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Item 2. Management’s Discussion and Analysis

2021-02-17 compared with 2020-08-19 · 64 added, 135 removed, 152 unchanged (57% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019 (fiscal 2019).

This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934.

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the effect of changes in or the application of new or revised tax laws;

expected cost savings;

the effect of new accounting pronouncements;

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and other characterizations of future events or circumstances are forward-looking statements.

Readers are cautioned that these forward-looking statements are only predictions and are inherently subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part II, Item 1A.

“Risk Factors” and elsewhere herein.

Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part II, Item 1A.

“Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

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

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

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

Proposed Acquisition of Maxim Integrated Products, Inc.

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

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

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

common stock.

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

Following the approval of Maxim stockholders and our shareholders, as well as the expiration of the waiting-period applicable to U.S.

regulatory approval, the transaction is subject to customary closing

conditions, including receipt of certain non-U.S.

regulatory approvals.

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

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Three Months Ended

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

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

Gross margin % 66.8 % 67.4 %

Net income $ 362,665 $ 362,374 $ 291 — %

Net income as a % of revenue 24.9 % 24.5 %

Diluted EPS $ 0.97 $ 0.97 $ — — %

Nine Months Ended

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

January 30, 2021 February 1, 2020 $ Change % Change

Revenue $ 1,558,458 $ 1,303,565 $ 254,893 20 %

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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 our product will be incorporated.

As data systems for capturing and tracking this data and our methodology evolve and improve, the categorization of products by end market can vary over time.

As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time.

When this occurs, we reclassify revenue by end market for prior periods.

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Three Months Ended

August 1, 2020 August 3, 2019

Revenue* Y/Y% Revenue % of

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* Y/Y% Revenue % of

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

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

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

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

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

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

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

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

Revenue increased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher demand for our products across all end markets.

Revenue by Sales Channel

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Three Months Ended

August 1, 2020 August 3, 2019

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

Revenue % of Revenue* Revenue % of Revenue*

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

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

Three Months Ended Nine Months Ended

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

As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end customer demand.

Three Months Ended

January 30, 2021 February 1, 2020 $ Change % Change

Gross margin $ 1,045,371 $ 848,142 $ 197,229 23 %

Gross margin % 67.1 % 65.1 %

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

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

Gross margin percentage increased by 200 basis points in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher utilization of our factories due to increased customer demand.

Research and Development (R&D)

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change % Change

R&D expenses $ 288,150 $ 257,073 $ 31,077 12 %

R&D expenses as a % of revenue 18 % 20 %

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

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

R&D expenses increased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher R&D employee-related variable compensation expense and salary and benefit expenses, partially offset by lower discretionary spending.

R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth.

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

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change % Change

SMG&A expenses $ 185,275 $ 199,280 $ (14,005) (7) %

SMG&A expenses as a % of revenue 12 % 15 %

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

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

Special Charges

We monitor global macroeconomic conditions on an ongoing basis and continue to assess opportunities for improved operational effectiveness and efficiency, as well as a better alignment of expenses with revenues.

As a result of these assessments, we have undertaken various restructuring actions over the past several years.

Repositioning Action:

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

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

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

Closure of Manufacturing Facilities:

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

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

See Note 6, Special Charges , of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 in this Quarterly Report on Form 10-Q for further information.

SMG&A expenses decreased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of a $40.0 million charitable contribution to the Analog Devices Foundation made in the first quarter of fiscal 2020, partially offset by $15.2 million in acquisition-related transaction costs in connection with the proposed acquisition of Maxim as well as higher variable compensation expense in the first quarter of the fiscal year ending October 30, 2021 (fiscal 2021).

Operating Income

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change % Change

Operating income $ 463,860 $ 273,428 $ 190,432 70 %

Operating income as a % of revenue 29.8 % 21.0 %

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

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

The year-over-year increase in operating income in the three-month period ended January 30, 2021 was primarily the result of an increase in revenue of $254.9 million, which drove a higher gross margin of $197.2 million, and decreases of $14.0 million in SMG&A expenses and $10.7 million in special charges, partially offset by a $31.1 million increase in R&D expenses, as described above under the headings Revenue Trends by End Market, Gross Margin, Selling, Marketing, General and Administrative (SMG&A) and Research and Development (R&D).

Nonoperating Expense (Income)

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change

Total nonoperating expense (income) $ 27,242 $ 47,211 $ (19,969)

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

The year-over-year decrease in nonoperating expense in the three-month period ended January 30, 2021 was primarily the result of a $16.2 million gain recorded in other investments in the first quarter of fiscal 2021.

Provision for Income Taxes

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change

Provision for income taxes $ 48,099 $ 22,343 $ 25,756

Effective income tax rate 11.0 % 9.9 %

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

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

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

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

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

Securities and Exchange Commission Staff Accounting Bulletin No.

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

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

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

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

Our pretax income for the three-month periods ended January 30, 2021 and February 1, 2020 was primarily generated in Ireland at a tax rate of 12.5%.

See Note 11, Income Taxes , in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Three Months Ended Nine Months Ended

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

Three Months Ended

January 30, 2021 February 1, 2020 $ Change % Change

Net Income $ 388,519 $ 203,874 $ 184,645 91 %

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Diluted EPS $ 1.04 $ 0.55

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

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

Net income increased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, as a result of a $190.4 million increase in operating income and a $20.0 million decrease in nonoperating expense (income), partially offset by a $25.8 million increase in provision for income taxes.

Liquidity and Capital Resources

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

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

At January 30, 2021, our principal source of liquidity was $1,048.1 million of cash and cash equivalents, of which approximately $245.8 million was held in the United States and the balance of our cash and cash equivalents was held outside the United States in various foreign subsidiaries.

We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States.

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

Nine Months Ended

August 1, 2020 August 3, 2019

Three Months Ended

January 30, 2021 February 1, 2020

Net cash provided by operating activities $ 427,941 $ 349,648

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Net cash used for financing activities $ (363,823) $ (289,572)

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

The following changes contributed to the net change in cash and cash equivalents in the three-month period ended January 30, 2021 as compared to the same period in fiscal 2020.

Operating Activities

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

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

The increase in cash provided by operating activities during the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, was primarily the result of higher net income adjusted for non-cash items, partially offset by changes in working capital.

Investing Activities

Investing cash flows generally consist of capital expenditures and cash used for acquisitions.

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

The increase in cash used for investing activities during the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, was primarily the result of cash payments for an asset acquisition and higher capital additions, partially offset by proceeds from other investments.

Financing Activities

Financing cash flows consist primarily of payments of dividends to stockholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans.

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

Financing cash flows generally consist of payments of dividends to stockholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans.

The increase in cash used for financing activities during the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, was primarily the result of increases in common stock repurchases and dividend payments to shareholders.

Working Capital

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

January 30, 2021 October 31, 2020 $ Change % Change

Accounts receivable $ 826,964 $ 737,536 $ 89,428 12 %

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

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

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

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

Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.

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

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

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

Current liabilities increased to approximately $1,676.8 million at January 30, 2021 from approximately $1,365.0 million at the end of fiscal 2020.

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

As of January 30, 2021, our debt obligations consisted of the following:

Principal Amount Outstanding

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

2.95% Senior unsecured notes, due January 2021 450,000

2.50% Senior unsecured notes, due December 2021 400,000

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Total debt $ 5,175,000

In March 2020, we repaid the 2.85% senior unsecured notes that were due March 2020 and in April 2020, we issued the 2.95% senior unsecured notes due April 2025.

The indentures governing our outstanding notes contain covenants that may limit our ability to:

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enter into sale and lease-back transactions with respect to a principal property;

and consolidate with or merge into, or transfer or

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

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

and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party.

As of January 30, 2021, we were in compliance with these covenants.

Revolving Credit Facility

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as administrative agent and other banks identified therein as lenders (Revolving Credit Agreement) provides for a five-year unsecured revolving credit facility in an aggregate principal amount of up to $1.25 billion, expiring on June 28, 2024.

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

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

We may borrow under this revolving credit facility in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes.

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In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0.

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

As of January 30, 2021, we were in compliance with these covenants.

Stock Repurchase Program

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

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

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

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

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

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

Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity, and other factors we deem relevant.

Capital Expenditures

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

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

Net additions to property, plant and equipment were $67.4 million in the first three months of fiscal 2021 and were funded with a combination of cash on hand and cash generated from operations.

We expect capital expenditures for fiscal 2021 to be slightly above 4% of fiscal 2021 revenue.

We expect these capital expenditures will be funded with a combination of cash on hand and cash generated from operations.

Analog Devices Foundation

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

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

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

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

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

On February 16, 2021, our Board of Directors 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.

We currently expect quarterly dividends to continue in future periods.

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Contractual Obligations

In the second quarter of fiscal 2020, we issued a green bond consisting of $400.0 million aggregate principal amount of 2.95% senior unsecured notes due April 1, 2025 with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing October 1, 2020.

In addition, during the same period, we repaid $300.0 million of principal on our 3-year 2.85% senior unsecured notes that were contractually due in March 2020.

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

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

There have not been any material changes during the three-month period ended January 30, 2021 to the amounts presented in the table summarizing our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by us as of the specified effective date.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by us as of the specified effective date.

Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition and results of operations.

See Note 12, New Accounting Pronouncements, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our historical financial condition and results of operations.

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

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

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

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

The FASB has issued amendments and updates to the new standard, including practical expedients to be used during adoption.

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

As a result of the adoption of ASU 2016-02, we changed our accounting policy for leases.

See Note 2, Leases and Note 14, New Accounting Pronouncements , in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for details of the impact of this ASU on our financial statements.

Critical Accounting Policies and Estimates

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

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

Except for the accounting policies for credit losses and income taxes that were updated as a result of adopting ASU 2016-13 and ASU 2019-12, respectively, there were no other changes in the three-month period ended January 30, 2021 to the information provided under the heading “Critical Accounting Policies and Estimates” in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

Quantitative and Qualitative Disclosures About Market Risk

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

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

There were no material changes in the three-month period ended January 30, 2021 to the information provided under Item 7A.

“Quantitative and Qualitative Disclosures about Market Risk,” set forth in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis