ANALOG DEVICES INC 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019 (fiscal 2019). This Quarterly Report on Form 10-Q, including the following discussion, 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,” “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; the proposed acquisition of Maxim Integrated Products, Inc.; our anticipated growth and trends in our businesses; our future liquidity, capital needs and capital expenditures; the impact of the COVID-19 pandemic on our business, financial condition and results of operations; our future market position and expected competitive changes in the marketplace for our products; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; the effect of changes in or the application of new or revised tax laws; the effect of new accounting pronouncements; our ability to successfully integrate acquired businesses and technologies; and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are inherently subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part II, Item 1A. “Risk Factors” and elsewhere herein. 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. Impact of COVID-19 on our Business The pandemic caused by the novel strain of the coronavirus (COVID-19) has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns. These measures have impacted and likely will continue to impact our workforce and operations, the operations of our customers and those of our respective vendors and suppliers. 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 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 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 22 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 Overview (all tabular amounts in thousands except per share amounts and percentages) Three Months Ended August 1, 2020 August 3, 2019 $ Change % Change Revenue $ 1,456,136 $ 1,480,143 $ (24,007) (2) % Gross margin % 66.8 % 67.4 % Net income $ 362,665 $ 362,374 $ 291 — % Net income as a % of revenue 24.9 % 24.5 % Diluted EPS $ 0.97 $ 0.97 $ — — % Nine Months Ended August 1, 2020 August 3, 2019 $ Change % Change Revenue $ 4,076,761 $ 4,547,846 $ (471,085) (10) % Gross margin % 65.4 % 67.5 % Net income $ 834,235 $ 1,085,317 $ (251,082) (23) % Net income as a % of revenue 20.5 % 23.9 % Diluted EPS $ 2.24 $ 2.90 $ (0.66) (23) % 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 evolve and improve, 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. Three Months Ended August 1, 2020 August 3, 2019 Revenue % of Revenue* Y/Y% Revenue % of Revenue* Industrial $ 774,353 53 % 3 % $ 753,118 51 % Communications 363,613 25 % 14 % 319,250 22 % Automotive 162,480 11 % (29) % 228,235 15 % Consumer 155,690 11 % (13) % 179,540 12 % Total revenue $ 1,456,136 100 % (2) % $ 1,480,143 100 % Nine Months Ended August 1, 2020 August 3, 2019 Revenue % of Revenue* Y/Y% Revenue % of Revenue* Industrial $ 2,174,183 53 % (4) % $ 2,262,597 50 % Communications 880,921 22 % (14) % 1,030,283 23 % Automotive 551,395 14 % (22) % 708,711 16 % Consumer 470,262 12 % (14) % 546,255 12 % Total revenue $ 4,076,761 100 % (10) % $ 4,547,846 100 % * The sum of the individual percentages may not equal the total due to rounding. 23 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 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 instrumentation test, energy and healthcare sectors of this end market. 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 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. Three Months Ended August 1, 2020 August 3, 2019 Revenue % of Revenue* Revenue % of Revenue* Channel Distributors $ 819,472 56 % $ 863,055 58 % Direct customers 614,770 42 % 600,609 41 % Other 21,894 2 % 16,479 1 % Total revenue $ 1,456,136 100 % $ 1,480,143 100 % Nine Months Ended August 1, 2020 August 3, 2019 Revenue % of Revenue* Revenue % of Revenue* Channel Distributors 2,317,421 57 % 2,563,807 56 % Direct customers 1,692,152 42 % 1,930,935 42 % Other 67,188 2 % 53,104 1 % Total revenue $ 4,076,761 100 % $ 4,547,846 100 % * 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. Gross Margin 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 % 24 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 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-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. 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. Therefore, we expect to continue to make significant R&D investments in the future. Selling, Marketing, General and Administrative (SMG&A) 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 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 We monitor global macroeconomic conditions on an ongoing basis and continue 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, we have undertaken various restructuring actions over the past several years. Repositioning Action: 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. 25 Closure of Manufacturing Facilities: 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. See Note 6, Special Charges , of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 in this Quarterly Report on Form 10-Q for further information. Operating Income 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 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 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 nine-month periods ended August 1, 2020 was primarily the result of a decrease in interest expense. Provision for Income Taxes 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) Effective income tax rate 2.8 % 7.0 % 6.7 % 9.4 % 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 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. 26 Non-U.S. 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. Net Income 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 %) Net Income as a % of revenue 24.9 % 24.5 % 20.5 % 23.9 % Diluted EPS $ 0.97 $ 0.97 $2.24 $2.90 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 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. 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 the results of operations. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds. 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, 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 Net cash provided by operations as a % of revenue 32.8 % 35.1 % Net cash used for investing activities $ (149,781) $ (229,429) 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 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 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. 27 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 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 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 August 1, 2020 November 2, 2019 $ Change % Change Accounts receivable $ 681,728 $ 635,136 $ 46,592 7 % Days sales outstanding* 40 39 Inventory $ 612,646 $ 609,886 $ 2,760 — % Days cost of sales in inventory* 113 110 * 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 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 $1,687.8 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. Debt As of August 1, 2020, our debt obligations consisted of the following: Principal Amount Outstanding 3-Year term loan, due March 2022 $ 925,000 2.95% Senior unsecured notes, due January 2021 450,000 2.50% Senior unsecured notes, due December 2021 400,000 2.875% Senior unsecured notes, due June 2023 500,000 3.125% Senior unsecured notes, due December 2023 550,000 2.95% Senior unsecured notes, due April 2025 400,000 3.90% Senior unsecured notes, due December 2025 850,000 3.50% Senior unsecured notes, due December 2026 900,000 4.50% Senior unsecured notes, due December 2036 250,000 5.30% Senior unsecured notes, due December 2045 400,000 Total debt $ 5,625,000 In March 2020, we repaid the 2.85% senior unsecured notes that were due March 2020 and in April 2020, we issued the 2.95% senior unsecured notes due April 2025. The indentures governing our outstanding notes contain covenants that may limit our ability to: incur, create, assume or guarantee any debt for borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or 28 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 Our Second Amended and Restated Revolving Credit Agreement, dated as of June 28, 2019, with Bank of America N.A. as administrative agent and other banks identified therein as lenders (Revolving Credit Agreement) provides for a five-year unsecured revolving credit facility in an aggregate principal amount of up to $1.25 billion, expiring on June 28, 2024. In March 2020, we borrowed $350.0 million under this revolving credit facility and utilized the proceeds for the repayment of existing indebtedness and working capital requirements. We repaid the $350.0 million plus interest of $0.6 million in April 2020. 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 August 1, 2020, we were in compliance with these covenants. Stock Repurchase Program In the aggregate, our Board of Directors has authorized us to repurchase $8.2 billion of our common stock under our common stock repurchase program. 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 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 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 $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. We expect these capital expenditures will be funded with a combination of cash on hand and cash generated from operations. Analog Devices Foundation During the first quarter of fiscal 2020, we contributed 335,654 shares of our common stock to the Analog Devices Foundation. As of the date of the contribution, the shares had a fair value of approximately $40.0 million. This expense was recorded in SMG&A in the Condensed Consolidated Statement of Income. Dividends 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. The payment of any future quarterly dividends, or a future increase in the quarterly dividend amount, will be at the discretion of the Board and will be dependent upon our financial position, results of operations, outlook, liquidity, and other factors deemed relevant by the Board. Contractual Obligations In the second quarter of fiscal 2020, we issued a green bond consisting of $400.0 million aggregate principal amount of 2.95% senior unsecured notes due April 1, 2025 with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing October 1, 2020. In addition, during the same period, we repaid $300.0 million of principal on our 3-year 2.85% senior unsecured notes that were contractually due in March 2020. 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 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. 29 New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that 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 14, New Accounting Pronouncements, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our historical financial condition and results of operations. Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires a lessee to recognize most leases on the balance sheet but recognize expenses on the income statement in a manner similar to current practice. The update states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying assets for the lease term. Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease. The FASB has issued amendments and updates to the new standard, including practical expedients to be used during adoption. The Company adopted the standard in the first quarter of fiscal 2020 under the modified retrospective approach. As a result of the adoption of ASU 2016-02, we changed our accounting policy for leases. See Note 2, Leases and Note 14, New Accounting Pronouncements , in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for details of the impact of this ASU on our financial statements. 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 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. 30 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 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.