
enter into a Joint Election, no Shares shall be issued to the Participant without any liability to the Company and/or the Employer. The Participant further agrees that the Company and/or the Employer may collect the Employer NICs from the Participant by any of the means set forth in Section 6 of the Agreement.
The Joint Election is attached hereto as Appendix D. If the Participant has signed a Joint Election in the past with respect to an RSU award granted to him or her by the Company and that Joint Election applies to all grants made under the Plan, the Participant need not sign another Joint Election in connection with this Performance RSU grant.
APPENDIX B - 17
APPENDIX C
EMPLOYER INFORMATION STATEMENT – DENMARK
RESTRICTED STOCK UNIT GRANT ON GRANT DATE
RESTRICTED STOCK UNIT GRANT ON GRANT DATE
Pursuant to section 3(1) of the Danish Act on the Use of Rights to Purchase or Subscribe for Shares etc. in Employment Relationships, as amended as of January 1, 2019 (the “Stock Option Act”), you are entitled to receive the following information regarding the grant of Performance Restricted Stock Units (“Performance RSUs”) by Analog Devices, Inc. (the “Company”) under the Analog Devices, Inc. 2020 Equity Incentive Plan (the “Plan”) in a separate written statement. This statement contains only the information mentioned in the Stock Option Act; the other terms and conditions of your grant of Performance RSUs is described in detail in your Global Performance Restricted Stock Unit Agreement (the “Agreement”), the appendix to your Agreement and the Plan.
1. Date of Grant
The Company approved the grant of Performance RSUs under the Plan on Grant Date. On this basis, the Date of Grant for your Performance RSUs is Grant Date.
2. Terms and Conditions of the Performance RSU Grant
The grant of Performance RSUs and other awards under the Plan is made at the sole discretion of the Company. In determining who will receive Performance RSUs, the number of shares of the Company’s common stock that are subject to the Performance RSUs, and all other terms and conditions of the Performance RSUs, the Company will consider a number of factors, including (but not limited to) the Company’s past, present and projected financial results, your personal performance and the value of the services that you render on the future value of the Company and its ongoing operations. Notwithstanding, the Company may decide, in its sole discretion, not to grant you additional Performance RSUs or other awards under the Plan in the future. Under the terms of the Plan and the Agreement, you have no entitlement or claim to receive future Performance RSU grants or other awards under the Plan.
3. Vesting Date of Performance RSUs
Your Performance RSUs will vest in accordance with the vesting schedule set forth in Section 1 of your Agreement. If you do not remain employed with the Company or one of the Company’s subsidiaries through the vesting date, you may forfeit all or a portion of your Performance RSUs as of the effective date of your termination, depending upon the particular circumstances of your termination and when it occurs. In this regard, please see Section 5 below.
When your Performance RSUs vest, the Company will issue one share of the Company’s common stock to you in settlement of each vested Performance RSU.
4. Exercise Price
Because each Performance RSU entitles you to receive one share of the Company’s common stock on the date of vesting without any cost to you or other payment required from you, there is no exercise price associated with the Performance RSUs.
5. Your Rights upon Termination of Service
In the event you terminate employment with the Company group, the vesting and forfeiture of your Performance RSUs will be determined in accord with the terms of your Agreement. In addition, you will be ineligible to receive any additional Performance RSU grants after your termination.
6. Financial Aspects of Participating in the Plan
The grant of Performance RSUs has no immediate financial consequences for you. The value of the Performance RSUs is not taken into account when calculating holiday allowances, pension contributions or other statutory consideration calculated on the basis of salary. The tax treatment of Performance RSUs depends on a number of aspects and thus, you are encouraged to seek particular advice regarding your tax position.
Shares of stock are financial instruments and investing in stocks will always have financial risk. The possibility of profit at the time of vesting will not only be dependent on the Company’s financial performance, but inter alia, also on the general development of the stock markets. In addition, before or after you vest in your Performance RSUs, the shares of the Company’s common stock could decrease in value even below the price of such stock on the Date of Grant.
APPENDIX C - 1
APPENDIX C
EMPLOYER INFORMATION STATEMENT – DENMARK
RESTRICTED STOCK UNIT GRANT ON GRANT DATE
RESTRICTED STOCK UNIT GRANT ON GRANT DATE
7. Other Issues
This Statement does not intend to alter any provisions of the Plan or the Agreement (or any related document), and the Plan and the Agreement (and any related document) shall prevail in case of any ambiguities. However, your mandatory rights under the Stock Option Act shall prevail in case of any ambiguities.
Notice Provided By:
Analog Devices, Inc.
One Analog Way
Wilmington, MA 01887
U.S.A.
APPENDIX C - 2
ARBEJDSGIVERERKLÆRING – DANMARK
Tildeling af “Restricted Stock Units” den GRANTDATE
Tildeling af “Restricted Stock Units” den GRANTDATE
I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret m.v. i ansættelsesforhold, som ændret virkning fra 1. januar 2019 (“Aktieoptionsloven”) er du berettiget til i en særskilt skriftlig erklæring at modtage følgende oplysninger om Analog Devices, Inc.’s (“Selskabets”) tildeling af “Performance Restricted Stock Units” (“RSU’er”) i henhold til Analog Devices, Inc.’s 2020 medarbejderaktieordning (“Ordningen”). Denne erklæring indeholder kun de oplysninger, der er nævnt i Aktieoptionsloven. De øvrige vilkår og betingelser for tildelingen er beskrevet nærmere i Global Performance Restricted Stock Unit Agreement (“Aftalen”), i tillægget til Aftalen og i Ordningen.
1. Tildelingsdato
Selskabets godkendte den Grant Date tildelingen af RSU’er i henhold til Ordningen. Tildelingsdatoen for dine RSU’er er således den Grant Date.
2. Vilkår og betingelser for RSU-tildelingen
RSU-tildelingen og øvrige tildelinger under Ordningen foretages efter Selskabets eget skøn. Ved fastlæggelsen af, hvem der skal modtage RSU’er, hvor mange af Selskabets ordinære aktier, der skal være genstand for RSU’er, og de øvrige vilkår og betingelser for RSU’erne, lægger Selskabet vægt på en række faktorer, herunder bl.a. Selskabets historiske, nuværende og forventede regnskabsmæssige resultater, dine personlige resultater og værdien af dine ydelser for Selskabets fremtidige værdi og løbende drift. Uanset ovenstående kan Selskabet frit vælge ikke at foretage yderligere RSU-tildelinger eller andre tildelinger til dig fremover. I henhold til Ordningen og Aftalen har du ikke ret til eller krav på fremover at modtage RSU-tildelinger eller andre tildelinger.
3. Modningsdato for RSU’er
Dine RSU’er modnes som anført i den modningsplan, der fremgår af afsnit 1 i Aftalen. Hvis du ikke forbliver ansat i Selskabet eller i et af Selskabets datterselskaber frem til modningsdatoen, kan du miste dine RSU’er helt eller delvist med virkning fra fratrædelsestidspunktet afhængig af de konkrete omstændigheder i forbindelse med din fratræden og tidspunktet herfor. Der henvises i den forbindelse til pkt. 5 nedenfor.
Når RSU’erne modnes, udsteder Selskabet én ordinær aktie i Selskabet til dig for hver RSU, der er modnet.
4. Udnyttelseskurs
Da hver RSU giver dig ret til at modtage én ordinær aktie i Selskabet på modningsdatoen, uden at du vil skulle betale nogen omkostninger eller andre beløb, er der ingen udnyttelseskurs forbundet med RSU’erne.
5. Din retsstilling i forbindelse med fratræden
Hvis din ansættelse i Selskabet eller dets koncern ophører, afhænger modningen og fortabelsen af RSU’erne af vilkårene i Aftalen. Derudover vil du ikke være berettiget til at få tildelt yderligere RSU’er efter din fratræden.
6. Økonomiske aspekter ved at deltage i Ordningen
Tildelingen af RSU’er har ingen umiddelbare økonomiske konsekvenser for dig.Værdien af RSU’erne indgår ikke i beregningen af feriepenge, pensionsbidrag eller andre lovpligtige, vederlagsafhængige ydelser. Den skattemæssige behandling af RSU’erne afhænger af flere forhold, og du opfordres derfor til at søge særskilt rådgivning vedrørende din skattemæssige situation.
Aktier er finansielle instrumenter, og investering i aktier vil altid være forbundet med en økonomisk risiko. Muligheden for at opnå en fortjeneste på modningstidspunktet afhænger således ikke kun af Selskabets økonomiske udvikling, men også af den generelle udvikling på aktiemarkedet. Derudover kan kursen på Selskabets aktier både før og efter overdragelsen af RSU’erne falde, måske endda til et niveau, der ligger under kursen på Tildelingsdatoen.
APPENDIX C - 3
ARBEJDSGIVERERKLÆRING – DANMARK
Tildeling af “Restricted Stock Units” den GRANTDATE
Tildeling af “Restricted Stock Units” den GRANTDATE
7. Diverse
Denne Erklæring har ikke til formål at ændre bestemmelserne i Ordningen eller Aftalen (eller i et dertil tilhørende dokument), og Ordningen og Aftalen (og eventuelle dertil tilhørende dokumenter) har forrang i tilfælde af flertydighed. Dine lovfæstede rettigheder i henhold til Aktieoptionsloven har dog forrang i tilfælde af flertydighed.
Meddelelse afgivet af:
Analog Devices, Inc.
One Analog Way
Wilmington, MA 01887
U.S.A.
APPENDIX C - 4
APPENDIX D TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Onscreen disclaimer
If you are liable for National Insurance contributions (“NICs”) in the United Kingdom in connection with your restricted stock units or stock options (“Awards”) granted under the Analog Devices, Inc. 2020 Equity Incentive Plan (the “Plan”), you are required to enter into an Election to transfer to you any liability for employer’s NICs that may arise in connection with your awards.
Clicking on the “ACCEPT” box indicates your acceptance of the Election. You should read the “Important Note on the Election to Transfer Employer NICs” before accepting the Election.
Important Note on the Election to Transfer Employer NICs
If you are liable for National Insurance contributions (“NICs”) in the United Kingdom in connection with Awards that have been granted or assumed and converted under the Plan, you are required to enter into an Election to transfer to you any liability for employer’s NICs that may arise in connection with your Awards.
By entering into the Election:
•you agree that any employer’s NICs liability that may arise in connection with your Awards will be transferred to you;
•you authorize your employer to recover an amount sufficient to cover this liability by such methods set out in the Award agreement including, but not limited to, deductions from your salary or other payments due or the sale of sufficient shares acquired pursuant to your Awards; and
•you acknowledge that even if you have clicked on the “ACCEPT” box where indicated, the Company or your employer may still require you to sign a paper copy of this Election (or a substantially similar form) if the Company determines such is necessary to give effect to the Election.
Please read the Election carefully before accepting the Election.
Please print and keep a copy of the Election for your records.
APPENDIX D - 1
APPENDIX D TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
This Election is between:
A. The individual who has obtained authorized access to this Election (the “Employee”), who is employed by one of the employing companies listed in the attached schedule (the “Employer”) and who is eligible to receive restricted stock units and/or stock options (“Awards”) pursuant to the Analog Devices, Inc. 2020 Equity Incentive Plan (the “Plan”), and
B. Analog Devices, Inc. of One Analog Way, Wilmington, Massachusetts 01887, U.S.A. (the “Company”), which may grant Awards under the Plans and is entering into this Election on behalf of the Employer.
1.Introduction
1.1This Election relates to all Awards granted to the Employee or assumed and converted under the Plan up to the termination dates of the Plans.
1.2In this Election the following words and phrases have the following meanings:
(a)“Chargeable Event” means any event giving rise to Relevant Employment Income.
(b)"Relevant Employment Income" from Awards on which employer's National Insurance Contributions becomes due is defined as:
(i)an amount that counts as employment income of the earner under section 426 ITEPA (restricted securities: charge on certain post-acquisition events);
(ii)an amount that counts as employment income of the earner under section 438 of ITEPA (convertible securities: charge on certain post-acquisition events); or
(iii)any gain that is treated as remuneration derived from the earner's employment by virtue of section 4(4)(a) SSCBA, including without limitation:
(A)the acquisition of securities pursuant to the Awards (within the meaning of section 477(3)(a) of ITEPA);
(B)the assignment (if applicable) or release of the Awards in return for consideration (within the meaning of section 477(3)(b) of ITEPA);
(C)the receipt of a benefit in connection with the Awards, other than a benefit within (i) or (ii) above (within the meaning of section 477(3)(c) of ITEPA);
(c)“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.
(d)“SSCBA” means the Social Security Contributions and Benefits Act 1992.
1.3This Election relates to the employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise on Relevant Employment Income in respect of the Awards pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.
1.4This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
APPENDIX D - 2
APPENDIX D TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
1.5This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).
2.The Election
The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability that arises on Relevant Employment Income is hereby transferred to the Employee. The Employee understands that, by electronically accepting this Election, he or she will become personally liable for the Employer’s Liability covered by this Election. This Election is made in accordance with paragraph 3B(1) of Schedule 1 of the SSCBA.
3.Payment of the Employer’s Liability
3.1The Employee hereby authorizes the Company and/or the Employer to collect the Employer’s Liability in respect of any Relevant Employment Income from the Employee at any time after the Chargeable Event:
(i) by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Chargeable Event; and/or
(ii) directly from the Employee by payment in cash or cleared funds; and/or
(iii) by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the Awards; and/or
(iv) by any other means specified in the applicable award agreement.
3.2The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities in respect of the Awards to the Employee until full payment of the Employer’s Liability is received.
3.3The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HM Revenue & Customs on behalf of the Employee within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days after the end of the UK tax month during which the Chargeable Event occurs if payments are made electronically).
4.Duration of Election
4.1The Employee and the Company agree to be bound by the terms of this Election regardless of whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.
4.2This Election will continue in effect until the earliest of the following:
(i) the Employee and the Company agree in writing that it should cease to have effect;
(ii) on the date the Company serves written notice on the Employee terminating its effect;
(iii) on the date HM Revenue & Customs withdraws approval of this Election; or
(iv) after due payment of the Employer’s Liability in respect of the entirety of the Awards to which this Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.
4.3This Election will continue in force regardless of whether the Employee ceases to be an employee of the Employer.
4.4Any reference in this Election to the Company and/or the Employer shall include that entity’s successors in title and assigns as permitted in accordance with the terms of the Plan and the relevant award agreement. This Election will continue in effect in respect of any awards which replace or replaced the Awards following their grant in circumstances where section 483 ITEPA applies.
APPENDIX D - 3
APPENDIX D TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Acceptance by the Employee
The Employee acknowledges that, by clicking on the “ACCEPT” box, the Employee agrees to be bound by the terms of this Election.
Acceptance by Analog Devices, Inc.
Analog Devices, Inc. acknowledges that, by signing this Election or arranging for the scanned signature of an authorized representative to appear on this Election, Analog Devices, Inc. agrees to be bound by the terms of this Election.
Signature for and on behalf of Analog Devices, Inc.
| /s/ Richard P. Ahern | ||
| Richard P. Ahern | ||
Corporate Vice President | ||
Date: Grant Date
Name: Participant Name
APPENDIX D - 4
APPENDIX D TO
2020 EQUITY INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Schedule of Employer Companies
The following are employer companies to which this Election may apply:
For each company, provide the following details:
Analog Devices Limited
| Registered Office: | 15 Pressing Lane, Blyth Road, Hayes, England, UB3 1EP | ||||
| Company Registration Number: | 00895439 | ||||
| Corporation Tax Reference: | 6873689030216A | ||||
| PAYE Reference: | 120/A4055 | ||||
APPENDIX D - 5
Exhibit 10.58
November 20, 2024
Martin Cotter
Dear Martin,
It is a great pleasure to offer you the role of Senior Vice President, Vertical Business Units. You will be reporting to the Chief Executive Officer, Vincent Roche (“CEO”), at our Wilmington, MA location.
Your start date in your new role on December 1st, 2024. You will work with Gregory Bryant to ensure a smooth handover of responsibilities.
Cash Compensation.
•Base Salary. You will be paid at the bi-weekly rate of $23,076.92, which is annualized at $600,000.
•Bonus. You will participate in the Executive Performance Incentive Plan (the “Plan”) commencing from the 2025 Fiscal Year. Your bonus target under the Plan will be 100% of your base salary. Your eligibility for a Bonus payment and the terms of the bonus are governed by the Plan, as it may be amended from time to time by our Board of Directors or the Compensation and Talent Committee of the Board.
Equity Compensation.
Ongoing Equity Grants (Focal Equity Awards). At the Company’s next focal program in Fiscal Year 2025, you will be recommended for an equity award(s) having an aggregate grant date value of $4.8 million. The equity award(s) will be comprised of the same types of equity received by other executives reporting to the CEO. The timing and structure of the awards is subject to review and approval by the Compensation and Talent Committee who has full discretion in determining the composition of annual executive equity awards. There is no guarantee that the value or composition of equity awards in ADI’s Fiscal Year 2026 (or in subsequent years) will be the same as what is described for Fiscal Year 2025 above.
As a member of ADI’s executive leadership team, ADI will offer you its standard agreements with executives, including a Retention Agreement and Indemnification Agreement, each as approved by the Board of Directors and/or the Compensation and Talent Committee of the Board.
Subject to confirmation by our Board of Directors, the position you are being offered would qualify you as a "Section 16 officer" of ADI.
Further, you will be subject to our executive stock ownership guidelines, which are subject to review by our Board of Directors from time to time. Under the executive stock ownership guidelines, you will be expected to own at least a number of ADI shares having a value equal to three times your base salary, valued at the current market value of ADI shares. Shares counted toward these guidelines include any shares you hold directly, or that are beneficially held by you, any vested or unvested time-based RSUs and unvested performance-based RSUs whose performance has been certified by the Compensation and Talent Committee.
1
Your employment relationship with ADI will be on an “at will” basis. This means either you or ADI may terminate the employment relationship at any time, for any reason, or without a reason, and without prior notice.
This offer letter is not a contract guaranteeing employment for any specified period of time. ADI reserves the right to amend or terminate any of the above-described programs, plans or policies at any time and from time to time. This means that policies, compensation, and benefits applicable to its executives and employees generally may be amended or terminated at ADI’s discretion.
Other than the agreements signed contemporaneously herewith, this letter sets forth the complete and sole understanding between the parties regarding your employment and supersedes any and all other offers, agreements or understandings, whether oral or written, between you and the Company.
We believe you will be an excellent addition to the ADI executive leadership team and look forward to working with us in that capacity. We are certain you will find this new role both challenging and rewarding.
Sincerely,
/s/ Mariya Trickett | ||
Mariya Trickett | ||
Senior Vice President & Chief People Officer | ||
I accept the above offer.
Signature: | /s/ Martin Cotter | Date: | November 20, 2024 | |||||||||||
Martin Cotter | ||||||||||||||
2
Exhibit 19
ANALOG DEVICES, INC.
Insider Trading Policy
1.BACKGROUND AND PURPOSE
1.1Why Have We Adopted This Policy?
The federal securities laws prohibit any member of the Board of Directors (a “Director”), officer (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934 (the “Exchange Act”), an “executive officer”) or employee of Analog Devices, Inc. (together with its subsidiaries, the “Company”) from purchasing or selling Company securities on the basis of material nonpublic information concerning the Company, or from tipping material nonpublic information to others. These laws impose severe sanctions on individuals who violate them. In addition, the Securities and Exchange Commission (the “SEC”) has the authority to impose large fines on the Company and on the Company’s Directors, executive officers and controlling stockholders if the Company’s employees engage in insider trading and the Company has failed to take appropriate steps to prevent it (so-called “controlling person” liability).
This insider trading policy is being adopted in light of these legal requirements, and with the goal of helping:
▪prevent inadvertent violations of the insider trading laws;
▪avoid embarrassing proxy disclosure of reporting violations by persons subject to Section 16 of the Exchange Act;
▪promote compliance with the Company's obligation to publicly disclose information related to its insider trading policies and procedures and the use of certain trading arrangements by Company insiders;
▪avoid the appearance of impropriety on the part of those employed by, or associated with, the Company;
▪protect the Company from controlling person liability; and
▪protect the reputation of the Company, its Directors and its employees.
As detailed below, this policy applies to family members and certain other individuals and entities with whom Directors and employees have relationships. While the provisions in Sections 2 and 3 of this policy are not applicable to transactions by the Company itself, transactions by the Company will only be made in accordance with applicable U.S. federal securities laws, including those relating to insider trading.
1.2What Type of Information is “Material”?
Information concerning the Company is considered material if there is a substantial likelihood that a reasonable shareholder would consider the information important in making an investment decision with respect to the Company’s securities. Stated another way, there must be a substantial likelihood that a reasonable shareholder would view the information as having significantly altered the “total mix” of information available about the Company. Material information can include positive or negative information about the Company. Information concerning any of the following subjects, or the Company’s plans with respect to any of these subjects, would often be considered material:
▪the Company’s revenues or earnings;
▪a significant merger or acquisition involving the Company;
▪a change in control of the Company;
▪a significant change in the management or the Board of Directors of the Company;
▪the public or private sale of a significant amount of securities of the Company;
▪the public offering of debt or equity securities;
▪the Company’s decision to commence, modify or terminate the payment of cash dividends;
▪the establishment of a program to repurchase securities of the Company;
▪a change in the Company’s debt ratings;
▪a stock split;
▪a default on outstanding debt of the Company or a bankruptcy filing;
▪pending or threatened significant litigation, or the resolution of such litigation;
▪a new product release or a significant development, invention or discovery;
▪the loss, delay or gain of a significant contract, sale or order or other important development regarding customers, business partners or suppliers;
▪a significant cybersecurity incident or investigation of a potential such incident;
▪a conclusion by the Company or a notification from its independent auditor that any of the Company’s previously issued financial statements should no longer be relied upon; or
▪a change in or disagreement (within the meaning of Item 304 of Regulation S-K) with the Company’s independent auditor.
This list is illustrative only and is not intended to provide a comprehensive list of circumstances that could give rise to material information.
1.3When is Information “Nonpublic”?
Information concerning the Company is considered nonpublic if it has not been disseminated in a manner making it available to investors generally.
Information will generally be considered nonpublic unless (1) the information has been disclosed in a press release, in a public filing made with the SEC (such as a Report on Form 10- K, Form 10-Q or Form 8-K), or through a news wire service or daily newspaper of wide circulation, and (2) a sufficient amount of time has passed so that the information has had an opportunity to be digested by the marketplace.
2.PROHIBITIONS RELATING TO TRANSACTIONS IN THE COMPANY’S SECURITIES
2.1Covered Persons. This Section 2 applies to the following individuals and entities (collectively, “Covered Persons”):
▪all Directors;
▪all employees;
▪all family members of Directors and employees who share the same address as, or are financially dependent on, the Director or employee and any other person who shares the same address as the Director or employee (other than (x) an employee or tenant of the Director or employee or (y) another unrelated person whom the Chief Legal Officer determines should not be covered by this policy); and
▪all corporations, limited liability companies, partnerships, trusts or other entities controlled by any of the above Covered Persons, unless the entity has implemented policies or procedures designed to ensure that
such Covered Person cannot influence transactions by the entity involving Company securities.
2.2Prohibition on Trading While Aware of Material Nonpublic Information.
(a)Prohibited Activities. Except as provided in Section 4, no Covered Person may:
purchase, sell or gift any securities of the Company while such Covered Person is aware of any material nonpublic information concerning the Company or recommend doing so to someone else;
tip or otherwise disclose to someone else any material nonpublic information concerning the Company if the recipient may misuse that information, such as by purchasing or selling Company securities or tipping that information to others;
purchase, sell or gift any securities of another company while such Covered Person is aware of any material nonpublic information concerning such other company which such Covered Person learned in the course of service as a Director or employee of the Company or recommend doing so to someone else; or
tip or otherwise disclose to someone else any material nonpublic information concerning another company which such Covered Person learned in the course of service as a Director or employee of the Company if the recipient may misuse that information, such as by purchasing or selling securities of such other company or tipping that information to others.
(b)Application of Policy After Cessation of Service. If an individual or entity ceases to be a Covered Person at a time when such individual or entity is aware of material nonpublic information concerning the Company, the prohibitions on purchasing, selling and gifting of Company securities in Section 2.2(a) shall continue to apply until that information has become public or is no longer material.
2.3Prohibition on Pledges. No Covered Person may purchase Company securities on margin, borrow against Company securities held in a margin account, or pledge Company securities as collateral for a loan, except to the extent approved prior to the approval of this Insider Trading Policy by the Board of Directors of the Company.
2.4Prohibition on Short Sales, Derivative Transactions and Hedging Transactions. No Covered Person may engage in any of the following types of transactions with respect to Company securities:
▪short sales, including short sales “against the box”; or
▪purchases or sales of puts, calls or other derivative securities; or
▪purchases of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities.
3.ADDITIONAL PROHIBITIONS APPLICABLE TO DIRECTORS, EXECUTIVE OFFICERS AND DESIGNATED EMPLOYEES
3.1Further Restricted Insiders. This Section 3 applies to the following Covered Persons, who are subject to certain additional restrictions as set forth herein (collectively, “Further Restricted Insiders”):
▪all Directors;
▪all executive officers;
▪such other employees as are designated from time to time by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the Chief Legal Officer as being subject to this Section 3 (the “Designated Employees”);
▪all family members of Directors, executive officers and Designated Employees who share the same address as, or are financially dependent on, the Director, executive officer or Designated Employee and any other person who shares the same address as the Director, executive officer or Designated Employee (other than (x) an employee or tenant of the Director, executive officer or Designated Employee or (y) another unrelated person whom the Chief Legal Officer determines should not be covered by this policy); and
▪all corporations, limited liability companies, partnerships, trusts or other entities controlled by any of the above Further Restricted Insiders, unless the entity has implemented policies or procedures designed to ensure that such Further Restricted Insider cannot influence transactions by the entity involving Company securities.
3.2Blackout Periods.
(a)Quarterly Blackout Periods. Except as provided in Section 4, no Further Restricted Insider may purchase, sell or gift any securities of the Company during the period beginning three weeks prior to the end of each fiscal quarter and ending upon the completion of the one full trading day, or such longer period as determined by the Chief Legal Officer, Chief Financial Officer or Associate General Counsel, Corporate, Securities and M&A, after the public announcement of earnings for such quarter (a “quarterly blackout period”).
(b)Special Blackout Periods. The Company may from time to time notify Directors, executive officers and other specified employees that an additional blackout period (a “special blackout period”) is in effect in view of significant events or developments involving the Company. In such event, except as provided in Section 4, no person who is notified of a special blackout period may purchase, sell or gift any securities of the Company during such special blackout period or inform anyone else that a special blackout period is in effect. (In this policy, quarterly blackout periods and special blackout periods are each referred to as a “blackout period.”)
(c)Awareness of Material Non-Public Information when a Blackout Period is Not in Effect. Even if no blackout period is then in effect, if a Further Restricted Insider is aware of material nonpublic information the prohibitions contained in Section 2.2(a) apply.
3.3Notice and Pre-Clearance of Transactions.
(a)Pre-Transaction Clearance. No Director, executive officer or such other employee designated from time to time by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the Chief Legal Officer as being subject to this Section 3.3 (a “Pre-Clearance Person”) may purchase, sell, gift, transfer, or otherwise acquire or dispose of securities of the Company, either directly or indirectly, other than in a transaction permitted under Section 4, unless such Pre-Clearance Person pre-clears the transaction with any two of the following: Chief Legal Officer, Chief Financial Officer or Associate General Counsel, Corporate, Securities and M&A. Subject to the above requirements in this Section 3.3(a), neither the Chief Legal Officer nor the Chief Financial Officer shall be permitted to pre-clear his or her own transactions. A request for pre-clearance shall be made at least two trading days prior to the intended transaction and in accordance with any additional procedures established by the Chief Legal Officer. Requests submitted after 4:00 p.m. eastern time on a weekday, on a weekend or during a Company holiday or closure will be processed on the next trading day. The Chief Legal Officer, Chief Financial Officer and Associate General Counsel, Corporate, Securities and M&A shall have sole discretion to decide whether to clear any contemplated transaction. All transactions that are pre-cleared must be effected within five business days of receipt of the pre-clearance unless a longer or shorter period has been specified by the Chief Legal Officer, Chief Financial Officer or Associate General Counsel, Corporate, Securities and M&A. A pre-cleared transaction (or any portion of a pre-cleared transaction) that has not been effected during the five-business-day period must be pre-cleared again prior to execution. Notwithstanding receipt of pre-clearance, if the Pre-Clearance Person becomes aware of
material non-public information or becomes subject to a blackout period before the transaction is effected, the transaction may not be completed.
(b)Post-Transaction Notice. Each Further Restricted Insider who is subject to reporting obligations under Section 16 of the Exchange Act shall also notify the Chief Legal Officer (or his or her designee) of the occurrence of any purchase, sale, gift, transfer, or other acquisition or disposition of securities of the Company as soon as possible following the transaction, but in any event within one business day after the transaction. Such notification may be oral or in writing (including by e-mail) and should include the identity of the Further Restricted Insider, the type of transaction, the date of the transaction, the number of shares involved, the purchase or sale price, and whether the transaction was effected pursuant to a contract, instruction or written plan that is intended either to satisfy the affirmative defense conditions of Rule 10b5-1(c) (and if so, the date of adoption of such contract, instruction or written plan) or to constitute a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
(c)Deemed Time of a Transaction. For purposes of this Section 3.3, a purchase, sale, gift, transfer, or other acquisition or disposition shall be deemed to occur at the time the person becomes irrevocably committed to it (for example, in the case of an open market purchase or sale, this occurs when the trade is executed, not when it settles).
4.EXCEPTIONS.
4.1Exceptions. The prohibitions in Sections 2.2(a) and 3.2 on purchasing, selling and gifting of Company securities do not apply to:
•exercises of stock options or other equity awards that would otherwise expire or the surrender of shares to the Company in payment of the exercise price or in satisfaction of any tax withholding obligations, in each case in a manner permitted by the applicable equity award agreement; provided, however, that the securities so acquired may not be sold (either outright or in connection with a “cashless” exercise transaction through a broker) while the Covered Person is aware of material nonpublic information or during an applicable blackout period;
•acquisitions or dispositions of Company common stock under the Company’s 401(k) or other individual account plan that are made pursuant to standing instructions, in a form approved by the Company, not entered into or modified while the Covered Person is aware of material nonpublic information or during an applicable blackout period;
•other purchases of securities from the Company (including purchases under the Company’s Employee Stock Purchase Plan pursuant to standing instructions, in a form approved by the Company) or sales of securities to the Company; provided, however, that if the transaction
involves the exercise of stock options or other equity awards, the transaction must be permitted by the first bullet above;
•bona fide gifts either to other Covered Persons or that are approved in advance by the Company; and
•purchases, sales or gifts made pursuant to a binding contract, written plan or specific instruction which satisfies the applicable affirmative defense conditions of Rule 10b5-1(c), including as applicable the requirements applicable to an eligible sell-to-cover transaction as defined in Rule 10b5-1(c)(1)(ii)(D)(3), or for which the affirmative defense is available under Rule 10b5-1(c) because such plan was adopted prior to February 27, 2023, met the affirmative defense conditions in effect at the time of adoption, and was not modified or changed on or after February 27, 2023 (a “trading plan”); provided such trading plan: (1) is in writing; and (2) was submitted to the Company for review prior to its adoption; and
•purchases, sales or gifts made pursuant to a binding contract, written plan or specific instruction which satisfies the definition of a “non-Rule 10b5-1 trading arrangement” as such term is defined in Item 408(c) of Regulation S-K, provided such non-Rule 10b5-1 trading arrangement: (1) is in writing and (2) was submitted to the Company for review prior to its adoption.
4.2Partnership Distributions. Nothing in this policy is intended to limit the ability of a venture capital partnership or other similar entity with which a Director is affiliated to distribute Company securities to its partners, members or other similar persons. It is the responsibility of each affected Director and the affiliated entity, in consultation with their own counsel (as appropriate), to determine the timing of any distributions, based on all relevant facts and circumstances and applicable securities laws.
4.3Underwritten Public Offering. Nothing in this policy is intended to limit the ability of any Covered Person to sell Company securities as a selling stockholder in an underwritten public offering pursuant to an effective registration statement in accordance with applicable securities law.
5.REGULATION BTR
If the Company is required to impose a “pension fund blackout period” under Regulation BTR, each Director and executive officer shall not, directly or indirectly sell, purchase or otherwise transfer during such blackout period any equity securities of the Company acquired in connection with the service of such person as a Director or officer of the Company, except as permitted by Regulation BTR.
6.PENALTIES FOR VIOLATION
6.1Penalties. Violation of any of the foregoing rules is grounds for disciplinary action by the Company, including termination of employment. In addition to any disciplinary actions the Company may take, insider trading can also result in administrative, civil or criminal proceedings which can result in significant fines and civil penalties, being barred from service as an officer or director of a public company, or imprisonment.
6.2Reporting. Any employee, executive officer or Director who knows or believes that someone has violated this Policy should report such information to the Chief Legal Officer, by email to the Compliance team at ethics.compliance@analog.com, or to the Company’s anonymous hotline at analog.ethicspoint.com or 800-381-6302 (United States) or 4008811475 (China). Callers in other locations can find their direct dial information at analog.ethicspoint.com.
7.COMPANY ASSISTANCE AND EDUCATION
7.1Education. The Company shall take reasonable steps designed to ensure that all Directors and employees of the Company are educated about, and periodically reminded of, the federal securities law restrictions and Company policies regarding insider trading.
7.2Assistance. The Company shall provide reasonable assistance to all Directors and executive officers, as requested by such Directors and executive officers, in connection with the filing of Forms 3, 4 and 5 under Section 16 of the Exchange Act. However, the ultimate responsibility, and liability, for timely filing remains with the Directors and executive officers.
7.3Limitation on Liability. None of the Company, the Chief Legal Officer, Chief Financial Officer, Associate General Counsel, Corporate, Securities and M&A or the Company’s other employees will have any liability for any delay in reviewing, or refusal of, a request for pre-clearance submitted pursuant to Section 3.3(a) or a trading plan submitted pursuant to Section 4.1. Notwithstanding any pre-clearance of a transaction pursuant to Section 3.3(a) or review of a trading plan pursuant to Section 4.1, none of the Company, the Chief Legal Officer, Chief Financial Officer, Associate General Counsel, Corporate, Securities and M&A or the Company’s other employees assumes any liability for the legality or consequences of such transaction or trading plan to the person engaging in or adopting such transaction or trading plan.
Adopted by the Board of Directors of the Company on December 12, 2023.
Exhibit 21
SUBSIDIARIES OF ANALOG DEVICES, INC.
As of November 2, 2024
| Name of Subsidiary | State or Other Jurisdiction of Incorporation or Organization | ||||
| Acuitas Silicon Limited | Ireland | ||||
| Analog Devices (China) Co. Ltd. | China | ||||
| Analog Devices (China) Holdings Co., Ltd. | China | ||||
| Analog Devices (Finland) OY | Finland | ||||
| Analog Devices (Hangzhou) Co., Ltd. | China | ||||
| Analog Devices (Israel), Ltd. | Israel | ||||
| Analog Devices (Thailand) Co., Ltd. | Thailand | ||||
| Analog Devices A.B. | Sweden | ||||
| Analog Devices A/S | Denmark | ||||
| Analog Devices Atlantic Unlimited Company | Ireland | ||||
| Analog Devices Australia Pty. Ltd. | Australia | ||||
| Analog Devices Canada, Ltd. | Canada | ||||
| Analog Devices Federal LLC | United States | ||||
| Analog Devices Gen. Trias, Inc. | Philippines | ||||
| Analog Devices GmbH | Austria | ||||
| Analog Devices GmbH | Germany | ||||
| Analog Devices GmbH Predstavnistvo Analog Devices GmbH Beograd (Representative Office) | Serbia | ||||
| Analog Devices Holdings B.V. | Netherlands | ||||
| Analog Devices India Private Limited | India | ||||
| Analog Devices International Unlimited Company | Ireland | ||||
| Analog Devices International, LLC | United States | ||||
| Analog Devices Korea, Ltd. | Korea, Republic of | ||||
| Analog Devices Limerick Unlimited Company | Ireland | ||||
| Analog Devices Limited | United Kingdom | ||||
| Analog Devices Limited Egypt LLC | Egypt | ||||
| Analog Devices LLC | United States | ||||
| Analog Devices Mexico, S. de R.L. de C.V. | Mexico | ||||
| Analog Devices Microelectronics | Egypt | ||||
| Analog Devices Mikroelektronik Sanayi Ve Ticaret Limited Şirketi | Turkey | ||||
| Analog Devices Nederland, B.V. | Netherlands | ||||
| Analog Devices Norway AS | Norway | ||||
| Analog Devices Pty. Ltd. | Australia | ||||
| Analog Devices Realty Holdings, Inc. | Philippines | ||||
| Name of Subsidiary | State or Other Jurisdiction of Incorporation or Organization | ||||
| Analog Devices Romania S.R.L. | Romania | ||||
| Analog Devices S.A.S. | France | ||||
| Analog Devices S.L. | Spain | ||||
| Analog Devices Sdn Bhd | Malaysia | ||||
| Analog Devices SP. Z o.o. | Poland | ||||
| Analog Devices Srl | Italy | ||||
| Analog Devices Taiwan Ltd | Taiwan | ||||
| Analog Devices, K.K. | Japan | ||||
| Calvatec Limited | United Kingdom | ||||
| Cambridge Analog Technologies, Inc. | United States | ||||
| Electric Motors Test, S.L. | Spain | ||||
| Hittite Microwave Holding LLC | United States | ||||
| Hittite Microwave LLC | United States | ||||
| Icron Technologies Corporation | Canada | ||||
| Innova Card | France | ||||
| Innovasic, Inc. | United States | ||||
| L&L Engineering, LLC | United States | ||||
| Linear Technology (Israel) Ltd. | Israel | ||||
| Linear Technology GK | Japan | ||||
| Linear Technology Holding LLC | United States | ||||
| Linear Technology KK | Japan | ||||
| Linear Technology PTE Ltd | Singapore | ||||
| Linear Technology Semiconductor India Private Limited | India | ||||
| Maxim (I.P.) Enterprise Solutions Corporation | Philippines | ||||
| Maxim France SARL | France | ||||
| Maxim India Integrated Circuit Design Private Limited | India | ||||
| Maxim Integrated Acquisition GmbH | Germany | ||||
| Maxim Integrated GmbH | Austria | ||||
| Maxim Integrated Products Asia Limited | Hong Kong | ||||
| Maxim Integrated Products GmbH (Austria) | Austria | ||||
| Maxim Integrated Products India Sales Private Limited | India | ||||
| Maxim Integrated Products International Limited | Ireland | ||||
| Maxim Integrated Products International Sales Japan GK | Japan | ||||
| Maxim Integrated Products International Sales Limited | Ireland | ||||
| Maxim Integrated Products UK Limited | United Kingdom | ||||
| Maxim Integrated Products, LLC | United States | ||||
| Maxim International Holding, Inc. | United States | ||||
| Maxim Island Holdings Corporation | Canada | ||||
| Maxim Japan Co., Ltd | Japan | ||||
| Name of Subsidiary | State or Other Jurisdiction of Incorporation or Organization | ||||
| Maxim Mikroelektronik Tasarım ve Geliştirme Limited Şirketi | Turkey | ||||
| Maxim Phil. Holding Corporation | Philippines | ||||
| Maxim Phil. Land Corporation | Philippines | ||||
| Maxim Semiconductor Corporation (Taiwan) | United States | ||||
| Mobilygen Corporation | United States | ||||
| Multigig, Inc. | United States | ||||
| OneTree MicroDevices, Inc. | United States | ||||
| Otosense Inc. | United States | ||||
| Phyworks Limited | United Kingdom | ||||
| Scintera Networks LLC | United States | ||||
| Security Bank Corp. (trustee of Maxim EE Retirement Plan) | Philippines | ||||
| TagArray, Inc. | United States | ||||
| Teridian Semiconductor Corp. | United States | ||||
| Teridian Semiconductor Holdings Corp. | United States | ||||
| Teridian Semiconductor Intermediate Holding Corp. | United States | ||||
| Trinamic Motion Control GmbH & Co. KG | Germany | ||||
| Trinamic OÜ | Estonia | ||||
| Trinamic Verwaltungsgesellschaft mbH | Germany | ||||
| Volterra Asia Pte. Ltd. | Singapore | ||||
| Volterra Semiconductor LLC | United States | ||||
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)Registration Statements on Form S-8 (Nos. 2-63561, 2-90023, 33-4067, 33-22604, 33-22605, 33-29484, 33-39851, 33-39852, 33-46521, 33-60642, 33-60696, 33-61427, 33-64849, 333-04771, 333-04819, 333-04821, 333-47787, 333-47789, 333-48243, 333-69359, 333-79551, 333-87055, 333-40224, 333-40222, 333-50092, 333-53314, 333-53828, 333-57444, 333-75170, 333-113510, 333-132409, 333-156309, 333-163653, 333-181951, 333-194556, 333-216696, 333-237083, 333-259081, and 333-265057) of Analog Devices, Inc.,
(2)Registration Statements on Form S-3 (Nos. 333-08505, 333-08509, 333-17651, 333-87053, 333-48928, 333-51530, 333-53660, 333-259782, and 333-281670) of Analog Devices, Inc., and
(3)Registration Statement on Form S-4 (No. 333-213454) of Analog Devices, Inc., including Post-Effective Amendment No. 1 on Form S-8 to Form S-4, and Registration Statements on Form S-4 (No. 333-248092 and No. 333-273607) of Analog Devices, Inc.;
of our reports dated November 26, 2024, with respect to the consolidated financial statements and schedule of Analog Devices, Inc. and the effectiveness of internal control over financial reporting of Analog Devices, Inc. included in this Annual Report (Form 10-K) of Analog Devices, Inc. for the year ended November 2, 2024.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 26, 2024
Exhibit 31.1
CERTIFICATION
I, Vincent Roche, certify that:
1. I have reviewed this annual report on Form 10-K of Analog Devices, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Vincent Roche | |||||
| Vincent Roche | |||||
| Chief Executive Officer and Chair of the Board of | |||||
| Directors | |||||
| (Principal Executive Officer) | |||||
Dated: November 26, 2024 | |||||
Exhibit 31.2
CERTIFICATION
I, Richard C. Puccio, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Analog Devices, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Richard C. Puccio, Jr. | |||||
Richard C. Puccio, Jr. | |||||
| Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Dated: November 26, 2024 | |||||
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Analog Devices, Inc. (the “Company”) for the period ended November 2, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Vincent Roche, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Vincent Roche | |||||
| Vincent Roche | |||||
| Chief Executive Officer | |||||
Dated: November 26, 2024 | |||||
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Analog Devices, Inc. (the “Company”) for the period ended November 2, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Richard C. Puccio, Jr., Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Richard C. Puccio, Jr. | |||||
Richard C. Puccio, Jr. | |||||
| Chief Financial Officer | |||||
Dated: November 26, 2024 | |||||