What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-11-24 compared with 2019-11-26 · 509 added, 601 removed, 1051 unchanged (51% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

Years ended November 2, 2019, November 3, 2018 and October 28, 2017

Years ended October 31, 2020, November 2, 2019 and November 3, 2018

(thousands, except per share amounts) 2020 2019

10 unchanged sentences

Operating income:

Nonoperating (income) expenses:

1,498,244 1,710,608 1,899,589

Nonoperating expense (income):

Interest expense 193,305 229,075 253,589

11 unchanged sentences

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

See accompanying Notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended November 2, 2019, November 3, 2018 and October 28, 2017

Years ended October 31, 2020, November 2, 2019 and November 3, 2018

(thousands) 2020 2019 2018 (1)

Net income $ 1,220,761 $ 1,363,011 $ 1,506,980

Foreign currency translation adjustment (net of taxes of $ 0 in 2019, $ 0 in 2018 and $ 1,556 in 2017)

( 1,365 ) ( 6,222 ) 1,572

Change in fair value of available-for-sale securities (net of taxes of $ 0 in 2019, $ 0 in 2018 and $ 35 in 2017)

10 ( 10 ) ( 517 )

Foreign currency translation adjustment 3,224 ( 1,365 ) ( 6,222 )

Change in fair value of available-for-sale securities — 10 ( 10 )

Change in unrecognized gains/losses on derivative instruments designated as cash flow hedges:

Changes in fair value of derivatives (net of taxes of $ 29,401 in 2019, $ 416 in 2018 and $ 920 in 2017)

Changes in fair value of derivatives (net of tax of $ 17,468 in 2020, $ 29,401 in 2019 and $ 416 in 2018)

( 51,437 ) ( 111,327 ) ( 1,863 )

Adjustment for realized gain/loss reclassified into earnings (net of taxes of $ 1,518 in 2019, $ 94 in 2018 and $ 1,326 in 2017)

Adjustment for realized gain/loss reclassified into earnings (net of tax of $ 158 in 2020, $ 1,518 in 2019 and $ 94 in 2018)

( 839 ) 7,667 ( 1,613 )

1 unchanged sentence

Changes in accumulated other comprehensive loss — pension plans:

Change in transition asset (net of taxes of $ 0 in 2019, $ 0 in 2018 and $ 1 in 2017)

Change in actuarial loss/gain (net of taxes of $ 5,734 in 2019, $ 2,363 in 2018 and $ 355 in 2017)

Change in transition asset — — 10

Change in actuarial loss/gain (net of tax of $ 5,167 in 2020, $ 5,734 in 2019 and $ 2,363 in 2018)

( 10,231 ) ( 24,344 ) 12,616

Change in prior service cost/income (net of taxes of $ 0 in 2019, $ 0 in 2018 and $ 61 in 2017)

Change in prior service cost/income — — 1

Total change in accumulated other comprehensive loss — pension plans, net of tax ( 10,231 ) ( 24,344 ) 12,627

3 unchanged sentences

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

See accompanying Notes.

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CONSOLIDATED BALANCE SHEETS

November 2, 2019 and November 3, 2018

October 31, 2020 and November 2, 2019

(thousands, except per share amounts) 2020 2019

14 unchanged sentences

Net property, plant and equipment 1,120,561 1,219,989

Deferred compensation plan investments 47,154 39,853

Other investments 86,729 77,324

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Deferred income taxes 1,919,595 2,088,212

Deferred compensation plan liability 47,154 39,846

Income taxes payable 591,780 654,420

11 unchanged sentences

$ 21,468,603 $ 21,392,641

_______________________________________

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See accompanying Notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended November 2, 2019, November 3, 2018 and October 28, 2017

Years ended October 31, 2020, November 2, 2019 and November 3, 2018

Capital in Accumulated

3 unchanged sentences

368,636 $ 61,441 $ 5,250,519 $ 5,179,024 $ ( 61,359 )

Activity in Fiscal 2017

Net Income — 2018 (1)

Dividends declared and paid ( 602,119 )

Dividends declared and paid - $ 1.89 per share

Issuance of stock under stock plans and other 4,012 668 98,359

Issuance of stock in connection with acquisition 55,884 9,314 4,584,341

Tax benefit — equity based awards 7,741

Stock-based compensation expense 151,165

Replacement share-based awards issued in connection with acquisition 33,530

Other comprehensive income 2,919

Common stock repurchased ( 2,488 ) ( 415 ) ( 225,562 )

BALANCE, OCTOBER 28, 2017 (1)

BALANCE, NOVEMBER 3, 2018 (1)

370,160 61,694 5,282,222 5,982,697 ( 58,440 )

Activity in Fiscal 2018

Effect of Accounting Standards Update 2016-16 331,026

Net Income — 2019

Dividends declared and paid ( 703,307 )

Dividends declared and paid - $ 2.10 per share

Issuance of stock under stock plans and other 4,271 712 115,811

Tax benefit — equity based awards 7,741

Stock-based compensation expense 150,300

Other comprehensive income 2,919

Other comprehensive loss ( 129,359 )

Common stock repurchased ( 6,129 ) ( 1,021 ) ( 611,984 )

1 unchanged sentence

368,302 61,385 4,936,349 6,899,253 ( 187,799 )

Activity in Fiscal 2019

Effect of Accounting Standards Update 2018-02

2,379 ( 2,379 )

Net Income — 2020

Dividends declared and paid ( 777,481 )

Dividends declared and paid - $ 2.40 per share

Issuance of stock under stock plans and other 3,110 518 67,885

Issuance of stock as charitable contribution 336 56 39,944

Stock-based compensation expense 149,518

1 unchanged sentence

Common stock repurchased ( 2,263 ) ( 377 ) ( 244,110 )

BALANCE, NOVEMBER 2, 2019

BALANCE, OCTOBER 31, 2020

369,485 $ 61,582 $ 4,949,586 $ 7,236,238 $ ( 249,461 )

1 unchanged sentence

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

See accompanying Notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended November 2, 2019, November 3, 2018 and October 28, 2017

Years ended October 31, 2020, November 2, 2019 and November 3, 2018

(thousands) 2020 2019 2018 (1)

4 unchanged sentences

Amortization of intangibles 577,148 570,574 570,538

Cost of goods sold for inventory acquired — — 358,718

Stock-based compensation expense 149,518 150,300 151,165

Non-cash portion of special charges 14,167 — —

Non-cash impairment included in special charges — 14,167 —

Other non-cash activity 5,418 40,907 36,569

Non-cash contribution to charitable foundation 40,000 — —

Deferred income taxes ( 113,948 ) ( 91,253 ) ( 730,376 )

4 unchanged sentences

Deferred compensation plan investments ( 3,853 ) ( 7,301 ) ( 7,484 )

Prepaid income tax ( 2,322 ) 133 2,679

Accounts payable and accrued liabilities 103,104 ( 6,371 ) ( 18,397 )

4 unchanged sentences

Net cash provided by operating activities 2,008,487 2,253,100 2,442,361

Investing Activities

Cash flows from investing:

Purchases of short-term available-for-sale investments — — ( 705,485 )

Maturities of short-term available-for-sale investments — — 3,362,792

Sales of short-term available-for-sale investments — — 577,187

Additions to property, plant and equipment, net ( 165,692 ) ( 275,372 ) ( 254,876 )

2 unchanged sentences

Net cash used for investing activities ( 180,523 ) ( 293,186 ) ( 313,998 )

Financing Activities

Cash flows from financing activities:

4 unchanged sentences

Proceeds from revolver 350,000 75,000 —

Proceeds from derivative instruments — — 3,904

Payments of deferred financing fees — — ( 5,625 )

Dividend payments to shareholders ( 886,155 ) ( 777,481 ) ( 703,307 )

2 unchanged sentences

Change in other financing activities ( 4,015 ) ( 2,831 ) 3,437

Net cash (used for) provided by financing activities ( 2,126,794 ) ( 2,358,042 ) 5,586,805

Net cash used for financing activities ( 1,420,608 ) ( 2,126,794 ) ( 2,358,042 )

Effect of exchange rate changes on cash 182 ( 1,389 ) ( 1,568 )

Net (decrease) increase in cash and cash equivalents ( 168,269 ) ( 231,247 ) 126,706

Net increase (decrease) in cash and cash equivalents 407,538 ( 168,269 ) ( 231,247 )

Cash and cash equivalents at beginning of year 648,322 816,591 1,047,838

2 unchanged sentences

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

See accompanying Notes.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended November 2, 2019, November 3, 2018 and October 28, 2017

Years ended October 31, 2020, November 2, 2019 and November 3, 2018

(all tabular amounts in thousands except per share amounts)

1 unchanged sentence

Analog Devices, Inc.

(Analog Devices or the Company) is a leading global high-performance analog technology company.

Since the Company's inception in 1965, it has focused on solving its customers’ toughest signal processing engineering challenges and playing a fundamental role in efficiently converting, conditioning, and processing real-world phenomena such as temperature, pressure, sound, light, speed, and motion into electrical signals to be used in a wide array of electronic applications.

The Company produces innovative products and technologies that accurately and securely sense, measure, connect, interpret and power, allowing its customers to intelligently bridge the physical and digital domains.

The Company designs, manufactures, and markets a broad portfolio of solutions, including integrated circuits (ICs), algorithms, software, and subsystems, that leverage high-performance analog, mixed-signal, and digital signal processing technologies.

The Company's fusion of cutting-edge sensors, data converters, amplifiers and linear products, radio frequency (RF) ICs, power management products, and other signal processing products with deep industry expertise allows it to create robust technology platforms that meet a broad spectrum of customer and market needs.

As new generations of applications evolve - such as autonomous vehicles, 5G networks, intelligent factories, and smart healthcare devices - the demand for Analog Devices’ high-performance analog signal processing and digital signal processing (DSP) products and technologies is increasing.

(Analog Devices or the Company) is a leading global high-performance analog technology company dedicated to solving its customers' most complex engineering challenges.

Since its inception in 1965, the Company has played a critical role at the intersection of the physical and digital world by providing the building blocks to sense, measure, interpret, connect and power.

The Company designs, manufactures, tests and markets a broad portfolio of solutions, including integrated circuits (ICs), software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies.

The Company's comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency ICs, digital signal processors and other sensors.

The Company's focus is largely on the business-to-business end markets of Industrial, Automotive and Communications and related applications, as well as Consumer applications, with the goal of driving sustainable and profitable growth over the long term.

Summary of Significant Accounting Policies

2 unchanged sentences

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, 2019 (fiscal 2019).

Certain amounts reported in previous years have been reclassified to conform to the presentation for the fiscal year ended October 31, 2020 (fiscal 2020).

The Company’s fiscal year is the 52 -week or 53 -week period ending on the Saturday closest to the last day in October.

2 unchanged sentences

Therefore, fiscal 2018 included an additional week of operations as compared to fiscal 2020 and fiscal 2019.

On March 10, 2017 (Acquisition Date), the Company completed the acquisition of all of the voting interests of Linear Technology Corporation (Linear), an independent manufacturer of high performance analog integrated circuits.

The total consideration paid to acquire Linear was approximately $ 15.8 billion, consisting of $ 11.1 billion in cash financed through existing cash on hand, net proceeds from bridge and term loan facilities and proceeds received from the issuance of senior unsecured notes, $ 4.6 billion from the issuance of the Company's common stock and $ 0.1 billion of consideration related to the replacement of outstanding equity awards held by Linear employees.

The acquisition of Linear is referred to as the Acquisition.

The Consolidated Financial Statements included in this Annual Report on Form 10-K include the financial results of Linear prospectively from the Acquisition Date.

See Note 6, Acquisitions, of these Notes to Consolidated Financial Statements for further discussion related to the Acquisition.

As further discussed in Note 2n, Revenue Recognition, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), in the first quarter of fiscal 2019.

The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period showing, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized as of the date of initial application.

The Company adopted ASU 2014-09 using the full retrospective method and applied the practical expedient, in which the Company is not required to disclose the amount of consideration allocated to any remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue for all reporting periods presented before the date of the initial application.

As a result of the adoption of ASU 2014-09, the Company changed its accounting policy for revenue recognition and recognizes revenue from product sales to its customers and distributors when title passes, which is generally upon shipment.

Prior to the adoption of ASU 2014-09, revenue and the related cost of sales on shipments to certain distributors were deferred until the distributor resold the products to their end customers.

See Note 2n, Revenue Recognition, in these Notes to

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Consolidated Financial Statements for the details of the Company’s revenue recognition policies.

The adoption of ASU 2014-09 impacted the Company’s consolidated statements of income and consolidated balance sheets but did not impact its consolidated statements of cash flows, with the exceptions of net income and reclassifications within adjustments to reconcile net income to cash provided by operations, and did not impact the consolidated statement of shareholders' equity, with the exceptions of retained earnings and net income.

As shown in the tables below, pursuant to the guidance in ASU 2014-09, the Company restated its historical financial results to be consistent with the standard.

On July 12, 2020, the Company 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.

See Note 6, Acquisitions , of the Notes to Consolidated Financial Statements for additional information.

As further discussed in Note 2n, Revenue Recognition , of the Notes to Consolidated Financial Statements, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), in the first quarter of fiscal 2019.

See Note 2n, Revenue Recognition , of the Notes to Consolidated Financial Statements for the details of the Company’s revenue recognition policies.

As shown in the table below, pursuant to the guidance in ASU 2014-09, the Company restated its historical financial results to be consistent with the standard.

Accordingly, the amounts for fiscal 2020, fiscal 2019 and fiscal 2018 periods presented in this Form 10-K reflect the impact of ASU 2014-09.

1 unchanged sentence

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in the first quarter of fiscal 2019.

Under this ASU, the service cost component of net periodic benefit cost is recorded in Cost of sales, Research and development, Selling, marketing, general and administrate expenses, while the remaining components are recorded to Other, net within the Company's consolidated statements of income.

As such, the prior year amounts have been reclassified to provide comparable presentation in line with the guidance in ASU 2017-07 based on amounts previously disclosed for the various components of net periodic pension cost.

See Note 11, Retirement Plans, in these Notes to Consolidated Financial Statements for more information on the adoption of ASU 2017-07.

The tables below reconcile the impact of ASU 2014-09 and ASU 2017-07 on the consolidated statements of income:

Year Ended November 3, 2018

Consolidated Statement of Income As Reported Impact of Adoption of ASU 2014-09 Impact of Adoption of ASU 2017-07 As Adjusted

Revenue $ 6,200,942 $ 23,747 $ — $ 6,224,689

Cost of sales 1,967,640 6,950 ( 297 ) 1,974,293

Gross margin 4,233,302 16,797 297 4,250,396

Operating expenses:

Research and development 1,165,410 — ( 363 ) 1,165,047

Selling, marketing, general and administrative 695,937 — ( 397 ) 695,540

Amortization of intangibles 428,902 — — 428,902

Special charges 61,318 — — 61,318

2,351,567 — ( 760 ) 2,350,807

Operating income 1,881,735 16,797 1,057 1,899,589

Nonoperating expense (income):

Interest expense 253,589 — — 253,589

Interest income ( 9,383 ) — — ( 9,383 )

Other, net ( 988 ) — 1,057 69

243,218 — 1,057 244,275

Income before income taxes 1,638,517 16,797 — 1,655,314

Provision for income taxes 143,085 5,249 — 148,334

Net income $ 1,495,432 $ 11,548 $ — $ 1,506,980

Shares used to compute earnings per common share – basic 370,430 — — 370,430

Shares used to compute earnings per common share – diluted 374,938 — — 374,938

Basic earnings per common share $ 4.02 $ 0.03 $ — $ 4.05

Diluted earnings per common share $ 3.97 $ 0.03 $ — $ 4.00

Under this ASU, the service cost component of net periodic benefit cost is recorded in Cost of sales, Research and development, and Selling, marketing, general and administrative expenses, while the remaining components are recorded to Other, net within the Company's Consolidated Statements of Income.

See Note 11, Retirement Plans , of the Notes to Consolidated Financial Statements for more information on the adoption of ASU 2017-07.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Year Ended October 28, 2017

The tables below reconcile the impact of ASU 2014-09 and ASU 2017-07 on the Consolidated Statement of Income for the year ended November 3, 2018:

Consolidated Statement of Income As Reported Impact of Adoption of ASU 2014-09 Impact of Adoption of ASU 2017-07 As Adjusted

29 unchanged sentences

Retained earnings $ 5,703,064 $ 279,633 $ 5,982,697

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, in the first quarter of fiscal 2019, the Company adopted ASU 2016-16, Income Taxes (Topic 740) (ASU 2016-16) using the modified retrospective method with a cumulative-effect adjustment directly to retained earnings.

ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.

The adoption of ASU 2016-16 resulted in the following cumulative-effect increase in the Company's deferred tax assets, deferred tax liabilities and retained earnings as follows:

The adoption of ASU 2016-16 resulted in the following cumulative-effect increase in the Company's deferred tax assets, deferred tax liabilities and retained earnings:

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

November 4, 2018

3 unchanged sentences

Retained earnings $ 5,982,697 $ 331,026 $ 6,313,723

See Note 12, Income Taxes, in these Notes to Consolidated Financial Statements for more information on the adoption of ASU 2016-16.

See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements for more information on the adoption of ASU 2016-16.

Cash and Cash Equivalents

Cash and cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition.

Cash and cash equivalents consist primarily of government and institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds and bank time deposits.

Cash and cash equivalents consist primarily of government and institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds, demand deposit accounts and bank time deposits.

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.

6 unchanged sentences

The Company’s deferred compensation plan investments are classified as trading.

See Note 2j, Fair Value and Note 11, Retirement Plans, of these Notes to Consolidated Financial Statements for additional information on these investments.

See Note 2j, Fair Value and Note 11, Retirement Plans , of the Notes to Consolidated Financial Statements for additional information on these investments.

The Company periodically evaluates its investments for impairment.

2 unchanged sentences

There were no material net realized gains or losses from the sales of available-for-sale investments during any of the fiscal periods presented.

The components of the Company’s cash and cash equivalents as of November 2, 2019 and November 3, 2018 were as follows:

Cash and cash equivalents:

The components of the Company’s cash and cash equivalents as of October 31, 2020 and November 2, 2019 were as follows:

Cash $ 239,607 $ 152,432

2 unchanged sentences

Total cash and cash equivalents $ 1,055,860 $ 648,322

See Note 2j, Fair Value, of these Notes to Consolidated Financial Statements for additional information on the Company’s cash equivalents.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

See Note 2j, Fair Value , of the Notes to Consolidated Financial Statements for additional information on the Company’s cash equivalents.

Supplemental Cash Flow Statement Information

6 unchanged sentences

The Company employs a variety of methodologies to determine the net realizable value of its inventory.

While a portion of the calculation to record inventory at its net realizable value is based on the age of the inventory and lower of cost or market calculations, a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products.

While a portion of the calculation to record

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

inventory at its net realizable value is based on the age of the inventory and lower of cost or market calculations, a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products.

If actual demand is less than the Company’s estimates, impairment charges, which are recorded to cost of sales, may need to be recorded in future periods.

Inventory in excess of saleable amounts is not valued, and the remaining inventory is valued at the lower of cost or market.

Inventories at November 2, 2019 and November 3, 2018 were as follows:

Inventories at October 31, 2020 and November 2, 2019 were as follows:

Raw materials $ 33,806 $ 35,447

3 unchanged sentences

Property, Plant and Equipment

Property, plant and equipment is recorded at cost, less allowances for depreciation.

Property, plant and equipment (PP&E) is recorded at cost, less allowances for depreciation.

The straight-line method of depreciation is used for all classes of assets for financial statement purposes while both straight-line and accelerated methods are used for income tax purposes.

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Leasehold improvements 7 - 20 years

Depreciation expense for property, plant and equipment was $ 240.7 million, $ 228.5 million and $ 194.7 million in fiscal 2019, 2018 and 2017, respectively.

The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable.

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.

1 unchanged sentence

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 has not recorded any material impairment charges related to our property, plant and equipment in fiscal 2019, fiscal 2018 or fiscal 2017.

Goodwill and Intangible Assets

The Company evaluates goodwill for impairment annually, utilizing either the qualitative or quantitative method, as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable.

The Company tests goodwill for impairment at the reporting unit level, which the Company has determined is consistent with our eight identified operating segments, on an annual basis on the first day of the fourth quarter (on or about August 4) or more frequently if indicators of impairment exist or the Company reorganizes its 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

The Company has not recorded any material impairment charges related to its PP&E in fiscal 2020, fiscal 2019 or fiscal 2018.

PP&E is identified as held for sale when it meets the held for sale criteria of Accounting Standards Codification Topic 360, Property, Plant, and Equipment (ASC 360).

Depreciation is not recorded for assets that are classified as held for sale.

When an asset meets the held for sale criteria, the lower of its carrying value or fair value less costs to sell is reclassified from the relevant PP&E line items and into current assets on the balance sheet, where it remains until it is either sold or it no longer meets the held for sale criteria.

If the assets held for sale were carried at fair value, it would be considered a Level 3 fair value measurement, and determined based on the use of appraisals and input from market participants.

As further discussed in Note 5, Special Charges , of the Notes to Consolidated Financial Statements, the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines and also to its outsourced assembly and test partners.

Accordingly, management has entered into an agreement to sell the facility and transfer the related land lease in Singapore in May 2021 and has determined that this facility and certain equipment therein have met the held for sale criteria as specified in ASC 360.

No write-down to fair value was required upon this designation, as the fair value of the asset group, less costs to sell, was greater than its carrying value.

As shown below, this carrying value was reclassified from PP&E to Prepaid expenses and other current assets as of October 31, 2020:

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

In the Company's annual impairment evaluation that occurred for fiscal 2019, management used the qualitative method of assessing goodwill for seven of its eight reporting units and the quantitative method for one reporting unit.

In fiscal 2018, the Company used the qualitative method for all eight of its identified reporting units.

For each of the reporting units evaluated using the qualitative method in fiscal 2019 and fiscal 2018, the Company determined that it was not more likely than not that the fair values were less than their net book values.

In making this determination, the Company considered several factors, including the following:

October 31, 2020

Land and buildings $ 36,451

Machinery and equipment 1,468

Office equipment 197

Leasehold improvements 5,744

Less accumulated depreciation and amortization ( 21,706 )

Net property, plant and equipment reclassified to Prepaid expenses and other current assets $ 22,154

Goodwill and Intangible Assets

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 eight identified operating segments, on an annual basis on the first day of the fourth quarter (on or about August 2) 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 first day of the fourth quarter compared to the previously calculated fair values as of the date of the most recent quantitative impairment analysis;

– 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 our competitors' businesses, such as significant declines in market capitalization or significant goodwill impairment charges that could be an indication that the goodwill of our reporting units was potentially impaired;

– 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 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;

– whether there had been any significant increases to the weighted-average cost of capital (WACC) rates for each reporting unit, which could materially lower our prior valuation conclusions under a discounted cash flow approach.

As a result of the quantitative goodwill impairment analysis performed in fiscal 2019 for one of the Company's reporting units, the Company concluded the reporting unit’s fair value exceeded its carrying amount as of the assessment date and no risk of impairment existed.

The first step of the goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount.

The Company determined the fair value of its reporting unit using a weighting of the income and market approaches.

Under the income approach, the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, perpetual growth rates, and long-term discount rates, among others.

For the market approach, the Company used the guideline public company method.

Under this method the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, to estimate valuation multiples that are applied to the operating performance of the reporting unit, in order to estimate its fair value.

There was no impairment of goodwill in any of the fiscal years presented.

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;

– 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.

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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2019, management elected to use the qualitative method of assessing goodwill for seven of its eight reporting units and the quantitative method for one reporting unit.

During the second quarter of fiscal 2020, the Company performed a quantitative assessment of one of its reporting units due to the macroeconomic climate at the time.

In the latest annual impairment evaluation that occurred as of August 2, 2020, the Company used the quantitative method of assessing goodwill for all eight of its reporting units.

In all periods presented, management concluded the reporting units' fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.

The Company’s next annual impairment assessment will be performed as of the first day of the fourth quarter of the fiscal year ending October 30, 2021 (fiscal 2021) unless indicators arise that would require the Company to reevaluate at an earlier date.

1 unchanged sentence

Balance at beginning of year $ 12,256,880 $ 12,252,604

Acquisition of Linear (Note 6) — 1,647

Goodwill adjustment related to other acquisitions (1) 6,702 36,558

Goodwill related to other acquisitions (1) 17,839 6,702

Foreign currency translation adjustment 3,706 ( 2,426 )

2 unchanged sentences

(1) Represents goodwill related to other acquisitions that were not material to the Company on either an individual or aggregate basis.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Intangible Assets

5 unchanged sentences

During fiscal 2019, the company recorded $ 14.2 million of special charges related to the write-off of acquired intellectual property, classified as IPR&D, due to the Company's decision to discontinue certain product development strategies.

As of November 2, 2019 and November 3, 2018, the Company’s intangible assets consisted of the following:

November 2, 2019 November 3, 2018

As of October 31, 2020 and November 2, 2019, the Company’s intangible assets consisted of the following:

October 31, 2020 November 2, 2019

Gross Carrying

5 unchanged sentences

Trade-name 72,200 37,489 73,417 28,164

IPR&D — — 20,768 —

Total (1) (2)

2 unchanged sentences

(1) Foreign intangible asset carrying amounts are affected by foreign currency translation.

(2) Increases in intangible assets primarily relate to acquisitions that were not material to the Company on either an individual or aggregate basis.

(2) Intangible assets, along with the related accumulated amortization, are removed from the table above at the end of the fiscal year they become fully amortized.

Amortization expense related to finite-lived intangible assets was $ 570.6 million, $ 570.5 million and $ 389.4 million in fiscal 2019, 2018 and 2017, respectively, and is recorded in Cost of sales and Amortization of intangibles on the consolidated statements of income.

Amortization expense related to intangible assets was $ 577.1 million, $ 570.6 million and $ 570.5 million in fiscal 2020, 2019 and 2018, 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 a weighted average life of approximately 3.2 years.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company expects annual amortization expense for intangible assets as follows:

8 unchanged sentences

These grants include capital, employment and research and development grants.

Capital grants for the acquisition of property 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.

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.

The amounts recognized were not material in fiscal 2019, fiscal 2018 or fiscal 2017.

Translation of Foreign Currencies

The functional currency for the Company’s foreign sales and research and development operations is the applicable local currency.

The functional currency for certain of the Company’s foreign operations is the applicable local currency.

Gains and losses resulting from translation of these foreign currencies into U.S.

dollars are recorded in AOCI.

Transaction gains and losses and re-measurement of foreign currency denominated assets and liabilities are included in income

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

currently, including those at the Company’s principal foreign manufacturing operations where the functional currency is the U.S.

Foreign currency transaction gains or losses included in other, net, were not material in fiscal 2019, 2018 or 2017.

Transaction gains and losses and re-measurement of foreign currency denominated assets and liabilities are included in income currently, including those at the Company’s principal foreign manufacturing operations where the functional currency is the U.S.

Foreign currency transaction gains or losses are included in Other, net in the Consolidated Statements of Income.

Derivative Instruments and Hedging Agreements

9 unchanged sentences

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 denominated in Euros, British Pounds, Philippine Pesos and Japanese Yen as of November 2, 2019 and November 3, 2018 was $ 191.1 million and $ 194.4 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, 2019 and November 3, 2018 were as follows:

The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges denominated in Euros, British Pounds, Philippine Pesos and Japanese Yen as of October 31, 2020 and November 2, 2019 was $ 202.7 million and $ 191.1 million, respectively.

The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Consolidated Balance Sheets as of October 31, 2020 and November 2, 2019 were as follows:

Fair Value At

Balance Sheet Location November 2, 2019 November 3, 2018

Balance Sheet Location October 31, 2020 November 2, 2019

Forward foreign currency exchange contracts Prepaid expenses and other current assets $ 5,550 $ 65

Forward foreign currency exchange contracts Accrued liabilities $ — $ 6,934

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, 2019 and November 3, 2018, the total notional amount of these undesignated hedges was $ 55.3 million and $ 40.6 million, respectively.

The fair value of these hedging instruments in the Company’s consolidated balance sheets was immaterial as of November 2, 2019 and November 3, 2018.

The Company estimates that settlements of forward foreign currency derivative instruments included in OCI that will be reclassified into earnings will be immaterial within the next 12 months.

As of October 31, 2020 and November 2, 2019, the total notional amount of these undesignated hedges was $ 62.7 million and $ 55.3 million, respectively.

The Company estimates that $ 3.8 million, net of tax, of settlements of forward foreign currency derivative instruments included in OCI will be reclassified into earnings within the next 12 months.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

All of the Company’s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other.

Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheets on a net basis.

As of November 2, 2019 and November 3, 2018, none of the netting arrangements involved collateral.

The following table presents the gross amounts of the Company's derivative assets and liabilities and the net amounts recorded in the Company's consolidated balance sheets as of November 2, 2019 and November 3, 2018:

November 2, 2019 November 3, 2018

Gross amount of recognized liabilities $ ( 2,828 ) $ ( 8,054 )

Gross amounts of recognized assets offset in the consolidated balance sheets 2,828 904

Net liabilities presented in the consolidated balance sheets $ — $ ( 7,150 )

As of October 31, 2020 and November 2, 2019, none of the netting arrangements involved collateral.

The following table presents the gross amounts of the Company's forward foreign currency exchange contracts and the net amounts recorded in the Company's Consolidated Balance Sheets as of October 31, 2020 and November 2, 2019:

October 31, 2020 November 2, 2019

Gross amount of recognized assets $ 6,114 $ 2,828

Gross amounts of recognized liabilities offset in the Consolidated Balance Sheets ( 687 ) ( 2,828 )

Net assets presented in the Consolidated Balance Sheets $ 5,427 $ —

Interest Rate Exposure Management — The Company's current and future debt may be subject to interest rate risk.

2 unchanged sentences

The interest rate swap was designated and qualified as a cash flow hedge.

The fair value of this hedge was $ 138.8 million as of November 2, 2019 and is included within accrued liabilities in the Company's consolidated balance sheets.

The fair value of this hedge was $ 214.6 million and $ 138.8 million as of October 31, 2020 and November 2, 2019, respectively, and is included within accrued liabilities in the Company's Consolidated Balance Sheets.

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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2019 and November 3, 2018, nonperformance is not perceived to be a material risk.

The counterparties to the agreements relating to the Company’s derivative instruments consist of a number of major international financial institutions with high credit ratings.

Based on the credit ratings of the Company’s counterparties as of October 31, 2020 and November 2, 2019, 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.

6 unchanged sentences

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 these Notes to Consolidated Financial Statements.

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.

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.

4 unchanged sentences

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, 2019 and November 3, 2018.

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, 2019 and November 3, 2018, the Company held $ 231.4 million and $ 217.6 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

November 2, 2019

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 exclude cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value.

As of October 31, 2020 and November 2, 2019, the Company held $ 239.6 million and $ 231.4 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.

October 31, 2020

Fair Value measurement at

6 unchanged sentences

Other assets:

Forward foreign currency exchange contracts (1) — 5,427 5,427

Deferred compensation investments 52,956 — 52,956

2 unchanged sentences

Total liabilities measured at fair value $ — $ 214,586 $ 214,586

(1) The Company has master netting arrangements by counterparty with respect to derivative contracts.

See Note 2i, Derivative Instruments and Hedging Agreements , of the Notes to Consolidated Financial Statements for more information related to the Company's master netting arrangements.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

November 2, 2019

6 unchanged sentences

Government and institutional money market funds $ 416,890 $ — $ 416,890

Corporate obligations (1) — 204,886 204,886

Other assets:

Deferred compensation investments 48,302 — 48,302

Interest rate derivatives — 1,436 1,436

Total assets measured at fair value $ 465,192 $ — $ 465,192

Forward foreign currency exchange contracts (2) — 7,150 7,150

Interest rate derivatives — 138,798 138,798

Total liabilities measured at fair value $ — $ 138,798 $ 138,798

_______________________________________

(1) The amortized cost of the Company’s investments classified as available-for-sale as of November 3, 2018 was $ 205.0 million.

(2) The Company has master netting arrangements by counterparty with respect to derivative contracts.

See Note 2i, Derivative Instruments and Hedging Agreements, of these Notes to Consolidated Financial Statements for more information related to the Company's master netting arrangements.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash equivalents — These investments are adjusted to fair value based on quoted market prices or are determined using a yield curve model based on current market rates.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred compensation plan investments — The fair value of these mutual fund, money market fund and equity investments are based on quoted market prices.

3 unchanged sentences

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis.

Held for sale assets — The Company has classified the assets held for sale at carrying value.

However, if it were to be carried at fair value, it would be considered a Level 3 fair value measurement and would be determined based on the use of appraisals and input from market participants.

See Note 2e, Property, Plant and Equipment , of the Notes to Consolidated Financial Statements for further discussion related to held for sale assets.

Debt — The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis.

The carrying amounts of the term loan approximates fair value.

The term loan is classified as Level 2 measurements according to the fair value hierarchy.

The fair values of the senior unsecured notes debt are obtained from broker prices and are classified as Level 1 measurements according to the fair value hierarchy.

See Note 14, Debt, of these Notes to Consolidated Financial Statements for further discussion related to outstanding debt.

November 2, 2019 November 3, 2018

The fair values of the senior unsecured notes are obtained from broker prices and are classified as Level 1 measurements according to the fair value hierarchy.

See Note 14, Debt , of the Notes to Consolidated Financial Statements for further discussion related to outstanding debt.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

October 31, 2020 November 2, 2019

Principal Amount Outstanding Fair Value Principal Amount Outstanding Fair Value

3-Year term loan, due March 2022 $ 925,000 $ 925,000 $ 925,000 $ 925,000

3-Year term loan, due March 2020 — — 425,000 425,000

5-Year term loan, due March 2022 — — 1,350,000 1,350,000

2020 Notes, due March 2020 — — 300,000 300,872

3 unchanged sentences

2023 Notes, due December 2023 550,000 590,177 550,000 567,159

2025 Notes, due April 2025 400,000 434,919 — —

2025 Notes, due December 2025 850,000 969,033 850,000 914,567

20 unchanged sentences

The Company maintains cash and cash equivalents with high credit quality counterparties, continuously monitors the amount of credit exposure to any one issuer and diversifies its investments in order to minimize its credit risk.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company sells its products to distributors and original equipment manufacturers (OEMs) involved in a variety of industries including industrial process automation, instrumentation, defense/aerospace, automotive, communications, computers and computer peripherals and consumer electronics.

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.

1 unchanged sentence

The Company provides reserves for estimated amounts of accounts receivable that may not be collected.

Our largest customer (through distributors and direct sales to OEMs), accounted for approximately 30 %, 28 %, and 14 % of net revenues in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.

Our next largest customer accounted for approximately 10 % of net revenues in fiscal 2019, less than 10 % of net revenues in fiscal 2018, and 12 % of net revenues in fiscal 2017.

The Company's largest customer, which is a distributor rather than an end customer, accounted for approximately 29 %, 30 %, and 28 % of net revenues in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

The Company's next largest customer, which is also a distributor, accounted for approximately 10 % of net revenues in fiscal 2019.

This next largest customer accounted for less than 10% of net revenues in fiscal 2020 and fiscal 2018.

No other customer accounted for greater than 10% of revenue in any period presented.

Concentration of Other Risks

3 unchanged sentences

The Company is exposed to the risk of obsolescence of its inventory depending on the mix of future business.

Additionally, a large portion of the Company’s purchases of external wafer and foundry services are from a limited number of suppliers, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others.

Additionally, a large portion of the

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

19 unchanged sentences

Performance Obligations :

Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (IC) products.

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.

1 unchanged sentence

Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with an original expected duration of one year or less.

As allowed under ASU 2014-09, the Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expected durations of less than one year.

As allowed under ASU 2014-09, the Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.

The Company generally offers a twelve -month warranty for its products.

1 unchanged sentence

Specific accruals are recorded for known product warranty issues.

Product warranty expenses during fiscal 2020, fiscal 2019 and fiscal 2018 were not material.

Transaction Price :

7 unchanged sentences

To date, actual distributor claims activity has been materially consistent with the provisions the Company has made based on its historical estimates.

For the years ended November 2, 2019 and November 3, 2018, sales to distributors were $ 3.4 billion in both periods, net of variable consideration for which the liability balances as of November 2, 2019 and November 3, 2018 were $ 227.0 million and $ 144.9 million, respectively.

For fiscal 2020 and fiscal 2019, sales to distributors were approximately $ 3.2 billion and $ 3.4 billion, respectively, net of variable consideration for which the liability balances as of

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

October 31, 2020 and November 2, 2019 were $ 229.8 million and $ 227.0 million, respectively, and were recorded in Accrued liabilities on the Consolidated Balance Sheets.

Contract Balances :

1 unchanged sentence

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.

To date, there have been no material credit losses on accounts receivable.

There were no material contract assets or contract liabilities recorded on the Consolidated Balance Sheets in any of the periods presented.

The Company generally warrants that products will meet their published specifications and that the Company will repair or replace defective products for twelve -months from the date title passes to the customer.

Specific accruals are recorded for known product warranty issues.

Product warranty expenses during fiscal 2019, fiscal 2018 and fiscal 2017 were not material.

Accumulated Other Comprehensive (Loss) Income

Accumulated other comprehensive (loss) income (AOCI) includes certain transactions that have generally been reported in the Consolidated Statement of Shareholders’ Equity.

The components of AOCI at November 2, 2019 and November 3, 2018 consisted of the following, net of tax:

Foreign currency translation adjustment Unrealized holding gains (losses) on available for sale securities Unrealized holding gains (losses) on derivatives Pension plans Total

The components of AOCI at October 31, 2020 and November 2, 2019 consisted of the following:

Foreign currency translation adjustment Unrealized holding gains (losses) on derivatives Pension plans Total

November 2, 2019 $ ( 30,076 ) $ ( 118,015 ) $ ( 39,708 ) $ ( 187,799 )

1 unchanged sentence

Amounts reclassified out of other comprehensive loss — ( 681 ) 2,617 1,936

Tax effects — — 27,883 5,734 33,617

Tax — 17,310 ( 5,167 ) 12,143

Other comprehensive (loss) income 3,224 ( 52,276 ) ( 10,231 ) ( 59,283 )

November 2, 2019 $ ( 30,076 ) $ — $ ( 118,015 ) $ ( 39,708 ) $ ( 187,799 )

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effect of Accounting Standards Update 2018-02

— ( 2,379 ) — ( 2,379 )

October 31, 2020 $ ( 26,852 ) $ ( 172,670 ) $ ( 49,939 ) $ ( 249,461 )

The amounts reclassified out of AOCI into the Consolidated Statements of Income, with presentation location during each period were as follows:

7 unchanged sentences

( 158 ) ( 1,518 ) Tax

Effect of Accounting Standards Update 2018-02

( 2,379 ) — Retained earnings

$ ( 3,218 ) $ 7,667 Net of tax

Amortization of pension components

Transition obligation $ — $ 10 (1)

Prior service credit and curtailment recognition — 1 (1)

Actuarial losses and settlement recognition 1,004 1,621 (1)

1,004 1,632 Total before tax

Amortization of pension components included in the computation of net periodic benefit cost

Actuarial losses 2,617 1,004 (1)

651 ( 248 ) Tax

2 unchanged sentences

_______________________________________

(1) The amortization of pension components is included in the computation of net periodic pension cost.

See Note 11, Retirement Plans, of these Notes to Consolidated Financial Statements for further information .

Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted income tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse.

A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.

The calculation of the tax liabilities involves dealing with uncertainties in the application of complex tax regulations.

If it is more likely than not that the tax position will not be sustained on audit, an uncertain tax position is recorded.

The Company re-evaluates these uncertain tax positions on a quarterly basis.

See Note 12, Income Taxes, of these Notes to Consolidated Financial Statements for further information related to income taxes.

(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 .

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 estimates.

See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements for further information related to income taxes.

Earnings Per Share of Common Stock

6 unchanged sentences

Those potential shares, determined based on the weighted average exercise prices during the respective periods, could be dilutive in the future.

In connection with the Acquisition, the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees.

In connection with the acquisition of Linear Technology Corporate (Linear), the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees.

These restricted stock awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant.

21 unchanged sentences

(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

(2) For the year ended October 31, 2020, the amount is not material.

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 over a three -year performance period.

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.

Determining the amount of stock-based compensation to be recorded for stock options requires the Company to develop estimates used in calculating the grant-date fair value of 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 use of valuation models requires the Company to make estimates and assumptions, such as expected volatility, expected term, risk-free interest rate, expected dividend yield and forfeiture rates.

The grant-date fair value of restricted stock units with only a service condition represents 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.

See Note 3, Stock-Based Compensation and Shareholders' Equity, of these Notes to Consolidated Financial Statements for additional information relating to stock-based compensation.

New Accounting Pronouncements

Standards Implemented

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, which supersedes nearly all existing revenue recognition guidance under U.S.

The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The FASB issued several amendments and updates to the new revenue standard, including guidance related to when an entity should recognize revenue gross as a principal or net as an agent and how an entity should identify performance obligations.

The Company adopted ASU 2014-09 in the first quarter of fiscal 2019 using the full retrospective method and restated prior periods.

As a result of the adoption of ASU 2014-09 the Company changed its accounting policy for revenue recognition.

See Note 2a, Principles of Consolidation, and Note 2n, Revenue Recognition, in these Notes to Consolidated Financial Statements for details of the impact of ASU 2014-09 on the Company's financial statements.

The grant-date fair value of restricted stock units with a service condition and restricted stock units with both service and performance conditions are calculated using the value of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting.

For restricted stock units with both service and performance conditions, this grant-date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability of achievement of that performance condition.

If the Company determines that an award is unlikely to vest, any previously recorded stock-based compensation expense is reversed in the period of that determination.

The grant date fair value of restricted stock units with both service and market conditions is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the performance condition stipulated in the award grant, including the possibility that the market condition may not be satisfied.

See Note 3, Stock-Based Compensation and Shareholders' Equity , of the Notes to Consolidated Financial Statements for additional information relating to stock-based compensation.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) (ASU 2016-16).

ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.

ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

The Company adopted ASU 2016-16 in the first quarter of fiscal 2019 using the modified retrospective method with a cumulative-effect adjustment directly to retained earnings.

The adoption of ASU 2016-16 resulted in a net cumulative-effect adjustment that resulted in an increase in retained earnings of $ 331.0 million, by recording new deferred tax assets from intra-entity transfers involving assets other than inventory, partially offset by a U.S.

deferred tax liability related to GILTI.

Adoption of the standard resulted in an increase in long-term deferred tax assets of $ 1.7 billion and an increase in long-term deferred tax liabilities of $ 1.3 billion.

The following standards were adopted during the first quarter of fiscal 2019 and did not have a material impact on the Company's financial position and results of operations:

• ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

• ASU 2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments.

• ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business.

• ASU 2017-07, Improving the Presentation of Net Period Pension Cost and Net Period Postretirement Benefit Cost.

• ASU 2017-09, Compensation-Stock Compensation (Topic 718):

Scope of Modification Accounting.

Standards to Be Implemented

Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02).

ASU 2018-02 allows for reclassification of stranded tax effects resulting from the Tax Legislation from AOCI to retained earnings.

ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

ASU 2018-02 is effective for the Company in the first quarter of the fiscal year ending October 31, 2020 (fiscal 2020).

The Company is currently evaluating the adoption date and the impact, if any, adoption will have on its financial position and results of operations.

New Accounting Pronouncements

Standards Implemented During Current Fiscal Year

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.

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 historical 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.

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ASU 2016-02, ASU 2018-01 and ASU 2018-11 are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

ASU 2016-02 and ASU 2018-01 are effective for the Company in the first quarter of fiscal 2020.

The Company is nearing completion in assessing all potential aspects of the standard on its Consolidated Financial Statements and related disclosures and expects that there will be an increase in assets and liabilities on the consolidated balance sheets at adoption due to the recognition of right-of-use assets and related lease liabilities, which the Company expects to be recorded using an incremental borrowing rate.

The Company plans to adopt the standard using the transition method provided by ASC 2018-11, in which prior periods will not be adjusted, and also plans to apply the package of practical expedients permitted under the transition guidance to its lease portfolio.

At November 2, 2019, the Company was contractually obligated to make future payments of approximately $ 0.4 billion under its operating lease obligations in existence as of that date, primarily related to long-term facility leases.

The Company does not expect the adoption of ASU 2016-02, ASU 2018-01 and ASU 2018-11 to have a material impact on its results of operations.

See Note 9, Lease

The Company adopted the standard in the first quarter of fiscal 2020 under the modified retrospective approach.

As allowed by the new standard, the Company elected the package of transition practical expedients but elected to not apply the hindsight practical expedient to its leases at transition.

As a result, the Company was not required to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the classification of any expired or existing leases and (iii) the treatment of initial direct costs for any existing leases.

The Company also elected not to separate lease and non-lease components for its leases.

Instead, for all applicable classes of underlying assets, the Company accounts for each separate lease component and the non-lease components associated with that lease component, as a single lease component.

Additionally, the Company has elected the short-term lease exception for all classes of assets, does not apply the recognition requirements for leases of twelve months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable.

These elections are applied consistently for all leases.

Upon adoption on November 3, 2019, the Company recorded operating lease liabilities of $ 301.4 million and operating lease assets for its leases of $ 233.2 million.

The operating lease assets are net of liabilities of $ 68.2 million for deferred rent and unamortized landlord construction allowances that were previously recorded in Accrued liabilities and Other non-current liabilities in the Consolidated Balance Sheets.

Operating lease right-of-use assets are presented within Other assets and corresponding liabilities are presented within Accrued liabilities and Other non-current liabilities in the Consolidated Balance Sheets.

There was no material impact to the Consolidated Statements of Income or Consolidated Statements of Cash Flows.

Please refer to Note 9 , Leases , of the Notes to Consolidated Financial Statements for information regarding the Company's lease portfolio as of October 31, 2020.

Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02).

ASU 2018-02 allows stranded tax effects resulting from changes to tax legislation to be reclassified from AOCI to retained earnings.

The Company adopted this ASU during the first quarter of fiscal 2020 and therefore applied the ASU in the period of adoption using the specific identification approach.

As a result, the Company reclassified approximately $ 2.4 million from AOCI into retained earnings.

The Company does not expect to record any additional reclassification adjustments in subsequent periods barring further regulatory changes.

Please refer to Note 12, Income Taxes, of the Notes to Consolidated Financial Statements for additional information regarding the Company's accounting policy for releasing stranded income tax effects from AOCI.

The following standards were adopted during the first quarter of fiscal 2020 and did not have an impact on the Company's financial position and results of operations:

• ASU 2017-11, Earnings Per Share (Topic 860), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815):

Accounting for Certain Financial Instruments with Down Round Features II.

Replacement of the Indefinite Deferral Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception;

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments, in these Notes to Consolidated Financial Statements for information regarding our leases under Accounting Standard Codification Topic 840, Leases.

• ASU 2018-07, Compensation - Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting.

Standards to Be Implemented

Retirement Benefits

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ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted.

ASU 2018-14 is effective for the Company in the first quarter of the fiscal year ending October 30, 2021 (fiscal 2021).

The Company is currently evaluating the adoption date.

ASU 2018-14 is effective for the Company in the first quarter of fiscal 2021.

The adoption of ASU 2018-14 will modify the Company's disclosures for defined benefit plans and other post-retirement plans but is not expected to impact its financial position or results of operations.

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ASU 2016-13 and ASU 2019-05 are effective for the Company in the first quarter of fiscal 2021.

The Company is currently evaluating the adoption date and the impact, if any, adoption will have on its financial position and results of operations.

The Company does not expect this update to have a material impact on its financial position and results of operations.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

ASU 2019-12 is effective for the Company in the first quarter of fiscal 2021.

The Company does not expect this update to have a material impact on its financial position and results of operations.

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 Amended and Restated 2006 Stock Incentive Plan (2006 Plan).

This plan was originally approved by shareholders on March 14, 2006, and shareholders subsequently approved the amended and restated 2006 Plan in March 2014.

The 2006 Plan provides for the grant of up to 34 million shares of the Company’s common stock, plus such number of additional shares that were subject to outstanding options under the Company’s previous equity compensation plans that have not been issued because the applicable option award subsequently terminates or expires without being exercised.

The Company grants, or has granted, stock options and other stock and stock-based awards under the Company's 2020 Equity Incentive Plan (2020 Plan), which was approved by shareholders in March 2020.

The 2020 Plan provides for the grant of up to 21.2 million shares of the Company’s common stock, which includes shares under the Company’s previous equity compensation plans, including the Amended and Restated 2006 Stock Incentive Plan, the Linear Technology Corporation Amended and Restated 2005 Equity Incentive Plan and the Amended and Restated 2010 Equity Incentive Plan.

The 2020 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.

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No award may be made under the 2020 Plan after March 11, 2030, but awards previously granted may extend beyond that date.

The Company will not grant further equity awards under any previous equity compensation plans.

In connection with the Acquisition, the Company assumed the Linear Technology Corporation Amended and Restated 2005 Equity Incentive Plan (the 2005 Plan) and the Linear Technology Corporation Amended and Restated 2010 Equity Incentive Plan (now referred to as the Analog Devices, Inc.

Amended and Restated 2010 Equity Incentive Plan) (the 2010 Plan).

The Company will not grant further equity awards under the 2005 Plan but may grant stock options and other stock and stock-based awards under the 2010 Plan.

While the Company may grant options to employees that become exercisable at different times or within different periods, the Company generally grants to employees options that vest over four years and become exercisable in annual installments of 25 % on each of the first, second, third and fourth anniversaries of the date of grant.

For grants issued prior to fiscal 2018 the options granted to employees generally vested over five years and became exercisable in annual installments of 20 % on each of the first, second, third, fourth and fifth anniversaries of the date of grant.

The maximum contractual term of all options is ten years .

In addition, the Company grants to employees restricted stock units that generally vest over four years in annual installments of 25 % on each of the first, second, third and fourth anniversaries of the date of grant.

For grants issued prior to fiscal 2018 restricted stock units generally vested in one installment on the third anniversary of the date of grant.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of November 2, 2019, a total of 10.2 million and 1.4 million common shares were available for future grant under the 2006 Plan and 2010 Plan, respectively, and 21.2 million common shares were reserved for issuance under the 2006 Plan, 2010 Plan and the Company's previous equity compensation plans.

Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of stock options.

Linear Replacement Awards

In connection with the Acquisition, the Company issued equity awards, consisting of restricted stock awards and restricted stock units (replacement awards), to certain Linear employees in replacement of Linear equity awards.

The replacement awards consisted of restricted stock awards and restricted stock units for approximately 2.8 million shares of the Company's common stock with a weighted average grant date fair value of $ 82.20 .

The terms and intrinsic value of these replacement awards are substantially the same as the converted Linear awards.

The fair value of the replacement awards associated with services rendered through the Acquisition Date was recognized as a component of the total acquisition consideration, and the remaining fair value of the replacement awards associated with post-Acquisition services will be recognized as an expense on a straight-line basis over the remaining vesting period.

The Company does not intend to grant further equity awards under any previous equity compensation plans.

As of October 31, 2020, a total of 19.6 million common shares were available for future grant under the 2020 Plan.

Modification of Awards

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The modifications made to the Company’s equity awards in fiscal 2020, fiscal 2019 and fiscal 2018 did not result in significant incremental compensation costs, either individually or in the aggregate.

Grant-Date Fair Value

The Company uses the Black-Scholes valuation model to calculate the grant-date fair value of stock option awards.

The use of valuation models requires the Company to make estimates and assumptions, such as expected volatility, expected term, risk-free interest rate, expected dividend yield and forfeiture rates.

The grant-date fair value of restricted stock units with a service condition represents 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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Grant-Date Fair Value of Stock Options

Information pertaining to the Company’s stock option awards and the related estimated weighted-average assumptions to calculate the fair value of stock options using the Black-Scholes valuation model granted in fiscal 2020, fiscal 2019 and fiscal 2018 is as follows:

Stock Options 2019 2018 2017

2020 2019 2018

Options granted (in thousands) 359 454 603

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and (4) the remaining maturities of the traded options used to estimate volatility are at least one year .

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Expected term — The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation.

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Cash dividends are not paid on options, restricted stock or restricted stock units.

In connection with the Acquisition, the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees.

In connection with the acquisition of Linear in fiscal 2017, the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees.

These restricted stock awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant.

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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, 2019.

This analysis will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary.

Based on an analysis of its historical forfeitures, the Company has applied an annual forfeiture rate of 5.0 % to all unvested stock-based awards as of October 31, 2020.

This analysis will be re-evaluated annually and the forfeiture rate will be adjusted as necessary.

Ultimately, the actual expense recognized over the vesting period will only be for those awards that vest.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total stock-based compensation expense recognized is as follows:

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Total stock-based compensation expense $ 149,518 $ 150,300 $ 151,165

As of November 2, 2019 and November 3, 2018, the Company capitalized $ 6.8 million and $ 7.1 million, respectively, of stock-based compensation in inventory.

Additional paid-in-capital (APIC) Pool

The Company adopted ASU 2016-09 during fiscal 2018.

ASU 2016-09 eliminated the APIC pool and requires that excess tax benefits and tax deficiencies be recorded in the income statement when awards are settled.

As a result of this adoption the Company recorded total excess tax benefits of $ 28.7 million and $ 26.2 million in fiscal 2019 and fiscal 2018, respectively, from its stock-based compensation payments within income tax expense in its consolidated statements of income.

For fiscal 2017, the APIC pool represented the excess tax benefits related to stock-based compensation that were available to absorb future tax deficiencies.

If the amount of future tax deficiencies was greater than the available APIC pool, the Company recorded the excess as income tax expense in its consolidated statements of income.

For fiscal 2017, the Company had a sufficient APIC pool to cover any tax deficiencies recorded and as a result, these deficiencies did not affect its results of operations.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of October 31, 2020 and November 2, 2019, the Company capitalized $ 5.8 million and $ 6.8 million, respectively, of stock-based compensation in inventory.

Stock-Based Compensation Activity

A summary of the activity under the Company’s stock option plans as of November 2, 2019 and changes during the fiscal year then ended is presented below:

A summary of the activity under the Company’s stock option plans as of October 31, 2020 and changes during the fiscal year then ended is presented below:

(in thousands) Weighted-

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Options forfeited ( 129 ) $ 82.70

Options expired ( 6 ) $ 21.97

Options outstanding at November 2, 2019

Options outstanding at October 31, 2020

4,192 $ 70.73 5.8 $ 200,398

Options exercisable at November 2, 2019

Options exercisable at October 31, 2020

2,677 $ 61.23 4.7 $ 153,408

Options vested or expected to vest at November 2, 2019 (1)

Options vested or expected to vest at October 31, 2020 (1)

4,109 $ 70.29 5.7 $ 198,237

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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 2019, fiscal 2018 and fiscal 2017 was $ 132.3 million, $ 123.8 million and $ 144.6 million, respectively, and the total amount of proceeds received by the Company from exercise of these options during fiscal 2019, fiscal 2018 and fiscal 2017 was $ 116.5 million, $ 99.0 million and $ 133.3 million, respectively.

A summary of the Company’s restricted stock unit award activity as of November 2, 2019 and changes during the fiscal year then ended is presented below:

A summary of the Company’s restricted stock unit award activity as of October 31, 2020 and changes during the fiscal year then ended is presented below:

Stock Units/Awards

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Forfeited ( 296 ) $ 89.45

Restricted stock units/awards outstanding at November 2, 2019

Restricted stock units/awards outstanding at October 31, 2020

3,637 $ 91.54

As of November 2, 2019, there was $ 318.3 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options and restricted stock units.

As of October 31, 2020, there was $ 280.9 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options and restricted stock units.

That cost is expected to be recognized over a weighted-average period of 1.3 years.

The total grant-date fair value of shares that vested during fiscal 2019, fiscal 2018 and fiscal 2017 was approximately $ 150.6 million, $ 136.1 million and $ 114.8 million, respectively.

The total grant-date fair value of awards that vested during fiscal 2020, fiscal 2019 and fiscal 2018 was approximately $ 174.1 million, $ 150.6 million and $ 136.1 million, respectively.

Common Stock Repurchases

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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.

In connection with the Acquisition, the Company temporarily suspended the share repurchase program.

On August 21, 2018, the Company reinstated the share repurchase program and, as of November 2, 2019, the Company had repurchased a total of approximately 154.4 million shares of its common stock for approximately $ 6.1 billion under this program.

An additional $ 2.1 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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized under the program.

As of October 31, 2020, the Company had repurchased a total of approximately 156.1 million shares of its common stock for approximately $ 6.3 billion under this program.

An additional $ 1.9 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.

In March 2020, the Company temporarily suspended the share repurchase program as a result of the global macroeconomic environment.

That suspension continued through the fourth quarter of fiscal 2020 given the planned acquisition of Maxim (see Note 6, Acquisitions, of the Notes to Consolidated Financial Statements).

The Company reinstated the common stock repurchase program effective November 2020 (fiscal 2021).

Future repurchases of common stock will be dependent upon the Company's financial position, results of operations, outlook, liquidity, and other factors deemed relevant by the Company.

The Company also, from time to time, repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options.

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Any future common stock repurchases will be dependent upon several factors, including the Company's financial performance, outlook, liquidity and the amount of cash the Company has available in the United States.

Analog Devices Foundation

During the first quarter of fiscal 2020, the Company contributed 335,654 shares of its common stock to the Analog Devices Foundation.

As of the date of the charitable contribution, the shares had a fair value of approximately $ 40.0 million.

This expense was recorded in Selling, marketing, general and administrative expense in the Consolidated Statement of Income.

Preferred Stock

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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.

As data systems for capturing and tracking this data and the Company's methodology evolves and improves, the categorization of

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

2020 2019 2018 (1)

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(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

(2) The sum of the individual percentages may not equal the total due to rounding.

Revenue by Sales Channel

The following tables summarize revenue by 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.

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Other customers include the U.S.

government, government prime contractors and some commercial customers.

government, government prime contractors and certain commercial customers for which revenue is recorded over time.

2020 2019 2018 (1)

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(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

(2) The sum of the individual percentages may not equal the total due to rounding.

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_______________________________________

(1) Balances for fiscal 2018 and fiscal 2017 have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

(2) As further discussed in Note 5, Special Charges , of the Notes to Consolidated Financial Statements the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines and also to its outsourced assembly and test partners.

As discussed in Note 2e, Property, Plant and Equipment , of the Notes to Consolidated Financial Statements, management has entered into an agreement to sell the facility and transfer the related land lease in Singapore in May 2021 and has classified $ 22.2 million as assets held for sale as of October 31, 2020.

Special Charges

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 restructuring actions over the past several years.

These actions are described below.

The following table displays a roll-forward from October 29, 2016 to November 2, 2019 of the employee separation and exit cost accruals established related to these actions.

Accrued Restructuring Closure of Manufacturing Facilities Reduction of

Costs Action Early Retirement Action Repositioning Action

Balance at October 29, 2016 $ — $ 12,374 $ — $ —

Fiscal 2017 special charges — 8,126 41,337 —

Severance payments — ( 15,764 ) ( 9,126 ) —

Effect of foreign currency on accrual — 401 — —

As a result of these assessments, the Company has undertaken various actions resulting in special charges over the past several years.

The following table displays a roll-forward from October 28, 2017 to October 31, 2020 of the employee separation and exit cost accruals established related to these actions along with related commentary.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accrued Special Charges Closure of Manufacturing Facilities Repositioning Action Other Actions

Balance at October 28, 2017 $ — $ — $ 37,348

Fiscal 2018 special charges 44,452 16,866 — —

Severance payments — ( 16,785 ) ( 22,314 ) —

Fiscal 2018 special charges, net 44,452 — 16,866

Severance and other payments — — ( 39,099 )

Effect of foreign currency on accrual ( 1,478 ) — 37

Balance at November 3, 2018 $ 42,974 $ — $ 15,152

Fiscal 2019 special charges 7,556 — — 88,103

Severance payments — ( 4,320 ) ( 5,314 ) ( 12,487 )

Fiscal 2019 special charges, net 7,556 88,103 —

Severance and other payments — ( 12,487 ) ( 9,634 )

Non-cash impairment charge — ( 14,167 ) —

Non-cash accelerated stock based compensation — — — ( 2,538 )

Non-cash accelerated stock based compensation charges — ( 2,538 ) —

Effect of foreign currency on accrual ( 129 ) ( 16 ) 5

Balance at November 2, 2019 $ 50,401 $ 58,895 $ 5,523

Current - accrued liabilities $ — $ 940 $ 4,583 $ 58,895

Other non-current liabilities $ 50,401 $ — $ — $ —

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fiscal 2020 special charges, net 2,918 49,419 —

Severance and other payments ( 8,113 ) ( 85,957 ) ( 2,034 )

Non-cash impairment charge — — —

Non-cash accelerated stock based compensation charges — ( 1,630 ) —

Effect of foreign currency on accrual ( 30 ) 47 —

Balance at October 31, 2020 $ 45,176 $ 20,774 $ 3,489

Accrued liabilities $ 45,176 $ 20,774 $ 3,489

Closure of Manufacturing Facilities

The Company recorded special charges of $ 52.0 million on a cumulative basis through November 2, 2019 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear Technology Corporation (Linear).

Over the next one to three years , the Company plans to close its Hillview wafer fabrication facility located in Milpitas, California and its Singapore test facility.

The Company recorded special charges of $ 54.9 million on a cumulative basis through October 31, 2020 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear.

The Company plans to close its Hillview wafer fabrication facility located in Milpitas, California and its Singapore test facility in fiscal 2021.

The Company intends to transfer Hillview wafer fabrication production to its other internal facilities and to external foundries.

In addition, the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines, in addition to its outsourced assembly and test partners.

The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations and one-time termination benefits for approximately 1,100 manufacturing, engineering and SMG&A employees.

In addition, the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines, and also to its outsourced assembly and test partners.

The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations and one-time termination benefits for the impacted manufacturing, engineering and selling, marketing, general and administrative (SMG&A) employees and other exit costs.

These one-time termination benefits are being recognized over the future service period required for employees to earn these benefits.

Employees included in this action must continue to be employed by the Company until their employment is terminated by the Company in order to receive the severance benefits.

Reduction of Operating Costs Actions

During fiscal 2018, the Company recorded special charges of approximately $ 16.9 million for severance and fringe benefit costs in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations for 126 manufacturing, engineering and SMG&A employees.

During fiscal 2017, the Company recorded special charges of approximately $ 8.1 million for severance and fringe benefit costs in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations for 177 manufacturing, engineering and SMG&A employees.

The Company terminated the employment of all employees associated with this action.

Early Retirement Action

During fiscal 2017, the Company initiated an early retirement action.

This resulted in a special charge of approximately $ 41.3 million for severance, related benefits and other costs in accordance with this program for 225 manufacturing, engineering and SMG&A employees.

The Company terminated the employment of all employees associated with this action.

Repositioning Action

During fiscal 2019, the Company recorded special charges of $ 88.1 million, as a result of organizational initiatives to reposition the Company's global workforce skill set to align with the Company's long-term strategic plan.

Approximately $ 73.9 million of the total charges were for severance and fringe benefit costs in accordance with either the Company's ongoing benefit plan or statutory requirements for 464 manufacturing, engineering and selling, marketing, general and administrative (SMG&A) employees.

As of November 2, 2019, the Company still employed 307 of the 464 employees included in this action.

These employees must continue to be employed by the Company until their employment is involuntarily terminated in order to receive the severance benefits.

The remaining $ 14.2 million of the charges related to the write-off of acquired intellectual property due to the Company's decision to discontinue certain product development strategies.

Repositioning Actions

The Company recorded special charges of $ 137.5 million on a cumulative basis through October 31, 2020 as a result of organizational initiatives to better align its global workforce with its long-term strategic plan.

Approximately $ 123.3 million of the total charges was for severance and fringe benefit costs in accordance with either the Company's ongoing benefit plan or statutory requirements for the impacted manufacturing, engineering and SMG&A employees.

The remaining $ 14.2 million of the charges were recorded in fiscal 2019 and related to the write-off of acquired intellectual property due to the Company's decision to discontinue certain product development strategies.

Other Actions

During fiscal 2018, the Company recorded special charges of approximately $ 16.9 million for severance and fringe benefit costs in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations as part of an action to reduce certain operating costs.

Linear Technology Corporation

On the Acquisition Date, the Company completed its acquisition of all of the voting interests of Linear, an independent manufacturer of high performance analog integrated circuits.

Under the terms of the agreement pursuant to which the Company acquired Linear (Merger Agreement), Linear stockholders received, for each outstanding share of Linear common stock, $ 46.00 in cash and 0.2321 of a share of the Company's common stock at the closing.

The Company believes the combination creates the premier analog technology company with the industry’s most comprehensive suite of high-performance analog offerings.

The results of operations of Linear from the Acquisition Date are included in the Company’s consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and shareholders’ equity for fiscal 2017.

The amount of revenue attributable to Linear included in the Company's consolidated statements of income for fiscal 2017 was $ 913.2 million.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Acquisition Date fair value of the consideration transferred in the Acquisition consisted of the following:

Cash consideration (1) $ 11,092,047

Issuance of common stock (2) 4,593,655

Fair value of replacement stock-based and cash awards (3) 70,954

Total estimated purchase consideration $ 15,756,656

_______________________________________

(1) The cash consideration was funded utilizing cash on hand, the net proceeds from bridge credit and term loan facilities and the proceeds received from the Company's issuance of the Notes (as defined in Note 14, Debt, of these Notes to Consolidated Financial Statements).

This reflects the cash portion of the purchase consideration paid to Linear stockholders of approximately $ 11.1 billion, as well as $ 16.3 million for the cash-settled portion of consideration paid to holders of restricted stock and restricted stock awards that automatically vested at the effective time of the Acquisition pursuant to pre-existing change-of-control agreements.

(2) The fair value is based on the issuance of approximately 55.9 million shares of the Company's common stock with a per-share value of $ 82.20 (the closing price of the Company's common stock on The Nasdaq Global Select Market on the acquisition Date).

(3) In connection with the Acquisition, the Company issued equity and cash awards to certain Linear employees to replace Linear equity awards.

This amount represents the portion of the fair value of the replacement equity and cash awards associated with services rendered though the Acquisition Date and have been included as a component of the total estimated purchase consideration.

During fiscal 2018, the Company completed the acquisition accounting for the Acquisition.

The following is a summary of the amounts recognized in accounting for the Acquisition:

Cash and cash equivalents $ 1,466,445

Marketable securities 100,246

Accounts receivable (1) 143,542

Inventories 461,695

Prepaid expenses and other assets 14,782

Property, plant and equipment 462,285

Intangible assets (Note 2f) 5,157,300

Goodwill (Note 2f) 10,533,919

Total assets 18,340,214

Assumed liabilities 190,925

Deferred tax liabilities 2,392,633

Total estimated purchase consideration $ 15,756,656

_______________________________________

(1) The fair value of accounts receivable was $ 143.5 million, with the gross contractual amount being $ 145.2 million, of which the Company estimates that $ 1.7 million is uncollectible.

The acquired intangible assets consisted of the following, which are being amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use.

Fair Value Weighted Average Useful Lives

Technology-based $ 1,046,100 8

Trade name 72,200 7

Customer relationships 4,039,000 12

Total amortizable intangible assets $ 5,157,300 11

The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and Linear's assembled workforce.

Future technologies did not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business.

There were no significant contingent obligations assumed as part of the Acquisition.

The Company recognized $ 47.5 million of transaction-related costs, including legal, accounting and other related fees that were expensed in fiscal 2017.

These costs are included in the consolidated statements of income within SMG&A expenses.

On March 10, 2017 (Acquisition Date), the Company completed its acquisition of all of the voting interests of Linear, an independent manufacturer of high performance analog integrated circuits.

Under the terms of the agreement pursuant to which the Company acquired Linear, Linear stockholders received, for each outstanding share of Linear common stock, $ 46.00 in

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following unaudited pro forma consolidated financial information combines the unaudited results of the Company for the year ended October 28, 2017 and the unaudited results of Linear for the year ended October 28, 2017 and assumes that the Acquisition, which closed on March 10, 2017, was completed on November 1, 2015 (the first day of fiscal 2016).

The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, transaction-related costs, a step-up in the value of acquired inventory and property, plant and equipment, compensation expense for ongoing stock-based compensation arrangements replaced and interest expense for the debt incurred to fund the Acquisition, together with the consequential tax effects.

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on November 1, 2015.

In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition.

Pro Forma Twelve Months Ended

October 28, 2017 (1)

Revenue $ 5,832,412

Net income $ 1,133,097

Basic net income per common share $ 3.07

Diluted net income per common share $ 3.03

_______________________________________

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

cash and 0.2321 of a share of the Company's common stock at the closing.

The results of operations of Linear from the Acquisition Date are included in the Company’s Consolidated Financial Statements for fiscal 2017.

The Company completed the acquisition accounting for Linear in fiscal 2018.

Proposed Acquisition of Maxim Integrated Products, Inc.

On July 12, 2020, the Company entered into the Merger Agreement to acquire 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 the Company’s common stock at the closing.

The estimated merger consideration is approximately $ 23.0 billion based on the closing price of the Company's common stock on November 20, 2020.

The value of the merger consideration will fluctuate based upon changes in the price of the Company's common stock and the number of shares of Maxim common stock, restricted stock awards and restricted stock unit awards outstanding on the closing date.

The transaction is subject to customary closing conditions, including receipt of certain non-U.S.

regulatory approvals.

The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired.

The Merger Agreement includes termination rights for both the Company and Maxim.

The Company may be required to pay Maxim a regulatory termination fee of $ 830.0 million in cash if the Merger Agreement is terminated in certain circumstances involving the failure to obtain the required regulatory approvals.

On October 8, 2020, the required shareholder approvals relating to the Merger Agreement were obtained from both the Company’s shareholders and Maxim’s stockholders.

In fiscal 2020, the Company incurred $ 20.1 million of transaction-related costs related to the anticipated acquisition of Maxim recorded within Selling, marketing, general and administrative expenses in the Company's Consolidated Statements of Income.

Other Acquisitions

The Company has not provided pro forma results of operations for any other acquisitions completed in fiscal 2019, fiscal 2018 or fiscal 2017 herein as they were not material to the Company on either an individual or an aggregate basis.

The Company included the results of operations of each acquisition in its consolidated statements of income from the date of each acquisition.

The Company has not provided pro forma results of operations for any acquisitions completed in fiscal 2020, fiscal 2019 or fiscal 2018 herein as they were not material to the Company on either an individual or an aggregate basis.

The Company included the results of operations of each acquisition in its Consolidated Statements of Income from the closing date of each acquisition.

Other Investments

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Investments are accounted for using the equity method of accounting or cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Realized gains and losses are reflected in nonoperating (income) expense based upon the Company's ownership share of the investee's financial results.

For equity method investments, realized gains and losses are reflected in nonoperating (income) expense based upon the Company's ownership share of the investee's financial results.

The Company recognized other-than-temporary impairments of $ 0.5 million and $ 6.6 million in fiscal 2020 and fiscal 2019, respectively.

These charges were recorded in the Consolidated Statements of Income in Other, net, within Non-operating (income) expense.

There were no other-than-temporary impairments recognized in fiscal 2018.

There were no material net realized or unrealized gains or losses from other investments during fiscal 2019, fiscal 2018 and fiscal 2017.

Accrued Liabilities

Accrued liabilities at November 2, 2019 and November 3, 2018 consisted of the following:

2019 2018 (1)

Accrued liabilities at October 31, 2020 and November 2, 2019 consisted of the following:

Distributor price adjustments and other revenue reserves $ 257,343 $ 227,020

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Accrued interest 56,083 61,255

Accrued restructuring 64,418 15,152

Accrued special charges 69,439 64,418

Other 154,507 135,854

Total accrued liabilities $ 955,633 $ 795,816

_______________________________________

(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Lease Commitments

The Company leases certain land, facilities, equipment and software under various operating leases that expire at various dates through 2057 .

The lease agreements frequently include renewal and escalation clauses and require the Company to pay taxes, insurance and maintenance costs.

Total rental expense under operating leases was approximately $ 92.3 million in fiscal 2019, $ 84.9 million in fiscal 2018 and $ 58.8 million in fiscal 2017.

The following is a schedule of future minimum rental payments required under long-term operating leases at November 2, 2019:

Fiscal Years Leases

In the first quarter of fiscal 2020, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02) using the modified retrospective approach.

Results for fiscal 2020 are presented under ASU 2016-02, while prior period Consolidated Financial Statements have not been adjusted and continue to be presented under the accounting standard in effect at that time.

See Note 2s, New Accounting Pronouncements, of the Notes to Consolidated Financial Statements for further detail on the adoption of this standard, including the initial adoption values.

The Company enters into operating leases which primarily relate to certain facilities.

The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement.

Lease assets represent the Company's right to use underlying assets for the lease term, and lease liabilities represent the obligation to make lease payments over the lease term.

At lease commencement, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term.

The interest rate implicit in lease contracts is typically not readily determinable.

As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.

The Company has agreements with lease and non-lease components, which are accounted for as a single lease component.

Non-lease components may include real estate taxes, insurance, maintenance, parking and other operating costs.

If these costs are variable costs they are not included in the measurement of the right-of-use assets and lease liabilities, but are expensed when the event determining the amount of variable consideration to be paid occurs.

The Company’s leases have remaining lease terms of less than one year to approximately twenty-five years , some of which may include options to extend the initial term of the lease.

These options are included in determining the initial lease term at lease commencement only if the Company is reasonably certain to exercise the option.

Lease costs are recognized on a straight-line basis as lease expense over the lease term.

For leases with terms of twelve months or less the Company recognizes the related lease payments as expense either on a straight-line basis over the lease term or as incurred depending on whether the lease payments are fixed or variable.

The following table presents supplemental balance sheet information related to the Company's operating leases:

October 31, 2020

Operating lease right-of-use assets in Other assets

Operating lease liabilities in Accrued liabilities

Operating lease liabilities in Other non-current liabilities

Details of the Company's operating leases are as follows:

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

October 31, 2020

Lease expense $ 45,892

Cash paid for amounts included in the measurement of operating lease liabilities

Operating cash flows from operating leases $ 47,243

Lease assets obtained in exchange for new lease liabilities $ 54,392

Weighted average remaining lease term 9.2 years

Weighted average discount rate 3.1 %

The following table presents the maturities of the Company's operating lease liabilities as of October 31, 2020:

Fiscal year Operating Leases

2021 $ 49,526

Later Years 190,171

Total $ 448,721

Thereafter 173,709

Total future minimum operating lease payments 380,843

imputed interest ( 52,428 )

Present value of operating lease liabilities $ 328,415

Commitments and Contingencies

From time to time, in the ordinary course of the Company’s business, various claims, charges and litigation are asserted or commenced against the Company arising from, or related to, among other things, contractual matters, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits.

From time to time, in the ordinary course of the Company’s business, various claims, charges and litigation are asserted or commenced against the Company arising from, or related to, among other things, contractual matters, acquisitions, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits.

As to such claims and litigation, the Company can give no assurance that it will prevail.

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employees was $ 48.7 million in fiscal 2020, $ 47.7 million in fiscal 2019 and $ 41.4 million in fiscal 2018.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Non-Qualified Deferred Compensation Plan

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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 presented separately as deferred compensation plan 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, for further information on these investments.

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 presented separately as deferred compensation plan liability, with the current portion of the obligation in accrued liabilities in the consolidated balance sheets.

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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Defined Benefit Pension Plans

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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, 2019 for fiscal 2019 and November 3, 2018 for fiscal 2018.

The Company has elected to measure defined benefit plan assets and obligations as of October 31, which is the month-end that is closest to its fiscal year-ends, which were October 31, 2020 for fiscal 2020 and November 2, 2019 for fiscal 2019.

Components of Net Periodic Benefit Cost

Net annual periodic pension cost of non-U.S.

Net annual periodic benefit cost of non-U.S.

plans for fiscal 2020, fiscal 2019 and fiscal 2018 is presented in the following table:

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Recognized actuarial loss 2,583 1,000 1,621

Net periodic pension cost $ 5,381 $ 7,948 $ 8,053

Subtotal $ 9,791 $ 5,381 $ 7,948

Curtailment impact ( 203 ) — —

Net periodic benefit cost $ 9,588 $ 5,381 $ 7,948

The service cost component of net periodic benefit cost above is recorded in Cost of sales, Research and development, Selling, marketing, general and administrative expenses within the Consolidated Statements of Income, while the remaining components are recorded to Other, net.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company adopted ASU 2017-07 the first quarter of fiscal 2019.

The service cost component of net periodic benefit cost above is recorded in Cost of sales, Research and development, Selling, marketing, general and administrate expenses within the consolidated statements of income, while the remaining components are recorded to Other, net.

The prior year amounts have been reclassified to provide comparable presentation in line with the guidance in ASU 2017-07 based on amounts previously disclosed for the various components of net periodic pension cost.

Benefit Obligations and Plan Assets

Obligation and asset data of the Company’s non-U.S.

plans at November 2, 2019 and November 3, 2018 is presented in the following table:

plans at October 31, 2020 and November 2, 2019 is presented in the following table:

Change in Benefit Obligation

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Interest cost 3,917 4,079

Actuarial loss (gain) 38,210 ( 20,406 )

Curtailment ( 705 ) —

Actuarial loss 2,916 38,210

Benefits paid ( 2,661 ) ( 3,053 )

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Amounts Recognized in the Balance Sheet

Non-current assets $ — $ 6,569

Current liabilities $ ( 973 ) $ ( 846 )

1 unchanged sentence

Net amount recognized $ ( 79,230 ) $ ( 69,709 )

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reconciliation of Amounts Recognized in the Statement of Financial Position

6 unchanged sentences

Changes in plan assets and benefit obligations recognized in other comprehensive income (loss)

Net loss (gain) arising during the year $ 31,100 $ ( 13,220 )

Net loss arising during the year $ 6,342 $ 31,100

Effect of exchange rates on amounts included in AOCI 1,305 ( 18 )

Amounts recognized as a component of net periodic benefit cost

Amortization, settlement or curtailment recognition of net transition obligation — ( 10 )

Amortization or curtailment recognition of prior service credit (cost) — ( 1 )

Amortization or settlement recognition of net loss ( 2,583 ) ( 1,004 )

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Estimated amounts that will be amortized from AOCI over the next fiscal year

Prior service credit ( 2 ) ( 2 )

Net Loss $ ( 2,845 ) $ ( 2,583 )

Total $ ( 2,583 ) $ ( 1,017 )

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The accumulated benefit obligation for non-U.S.

pension plans was $ 138.1 million and $ 105.8 million at November 2, 2019 and November 3, 2018, respectively.

pension plans was $ 155.5 million and $ 138.1 million at October 31, 2020 and November 2, 2019, respectively.

Information relating to the Company’s non-U.S.

plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets at November 2, 2019 and November 3, 2018 is presented in the following table:

plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets at October 31, 2020 and November 2, 2019 is presented in the following table:

Plans with projected benefit obligations in excess of plan assets:

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Fair value of plan assets $ 69,250 $ 1,305

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The range of assumptions used for the non-U.S.

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Rate of increase in compensation levels 3.19 % 3.38 %

Net annual periodic pension cost was determined using the following weighted average assumptions:

Net annual periodic benefit cost was determined using the following weighted average assumptions:

Discount rate 2.45 % 3.53 %

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The Company’s investment strategy is based on an expectation that equity securities will outperform debt securities over the long term.

Accordingly, in order to maximize the return on assets, a majority of assets are invested in equities.

Accordingly, in order to maximize the return on assets, a majority of assets in fiscal 2020 were invested in equities.

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.

During fiscal 2020, one of the Company's plans began to implement a revised investment strategy that utilizes a greater range of asset classes to reduce risk associated with changes in long-term interest rates and inflation expectations.

The investment portfolio will make use of two key types of investments:

a) a range of instruments that provide a broad match to changes in liability values and provides protection against changes in interest rates and inflation;

and b) a diversified portfolio of return-seeking assets including equities, real assets, secure income assets and credit securities.

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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2019 and November 3, 2018 using the same three-level hierarchy described in Note 2j, Fair Value, of these Notes to Consolidated Financial Statements:

November 2, 2019 November 3, 2018

The following table presents plan assets measured at fair value on a recurring basis by investment categories as of October 31, 2020 and November 2, 2019 using the same three-level hierarchy described in Note 2j, Fair Value , of the Notes to Consolidated Financial Statements:

October 31, 2020 November 2, 2019

Fair Value Measurement at Reporting Date Using:

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Fixed income securities(2) — 24,636 24,636 — 48,274 48,274

Property (3) — 8,034 8,034 — — —

Investment Funds (4) — 21,960 21,960 — — —

Cash and cash equivalents 27,498 — 27,498 1,626 — 1,626

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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) The majority of the assets in this category are invested in funds primarily concentrated in non-U.S.

(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.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(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.

Estimated future cash flows

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2027 through 2031 $ 27,481

The Tax Cuts and Jobs Act of 2017 (Tax Legislation), enacted on December 22, 2017, contains significant changes to U.S.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Tax Cuts and Jobs Act of 2017 (Tax Legislation), enacted on December 22, 2017, contained significant changes to U.S.

tax law, including lowering the U.S.

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As a result, the Tax Legislation reduced the U.S.

statutory tax rate from 35.0% to 21.0%, effective January 1, 2018, which results in a blended statutory income tax rate for the Company of 23.4 % for fiscal 2018.

statutory tax rate from 35.0% to 21.0%, effective January 1, 2018, which resulted in a blended statutory income tax rate for the Company of 23.4 % for fiscal 2018.

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.

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Tax at statutory rate $ 275,439 $ 312,003 $ 387,343

312,003 $ 387,343 $ 327,161

Net foreign income subject to lower tax rate ( 225,937 ) ( 242,893 ) ( 420,756 )

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Amortization of purchased intangibles 101,906 111,547 213,198

Acquisition and integration costs — — 109,040

Taxes attributable to the Tax Cuts and Jobs Act of 2017 — ( 7,500 ) 56,608

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(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

See Note 2a, Principles of Consolidation, of the Notes to Consolidated Financial Statements.

Income before income taxes for fiscal 2020, fiscal 2019 and fiscal 2018 includes the following components:

2019 2018 (1) 2017 (1)

Income before income taxes (1) 2020 2019 2018 (2)

Domestic $ 355,442 $ 484,876 $ 615,238

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_______________________________________

(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

(1) Income before income taxes reflects deemed intercompany royalties in all periods presented.

(2) B alances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of the provision for income taxes for fiscal 2020, fiscal 2019 and fiscal 2018 are as follows:

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(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

See Note 2a, Principles of Consolidation , of the Notes to Consolidated Financial Statements.

In fiscal 2018, the Company recorded a $ 637.0 million tax benefit for the re-measurement of deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21.0 %.

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The Company carries other outside basis differences in its subsidiaries, primarily arising from purchase accounting adjustments and undistributed earnings that are considered indefinitely reinvested.

As of November 2, 2019, the Company has not recognized deferred income tax on $ 22.8 billion of outside basis differences because of its intent and ability to indefinitely reinvest these basis differences.

As of October 31, 2020, the Company has not recognized deferred income tax on $ 22.8 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.

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The significant components of the Company’s deferred tax assets and liabilities for fiscal 2020 and fiscal 2019 are as follows:

2019 2018 (1)

Deferred tax assets:

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Intra-entity transfer of intangible assets 1,479,944 1,567,536

Lease liability 55,250 —

Other 159,838 70,974

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Deferred GILTI tax liabilities ( 1,183,955 ) ( 1,254,029 )

Right of use asset ( 51,055 ) —

Acquisition-related intangible ( 971,327 ) ( 1,012,042 )

Other — ( 1,914 )

Total gross deferred tax liabilities ( 2,213,746 ) ( 2,304,535 )

Net deferred tax liabilities $ ( 416,531 ) $ ( 505,830 )

_______________________________________

(1) Balances have been restated to reflect the adoption of ASU 2014-09.

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

The valuation allowances of $ 116.3 million and $ 82.3 million at November 2, 2019 and November 3, 2018, respectively, are valuation allowances primarily for the Company’s state credit carryforwards.

The valuation allowances of $ 154.1 million and $ 116.3 million at October 31, 2020 and November 2, 2019, respectively, are valuation allowances primarily for the Company’s state 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 state credit carryover of $ 133.5 million will begin to expire in 2020.

As of November 2, 2019 and November 3, 2018, the Company had gross unrealized tax benefits of $ 34.3 million and $ 13.3 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded.

The state credit carryover of $ 151.7 million will begin to expire in 2021 while the foreign investment tax credit carryover of $ 11.8 million will begin to expire in fiscal 2025.

As of October 31, 2020 and November 2, 2019, the Company had gross unrealized tax benefits of $ 21.3 million and $ 34.3 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded.

Liabilities for uncertain tax benefits are classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities may not occur within the next twelve months.

As of November 2, 2019 and November 3, 2018, the Company had a liability of approximately $ 4.7 million and $ 3.5 million, respectively, for interest and penalties, which is included within the provision for taxes in the consolidated statements of income.

As of October 31, 2020 and November 2, 2019, the Company had a liability of approximately $ 3.4 million and $ 4.7 million, respectively, for interest and penalties, which is included within the provision for taxes in the Consolidated Statements of Income.

The Consolidated Statements of Income for fiscal year 2020, fiscal 2019 and fiscal 2018 include $ 1.0 million, $ 1.5 million and $ 7.3 million, respectively, of interest and penalties related to these uncertain tax positions.

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Additions for tax positions related to current year 1,334

Additions for tax positions related to acquisition 12,332

Reductions for tax positions related to prior years ( 295 )

Reductions due to lapse of applicable statute of limitations ( 25,640 )

Balance, October 28, 2017 $ 37,857

Additions for tax positions related to current year 1,334

Reductions for tax positions related to prior years ( 295 )

Reductions due to lapse of applicable statute of limitations ( 25,640 )

Balance, November 3, 2018 $ 13,256

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Balance, November 2, 2019 $ 34,343

In fiscal 2017 the Company released a reserve of $ 50.5 million, which was comprised of the $ 41.7 million in accrued tax and $ 8.8 million of accrued net interest due to favorable settlement with the U.S.

The settled issue pertained to Section 965 of the Internal Revenue Code related to the beneficial tax treatment of dividends paid from foreign owned companies under The American Jobs Creation Act.

Additions for tax positions related to current year 3,270

Reductions for tax positions related to prior years ( 16,152 )

Reductions due to lapse of applicable statute of limitations ( 170 )

Balance, October 31, 2020 $ 21,291

In fiscal 2018, the Company released reserves of $ 18.1 million relating to certain international transfer pricing matters, $ 4.2 million relating to worthless stock deductions and $ 3.3 million relating to other releases in fiscal year 2013 due to the lapse of the statute of limitations.

With accrued interest of $ 9.9 million, the released reserves totaled $ 35.5 million.

In fiscal 2019, the Company has reflected an unrealized tax benefit related to a refund claim of $ 11.4 million on a recently filed amended tax return that is currently being reviewed by the Joint Committee on Taxation.

In fiscal 2019, the Company has reflected an unrealized tax benefit related to a refund claim of $ 11.4 million on a recently filed amended tax return that was previously under review by the Joint Committee on Taxation.

In fiscal 2020, the Company released reserves of $ 18.6 million, which included accrued interest as a result of the resolution of the amended tax return that was previously under review by the Joint Committee on Taxation, combined with other tax positions resolved by the closing of the Internal Revenue Service audit of Linear’s pre-acquisition federal income tax returns for fiscal 2015 through fiscal 2017.

The Company has numerous audits ongoing at any time throughout the world including:

an Internal Revenue Service income tax audit for Linear’s pre-acquisition fiscal years 2015, 2016, and 2017;

state and local tax audits;

and international audits, including the transfer pricing audit in Ireland discussed below.

Except for the Linear pre-acquisition audit years, the Company’s U.S.

federal tax returns prior to fiscal year ended October 29, 2016 are no longer subject to examination.

an IRS income tax audit for fiscal 2019 and fiscal 2018, various U.S.

state and local tax audits and international audits, including the transfer pricing audit in Ireland discussed below.

The Company’s U.S.

federal tax returns prior to fiscal 2017 are no longer subject to examination.

The Company’s Ireland tax returns prior to fiscal year ended November 2, 2013 are no longer subject to examination.

During the fourth quarter of fiscal 2018, the Company’s Irish tax resident subsidiary received an assessment for fiscal 2013 of approximately € 43.0 million, or $ 48.0 million (as of November 2, 2019), from the Irish Revenue Commissioners (Irish Revenue).

During the fourth quarter of fiscal 2018, the Company’s Irish tax resident subsidiary received an assessment for fiscal 2013 of approximately € 43.0 million, or $ 50.2 million (as of October 31, 2020), from the Irish Revenue Commissioners (Irish Revenue).

This assessment excludes any penalties and interest.

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If Irish Revenue were ultimately to prevail with respect to its assessment for fiscal 2013, such assessment and any potential impact related to years subsequent to 2013 could have a material unfavorable impact on the Company's income tax expense and net earnings in future periods.

During the first quarter of fiscal 2019, Irish Revenue commenced transfer pricing audits of the fiscal years ended November 1, 2014;

October 31, 2015;

October 29, 2016;

and October 28, 2017.

During the fourth quarter of fiscal 2019, the Company received confirmation from Irish Revenue that the audit relating to the period ended November 1, 2014 was complete and that no further tax assessment arose in respect of that period.

The audits related to fiscal 2015, fiscal 2016 and fiscal 2017 are on-going.

During the first quarter of fiscal 2019, Irish Revenue commenced transfer pricing audits of the fiscal years ended November 1, 2014 (fiscal 2014);

the fiscal year ended October 31, 2015 (fiscal 2015);

the fiscal year ended October 29, 2016 (fiscal 2016);

and fiscal 2017.

During fiscal 2019, the Company received confirmation from Irish Revenue that the audit relating to fiscal 2014 was complete with no further tax amount due in respect of that period.

During fiscal 2020, the Company settled the audit relating to fiscal 2015 for an additional tax payment that was not material.

The audits relating to fiscal 2016 and fiscal 2017 are on-going.

The Company has a partial tax holiday in Malaysia whereby the local statutory rate is significantly reduced, if certain conditions are met.

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A partial tax holiday in Singapore was terminated in September 2018 through negotiations with the Economic Development Board.

The impact of the Singapore and

The impact of the Singapore and Malaysia tax holidays increased net income by approximately $ 4.6 million, $ 14.9 million and $ 27.7 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively, resulting in increases in basic and diluted net income per common share by $ 0.01 , $ 0.04 and $ 0.07 in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Malaysia tax holidays increased net income by approximately $ 14.9 million, $ 27.7 million and $ 27.4 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively, resulting in increases in basic and diluted net income per common share by $ 0.04 , $ 0.07 and $ 0.08 in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.

Revolving Credit Facility

On June 28, 2019, the Company entered into a second amended and restated revolving credit agreement with certain institutional lenders that expires on June 28, 2024.

The agreement for such revolving credit facility (Revolving Credit Agreement), which further amended and restated our amended and restated revolving credit agreement dated as of September 23, 2016, provides for a five year unsecured revolving credit facility in an aggregate principal amount of up to $ 1.25 billion.

As of November 2, 2019.

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.

The agreement for such revolving credit facility (Revolving Credit Agreement), which further amended and restated the Company's amended and restated revolving credit agreement dated as of September 23, 2016, provides for a five year unsecured revolving credit facility in an aggregate principal amount of up to $ 1.25 billion.

In March 2020, the Company borrowed $ 350.0 million under this revolving credit facility and utilized the proceeds for the repayment of existing indebtedness and working capital requirements.

The Company repaid the $ 350.0 million plus interest of $ 0.6 million in April 2020.

As of October 31, 2020, 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.

Loans under the Revolving Credit Agreement can be Eurocurrency Rate Loans or Base Rate Loans at the Company's option.

Each Eurocurrency Loan will bear interest at a rate per annum equal to the Eurocurrency Rate plus a margin based on the Company's debt ratings from time to time of between 0.690 % and 1.375 %.

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 0.375 %.

Each Base Rate Loan will bear interest at a rate per annum equal to the Base Rate plus a margin based on the Company's debt ratings from time to time of between 0.00 % and 0.375 %.

The Revolving Credit Agreement imposes restrictions on the Company’s ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness.

In addition, the Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) of not greater than 4.0 to 1.0.

The debt covenant will be reduced over time to 3.5 to 1.0, beginning in fiscal 2020 depending on facts and circumstances.

As of November 2, 2019, the Company was compliant with these covenants .

In addition, the Revolving Credit Agreement requires the Company to maintain a consolidated leverage ratio of total consolidated funded debt to consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) for a trailing twelve-month period of not greater than 3.5 to 1.0, assuming the Company does not undertake any significant acquisitions, mergers, and other fundamental changes.

Should such a change occur, it may be authorized to increase the covenant to 4.0 to 1.0.

As of October 31, 2020, the Company was compliant with these covenants .

On June 3, 2013, the Company issued $ 500.0 million aggregate principal amount of 2.875 % senior unsecured notes due June 1, 2023 (the 2023 Notes) with semi-annual fixed interest payments due on June 1 and December 1 of each year, commencing December 1, 2013 .

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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, 2019, the Company was compliant with these covenants .

As of October 31, 2020, the Company was compliant with these covenants .

The notes are subordinated to any future secured debt and to the other liabilities of the Company's subsidiaries.

6 unchanged sentences

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, 2019, the Company was compliant with these covenants .

As of October 31, 2020, the Company was compliant with these covenants .

The 2025 Notes and 2045 Notes are subordinated to any future secured debt and to the other liabilities of the Company's subsidiaries.

On July 26, 2016, the Company entered into a definitive agreement to acquire Linear (the Merger Agreement).

In connection with the Acquisition, the Company announced that it had obtained commitment financing in the form of a 364 -day senior unsecured bridge facility in an aggregate principal amount of up to $ 7.5 billion ( 364 -day Bridge Commitment) and a 90 -day senior unsecured bridge facility in an aggregate principal amount of up to $ 4.1 billion ( 90 -day Bridge Commitment).

As discussed below, as a result of entering into the term loan facility and the issuance of $ 2.1 billion senior unsecured notes, the 364 -day Bridge Commitment was terminated and $ 13.7 million and $ 7.2 million of unamortized bridge fees relating to the 364 -day Bridge Commitment were accelerated and amortized into interest expense in fiscal 2016 and first quarter of fiscal 2017, respectively.

Total fees incurred by the Company for the 364 -day Bridge Commitment were approximately $ 27.5 million.

On the Acquisition Date, the Company entered into a 90 -day Bridge Credit Agreement (the Bridge Credit Agreement).

The Bridge Credit Agreement provided for unsecured loans in an aggregate principal amount of up to $ 4.1 billion.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

quarter of fiscal 2017, the Company repaid all of the $ 4.1 billion of outstanding loans under the Bridge Credit Agreement.

Total fees incurred by the Company for the 90 -day Bridge Commitment and Bridge Credit Agreement were approximately $ 15.0 million.

On September 23, 2016, the Company entered into a term loan facility consisting of a 3 -year unsecured term loan facility in the principal amount of $ 2.5 billion and a 5 -year unsecured term loan facility in the principal amount of $ 2.5 billion established pursuant to a credit agreement (2016 Term Loan Agreement).

On the Acquisition Date, the Company borrowed under the 2016 Term Loan Agreement, consisting of a 3 -year unsecured term loan in the principal amount of $ 2.5 billion, due March 10, 2020 and a 5 -year unsecured term loan in the principal amount of $ 2.5 billion, due March 10, 2022.

The 5 -year term loan required repayment in quarterly installments on the last business day of each March, June, September and December with the first required payment due June 2017.

Prepayments of principal on the term loans could be made at any time without penalty.

The term loans bore interest at a rate per annum equal to the Eurodollar Rate plus a margin based on the Company’s debt ratings from time to time of between 0.75 % and 1.63 % in the case of the 3 -year term loan, and a margin of between 0.88 % and 1.75 % in the case of the 5 -year term loan.

As a result of entering into the 2016 Term Loan Agreement and drawing on the available borrowings, the Company incurred fees of approximately $ 11.5 million.

The Company recorded these costs as deferred financing costs and amortized them to expense pro-rata over the term of the instrument, accelerating proportionally with any prepayment.

During fiscal 2017, fiscal 2018 and fiscal 2019, the Company made various payments on both the 3 -year and 5 - year term loans.

During fiscal 2019, the Company repaid these 3 -year and 5 -year term loans in full.

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, and together with the 2021 Notes, the December 2023 Notes and the 2026 Notes, the Notes) with semi-annual fixed interest payments due on June 5 and December 5 of each year, commencing June 5, 2017 .

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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, 2019, the Company was compliant with these covenants.

The 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 issuance of the Notes replaced the remaining $ 2.5 billion of the 364 -day Bridge Commitment.

As of October 31, 2020, the Company was compliant with these covenants.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

rank without preference or priority among themselves and equally in right of payment with all other existing and future senior unsecured debt and senior in right of payment to all of the Company's future subordinated debt.

On March 12, 2018, in an underwritten public offering , the Company issued $ 300.0 million aggregate principal amount of 2.850 % senior unsecured notes due March 12, 2020 (the 2020 Notes) and $ 450.0 million aggregate principal amount of 2.950 % senior unsecured notes due January 12, 2021 (the January 2021 Notes and, together with the 2020 Notes, the 2018 Note Offerings).

Interest on the 2020 Notes is payable on March 12 and September 12 of each year, beginning on September 12, 2018.

Interest on the January 2021 Notes is payable on January 12 and July 12 of each year, beginning on July 12, 2018.

Interest on the 2020 Notes was payable on March 12 and September 12 of each year, beginning on September 12, 2018.

Interest on the January 2021 Notes was payable on January 12 and July 12 of each year, beginning on July 12, 2018.

The net proceeds of the offering were $ 743.8 million, after discount and issuance costs, which were used to repay a portion of the Company’s outstanding 5 -year term loan.

Debt discount and issuance costs will be amortized through interest expense over the term of the 2018 Note Offerings.

At any time prior to the applicable maturity date of the 2018 Note Offerings, the Company may, at its option, redeem some or all of the applicable series of the 2018 Note Offerings by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of redemption.

The 2018 Note Offerings are unsecured and rank equally in right of payment with all of the Company’s other unsecured senior indebtedness.

The 2018 Note Offerings were unsecured and ranked equally in right of payment with all of the Company’s other unsecured senior indebtedness.

The 2018 Note Offerings 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, 2019, the Company was in compliance with these covenants .

In fiscal 2020, the Company repaid $ 300.0 million of principal on the 2020 Notes and $ 450.0 million of principal on the January 2021 Notes.

These obligations have been paid in full and are no longer outstanding as of October 31, 2020.

On June 28, 2019, the Company entered into a term loan credit agreement (Term Loan Agreement) with the Company as the borrower and JPMorgan Chase Bank, N.A.

as administrative agent and the other banks identified therein as lenders, under which the Company borrowed unsecured term loans in the aggregate principal amount of $ 1.25 billion, maturing on March 10, 2022.

Loans under the term loan credit agreement bear interest, at the Company’s option, at either a rate equal to (a) the Adjusted LIBO Rate (as defined in the Term Loan Agreement) plus a margin based on the Company’s debt rating or (b) the Base Rate (defined as the highest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the Term Loan Agreement) plus 0.50 %, and (iii) one month Adjusted LIBO Rate plus 1.00 %) plus a margin based on the Company’s debt rating.

Loans under the Term Loan Agreement bear interest, at the Company’s option, at either a rate equal to (a) the Adjusted LIBO Rate (as defined in the Term Loan Agreement) plus a margin based on the Company’s debt rating or (b) the Base Rate (defined as the highest of (i) the prime rate, (ii) the NYFRB Rate (as defined in the Term Loan Agreement) plus 0.50 %, and (iii) one month Adjusted LIBO Rate plus 1.00 %) plus a margin based on the Company’s debt rating.

The Term Loan Agreement contains customary representations and warranties, affirmative and negative covenants and events of default applicable to the Company and its subsidiaries.

The events of default include, among others, nonpayment of principal, interest, fees or other amounts, failure to perform certain covenants, cross-defaults to certain other indebtedness, insolvency or bankruptcy, customary ERISA defaults or the occurrence of a change of control.

The negative covenants include limitations on

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

liens, indebtedness of non-guarantor subsidiaries and mergers and other fundamental changes, among others.

The Term Loan Agreement also requires the Company to maintain a consolidated leverage ratio of total consolidated funded debt to consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) for a trailing twelve-month period of not greater than 4.0 to 1.0.

The covenant will be reduced to 3.5 to 1.0 beginning in fiscal year 2020, assuming the Company does not undertake any significant acquisitions, mergers, and other fundamental changes.

Should such a change occur, the Company may be authorized to increase the covenant back to 4.0 to 1.0.

As of November 2, 2019, the Company was compliant with these covenants.

The negative covenants include limitations on liens, indebtedness of non-guarantor subsidiaries and mergers and other fundamental changes, among others.

Should such a change occur, the Company may be authorized to increase the covenant to 4.0 to 1.0.

As of October 31, 2020, the Company was compliant with these covenants.

In fiscal 2019, the Company made principal payments on the term loans in the amount of $ 325.0 million.

These amounts were not contractually due under the terms of the term loan credit agreement.

The Company’s debt consisted of the following as of November 2, 2019 and November 3, 2018:

November 2, 2019 November 3, 2018

On April 8, 2020, in an underwritten public offering, the Company issued its first green bond consisting of $ 400.0 million aggregate principal amount of 2.95 % senior unsecured notes due April 1, 2025 (the April 2025 Notes).

Interest on the April 2025 Notes is payable on April 1 and October 1 of each year, beginning on October 1, 2020.

The Company intends to use the net proceeds of $ 395.6 million from the green bond offering to finance or refinance, in whole or in part, one or more new or existing eligible projects involving renewable energy, energy efficiency, green buildings, sustainable water and wastewater management, pollution prevention and control, clean transportation or eco-efficient and/or circular economy adapted products, production technologies and processes.

Debt discount and underwriting fees will be amortized over the life of the debt.

At any time prior to March 1, 2025, the Company may, at its option, redeem some or all of the April 2025 Notes at a redemption price equal to the greater of 100 % of the principal amount of the April 2025 Notes being redeemed and the make-whole premium, plus accrued and unpaid interest on the April 2025 Notes being redeemed, if any, to but excluding the date of redemption.

The April 2025 Notes are unsecured and rank equally in right of payment with all of the Company's other existing and future unsecured senior indebtedness.

The April 2025 Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture, and the indenture and supplemental indenture contain certain covenants, events of default and other customary provisions.

As of October 31, 2020, the Company was in compliance with these covenants.

ANALOG DEVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s debt consisted of the following as of October 31, 2020 and November 2, 2019:

October 31, 2020 November 2, 2019

Principal Unamortized discount and debt issuance costs Principal Unamortized discount and debt issuance costs

3-Year term loan, due March 2022 $ 925,000 $ — $ 925,000 $ —

3-Year term loan, due March 2020 — — 358,000 318

5-Year term loan, due March 2022 — — 1,350,000 1,503

2020 Notes, due March 2020 — — 300,000 1,273

2021 Notes, due January 2021 — — 450,000 1,819

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2023 Notes, due December 2023 550,000 2,741 550,000 3,619

2025 Notes, due April 2025 400,000 3,916 — —

2025 Notes, due December 2025 850,000 4,504 850,000 5,382

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2020 Notes, due March 2020 — — 300,000 333

3-Year term loan, due March 2020, current — — 67,000 —

Total Current Debt $ — $ — $ 300,000 $ 333

2 unchanged sentences

On November 23, 2020 , the Board of Directors of the Company declared a cash dividend of $ 0.62 per outstanding share of common stock.

The dividend will be paid on December 17, 2019 to all shareholders of record at the close of business on December 6, 2019 .

The dividend will be paid on December 15, 2020 to all shareholders of record at the close of business on December 4, 2020 and is expected to total $ 229.1 million.

The Company reinstated its common stock repurchase program effective November 2020 (fiscal 2021).

For additional information about the common stock repurchase program, see Note 3, Stock-Based Compensation and Shareholders' Equity, of the Notes to Consolidated Financial Statements.

ANALOG DEVICES, INC.

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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 2019 is a 52 -week fiscal year.

Fiscal 2018 was a 53 -week fiscal year.

Fiscal 2020 and fiscal 2019 were 52-week fiscal years.

The Company's interim periods operate on a 4-4-5 fiscal calendar, where each fiscal quarter is comprised of two 4-week periods and one 5-week period, with each week ending on a Saturday.

The additional week in fiscal 2018 was included in the first quarter ended February 3, 2018.

Therefore, fiscal 2018 included an additional week of operations as compared to fiscal 2019.

4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 2Q19 1Q19

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% of Revenue 25 % 25 % 20 % 16 % 19 % 24 % 24 % 23 %

Net income allocable to common shares (4) $ 277,182 $ 361,562 $ 367,029 $ 353,969 $ 403,511 $ 407,031 $ 398,796 $ 291,997

Net income allocated to common shares (3) $ 386,526 $ 362,665 $ 267,696 $ 203,874 $ 277,182 $ 361,562 $ 367,029 $ 353,969

Basic earnings per common share $ 1.05 $ 0.98 $ 0.73 $ 0.55 $ 0.75 $ 0.98 $ 0.99 $ 0.96

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_______________________________________

(1) Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K .

(2) Represents charges recorded for various restructuring actions.

See Note 5, Special Charges, of the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

(3) See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

(4) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net income by the income allocable to participating securities.

(1) See Note 5, Special Charges , of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for additional information.

(2) See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for additional information.

(3) See Note 2q, Earnings per Share of Common Stock , of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for additional information.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data