What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-19 compared with 2020-05-20 · 90 added, 76 removed, 197 unchanged (46% of the section changed)

6 unchanged sentences

In addition, any statements that refer to projections regarding our future financial performance;

the proposed acquisition of Maxim Integrated Products, Inc.;

our anticipated growth and trends in our businesses;

17 unchanged sentences

We have significant operations worldwide, including in the United States, the Philippines, Ireland, Singapore, Malaysia, China and India.

Each of these countries has been affected by the outbreak and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities.

In recent weeks, our manufacturing operations and supply chain have generally stabilized at normal levels, but that could change in the future given that the COVID-19 situation remains dynamic.

Each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities.

Since the beginning of the third quarter of fiscal 2020, our manufacturing operations and supply chain generally stabilized at normal levels, but that could change in the future given that the COVID-19 situation remains dynamic.

The spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, modifying employee work locations and cancelling physical participation in meetings, events and conferences) and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and shareholders.

While we are confident that our strategy and long-term contingency planning have positioned us well to weather the current uncertainty, we cannot at this time fully quantify or forecast the impact of COVID-19 on our business.

The degree to which COVID-19 impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain, and we cannot provide assurance as to the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, or how quickly and to what extent normal economic and operating conditions can resume.

The degree to which COVID-19 impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain, and we cannot provide assurance as to the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, or how quickly and to what extent normal economic and operating conditions can resume.

Proposed Acquisition of Maxim Integrated Products, Inc.

On July 12, 2020, we entered into a definitive agreement (the Merger Agreement) to acquire Maxim Integrated Products, Inc.

(Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies.

Under the terms of the Merger Agreement, Maxim stockholders will receive, for each outstanding share of Maxim common stock, 0.630 of a share of our common stock.

The estimated merger consideration is approximately $20.0 billion based on the closing price of our common stock on August 14, 2020.

The acquisition is subject to the approval of Maxim stockholders, the satisfaction of customary closing conditions, including applicable regulatory approvals and approval by our shareholders of the issuance of our

common stock.

See Note 15, Acquisitions , in the Notes to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Results of Operations

1 unchanged sentence

Three Months Ended

May 2, 2020 May 4, 2019 $ Change % Change

August 1, 2020 August 3, 2019 $ Change % Change

Revenue $ 1,456,136 $ 1,480,143 $ (24,007) (2) %

3 unchanged sentences

Diluted EPS $ 0.97 $ 0.97 $ — — %

Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change

Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change

Revenue $ 4,076,761 $ 4,547,846 $ (471,085) (10) %

10 unchanged sentences

Three Months Ended

May 2, 2020 May 4, 2019

August 1, 2020 August 3, 2019

Revenue* Y/Y% Revenue % of

4 unchanged sentences

Total revenue $ 1,456,136 100 % (2) % $ 1,480,143 100 %

Six Months Ended

May 2, 2020 May 4, 2019

Nine Months Ended

August 1, 2020 August 3, 2019

Revenue* Y/Y% Revenue % of

5 unchanged sentences

* The sum of the individual percentages may not equal the total due to rounding.

Revenue decreased across all end markets in the three- and six- month periods ended May 2, 2020, as compared to the same periods of the prior fiscal year, primarily as a result of a broad-based decrease in demand for our products and by supply constraints attributable to COVID-19 related slowdowns in March and April.

The revenue decreases in the Automotive end

market were more pronounced as this market was impacted by lower vehicle sales and a global slowdown in production as many of our customers were required to suspend their operations in response to shelter in place orders from governments around the world.

The revenue decreases in the Communications end market were also more pronounced as the revenue in this end market in our prior year periods benefited from a significant ramp up as this market moved through infrastructure deployment cycles.

The percentage decline in our Industrial end market was less than the overall percentage decline as the broad-based weakness across many applications was offset by growth in the memory test and energy portions of this market.

In aggregate, revenue decreased in the three-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of a global slowdown in production in the Automotive end market and lower demand for products used in the broad market portion of our Consumer end market related to the COVID-19 pandemic.

These decreases were partially offset by increases in the Industrial and Communications end markets which were as a result of higher demand for products sold into the instrumentation test and healthcare sectors of the Industrial end market and both the wireline and wireless sectors of the Communications end market.

Revenue decreased across all end markets in the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of a broad-based decrease in demand for our products and due to supply constraints attributable to COVID-19 related slowdowns.

The revenue decreases in the Automotive end market were more pronounced as this market was impacted by lower vehicle sales and a global slowdown in production as many of our customers were required to suspend their operations in response to shelter in place orders from governments around the world.

While COVID-19 related slowdowns also impacted the Communications end market, the declines noted in this market primarily resulted from prior year periods that benefited from a significant ramp up in certain regions as this market moved through infrastructure deployment cycles.

The revenue decreases in the Consumer end market resulted from a broad-based decrease in demand for our products in this end market, including lower demand for products used in portable consumer applications.

Revenue by Sales Channel

6 unchanged sentences

Three Months Ended

May 2, 2020 May 4, 2019

August 1, 2020 August 3, 2019

Revenue % of Revenue* Revenue % of Revenue*

3 unchanged sentences

Total revenue $ 1,456,136 100 % $ 1,480,143 100 %

Six Months Ended

May 2, 2020 May 4, 2019

Nine Months Ended

August 1, 2020 August 3, 2019

Revenue % of Revenue* Revenue % of Revenue*

5 unchanged sentences

As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented.

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change May 2, 2020 May 4, 2019 $ Change % Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change August 1, 2020 August 3, 2019 $ Change % Change

Gross margin $ 972,578 $ 997,811 $ (25,233) (3) % $ 2,667,394 $ 3,071,559 $ (404,165) (13) %

Gross margin % 66.8 % 67.4 % 65.4 % 67.5 %

Gross margin percentage decreased by 340 and 290 basis points in the three- and six-month periods ended May 2, 2020, respectively, as compared to the same periods of the prior fiscal year, primarily as a result of lower utilization of our factories due to decreased customer demand as well as temporary shutdowns at some of our manufacturing locations in response to the COVID-19 pandemic.

Gross margin percentage decreased by 60 and 210 basis points in the three- and nine-month periods ended August 1, 2020, respectively, as compared to the same periods of the prior fiscal year, primarily as a result of lower utilization of our factories due to decreased customer demand.

The percentage decrease noted in the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, was also partially due to temporary shutdowns at some of our manufacturing locations in response to the COVID-19 pandemic.

Research and Development (R&D)

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change May 2, 2020 May 4, 2019 $ Change % Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change August 1, 2020 August 3, 2019 $ Change % Change

R&D expenses $ 260,794 $ 280,102 $ (19,308) (7) % $ 770,280 $ 853,330 $ (83,050) (10) %

R&D expenses as a % of revenue 17.9 % 18.9 % 18.9 % 18.8 %

R&D expenses decreased in the three- and six-month periods ended May 2, 2020, as compared to the same periods of the prior fiscal year, primarily as a result of lower variable compensation expense, lower discretionary spending partially in response to uncertainty associated with the COVID-19 pandemic and lower R&D employee-related salary and benefit expenses.

R&D expenses decreased in the three-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of lower R&D employee-related salary and benefit expenses and lower discretionary spending partially in response to uncertainty associated with the COVID-19 pandemic.

R&D expenses decreased in the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of lower variable compensation expense, lower R&D employee-related salary and benefit expenses and lower discretionary spending partially in response to uncertainty associated with the COVID-19 pandemic.

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.

3 unchanged sentences

Selling, Marketing, General and Administrative (SMG&A)

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change May 2, 2020 May 4, 2019 $ Change % Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change August 1, 2020 August 3, 2019 $ Change % Change

SMG&A expenses $ 153,753 $ 162,825 $ (9,072) (6) % $ 494,808 $ 493,295 $ 1,513 — %

SMG&A expenses as a % of revenue 10.6 % 11.0 % 12.1 % 10.8 %

SMG&A expenses decreased in the three-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, primarily as a result of lower variable compensation expense, lower discretionary spending in response to uncertainty associated with the COVID-19 pandemic and lower SMG&A employee-related salary and benefit expenses.

SMG&A expenses increased in the six-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, primarily as a result of a $40.0 million charitable contribution to the Analog Devices Foundation made in the first quarter of fiscal 2020, partially offset by lower variable compensation expense, lower discretionary spending in response to uncertainty associated with the COVID-19 pandemic and lower SMG&A employee-related salary and benefit expenses.

SMG&A expenses decreased in the three-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of lower discretionary spending in response to uncertainty associated with the COVID-19 pandemic, partially offset by $9.1 million in the three-month period ended August 1, 2020 of acquisition-related transaction costs in connection with the proposed acquisition of Maxim.

SMG&A expenses increased slightly in the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, primarily as a result of a $40.0 million charitable contribution to the Analog Devices Foundation made in the first quarter of fiscal 2020 and $9.1 million in acquisition-related transaction costs in connection with the proposed acquisition of Maxim, partially offset by lower variable compensation expense, lower discretionary spending in response to uncertainty associated with the COVID-19 pandemic and lower SMG&A employee-related salary and benefit expenses.

Special Charges

2 unchanged sentences

Repositioning Action:

We recorded special charges of approximately $97.2 million on a cumulative basis through May 2, 2020 as a result of organizational initiatives to reposition our global workforce skill set to align with our long-term strategic plan, of which $9.2 million was recorded in the first quarter of fiscal 2020.

Once fully implemented, the repositioning actions are expected to result in net annualized cash savings of approximately $48.0 million.

As a result of organizational initiatives to better align the global workforce with our long-term strategic plan, we recorded special charges of approximately $130.5 million on a cumulative basis through August 1, 2020, including $33.2 million and $42.4 million, in the three- and nine-month periods ended August 1, 2020, respectively.

Once fully implemented, the repositioning actions prior to the third quarter of fiscal 2020 are expected to result in net annualized cash savings of approximately $48.0 million.

The repositioning action related to the third quarter of fiscal 2020, once fully implemented, is not expected to result in any net annualized savings as the reduction in salary and benefits from workforce reductions will be redeployed to other areas of the business as part of the reorganizational initiative.

Closure of Manufacturing Facilities:

We recorded special charges of $55.3 million on a cumulative basis through May 2, 2020 as a result of our decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear Technology Corporation (Linear), of which $2.0 million was recorded in the first quarter of fiscal 2020 and $1.3 million was recorded in the second quarter of fiscal 2020.

As a result of our decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear Technology Corporation (Linear), we recorded special charges of $53.9 million on a cumulative basis through August 1, 2020, including a reversal of $1.4 million in the three-month period ended August 1, 2020 and a net charge of $1.9 million in the nine-month period ended August 1, 2020.

Once fully implemented, we expect that these actions will result in estimated annual salary, variable compensation and employee benefit savings of approximately $60.0 million.

1 unchanged sentence

Operating Income

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change May 2, 2020 May 4, 2019 $ Change % Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change August 1, 2020 August 3, 2019 $ Change % Change

Operating income $ 419,124 $ 446,726 $ (27,602) (6) % $ 1,036,572 $ 1,372,247 $ (335,675) (24) %

Operating income as a % of revenue 28.8 % 30.2 % 25.4 % 30.2 %

The year-over-year decrease in operating income in the three-month period ended May 2, 2020 was primarily the result of a $187.4 million decrease in gross margin, partially offset by a $33.4 million decrease in R&D expenses, a $21.4 million decrease in SMG&A expenses and a $6.8 million decrease in special charges, as described above under the headings Gross Margin, Research and Development (R&D), Selling, Marketing, General and Administrative (SMG&A) and Special Charges.

The year-over-year decrease in operating income in the six-month period ended May 2, 2020 was primarily the result of a $378.9 million decrease in gross margin and a $10.6 million increase in SMG&A expenses, partially offset by a $63.7 million decrease in R&D expenses and a $17.5 million decrease in special charges, as described above under the headings Gross Margin, Research and Development (R&D), Special Charges and Selling, Marketing, General and Administrative (SMG&A).

The year-over-year decrease in operating income in the three-month period ended August 1, 2020 was primarily the result of a $30.9 million increase in special charges and a $25.2 million decrease in gross margin, partially offset by a $19.3 million decrease in R&D expenses and a $9.1 million decrease in SMG&A expenses, as described above under the headings Special Charges, Gross Margin, Research and Development (R&D) and Selling, Marketing, General and Administrative (SMG&A).

The year-over-year decrease in operating income in the nine-month period ended August 1, 2020 was primarily the result of a $404.2 million decrease in gross margin and a $13.4 million increase in special charges, partially offset by a $83.1 million decrease in R&D expenses, as described above under the headings Gross Margin, Special Charges and Research and Development (R&D).

Nonoperating Expense (Income)

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change May 2, 2020 May 4, 2019 $ Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change August 1, 2020 August 3, 2019 $ Change

Total nonoperating expense (income) $ 46,095 $ 57,168 $ (11,073) $ 142,265 $ 174,346 $ (32,081)

The year-over-year decrease in nonoperating expense in the three- and six-month periods ended May 2, 2020 was primarily the result of a decrease in interest expense and other, net expenses.

The year-over-year decrease in nonoperating expense in the three- and nine-month periods ended August 1, 2020 was primarily the result of a decrease in interest expense.

Provision for Income Taxes

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change May 2, 2020 May 4, 2019 $ Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change August 1, 2020 August 3, 2019 $ Change

Provision for income taxes $ 10,364 $ 27,184 $ (16,820) $ 60,072 $ 112,584 $ (52,512)

1 unchanged sentence

Our effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where our income is earned.

The effective tax rates for the three- and six-month periods ended May 2, 2020 and May 4, 2019 were below the U.S.

statutory tax rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income and as a result of the foreign derived intangible income deduction (FDII), partially offset by the global intangible low-tax income (GILTI) tax.

The effective tax rate decreased in the three- and six-month periods ended May 2, 2020, as compared to the same period of the prior fiscal year, primarily as a result of a change in the mix of the foreign jurisdictions where we earn income.

Additionally, the tax rate for the six-month period ended May 4, 2019 included the effects of recording deferred tax benefits relating to a one-time set up of our GILTI deferred method election of $5.1 million along with the completion of our accounting for the income tax effects of the Tax Cuts and Jobs Act legislation, in accordance with the U.S.

The effective tax rates for the three- and nine-month periods ended August 1, 2020 and August 3, 2019 were below the U.S.

statutory tax rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.

The tax rates for the three and nine-month periods ended August 1, 2020 were also impacted by discrete income tax benefits of $33.7 million recorded in the third quarter of fiscal 2020, comprised primarily of $25.9 million of income tax benefits resulting from the resolution of the Internal Revenue Service (IRS) audit of Linear’s pre-acquisition federal income tax returns for fiscal 2015 through fiscal 2017 and other income tax benefits recorded upon filing of our federal income tax return for fiscal 2019.

Additionally, the tax rate for the nine-month period ended August 3, 2019 included the effects of recording deferred tax benefits relating to a one-time set up of our global intangible low tax income (GILTI) deferred method election of $5.1 million along with the completion of our accounting for the income tax effects of the Tax Cuts and Jobs Act of 2017, in accordance with the U.S.

Securities and Exchange Commission Staff Accounting Bulletin No.

118 for the transition tax which yielded a $7.5 million tax benefit.

jurisdictions accounted for a significant portion of our total revenue and pre-tax income for the three- and six-month periods ended May 2, 2020 and May 4, 2019.

For the three- and six-month periods ended May 2, 2020, this pretax income was primarily generated in Ireland at a tax rate of 12.5%.

For the three- and six-month periods ended May 4, 2019, this pretax income was primarily generated in Ireland and Singapore, at tax rates ranging from 12.5% to 17% in these jurisdictions.

jurisdictions accounted for a significant portion of our total revenue and pre-tax income for the three- and nine-month periods ended August 1, 2020 and August 3, 2019.

For the three- and nine-month periods ended August 1, 2020, this pretax income was primarily generated in Ireland at a tax rate of 12.5%.

For the three- and nine-month periods ended August 3, 2019, this pretax income was primarily generated in Ireland and Singapore, at tax rates ranging from 12.5% to 17% in these jurisdictions.

See Note 13, Income Taxes , in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Three Months Ended Six Months Ended

May 2, 2020 May 4, 2019 $ Change % Change May 2, 2020 May 4, 2019 $ Change % Change

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 $ Change % Change August 1, 2020 August 3, 2019 $ Change % Change

Net Income $ 362,665 $ 362,374 $ 291 — % $ 834,235 $ 1,085,317 $ (251,082) (23 %)

1 unchanged sentence

Diluted EPS $ 0.97 $ 0.97 $2.24 $2.90

Net income decreased in the three-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, as a result of a $125.7 million decrease in operating income, partially offset by a $13.1 million decrease in provision for income taxes and a $12.3 million decrease in nonoperating expense.

Net income decreased in the six-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, as a result of a $308.1 million decrease in operating income, partially offset by a $35.7 million decrease in provision for income taxes and a $21.0 million decrease in nonoperating expense.

Net income was relatively flat in the three-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, as a result of a $27.6 million decrease in operating income, partially offset by a $16.8 million decrease in provision for income taxes and an $11.1 million decrease in nonoperating expense.

Net income decreased in the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, as a result of a $335.7 million decrease in operating income, partially offset by a $52.5 million decrease in provision for income taxes and a $32.1 million decrease in nonoperating expense.

Liquidity and Capital Resources

At May 2, 2020, our principal source of liquidity was $784.9 million of cash and cash equivalents, of which approximately $76.1 million was held in the United States.

At August 1, 2020, our principal source of liquidity was $1,090.3 million of cash and cash equivalents, of which approximately $423.5 million was held in the United States.

The balance of our cash and cash equivalents was held outside the United States in various foreign subsidiaries.

3 unchanged sentences

We maintain these balances with high credit quality counterparties, 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 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.

Six Months Ended

May 2, 2020 May 4, 2019

We believe that our existing sources of liquidity and cash expected to be generated from future operations, together with existing and anticipated available long-term financing, will be sufficient to fund operations, capital expenditures, research and development efforts, transaction costs associated with our proposed merger with Maxim and dividend payments (if any) in the immediate future and for at least the next twelve months.

Nine Months Ended

August 1, 2020 August 3, 2019

Net cash provided by operating activities $ 1,335,889 $ 1,595,196

2 unchanged sentences

Net cash used for financing activities $ (744,442) $ (1,569,684)

The following changes contributed to the net change in cash and cash equivalents in the six-month period ended May 2, 2020 as compared to the same period in fiscal 2019.

The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended August 1, 2020 as compared to the same period in fiscal 2019.

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.

The decrease in cash provided by operating activities during the six-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, was primarily the result of lower net income adjusted for non-cash items, including a $40.0 million non-cash charitable contribution to the Analog Devices Foundation made in the first quarter of fiscal 2020 and a decrease from changes in working capital.

The decrease in cash provided by operating activities during the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, was primarily the result of lower net income adjusted for non-cash items, including a $40.0 million non-cash charitable contribution to the Analog Devices Foundation made in the first quarter of fiscal 2020, and a decrease from 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 the six-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, was primarily the result of a decrease in cash used for capital expenditures.

The decrease in cash used for investing activities during the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, was primarily the result of a decrease in cash used for capital expenditures, partially offset by payments for acquisitions.

Financing Activities

Financing cash flows consist primarily of payments of dividends to stockholders, 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 related to financing activities during the six-month period ended May 2, 2020, as compared to the same period of the prior fiscal year, was primarily the result of a $350.0 million debt repayment in the six-month period ended May 4, 2019 and a $109.0 million decrease in common stock repurchases in the six-month period ended May 2, 2020 as compared to the same period of the prior fiscal year.

We also had a net increase of $95.6 million of debt in the six-month period ended May 2, 2020 as compared to the same period in fiscal 2019,

The decrease in cash used related to financing activities during the nine-month period ended August 1, 2020, as compared to the same period of the prior fiscal year, was primarily the result of our bond issuance of $395.6 million, a $350.0 million decrease in debt repayments and a $203.4 million decrease in common stock repurchases, partially offset by an increase of $79.3 million in dividend payments and a decrease of $48.4 million in proceeds from employee stock plans, in the nine-month period ended August 1, 2020 as compared to the same period of the prior fiscal year.

Working Capital

May 2, 2020 November 2, 2019 $ Change % Change

August 1, 2020 November 2, 2019 $ Change % Change

Accounts receivable $ 681,728 $ 635,136 $ 46,592 7 %

3 unchanged sentences

* We use the average of the current quarter and prior quarter ending accounts receivable and ending inventory balances in our calculation of days sales outstanding and days cost of sales in inventory, respectively.

The decrease in accounts receivable in dollars was primarily the result of the decrease in revenue in the three-month period ended May 2, 2020 as compared to the three-month period ended November 2, 2019 and normal variations in the timing of collections and billings.

Inventory in dollars decreased, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels.

The increase in accounts receivable in dollars was primarily the result of normal variations in the timing of collections and billings.

Inventory in dollars increased, 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 increased to approximately $1.6 billion at May 2, 2020 from approximately $1.5 billion at the end of fiscal 2019.

The increase was primarily due to an increase in the current portion of our debt, partially offset by decreases in income taxes payable and accounts payable.

As of May 2, 2020, our debt obligations consisted of the following:

Current liabilities increased to approximately $1,687.8 million at August 1, 2020 from approximately $1,508.6 million at the end of fiscal 2019.

The increase was primarily due to an increase in the current portion of our debt and accrued liabilities, partially offset by decreases in income taxes payable and accounts payable.

As of August 1, 2020, our debt obligations consisted of the following:

Principal Amount Outstanding

14 unchanged sentences

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 May 2, 2020, we were in compliance with these covenants.

and consolidate with or merge into, or transfer or

lease all or substantially all of our assets to, any other party.

As of August 1, 2020, we were in compliance with these covenants.

Revolving Credit Facility

6 unchanged sentences

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 May 2, 2020, we were in compliance with these covenants.

As of August 1, 2020, we were in compliance with these covenants.

Stock Repurchase Program

1 unchanged sentence

Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized under the program.

As of May 2, 2020, an additional $1.9 billion remains available for repurchase under the current authorized program.

As of August 1, 2020, an additional $1.9 billion remains available for repurchase under the current authorized program.

The repurchased shares are held as authorized but unissued shares of common stock.

We also repurchase shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options.

Given the current macroeconomic environment, we have temporarily suspended common stock repurchases under our authorized program.

Given the planned acquisition of Maxim, we have continued the temporary suspension our share repurchase program, which was previously suspended in March 2020 as a result of the global macroeconomic environment.

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 $115.0 million in the first six months of fiscal 2020 and were funded with a combination of cash on hand and cash generated from operations.

Net additions to property, plant and equipment were $135.8 million in the first nine months of fiscal 2020 and were funded with a combination of cash on hand and cash generated from operations.

We expect capital expenditures for fiscal 2020 to be below 4% of fiscal 2020 revenue.

4 unchanged sentences

This expense was recorded in SMG&A in the Condensed Consolidated Statement of Income.

On May 19, 2020, our Board of Directors declared a cash dividend of $0.62 per outstanding share of common stock.

The dividend will be paid on June 9, 2020 to all shareholders of record at the close of business on May 29, 2020 and is expected to total approximately $228.4 million.

On August 18, 2020, our Board of Directors declared a cash dividend of $0.62 per outstanding share of common stock.

The dividend will be paid on September 9, 2020 to all shareholders of record at the close of business on August 28, 2020 and is expected to total approximately $228.9 million.

We currently expect quarterly dividends to continue in future periods.

4 unchanged sentences

For additional information, see Note 11, Debt, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have not been any other material changes during the six-month period ended May 2, 2020 to the amounts presented in the table summarizing our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

There have not been any other material changes during the nine-month period ended August 1, 2020 to the amounts presented in the table summarizing our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

New Accounting Pronouncements

11 unchanged sentences

Critical Accounting Policies and Estimates

Except for the accounting policies for leases and income taxes that were updated as a result of adopting ASU 2016-02 and ASU 2018-02, respectively, there were no other material changes in the six-month period ended May 2, 2020 to the information provided under the heading “Critical Accounting Policies and Estimates” in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

Except for the accounting policies for leases and income taxes that were updated as a result of adopting ASU 2016-02 and ASU 2018-02, respectively, there were no other material changes in the nine-month period ended August 1, 2020 to the information provided under the heading “Critical Accounting Policies and Estimates” in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

See Note 2 , Leases and Note 13, Income Taxes of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 in this Quarterly Report on Form 10-Q for further information.

Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the six-month period ended May 2, 2020 to the information provided under Item 7A.

There were no material changes in the nine-month period ended August 1, 2020 to the information provided under Item 7A.

“Quantitative and Qualitative Disclosures about Market Risk,” set forth in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis