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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.
−Removed: During fiscal 2019, we entered into a term loan credit agreement, under which we borrowed unsecured term loans in the aggregate principal amount of $1.25 billion, maturing March 10, 2022.
−Removed: Loans under the term loan agreement may be Eurodollar Rate Loans or Base Rate Loans at our option.
−Removed: Each Eurodollar Rate Loan will bear interest at a rate per annum equal to the Adjusted LIBO Rate plus a margin based on our debt ratings from time to time of between 0.625% and 1.500%.
−Removed: Each Base Rate Loan will bear interest at a rate per annum equal to the Base Rate plus a margin based on our debt ratings from time to time of between 0.000% and 0.500%.
−Removed: In fiscal 2019, we made principal payments on the term loans in the amount of $325.0 million.
−Removed: Based on the $925 million of floating rate debt outstanding as of November 2, 2019, our annual interest expense would change by approximately $9.3 million for each 100 basis point increase in interest rates.
−Removed: We utilize interest rate derivatives to manage interest rate exposure on both outstanding debt as well as future issuances.
−Removed: As of November 2, 2019, for each 100 basis point decrease in the ten-year U.S.
−Removed: Treasury rate, the fair value of our outstanding derivative instruments would change by approximately $100 million.
−Removed: Based on our marketable securities outstanding as of November 2, 2019 and November 3, 2018, our annual interest income would change by approximately $6.5 million and $8.2 million, respectively, for each 100 basis point increase in interest rates.
+Added: Based on the $925.0 million of our floating rate debt outstanding as of October 31, 2020, our annual interest expense would change by approximately $9.3 million for each 100 basis point increase in interest rates.
+Added: In certain instances we utilize interest rate derivatives to manage interest rate exposure on both outstanding debt as well as future issuances.
+Added: As of October 31, 2020 and November 2, 2019, for each 100 basis point decrease in the ten-year U.S.
+Added: Treasury rate, the fair value of our outstanding derivative instruments would change by approximately $102.0 million and $100.0 million, respectively.
+Added: Based on our marketable securities outstanding as of October 31, 2020 and November 2, 2019, our annual interest income would change by approximately $10.6 million and $6.5 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 a 100 basis point parallel shift in the yield curve.
−Removed: Based on investment positions as of November 2, 2019 and November 3, 2018, 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.
+Added: Based on investment positions as of October 31, 2020 and November 2, 2019, 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.
−Removed: As of November 2, 2019, we had $4.6 billion in principal amount of senior unsecured notes outstanding, with a fair value of $4.9 billion.
+Added: As of October 31, 2020, we had $4.3 billion in principal amount of senior unsecured notes outstanding, with a fair value of $4.8 billion.
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.
−Removed: The fair values of our notes as of November 2, 2019 and November 3, 2018, assuming a hypothetical 100 basis point increase in market interest rates, are as follows:
−Removed: November 2, 2019 November 3, 2018
+Added: The fair values of our notes as of October 31, 2020 and November 2, 2019, assuming a hypothetical 100 basis point increase in market interest rates, are as follows:
+Added: October 31, 2020 November 2, 2019
(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
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2023 Notes, due December 2023 550,000 590,177 572,965 550,000 567,159 545,897
+Added: 2025 Notes, due April 2025 400,000 434,919 417,225 — — —
2025 Notes, due December 2025 850,000 969,033 924,695 850,000 914,567 866,162
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Foreign Currency Exposure
−Removed: As more fully described in Note 2i, Derivative and Hedging Agreements, in 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.
+Added: 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.
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Currently, our largest foreign currency exposure is the Euro, primarily because our European operations have the highest proportion of our local currency denominated expenses.
−Removed: Relative to foreign currency exposures existing at November 2, 2019 and November 3, 2018, a 10% unfavorable movement in foreign currency exchange rates over the course of the year would result in approximately $12.1 million of losses and $14.1 million of losses, respectively, in changes in earnings or cash flows.
+Added: Relative to foreign currency exposures existing at October 31, 2020 and November 2, 2019, a 10% unfavorable movement in foreign currency exchange rates over the course of the year would result in approximately $18.5 million of losses and $12.1 million of losses, respectively, in changes in earnings or cash flows.
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.
−Removed: Based on the credit ratings of our counterparties as of November 2, 2019, we do not believe that there is significant risk of nonperformance by them.
+Added: Based on the credit ratings of our counterparties as of October 31, 2020, 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.
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The following table illustrates the effect that a 10% unfavorable or favorable movement in foreign currency exchange rates, relative to the U.S.
−Removed: dollar, would have on the fair value of our forward exchange contracts as of November 2, 2019 and November 3, 2018:
−Removed: November 2, 2019 November 3, 2018
−Removed: Fair value of forward exchange contracts liability $ — $ (7,150)
+Added: dollar, would have on the fair value of our forward exchange contracts as of October 31, 2020 and November 2, 2019:
+Added: October 31, 2020 November 2, 2019
+Added: Fair value of forward exchange contracts assets $ 5,427 $ —
Fair value of forward exchange contracts after a 10% unfavorable movement in foreign currency exchange rates asset $ 21,859 $ 20,810
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We have audited the accompanying consolidated balance sheets of Analog Devices, Inc.
−Removed: (the Company) as of November 2, 2019 and November 3, 2018, 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, 2019, 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”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at November 2, 2019 and November 3, 2018, and the results of its operations and its cash flows for each of the three years in the period ended November 2, 2019, in conformity with U.S.
+Added: (the Company) as of October 31, 2020 and November 2, 2019, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended October 31, 2020, 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”).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 31, 2020 and November 2, 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2020, in conformity with U.S.
generally accepted accounting principles.
−Removed: 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, 2019, 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, 2019 expressed an unqualified opinion thereon.
+Added: 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 October 31, 2020, 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 24, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No.
−Removed: As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in the year ended November 2, 2019 due to the adoption of Accounting Standards Update (ASU) No.
−Removed: 2014-09, Revenue from Contracts with Customers (Topic 606) , and the related amendments.
+Added: As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended October 31, 2020 due to the adoption of Accounting Standards Update (ASU) No.
+Added: 2016-02, Leases (Topic 842) , and the related amendments.
Adoption of ASU No.
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Description of the Matter As described in Note 2 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.
−Removed: During 2019, sales to distributors were $3.4 billion net of expected price protection discounts and rights of return for which the liability balance as of November 2, 2019 was $227.0 million.
+Added: During 2020, sales to distributors were $3.2 billion net of expected price protection discounts and rights of return for which the liability balance as of October 31, 2020 was $229.8 million.
Auditing the Company's measurement of variable consideration under distributor contracts involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of expected price protection discounts and returns.
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Goodwill – Quantitative Impairment Assessment
−Removed: Description of the Matter The Company’s consolidated goodwill balance was $12.3 billion as of November 2, 2019.
−Removed: As described in Note 2 to the consolidated financial statements, the Company evaluates goodwill for impairment at the reporting unit level annually and performed a quantitative goodwill impairment assessment for one of its eight reporting units.
−Removed: The quantitative impairment assessment involves the comparison of the fair value of a reporting unit to its carrying amount.
−Removed: The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit.
−Removed: Auditing management's quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of the reporting unit.
−Removed: In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues, gross profit margins, operating income margins, long-term discount rate, perpetual growth rate, identification of comparable publicly traded companies and estimated valuation multiples.
+Added: Description of the Matter The Company’s consolidated goodwill balance was $12.3 billion as of October 31, 2020.
+Added: As described in Note 2 to the consolidated financial statements, the Company evaluates goodwill for impairment at the reporting unit level annually and performed a quantitative goodwill impairment assessment for each of its eight reporting units.
+Added: The quantitative impairment assessment involves the comparison of the fair value of each reporting unit to its respective carrying amount.
+Added: The Company used a weighting of the income and market approaches to determine the fair value of each reporting unit.
+Added: Auditing management's quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of each reporting unit.
+Added: In particular, the fair value estimate for one of the eight reporting units was sensitive to significant assumptions, such as forecasted revenues, gross profit margins, operating income margins, long-term discount rate, perpetual growth rate, identification of comparable publicly traded companies and estimated valuation multiples, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions as outlined above, used in determining the fair value of this reporting unit.
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 quantitative goodwill impairment assessment process.
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To test the estimated fair value of the reporting unit, our audit procedures included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.
−Removed: We tested significant assumptions by comparing to current and forecasted industry and economic trends, analyst reports, and forecasted peer company information.
+Added: We tested significant assumptions by comparing them to current and forecasted industry and economic trends, analyst reports, and forecasted peer company information.
We evaluated management’s ability to accurately forecast by comparing actual results to historical forecasts.
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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.