What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-17 compared with 2020-08-19 · 165 added, 336 removed, 395 unchanged (56% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Revenue $ 1,558,458 $ 1,303,565

8 unchanged sentences

Operating income:

463,860 273,428

Nonoperating expense (income):

14 unchanged sentences

(in thousands)

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Net income $ 388,519 $ 203,874

Foreign currency translation adjustments 8,279 ( 195 )

Change in fair value of available-for-sale securities — ( 5 ) — 10

Change in fair value of derivative instruments designated as cash flow hedges (net of taxes of $ 6,661 and $ 5,459 , respectively)

8 unchanged sentences

(in thousands, except share and per share amounts)

August 1, 2020 November 2, 2019

January 30, 2021 October 31, 2020

Current Assets

35 unchanged sentences

Preferred stock, $ 1.00 par value, 471,934 shares authorized, none outstanding

Common stock, 0.16 2/3 par value, 1,200,000,000 shares authorized, 369,166,257 shares outstanding ( 368,302,369 on November 2, 2019)

Common stock, 0.16 2/3 par value, 1,200,000,000 shares authorized, 368,893,742 shares outstanding ( 369,484,899 on October 31, 2020)

61,484 61,582

8 unchanged sentences

(in thousands)

Three Months Ended August 1, 2020

Three Months Ended January 30, 2021

Capital in Accumulated

1 unchanged sentence

Shares Amount Par Value Earnings Loss

BALANCE, MAY 2, 2020

BALANCE, OCTOBER 31, 2020

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

5 unchanged sentences

Common stock repurchased ( 1,079 ) ( 180 ) ( 156,877 )

BALANCE, AUGUST 1, 2020

BALANCE, JANUARY 30, 2021

368,894 $ 61,484 $ 4,849,185 $ 7,395,578 $ ( 218,501 )

Nine Months Ended August 1, 2020

Three Months Ended February 1, 2020

Capital in Accumulated

2 unchanged sentences

BALANCE, November 2, 2019 368,302 $ 61,385 $ 4,936,349 $ 6,899,253 $ ( 187,799 )

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

Effect of Accounting Standards Update 2018-02 2,379 ( 2,379 )

2,379 ( 2,379 )

Net income 203,874

5 unchanged sentences

Common stock repurchased ( 909 ) ( 152 ) ( 105,878 )

BALANCE, AUGUST 1, 2020 369,166 $ 61,529 $ 4,909,651 $ 7,079,309 $ ( 272,929 )

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

Three Months Ended August 3, 2019

Capital in Accumulated

Common Stock Excess of Retained Comprehensive

Shares Amount Par Value Earnings Loss

BALANCE, MAY 4, 2019 369,761 $ 61,628 $ 5,117,202 $ 6,659,449 $ ( 96,021 )

Net income 362,374

Dividends declared and paid - $ 0.54 per share

Issuance of stock under stock plans and other 667 111 19,117

Stock-based compensation expense 36,098

Other comprehensive loss ( 57,652 )

Common stock repurchased ( 1,022 ) ( 170 ) ( 111,831 )

BALANCE, AUGUST 3, 2019

369,406 $ 61,569 $ 5,060,586 $ 6,821,755 $ ( 153,673 )

Nine Months Ended August 3, 2019

Capital in Accumulated

Common Stock Excess of Retained Comprehensive

Shares Amount Par Value Earnings Loss

BALANCE, NOVEMBER 3, 2018 (1)

BALANCE, FEBRUARY 1, 2020

368,220 $ 61,371 $ 4,923,947 $ 6,906,346 $ ( 202,147 )

Effect of Accounting Standards Update 2016-16 331,026

Net income 1,085,317

Dividends declared and paid - $ 1.56 per share

Issuance of stock under stock plans and other 3,807 635 105,500

Stock-based compensation expense 112,720

Other comprehensive loss ( 95,233 )

Common stock repurchased ( 4,561 ) ( 760 ) ( 439,856 )

BALANCE, AUGUST 3, 2019 369,406 $ 61,569 $ 5,060,586 $ 6,821,755 $ ( 153,673 )

(1) Balances have been restated to reflect the full retrospective adoption of Accounting Standards Update ASU 2014-09, Revenue from Contracts with Customers , adopted by the Company in fiscal 2019.

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended

August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation expense 36,638 37,501

Non-cash portion of special charge — 4,367

Deferred income taxes ( 27,275 ) ( 13,982 )

5 unchanged sentences

Cash flows from investing activities:

Proceeds from other investments 18,566 —

Additions to property, plant and equipment ( 67,388 ) ( 54,839 )

Cash paid for asset acquisition ( 22,522 ) —

Payments for acquisitions, net of cash acquired ( 2,428 ) —

2 unchanged sentences

Cash flows from financing activities:

Proceeds from debt 395,646 1,250,000

Early termination of debt — ( 1,250,000 )

Proceeds from revolver 350,000 75,000

Payments on revolver ( 350,000 ) ( 75,000 )

Debt repayments ( 300,000 ) ( 650,000 )

Dividend payments to shareholders ( 229,179 ) ( 199,160 )

4 unchanged sentences

Effect of exchange rate changes on cash 3,156 742

Net increase (decrease) in cash and cash equivalents 441,942 ( 204,427 )

Net (decrease) increase in cash and cash equivalents ( 7,797 ) 6,086

Cash and cash equivalents at beginning of period 1,055,860 648,322

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED AUGUST 1, 2020

FOR THE THREE MONTHS ENDED JANUARY 30, 2021 (UNAUDITED)

(all tabular amounts in thousands except per share amounts and percentages)

Note 1 – Basis of Presentation

In the opinion of management, the information furnished in the accompanying condensed consolidated financial statements reflects all normal recurring adjustments that are necessary to fairly state the results for these interim periods and should be read in conjunction with Analog Devices, Inc.’s (the Company) Annual Report on Form 10-K for the fiscal year ended November 2, 2019 (fiscal 2019) and related notes.

The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending October 30, 2021 (fiscal 2021) or any future period.

5 unchanged sentences

See Note 13, Acquisitions , for additional information.

Note 2 – 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 14, New Accounting Pronouncements of these Notes to Condensed 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 straight-line 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:

August 1, 2020

Operating lease right-of-use assets in Other assets

Operating lease liabilities in Accrued liabilities

Operating lease liabilities in Other non-current liabilities

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

Three Months Ended Nine Months Ended

August 1, 2020 August 1, 2020

Lease expense $ 11,728 $ 33,864

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

Operating cash flows from operating leases $ 12,159 $ 35,094

Lease assets obtained in exchange for new lease liabilities $ 11,158 $ 36,888

Weighted average remaining lease term 9.4 years 9.4 years

Weighted average discount rate 3.2 % 3.2 %

The following table presents the maturities of the Company's operating lease liabilities as of August 1, 2020:

Fiscal year Operating Leases

Remainder of 2020 $ 11,778

Thereafter 166,800

Total future minimum operating lease payments 373,018

imputed interest ( 53,489 )

Present value of operating lease liabilities $ 319,529

As of August 1, 2020, the Company has an additional lease for office space, which has not yet commenced, of approximately $ 9.1 million.

This lease will commence in fiscal 2020, with a lease term of 10 years.

Note 2 – Stock-Based Compensation and Shareholders' Equity

A summary of the Company’s stock option activity as of August 1, 2020 and changes during the nine-month period then ended is presented below:

A summary of the Company’s stock option activity as of January 30, 2021 and changes during the three-month period then ended is presented below:

(in thousands)

2 unchanged sentences

Term in Years

Options outstanding at November 2, 2019 5,183 $ 65.97

Options outstanding at October 31, 2020 4,192 $ 70.73

Options granted 460 $ 144.06

1 unchanged sentence

Options forfeited ( 21 ) $ 85.53

Options outstanding at August 1, 2020 4,413 $ 70.18 5.73 $ 197,106

Options exercisable at August 1, 2020 2,845 $ 60.81 4.66 $ 153,749

Options vested or expected to vest at August 1, 2020 (1) 4,309 $ 69.67 5.67 $ 194,685

Options expired ( 5 ) $ 37.52

Options outstanding at January 30, 2021 4,277 $ 79.71 5.9 $ 289,219

Options exercisable at January 30, 2021 2,332 $ 61.96 4.4 $ 199,072

Options vested or expected to vest at January 30, 2021 (1) 4,158 $ 78.63 5.9 $ 285,622

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future.

The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.

During the nine-month periods ended August 1, 2020 and August 3, 2019, 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) was $ 61.7 million and $ 120.7 million, respectively.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A summary of the Company’s restricted stock unit/award activity as of August 1, 2020 and changes during the nine-month period then ended is presented below:

In the first quarter of fiscal 2021, the Company issued a special performance stock option award to the Company's chief executive officer.

The performance stock option award is exercisable for up to 460,000 shares of the Company's common stock (the Target Number of Shares) at an exercise price per share of $ 144.06 , which was the closing price of the Company's common stock on the date of grant, and vests subject to the satisfaction of certain target stock price thresholds during a five -year period, measured on the basis of the average of the closing prices of the Company's common stock over 70 consecutive trading days.

The actual number of shares that will become exercisable will range from 0 % to a maximum of 100 % of the Target Number of Shares based on the attainment of such target stock price thresholds at any time during a five -year period from December 15, 2020 to December 15, 2025.

The grant date fair value of the award was calculated using the Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award to calculate the fair market value.

The Monte Carlo simulation model also uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions, including the possibility that the market condition may not be satisfied, and the resulting fair value of the award.

During the three-month periods ended January 30, 2021 and February 1, 2020, 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) was $ 30.4 million and $ 20.3 million, respectively.

A summary of the Company’s restricted stock unit/award activity as of January 30, 2021 and changes during the three-month period then ended is presented below:

Stock Units/Awards

2 unchanged sentences

Date Fair Value

Restricted stock units/awards outstanding at November 2, 2019 4,396 $ 87.18

Restricted stock units/awards outstanding at October 31, 2020 3,637 $ 91.54

Units/Awards granted 196 $ 138.21

1 unchanged sentence

Forfeited ( 59 ) $ 99.73

Restricted stock units/awards outstanding at August 1, 2020 3,899 $ 89.65

As of August 1, 2020, there was $ 316.0 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options and restricted stock units/awards.

Restricted stock units/awards outstanding at January 30, 2021 3,639 $ 92.02

In the first quarter of fiscal 2021, the Company issued approximately 110,000 performance-based restricted stock units (Maxim Integration PRSUs) related to the Company's planned acquisition of Maxim to a select group of employees.

The number of Maxim Integration PRSUs that may be earned will range from 0 % to a maximum of 200 % of the issued amount of Maxim Integration PRSUs and will be determined according to the achievement of certain performance metrics.

Any shares earned will vest on the 60th day following the two -year anniversary of the closing of the Maxim acquisition.

If the Maxim acquisition does not close, the awards will be cancelled.

The grant date fair value of these awards were 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.

The grant-date fair value of these awards 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.

As of January 30, 2021, there was $ 267.1 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options and restricted stock units/awards.

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

The total grant-date fair values of awards that vested during the nine-month periods ended August 1, 2020 and August 3, 2019 were approximately $ 157.9 million and $ 131.0 million, respectively.

The total grant-date fair values of awards that vested during the three-month periods ended January 30, 2021 and February 1, 2020 were approximately $ 15.6 million and $ 14.8 million, respectively.

Total stock-based compensation expense recognized was as follows:

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Cost of sales $ 4,354 $ 4,564

1 unchanged sentence

Selling, marketing, general and administrative 13,963 15,332

Special charges 943 — 943 —

Total stock-based compensation expense $ 36,638 $ 37,501

As of August 1, 2020 and November 2, 2019, the Company capitalized $ 5.9 million and $ 6.8 million, respectively, of stock-based compensation in Inventories on the Condensed Consolidated Balance Sheets.

As of January 30, 2021 and October 31, 2020, the Company capitalized $ 5.7 million and $ 5.8 million, respectively, of stock-based compensation in Inventories on the Condensed Consolidated Balance Sheets.

Common Stock Repurchases

As of August 1, 2020, the Company had repurchased a total of approximately 156.1 million shares of its common stock for approximately $ 6.3 billion under the Company's share repurchase program.

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

As of January 30, 2021, the Company had repurchased a total of approximately 157.1 million shares of its common stock for approximately $ 6.4 billion under the Company's share repurchase program.

As of January 30, 2021, an additional $ 1.7 billion remains available for repurchase of shares under the current authorized program.

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

Given the planned acquisition of Maxim (see Note 15, Acquisitions) , the Company has continued its temporary suspension of the common stock repurchase program, which was previously suspended in March 2020 as a result of the global macroeconomic environment.

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

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 Condensed Consolidated Statement of Income.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3 – Accumulated Other Comprehensive (Loss) Income

The following table provides the changes in accumulated other comprehensive (loss) income (AOCI) by component and the related tax effects during the first nine months of fiscal 2020.

Foreign currency translation adjustment

Unrealized holding gains (losses) on derivatives

Pension plans

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

Other comprehensive loss before reclassifications 197 ( 111,684 ) ( 1,401 ) ( 112,888 )

The following table provides the changes in accumulated other comprehensive (loss) income (AOCI) by component and the related tax effects during the first three months of fiscal 2021.

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

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

Other comprehensive income (loss) before reclassifications 8,279 34,930 ( 2,446 ) 40,763

Amounts reclassified out of other comprehensive income (loss) — ( 3,804 ) 748 ( 3,056 )

Tax effects — ( 6,661 ) ( 86 ) ( 6,747 )

Other comprehensive (loss) income 197 ( 83,016 ) 68 ( 82,751 )

Effect of Accounting Standards Update 2018-02

— ( 2,379 ) — ( 2,379 )

August 1, 2020 $ ( 29,879 ) $ ( 203,410 ) $ ( 39,640 ) $ ( 272,929 )

Other comprehensive income (loss) 8,279 24,465 ( 1,784 ) 30,960

January 30, 2021 $ ( 18,573 ) $ ( 148,205 ) $ ( 51,723 ) $ ( 218,501 )

The amounts reclassified out of AOCI into the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Shareholders' Equity with presentation location during each period were as follows:

Three Months Ended Nine Months Ended

Comprehensive Income Component August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 Location

Three Months Ended

Comprehensive Income Component January 30, 2021 February 1, 2020 Location

Unrealized holding losses (gains) on derivatives

13 unchanged sentences

Total amounts reclassified out of AOCI, net of tax $ ( 2,938 ) $ ( 967 )

The Company estimates $ 7.2 million, net of tax, of gains on forward foreign currency derivative instruments included in AOCI will be reclassified into earnings within the next twelve months.

Realized gains or losses on investments are determined based on the specific identification basis and are recognized in nonoperating expense (income).

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

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 4 – Earnings Per Share

The Company utilized the two-class method for calculating earnings per share because certain restricted stock awards granted were participating securities containing non-forfeitable rights to receive dividend equivalents.

Under the two-class method, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of earnings per share allocated to common stock.

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended Nine Months Ended

August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Net Income $ 388,519 $ 203,874

income allocated to participating securities* — 812 — 2,750

Net income allocated to common stockholders $ 362,665 $ 361,562 $ 834,235 $ 1,082,567

Basic shares:

10 unchanged sentences

Outstanding stock-based awards 239 397

*The amounts in the three-month and nine-month periods ended August 1, 2020 are not material.

Note 5 – Special Charges

The following table is a quarterly roll-forward from November 2, 2019 to August 1, 2020 of the employee separation and exit cost accruals established related to existing restructuring actions:

The following table is a quarterly roll-forward from October 31, 2020 to January 30, 2021 of the employee separation and exit cost accruals established related to existing restructuring actions:

Accrued Restructuring Closure of Manufacturing Facilities Repositioning Action Other Actions

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

First quarter fiscal 2020 special charges, net 1,982 9,154 —

Severance and other payments ( 908 ) ( 29,597 ) ( 471 )

Effect of foreign currency on accrual ( 30 ) ( 21 ) —

Balance at February 1, 2020 $ 51,445 $ 38,431 $ 5,052

Second quarter fiscal 2020 special charges, net 1,320 — —

Severance and other payments ( 2,564 ) ( 15,025 ) ( 327 )

Effect of foreign currency on accrual ( 17 ) ( 127 ) —

Balance at May 2, 2020 $ 50,184 $ 23,279 $ 4,725

Third quarter fiscal 2020 special charges, net ( 1,402 ) 33,232 —

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

First quarter fiscal 2021 special charges 438 — —

Severance and other payments ( 1,950 ) ( 8,128 ) ( 333 )

Effect of foreign currency on accrual — 248 —

Balance at August 1, 2020 $ 47,439 $ 43,859 $ 4,527

Accrued liabilities $ 47,439 $ 43,859 $ 4,527

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Balance at January 30, 2021 $ 43,664 $ 12,894 $ 3,156

Current - accrued liabilities $ 33,433 $ 12,894 $ 3,156

Other non-current liabilities $ 10,231 $ — $ —

Repositioning Action

The Company recorded special charges of $ 130.5 million on a cumulative basis through August 1, 2020, as a result of organizational initiatives to better align the global workforce with the Company's long-term strategic plan.

The Company recorded special charges of $ 137.5 million on a cumulative basis through January 30, 2021, as a result of organizational initiatives to better align the global workforce with the Company's 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 selling, marketing, general and administrative (SMG&A) employees.

1 unchanged sentence

Closure of Manufacturing Facilities

The Company recorded special charges of $ 53.9 million on a cumulative basis through August 1, 2020 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).

The Company plans to close its Hillview wafer fabrication facility located in Milpitas, California and its Singapore test facility in the fiscal year ending October 30, 2021.

The Company recorded special charges of $ 55.4 million on a cumulative basis through January 30, 2021 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).

The Company plans to close its Hillview wafer fabrication facility located in Milpitas, California in fiscal 2021 and its Singapore test facility in the fiscal year ending October 29, 2022.

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.

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, one-time termination benefits for the impacted manufacturing, engineering and SMG&A employees and other exit costs.

1 unchanged sentence

Note 6 – Property, Plant and Equipment

Property, plant and equipment (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, its carrying value is reclassified from the relevant PP&E line items and into current assets on the balance sheet, where it remains until either it is sold or it no longer meets the held for sale criteria.

The fair value of assets held for sale is considered to be a Level 3 fair value measurement, and is determined based on the use of appraisals and input from market participants.

As discussed in Note 5, Special Charges , 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.

Accordingly, management has entered into an agreement to sell the facility 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 August 1, 2020.

August 1, 2020

No write-down to fair value was required upon this designation during fiscal 2020, 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 various line items within Property, plant and equipment to Prepaid expenses and other current assets upon designation and remains in Prepaid expenses and other current assets as of January 30, 2021.

Land and buildings $ 36,451

6 unchanged sentences

The Company designs, develops, manufactures and markets a broad range of integrated circuits.

The Company operates and tracks its results in one reportable segment based on the aggregation of eight operating segments, which reflects the consolidation of one operating segment into the existing operating segments in the three-months ended August 1, 2020 as a result of a continued refinement of the Company's organizational structure.

Due to the current macroeconomic environment, in the second quarter of fiscal 2020, the Company elected to perform a quantitative goodwill impairment analysis for one of its reporting units.

As a result of this analysis, management concluded that the reporting unit’s fair value exceeded its carrying amount as of the May 2, 2020 assessment date and no risk of impairment existed.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company operates and tracks its results in one reportable segment based on the aggregation of eight operating segments .

Revenue Trends by End Market

1 unchanged sentence

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 evolve and improve, the categorization of products by end market can vary over time.

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.

1 unchanged sentence

Three Months Ended

August 1, 2020 August 3, 2019

Revenue % of Revenue* Y/Y% Revenue % of Revenue*

Industrial $ 774,353 53 % 3 % $ 753,118 51 %

Communications 363,613 25 % 14 % 319,250 22 %

Automotive 162,480 11 % ( 29 ) % 228,235 15 %

Consumer 155,690 11 % ( 13 ) % 179,540 12 %

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

Nine Months Ended

August 1, 2020 August 3, 2019

January 30, 2021 February 1, 2020

Revenue % of Revenue* Y/Y% Revenue % of Revenue*

13 unchanged sentences

Three Months Ended

August 1, 2020 August 3, 2019

Channel Revenue % of Revenue* Revenue % of Revenue*

Distributors $ 819,472 56 % $ 863,055 58 %

Direct customers 614,770 42 % 600,609 41 %

Other 21,894 2 % 16,479 1 %

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

Nine Months Ended

August 1, 2020 August 3, 2019

January 30, 2021 February 1, 2020

Channel Revenue % of Revenue* Revenue % of Revenue*

4 unchanged sentences

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

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 8 – Fair Value

6 unchanged sentences

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 August 1, 2020 and November 2, 2019.

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 August 1, 2020 and November 2, 2019, the Company held $ 144.8 million and $ 231.4 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.

August 1, 2020

As of January 30, 2021 and October 31, 2020, the Company held $ 205.7 million and $ 239.6 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.

January 30, 2021

Fair Value measurement at

5 unchanged sentences

Government and institutional money market funds $ 822,348 $ — $ 822,348

Corporate obligations (1) — 19,998 19,998

Other assets:

4 unchanged sentences

Total liabilities measured at fair value $ — $ 185,349 $ 185,349

(1) The amortized cost of the Company’s investments classified as available-for-sale as of January 30, 2021 was $ 20.0 million.

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

See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements for more information related to the Company's master netting arrangements.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

November 2, 2019

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 9, Derivatives, in these Notes to Condensed 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:

5 unchanged sentences

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Held for sale assets — The fair value of assets held for sale is considered to be a Level 3 fair value measurement, and is determined based on the use of appraisals and input from market participants.

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

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

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

2 unchanged sentences

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.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

August 1, 2020 November 2, 2019

January 30, 2021 October 31, 2020

Principal Amount Outstanding Fair Value Principal Amount Outstanding Fair Value

1 unchanged sentence

$ 925,000 $ 925,000 $ 925,000 $ 925,000

2.85 % Senior unsecured notes, due March 2020

— — 300,000 300,872

2.95 % Senior unsecured notes, due January 2021

450,000 455,085 450,000 454,634

2.50 % Senior unsecured notes, due December 2021

15 unchanged sentences

Total debt $ 5,175,000 $ 5,745,078 $ 5,175,000 $ 5,708,995

As of January 30, 2021, the Company believed that none of its unrealized losses on its available-for-sale investments were attributable to credit losses and therefore were not impaired.

The investments with unrealized losses consisted primarily of corporate debt securities.

In making the determination that the decline in fair value of these securities did not indicate impairment, the Company considered various factors, including, but not limited to:

the extent to which fair value was less than cost;

the financial condition and near-term prospects of the issuers;

and the Company’s intent not to sell these securities and the assessment that it is more likely than not that the Company would not be required to sell these securities before the recovery of their amortized cost basis.

Unrealized gains and losses, net of taxes, are reported as a component of AOCI in the Company’s Condensed Consolidated Statements of Stockholders’ Equity.

No material amounts were reclassified out of AOCI during the three months ended January 30, 2021 and February 1, 2020 for realized gains or losses on available-for-sale investments.

Note 9 – Derivatives

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The gain or loss on the derivative is recorded as a component of AOCI in shareholders’ equity and is 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 August 1, 2020 and November 2, 2019 were $ 202.8 million and $ 191.1 million, respectively.

The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Condensed Consolidated Balance Sheets as of August 1, 2020 and November 2, 2019 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 January 30, 2021 and October 31, 2020 were $ 217.0 million and $ 202.7 million, respectively.

The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Condensed Consolidated Balance Sheets as of January 30, 2021 and October 31, 2020 were as follows:

Fair Value At

Balance Sheet Location August 1, 2020 November 2, 2019

Balance Sheet Location January 30, 2021 October 31, 2020

Forward foreign currency exchange contracts Prepaid expenses and other current assets $ 7,490 $ 5,550

As of August 1, 2020 and November 2, 2019, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $ 32.3 million and $ 55.3 million, respectively.

The fair values of these hedging instruments in the Company’s Condensed Consolidated Balance Sheets were immaterial as of August 1, 2020 and November 2, 2019.

As of January 30, 2021 and October 31, 2020, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $ 87.5 million and $ 62.7 million, respectively.

The fair values of these hedging instruments in the Company’s Condensed Consolidated Balance Sheets were immaterial as of January 30, 2021 and October 31, 2020.

The Company estimates that $ 5.1 million, net of tax, of settlements of forward foreign currency derivative instruments included in AOCI will be reclassified into earnings within the next 12 months.

All 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 Condensed Consolidated Balance Sheets on a net basis.

As of August 1, 2020 and November 2, 2019, none of the netting arrangements involved collateral.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of January 30, 2021 and October 31, 2020, none of the netting arrangements involved collateral.

The following table presents the gross amounts of the Company's forward foreign currency exchange contract derivative assets and liabilities and the net amounts recorded in the Company's Condensed Consolidated Balance Sheets:

August 1, 2020 November 2, 2019

January 30, 2021 October 31, 2020

Gross amount of recognized assets $ 7,737 $ 6,114

1 unchanged sentence

Net assets presented in the Condensed Consolidated Balance Sheets $ 7,386 $ 5,427

As of August 1, 2020 and November 2, 2019, the fair value of the interest rate swap agreement designated as a cash flow hedge was $ 258.1 million and $ 138.8 million, respectively, and is included within Accrued liabilities in the Company's Condensed Consolidated Balance Sheets.

As of January 30, 2021 and October 31, 2020, the fair value of the interest rate swap agreement designated as a cash flow hedge was $ 185.3 million and $ 214.6 million, respectively, and is included within Accrued liabilities in the Company's Condensed 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.

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 August 1, 2020 and November 2, 2019, nonperformance is not perceived to be a material risk.

Based on the credit ratings of the Company’s counterparties as of January 30, 2021 and October 31, 2020, 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.

3 unchanged sentences

For information on the unrealized holding gains (losses) on derivatives included in and reclassified out of AOCI into the Condensed Consolidated Statements of Income related to forward foreign currency exchange contracts, see Note 3, Accumulated Other Comprehensive (Loss) Income, in these Notes to Condensed Consolidated Financial Statements for further information.

Note 11 – Debt

Term Loan Agreement

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, for an unsecured term loan facility in the principal amount of $ 1.25 billion, maturing on March 10, 2022.

Loans under the term loan facility 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 .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 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 3.5 to 1.0, 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 August 1, 2020, the Company was compliant with these covenants.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 2025 Notes).

Interest on the 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 2025 Notes at a redemption price equal to the greater of 100 % of the principal amount of the 2025 Notes being redeemed and the make-whole premium, plus accrued and unpaid interest on the 2025 Notes being redeemed, if any, to but excluding the date of redemption.

The 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 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 August 1, 2020, the Company was in compliance with these covenants.

On March 12, 2020, the Company repaid $ 300.0 million of principal on its 2.85 % senior unsecured notes that were contractually due in March 2020.

This obligation has been paid in full and is no longer outstanding.

Revolving Credit Agreement

On June 28, 2019, the Company entered into a second amended and restated revolving credit agreement (Revolving Credit Agreement) with the Company as borrower and Bank of America, N.A.

as administrative agent and the other banks identified therein as lenders, which further amended and restated its amended and restated revolving credit agreement dated as of September 23, 2016.

The Revolving Credit Agreement provides for a five year unsecured revolving credit facility in an aggregate principal amount of up to $ 1.25 billion, expiring on June 28, 2024.

In March 2020, 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.

The Revolving Credit Agreement contains the customary representations and warranties, and affirmative and negative covenants and events of default applicable to the Company and its subsidiaries.

As of August 1, 2020, the Company was in compliance with these covenants.

Note 10 – Inventories

Inventories at August 1, 2020 and November 2, 2019 were as follows:

August 1, 2020 November 2, 2019

Inventories at January 30, 2021 and October 31, 2020 were as follows:

January 30, 2021 October 31, 2020

Raw materials $ 35,618 $ 33,806

3 unchanged sentences

Note 11 – Income Taxes

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

The Company’s effective tax rates for the three-month periods ended January 30, 2021 and February 1, 2020 were below the U.S.

statutory tax rate of 21.0 %, due to lower statutory tax rates applicable to the Company's operations in the foreign jurisdictions in which it earns income.

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

The Company has numerous audits ongoing throughout the world including:

an IRS income tax audit for the fiscal year ended November 3, 2018 (fiscal 2018);

an IRS income tax audit for the fiscal years ended November 3, 2018 (fiscal 2018) and November 2, 2019 (fiscal 2019);

state and local tax audits;

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

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company's U.S.

federal tax returns prior to the fiscal year ended October 28, 2017 (fiscal 2017) are no longer subject to examination.

The Company’s Ireland tax returns prior to the 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 the fiscal year ended November 2, 2013 (fiscal 2013) of approximately € 43.0 million, or $ 50.9 million (as of August 1, 2020), 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 the fiscal year ended November 2, 2013 (fiscal 2013) of approximately € 43.0 million, or $ 52.0 million (as of January 30, 2021), from the Irish Revenue Commissioners (Irish Revenue).

This assessment excludes any penalties and interest.

1 unchanged sentence

The Company strongly disagrees with the assessment and maintains that its transfer pricing is appropriate.

Therefore, the Company has not recorded any additional tax liability related to fiscal 2013 or any other periods.

Therefore, the Company has not recorded any additional tax liability related to fiscal 2013.

The Company intends to vigorously defend its originally filed tax return position and is currently preparing for an appeal with the Irish Tax Appeals Commission, which is the normal process for the resolution of differences between Irish Revenue and taxpayers.

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 fiscal 2013 could have a material unfavorable impact on the Company's income tax expense and net earnings in future periods.

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

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

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

October 31, 2015 (fiscal 2015);

October 29, 2016 (fiscal 2016);

and October 28, 2017 (fiscal 2017);

however, 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.

In February 2018, the Financial Accounting Standards Board (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.

and fiscal 2017.

However, the Company received confirmation from Irish Revenue that the audit relating to fiscal 2014 was complete and that no further tax assessment arose 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 related to fiscal 2016 and fiscal 2017 are on-going.

Note 12 – New Accounting Pronouncements

Standards Implemented

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02).

ASU 2016-02 requires a lessee to recognize most leases on the balance sheet but recognize expenses on the income statement in a manner similar to current practice.

The update states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying assets for the lease term.

Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease.

In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842):

Land Easement Practical Expedient for Transition to Topic 842 (ASU 2018-01).

ASU 2018-01 permits an entity to elect an optional transition practical expedient to not evaluate land easements that existed or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840.

In July 2018, the FASB issued ASU 2018-11, Leases – Targeted Improvements (Topic 842) (ASU 2018-11), which provides for an additional transition method that allows companies to apply the new lease standard at the adoption date, eliminating the requirement to apply the standard to the earliest period presented in the financial statements.

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.

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 Condensed 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 Condensed Consolidated Balance Sheets.

There was no material impact to the Condensed Consolidated Statements of Income or

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Consolidated Statements of Cash Flows.

Please refer to Note 2 , Leases for information regarding the Company's lease portfolio as of August 1, 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 13, Income Taxes 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 a material 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;

• ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities;

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

Improvements to Nonemployee Share-Based Payment Accounting.

Standards to Be Implemented

Retirement Benefits

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20):

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post-retirement plans.

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 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.

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13).

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13).

ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

5 unchanged sentences

ASU 2019-11 allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326.

These ASUs are effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years;

and therefore, are effective for the Company in the first quarter of fiscal 2021.

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

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company is exposed to credit losses through sales of its products and certain financial instruments.

The Company determines if there is an expected loss on its accounts receivables using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.

The Company adopted these standards effective November 1, 2020 using the modified retrospective approach, which did not have a material impact on the Company's financial position and results of operations.

See Note 8, Fair Value, in these Notes to Condensed Consolidated Financial Statements for more information related to how the Company assesses credit losses on its available-for-sale debt securities.

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

1 unchanged sentence

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.

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

The Company adopted ASU 2019-12 in the first quarter of fiscal 2021.

Upon adoption, ASU 2019-12 did not have a material impact on the Company's financial position and results of operations.

Retirement Benefits

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20):

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

The Company adopted ASU 2018-14 in the first quarter of fiscal 2021.

Upon adoption, ASU 2018-14 did not have a material impact on the Company's financial position and results of operations.

Standards to Be Implemented

Reference Rate Reform

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met.

The provisions of this standard are available for election through December 31, 2022.

The Company is currently evaluating the impact of the reference rate reform on its contracts and the resulting impact of adopting this standard on our financial statements.

Note 13 – Acquisitions

Proposed acquisition of Maxim Integrated Products, Inc.

On July 12, 2020, the Company entered into a definitive agreement (the Merger Agreement) to acquire Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies.

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 $ 20.0 billion based on the closing price of the Company's common stock on August 14, 2020.

The estimated merger consideration is approximately $ 27.0 billion based on the closing price of the Company's common stock on February 12, 2021.

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 antitrust regulatory clearances, approval by Maxim stockholders, and approval by the Company's shareholders of the issuance of shares of the Company's common stock.

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.

Maxim and the Company have each agreed to pay a termination fee of $ 725.0 million in cash to the other party if the Merger Agreement is terminated in certain circumstances involving an acquisition proposal, a change of recommendation or a breach of the other party’s non-solicitation obligations under the Merger Agreement.

In addition, 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 required regulatory approvals.

In the third quarter of fiscal 2020, the Company incurred $ 9.1 million of transaction-related costs recorded within Selling, marketing, general and administrative expenses in the Company's Condensed Consolidated Statement of Income.

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 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 shareholders.

In the first three months of fiscal 2021, the Company incurred $ 15.2 million of transaction-related costs recorded within Selling, marketing, general and administrative expenses in the Company's Condensed Consolidated Statement of Income.

Maxim Merger Litigation

As previously disclosed, in August and September 2020, three lawsuits were filed against the Company and/or its board of directors in connection with the Company’s proposed acquisition of Maxim:

(1) Joseph Post v.

Maxim Integrated Products, Inc., et al., Case No.

1:99-mc-09999 (D.

Del., filed August 24, 2020) (the Post Action);

(2) Coe Living Trust v.

Analog Devices, Inc., et al., Case No.

1:20-cv-11682 (D.

Mass., filed September 11, 2020) (the Coe Action);

and (3) Delman, et al.

Stata, et al., Case No.

2082CV00864 (Mass.

Ct., Norfolk Cnty., filed September 11, 2020) (the Delman Action).

The Post Action was brought by a purported shareholder of Maxim against Maxim, the members of Maxim’s board of directors, the Company and a subsidiary of the Company.

The Coe Action was brought by a purported shareholder of the Company against the Company and the members of the Company’s board of directors.

The Delman Action was brought by two purported shareholders of the Company against the members of the Company’s board of directors.

In exchange for certain disclosures that the Company and Maxim voluntarily made in Form 8-Ks filed on September 30, 2020, the plaintiff in the Post Action filed a notice of voluntary dismissal on October 8, 2020, the plaintiff in the Coe Action filed a notice of voluntary dismissal on October 22, 2020, and the plaintiffs in the Delman Action filed a notice of dismissal subject to court approval on October 1, 2020.

In each case, the notices of dismissal did not affect the rights of any other shareholders.

Note 14 – Subsequent Events

On August 18, 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 September 9, 2020 to all shareholders of record at the close of business on August 28, 2020 and is expected to total approximately $ 228.9 million.

On February 16, 2021, the Board of Directors of the Company declared a cash dividend of $ 0.69 per outstanding share of common stock.

The dividend will be paid on March 9, 2021 to all shareholders of record at the close of business on February 26, 2021 and is expected to total approximately $ 254.5 million.

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

What changed 10-Q

Item 1. Financial Statements