ANALOG DEVICES INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ANALOG DEVICES, INC. CONSOLIDATED STATEMENTS OF INCOME Years ended October 29, 2022, October 30, 2021 and October 31, 2020 (thousands, except per share amounts) 2022 2021 2020 Revenue Revenue $ 12,013,953 $ 7,318,286 $ 5,603,056 Costs and Expenses Cost of sales 4,481,479 2,793,274 1,912,578 Gross margin 7,532,474 4,525,012 3,690,478 Operating expenses: Research and development 1,700,518 1,296,126 1,050,519 Selling, marketing, general and administrative 1,266,175 915,418 659,923 Amortization of intangibles 1,012,572 536,811 429,455 Special charges, net 274,509 84,456 52,337 4,253,774 2,832,811 2,192,234 Operating income: 3,278,700 1,692,201 1,498,244 Nonoperating expense (income): Interest expense 200,408 184,825 193,305 Loss on extinguishment of debt — 215,150 — Interest income ( 6,906 ) ( 1,220 ) ( 4,305 ) Other, net ( 13,551 ) ( 35,268 ) ( 2,373 ) 179,951 363,487 186,627 Earnings Income before income taxes 3,098,749 1,328,714 1,311,617 Provision for (benefit from) income taxes 350,188 ( 61,708 ) 90,856 Net income $ 2,748,561 $ 1,390,422 $ 1,220,761 Shares used to compute earnings per common share — basic 519,226 397,462 368,633 Shares used to compute earnings per common share — diluted 523,178 401,288 371,973 Basic earnings per common share $ 5.29 $ 3.50 $ 3.31 Diluted earnings per common share $ 5.25 $ 3.46 $ 3.28 See accompanying Notes. 45 ANALOG DEVICES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended October 29, 2022, October 30, 2021 and October 31, 2020 (thousands) 2022 2021 2020 Net income $ 2,748,561 $ 1,390,422 $ 1,220,761 Foreign currency translation adjustment ( 46,341 ) 1,057 3,224 Change in unrecognized gains/losses on derivative instruments designated as cash flow hedges: Changes in fair value of derivatives (net of tax of $ 2,902 in 2022, $ 14,217 in 2021 and $ 17,468 in 2020) ( 30,331 ) 41,817 ( 51,437 ) Adjustment for realized loss/(gain) reclassified into earnings (net of tax of $ 5,054 in 2022, $ 189 in 2021 and $ 158 in 2020) 34,472 7,099 ( 839 ) Total change in derivative instruments designated as cash flow hedges, net of tax 4,141 48,916 ( 52,276 ) Changes in accumulated other comprehensive loss — pension plans: Change in actuarial gain/(loss) (net of tax of $ 7,756 in 2022, $ 637 in 2021 and $ 5,167 in 2020) 30,613 12,923 ( 10,231 ) Other comprehensive (loss) income ( 11,587 ) 62,896 ( 59,283 ) Comprehensive income $ 2,736,974 $ 1,453,318 $ 1,161,478 See accompanying Notes. 46 ANALOG DEVICES, INC. CONSOLIDATED BALANCE SHEETS October 29, 2022 and October 30, 2021 (thousands, except per share amounts) 2022 2021 ASSETS Current Assets Cash and cash equivalents $ 1,470,572 $ 1,977,964 Accounts receivable less allowances of $ 4,571 ($ 2,658 in 2021) 1,800,462 1,459,056 Inventories 1,399,914 1,200,610 Prepaid expenses and other current assets 267,044 740,687 Total current assets 4,937,992 5,378,317 Other Assets Net property, plant and equipment 2,401,304 1,979,051 Other investments 122,285 127,856 Goodwill 26,913,134 26,918,470 Intangible assets, net 13,265,406 15,267,170 Deferred tax assets 2,264,888 2,267,269 Other assets 397,341 383,938 Total other assets 45,364,358 46,943,754 $ 50,302,350 $ 52,322,071 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 582,160 $ 443,434 Income taxes payable 265,845 332,685 Debt, current — 516,663 Accrued liabilities 1,594,650 1,477,530 Total current liabilities 2,442,655 2,770,312 Non-current Liabilities Long-term debt 6,548,625 6,253,212 Deferred income taxes 3,622,538 3,938,830 Income taxes payable 707,846 811,337 Other non-current liabilities 515,363 555,838 Total non-current liabilities 11,394,372 11,559,217 Commitments and contingencies (Note 10) Shareholders’ Equity 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, 509,295,941 shares outstanding ( 525,330,672 on October 30, 2021) 84,880 87,554 Capital in excess of par value 27,857,270 30,574,237 Retained earnings 8,721,325 7,517,316 Accumulated other comprehensive loss ( 198,152 ) ( 186,565 ) Total shareholders’ equity 36,465,323 37,992,542 $ 50,302,350 $ 52,322,071 See accompanying Notes. 47 ANALOG DEVICES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Years ended October 29, 2022, October 30, 2021 and October 31, 2020 Capital in Accumulated Other Common Stock Excess of Retained Comprehensive (thousands) Shares Amount Par Value Earnings (Loss) Income BALANCE, NOVEMBER 2, 2019 368,302 $ 61,385 $ 4,936,349 $ 6,899,253 $ ( 187,799 ) Effect of Accounting Standards Update 2018-02 2,379 ( 2,379 ) Net Income — 2020 1,220,761 Dividends declared and paid - $ 2.40 per share ( 886,155 ) Issuance of stock under stock plans and other 3,110 518 67,885 Issuance of stock as charitable contribution 336 56 39,944 Stock-based compensation expense 149,518 Other comprehensive loss ( 59,283 ) Common stock repurchased ( 2,263 ) ( 377 ) ( 244,110 ) BALANCE, OCTOBER 31, 2020 369,485 61,582 4,949,586 7,236,238 ( 249,461 ) Net Income — 2021 1,390,422 Dividends declared and paid - $ 2.69 per share ( 1,109,344 ) Issuance of stock under stock plans and other 2,738 355 62,750 Issuance of stock in connection with Acquisition 169,233 28,204 27,725,957 Stock-based compensation expense 243,611 Replacement share-based awards issued in connection with Acquisition 194,890 Other comprehensive income 62,896 Common stock repurchased ( 16,125 ) ( 2,587 ) ( 2,602,557 ) BALANCE, OCTOBER 30, 2021 525,331 87,554 30,574,237 7,517,316 ( 186,565 ) Net Income — 2022 2,748,561 Dividends declared and paid - $ 2.97 per share ( 1,544,552 ) Issuance of stock under stock plans and other 2,701 449 33,438 Stock-based compensation expense 323,487 Other comprehensive loss ( 11,587 ) Common stock repurchased ( 18,736 ) ( 3,123 ) ( 3,073,892 ) BALANCE, OCTOBER 29, 2022 509,296 $ 84,880 $ 27,857,270 $ 8,721,325 $ ( 198,152 ) See accompanying Notes. 48 ANALOG DEVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended October 29, 2022, October 30, 2021 and October 31, 2020 (thousands) 2022 2021 2020 Cash flows from operating activities: Net income $ 2,748,561 $ 1,390,422 $ 1,220,761 Adjustments to reconcile net income to net cash provided by operations: Depreciation 283,338 231,275 233,775 Amortization of intangibles 2,014,161 843,359 577,148 Cost of goods sold for inventory acquired 271,396 331,083 — Stock-based compensation expense 323,487 243,611 149,518 Non-cash contribution to charitable foundation — — 40,000 Loss on extinguishment of debt — 215,150 — Non-cash impairment charge 91,953 — — Non-cash operating lease costs ( 44,087 ) 19,232 ( 257,607 ) Other ( 2,987 ) ( 24,086 ) 5,418 Deferred income taxes ( 326,755 ) ( 406,922 ) ( 113,948 ) Change in operating assets and liabilities: Accounts receivable ( 343,908 ) ( 114,504 ) ( 101,626 ) Inventories ( 470,725 ) ( 65,114 ) 1,760 Prepaid expenses and other current assets ( 79,439 ) ( 53,326 ) ( 3,666 ) Prepaid income tax 14,855 ( 5,791 ) — Accounts payable and accrued liabilities 171,772 208,444 103,104 Income taxes payable, current ( 91,852 ) ( 6,797 ) 29,441 Other assets ( 14,441 ) ( 21,690 ) — Other liabilities ( 69,927 ) ( 49,277 ) 124,409 Total adjustments 1,726,841 1,344,647 787,726 Net cash provided by operating activities 4,475,402 2,735,069 2,008,487 Cash flows from investing activities: Additions to property, plant and equipment, net ( 699,308 ) ( 343,676 ) ( 165,692 ) Cash received from acquisition of Maxim, net of cash paid — 2,450,550 — Other 41,940 36,651 ( 14,831 ) Net cash (used for) provided by investing activities ( 657,368 ) 2,143,525 ( 180,523 ) Cash flows from financing activities: Proceeds from debt 296,130 3,939,640 395,646 Early termination of debt ( 519,116 ) ( 3,591,982 ) — Debt repayments — — ( 750,000 ) Payments on revolver ( 400,000 ) ( 400,000 ) ( 350,000 ) Proceeds from revolver 400,000 400,000 350,000 Payment on derivative instrument — ( 153,161 ) — Prepayment for stock repurchases — ( 500,000 ) — Dividend payments to shareholders ( 1,544,552 ) ( 1,109,344 ) ( 886,155 ) Repurchase of common stock ( 2,577,015 ) ( 2,605,144 ) ( 244,487 ) Proceeds from employee stock plans 33,887 63,105 68,403 Other 19,946 ( 2,778 ) ( 4,015 ) Net cash used for financing activities ( 4,290,720 ) ( 3,959,664 ) ( 1,420,608 ) Effect of exchange rate changes on cash ( 34,706 ) 3,174 182 Net (decrease) increase in cash and cash equivalents ( 507,392 ) 922,104 407,538 Cash and cash equivalents at beginning of year 1,977,964 1,055,860 648,322 Cash and cash equivalents at end of year $ 1,470,572 $ 1,977,964 $ 1,055,860 See accompanying Notes. 49 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended October 29, 2022, October 30, 2021 and October 31, 2020 (all tabular amounts in thousands except per share amounts) 1. Description of Business Analog Devices, Inc. (Analog Devices or the Company) is a leading semiconductor company dedicated to solving its customers' most complex engineering challenges. Since its inception in 1965, the Company has played a critical role at the intersection of the physical and digital world by providing the building blocks to sense, measure, interpret, connect and power. The Company designs, manufactures, tests and markets a broad portfolio of solutions, including integrated circuits (ICs), software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies. The Company's comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency ICs, edge processors and other sensors. The Company's focus is largely on the business-to-business end markets of Industrial, Automotive and Communications and related applications, as well as Consumer applications, with the goal of driving sustainable and profitable growth over the long term. 2. Summary of Significant Accounting Policies a. Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. Certain amounts reported in previous years have been reclassified to conform to the presentation for the fiscal year ended October 29, 2022 (fiscal 2022). Such reclassified amounts are immaterial. The Company’s fiscal year is the 52 -week or 53 -week period ending on the Saturday closest to the last day in October. Fiscal 2022, the fiscal year ended October 30, 2021 (fiscal 2021) and the fiscal year ended October 31, 2020 (fiscal 2020) were 52 -week fiscal periods. On August 26, 2021 (Acquisition Date), the Company completed the acquisition of Maxim Integrated Products, Inc. (Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies. Pursuant to the Agreement and Plan of Merger, dated as of July 12, 2020 (the Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company’s common stock as of the Acquisition Date for total consideration of approximately $ 28.0 billion of the Company's common stock. The acquisition of Maxim is referred to as the Acquisition. The consolidated financial statements included in this Annual Report on Form 10-K include the financial results of Maxim prospectively from the Acquisition Date. See Note 6, Acquisitions , of the Notes to Consolidated Financial Statements for additional information. b. Cash and Cash Equivalents Cash and cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash and cash equivalents consist primarily of government and institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds, demand deposit accounts and bank time deposits. The Company classifies its investments in readily marketable debt and equity securities as “held-to-maturity,” “available-for-sale” or “trading” at the time of purchase. There were no transfers between investment classifications in any of the fiscal years presented. Held-to-maturity securities, which are carried at amortized cost, include only those securities the Company has the positive intent and ability to hold to maturity. Securities such as bank time deposits, which by their nature are typically held to maturity, are classified as such. The Company’s other readily marketable cash equivalents are classified as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related tax, reported in accumulated other comprehensive (loss) income (AOCI). Adjustments to the fair value of investments classified as available-for-sale are recorded as an increase or decrease in AOCI, unless the adjustment is considered an other-than-temporary impairment, in which case the adjustment is recorded as a charge in the Consolidated Statements of Income. The Company periodically evaluates its investments for impairment. There were no other-than-temporary impairments of investments in any of the fiscal years presented. 50 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Realized gains or losses on investments are determined based on the specific identification basis and are recognized in nonoperating (income) expense. There were no material net realized gains or losses from the sales of available-for-sale investments during any of the fiscal periods presented. The components of the Company’s cash and cash equivalents as of October 29, 2022 and October 30, 2021 were as follows: 2022 2021 Cash $ 1,016,027 $ 1,314,967 Available-for-sale securities 454,545 662,997 Total cash and cash equivalents $ 1,470,572 $ 1,977,964 See Note 2j, Fair Value , of the Notes to Consolidated Financial Statements for additional information on the Company’s cash equivalents. c. Supplemental Cash Flow Statement Information 2022 2021 2020 Cash paid during the fiscal year for: Income taxes $ 821,683 $ 388,115 $ 237,691 Interest $ 172,957 $ 197,841 $ 185,854 Noncash issuance of common stock for the Acquisition $ — $ 27,754,161 $ — Fair value of partially vested equity replacement awards issued for the Acquisition $ — $ 194,890 $ — d. Inventories Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. The valuation of inventory requires the Company to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The Company employs a variety of methodologies to determine the net realizable value of its inventory. While a portion of the calculation to record inventory at its net realizable value is based on the age of the inventory and lower of cost or net realizable value calculations, a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products. If actual demand is less than the Company’s estimates, impairment charges, which are recorded to cost of sales, may need to be recorded in future periods. Inventory in excess of saleable amounts is not valued, and the remaining inventory is valued at the lower of cost or net realizable value. Inventories at October 29, 2022 and October 30, 2021 were as follows: 2022 2021 Raw materials $ 110,908 $ 71,639 Work in process 904,648 858,627 Finished goods 384,358 270,344 Total inventories $ 1,399,914 $ 1,200,610 e. Property, Plant and Equipment The following table presents details of the Company's property, plant and equipment (PP&E), net of accumulated depreciation: 2022 2021 Land and buildings $ 1,459,981 $ 1,392,364 Machinery and equipment 3,817,812 3,210,879 Office equipment 152,858 164,431 Leasehold improvements 118,856 167,623 5,549,507 4,935,297 Less accumulated depreciation and amortization 3,148,203 2,956,246 Net property, plant and equipment $ 2,401,304 $ 1,979,051 51 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) PP&E is recorded at cost, less allowances for depreciation. The straight-line method of depreciation is used for all classes of assets for financial statement purposes while both straight-line and accelerated methods are used for income tax purposes. Leasehold improvements are depreciated over the lesser of the term of the lease or the useful life of the asset. Repairs and maintenance charges are expensed as incurred. Depreciation is based on the following ranges of estimated useful lives: Buildings Up to 30 years Machinery & equipment 3 - 10 years Office equipment 3 - 10 years Leasehold improvements 7 - 20 years The Company reviews PP&E for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Recoverability of these assets is determined by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. If such assets are not impaired, but their useful lives have decreased, the remaining net book value is depreciated over the revised useful life. PP&E is identified as held for sale when it meets the held for sale criteria of Accounting Standards Codification Topic 360, Property, Plant, and Equipment (ASC 360). Depreciation is not recorded for assets that are classified as held for sale. When an asset meets the held for sale criteria, the lower of its carrying value or fair value less costs to sell is reclassified from the relevant PP&E line items and into current assets on the balance sheet, where it remains until it is either sold or it no longer meets the held for sale criteria. If the assets held for sale were carried at fair value, it would be considered a Level 3 fair value measurement, and determined based on the use of appraisals and input from market participants. f. Goodwill and Intangible Assets Goodwill The Company evaluates goodwill for impairment annually, as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable, utilizing either the qualitative or quantitative method. The Company tests goodwill for impairment at the reporting unit level, which the Company has determined is consistent with its identified operating segments, on an annual basis on the first day of the fourth quarter (on or about July 31) or more frequently if indicators of impairment exist or the Company reorganizes its operating segments or reporting units. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value. When using the qualitative method, the Company considers several factors, including the following: – the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment; – the carrying values of these reporting units as of the assessment date compared to the previously calculated fair values as of the date of the most recent quantitative impairment analysis; – the Company's current forecasts as compared to the forecasts included in the most recent quantitative impairment analysis; – public information from competitors and other industry information to determine if there were any significant adverse trends in the Company's competitors' businesses; – changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of the Company's reporting units; – changes in the Company's market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of its reporting units had significantly decreased; and – whether there had been any significant increases to the weighted-average cost of capital rates for each reporting unit, which could materially lower the Company's prior valuation conclusions under a discounted cash flow approach. If the Company elects not to use this option, or it determines that it is more likely than not that the fair value of a reporting unit is less than its net book value, then the Company performs the quantitative goodwill impairment test. The quantitative goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount. If 52 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, the Company considers income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Management determines the fair values of the reporting units using a weighting of the income and market approaches. Under the income approach, it uses a discounted cash flow methodology, which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates and long-term discount rates, among others. For the market approach, it uses the guideline public company method. Under this method management utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain its respective fair value. In order to assess the reasonableness of the calculated values, the aggregate fair values of the reporting units are reconciled to the Company's total market capitalization, allowing for a reasonable control premium. In fiscal 2022, the Company used a combination of the qualitative and quantitative methods of assessing goodwill for the Company's reporting units. In fiscal 2021, the Company used the quantitative method of assessing goodwill for the Company's reporting units. In all periods presented, management concluded the reporting units' fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed. The Company’s next annual impairment assessment will be performed as of the first day of the fourth quarter of the fiscal year ending October 28, 2023 (fiscal 2023) unless indicators arise that would require the Company to reevaluate at an earlier date. The following table presents the changes in goodwill during fiscal 2022 and fiscal 2021: 2022 2021 Balance at beginning of year $ 26,918,470 $ 12,278,425 Acquisition of Maxim (Note 6) 15,267 14,645,076 Foreign currency translation adjustment and other adjustments ( 20,603 ) ( 5,031 ) Balance at end of year $ 26,913,134 $ 26,918,470 Intangible Assets The Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable. If required, recoverability of these assets is determined by comparison of their carrying value to the estimated future undiscounted cash flows the assets are expected to generate over their remaining estimated useful lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their estimated fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. In-process research and development (IPR&D) assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development (R&D) efforts. Upon completion of the projects, the IPR&D assets are reclassified to technology-based intangible assets and amortized over their estimated useful lives. As of October 29, 2022 and October 30, 2021, the Company’s intangible assets consisted of the following: October 29, 2022 October 30, 2021 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer relationships $ 10,335,903 $ 3,011,889 $ 10,336,477 $ 2,191,729 Technology-based 7,555,708 1,804,596 7,559,503 819,204 Trade-name 72,200 58,117 72,200 47,803 Backlog 361,200 213,346 361,200 32,746 Assembled workforce 1,800 1,679 1,800 750 IPR&D 28,222 — 28,222 — Total (1) $ 18,355,033 $ 5,089,627 $ 18,359,402 $ 3,092,232 _______________________________________ (1) Foreign intangible asset carrying amounts are affected by foreign currency translation. 53 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Amortization expense related to intangible assets was $ 2,014.2 million, $ 843.4 million and $ 577.1 million in fiscal 2022, 2021 and 2020, respectively, and is recorded in Cost of sales and Amortization of intangibles on the Consolidated Statements of Income. The remaining amortization expense will be recognized over the remaining weighted average life of approximately 4.5 years. The Company expects annual amortization expense for intangible assets as follows: Fiscal Year Amortization Expense 2023 $ 1,955,394 2024 $ 1,732,867 2025 $ 1,572,000 2026 $ 1,522,480 2027 $ 1,520,586 g. Grant Accounting Certain of the Company’s subsidiaries have received grants from governmental agencies. These grants include capital, employment and research and development grants. Capital grants for the acquisition of property, plant and equipment are netted against the related capital expenditures and amortized as a credit to depreciation expense over the estimated useful life of the related asset. Employment grants, which relate to employee hiring and training, and research and development grants are recognized in earnings in the period in which the related expenditures are incurred by the Company. h. Translation of Foreign Currencies The functional currency for certain of the Company’s foreign operations is the applicable local currency. Gains and losses resulting from translation of these foreign currencies into U.S. dollars are recorded in AOCI. Transaction gains and losses and re-measurement of foreign currency denominated assets and liabilities are included in income currently, including those at the Company’s principal foreign manufacturing operations where the functional currency is the U.S. dollar. Foreign currency transaction gains or losses are included in Other, net in the Consolidated Statements of Income. i. Derivative Instruments and Hedging Agreements Foreign Exchange Exposure Management — The Company enters into forward foreign currency exchange contracts to offset certain operational and balance sheet exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company’s operations, assets and liabilities that are denominated in currencies other than the U.S. dollar, primarily the Euro; other significant exposures include the British Pound, Philippine Peso, Thai Baht, Malaysian Ringgit and the Japanese Yen. Derivative instruments are employed to eliminate or minimize certain foreign currency exposures that can be confidently identified and quantified. These foreign currency exchange contracts are entered into to support transactions made in the normal course of business, and accordingly, are not speculative in nature. The contracts are for periods consistent with the terms of the underlying transactions, generally one year or less. Hedges related to anticipated transactions are matched with the underlying exposures at inception and designated and documented as cash flow hedges. They are qualitatively evaluated for effectiveness on a quarterly basis. The gain or loss on the derivatives are reported as a component of AOCI in shareholders’ equity and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction in the same period during which the hedged transaction affects earnings. The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges as of October 29, 2022 and October 30, 2021 was $ 307.1 million and $ 343.6 million, respectively. The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Consolidated Balance Sheets as of October 29, 2022 and October 30, 2021 were as follows: Fair Value At Balance Sheet Location October 29, 2022 October 30, 2021 Forward foreign currency exchange contracts Accrued liabilities $ 18,050 $ 7,113 Additionally, the Company enters into forward foreign currency contracts that economically hedge the gains and losses generated by the re-measurement of certain recorded assets and liabilities in a non-functional currency. Changes in the fair value of these undesignated hedges are recognized in other (income) expense immediately as an offset to the changes in the fair value of the asset or liability being hedged. As of October 29, 2022 and October 30, 2021, the total notional amount of these undesignated hedges was $ 246.4 million and $ 120.0 million, respectively. 54 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company estimates that $ 12.9 million, net of tax, of losses of forward foreign currency derivative instruments included in AOCI will be reclassified into earnings within the next 12 months. All of the Company’s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheets on a net basis. As of October 29, 2022 and October 30, 2021, none of the netting arrangements involved collateral. The following table presents the gross amounts of the Company's forward foreign currency exchange contracts and the net amounts recorded in the Company's Consolidated Balance Sheets as of October 29, 2022 and October 30, 2021: October 29, 2022 October 30, 2021 Gross amount of recognized liabilities $ ( 19,846 ) $ ( 8,404 ) Gross amounts of recognized assets 2,862 319 Net liabilities offset and presented in the Consolidated Balance Sheets $ ( 16,984 ) $ ( 8,085 ) Interest Rate Exposure Management — The Company's current and future debt may be subject to interest rate risk. The Company utilizes interest rate derivatives to alter interest rate exposure in an attempt to reduce the effects of the changes in interest rates. During fiscal 2019, the Company entered into an interest rate swap agreement which locked in the interest rate for up to $ 1 billion in future debt issuances. The interest rate swap was designated and qualified as a cash flow hedge. During fiscal 2021, the Company issued $ 1 billion of 2.100 % Senior Notes due October 2031, and the swap was cash terminated in the amount of $ 153.2 million. The accumulated loss recorded in AOCI will be reclassified to interest expense on a straight-line basis over the 10-year term of such Senior Notes. 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 October 29, 2022 and October 30, 2021, 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. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Company’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the obligations of the Company to the counterparties. As a result of the above considerations, the Company does not consider the risk of counterparty default to be significant. The Company records the fair value of its derivative financial instruments in its Consolidated Financial Statements in other current assets, other assets, accrued liabilities and other non-current liabilities, depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of AOCI. Changes in the fair value of cash flow hedges are recorded in AOCI and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction when the underlying contract matures. Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur. For information on the unrealized holding gains (losses) on derivatives included in and reclassified out of AOCI into the Consolidated Statements of Income related to forward foreign currency exchange contracts, see Note 2o, Accumulated Other Comprehensive (Loss) Income, of the Notes to Consolidated Financial Statements. j. Fair Value The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. 55 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. The tables below, set forth by level, presents the Company’s financial assets and liabilities, excluding accrued interest components, that were accounted for at fair value on a recurring basis as of October 29, 2022 and October 30, 2021. The tables exclude cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value. As of October 29, 2022 and October 30, 2021, the Company held $ 1,016.0 million and $ 1,315.0 million, respectively, of cash that was excluded from the tables below. October 29, 2022 Fair Value measurement at Reporting Date using: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Assets Cash equivalents: Available-for-sale: Government and institutional money market funds $ 454,545 $ — $ 454,545 Other assets: Deferred compensation investments 63,211 — 63,211 Total assets measured at fair value $ 517,756 $ — $ 517,756 Liabilities Forward foreign currency exchange contracts (1) $ — $ 16,984 $ 16,984 Total liabilities measured at fair value $ — $ 16,984 $ 16,984 (1) The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 2i, Derivative Instruments and Hedging Agreements , of the Notes to Consolidated Financial Statements for more information related to the Company's master netting arrangements. 56 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) October 30, 2021 Fair Value measurement at Reporting Date using: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Assets Cash equivalents: Available-for-sale: Government and institutional money market funds $ 662,997 $ — $ 662,997 Other assets: Deferred compensation investments 71,301 — 71,301 Total assets measured at fair value $ 734,298 $ — $ 734,298 Liabilities Forward foreign currency exchange contracts (1) $ — $ 8,085 $ 8,085 Total liabilities measured at fair value $ — $ 8,085 $ 8,085 (1) The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 2i, Derivative Instruments and Hedging Agreements , of the Notes to Consolidated Financial Statements for more information related to the Company's master netting arrangements. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash equivalents — These investments are adjusted to fair value based on quoted market prices or are determined using a yield curve model based on current market rates. Deferred compensation plan investments — The fair value of these mutual fund, money market fund and equity investments are based on quoted market prices. Forward foreign currency exchange contracts — The estimated fair value of forward foreign currency exchange contracts, which includes derivatives that are accounted for as cash flow hedges and those that are not designated as cash flow hedges, is based on the estimated amount the Company would receive if it sold these agreements at the reporting date taking into consideration current exchange rates as well as the creditworthiness of the counterparty for assets and the Company’s creditworthiness for liabilities. The fair value of these instruments is based upon valuation models using current market information such as strike price, spot rate, forward points, and maturity date. Financial Instruments Not Recorded at Fair Value on a Recurring Basis Santa Clara, California leased property asset group - As a result of a sublease transaction involving a leased property in Santa Clara, California during the third quarter of 2022, the Company estimated the fair value of the sublease assets using discounted cash flows from the estimated net sublease rental income discounted at a market rate and recorded an impairment charge which represented the excess carrying value of the asset group associated with the Santa Clara, California leased property over its estimated fair value. These assets are considered a Level 2 fair value measurement. See Note 5, Special Charges, Net , of the Notes to Consolidated Financial Statements for additional information. Debt — The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis. The fair values of the senior unsecured notes are obtained from broker prices and are classified as Level 1 measurements according to the fair value hierarchy. See Note 14, Debt , of the Notes to Consolidated Financial Statements for further discussion related to outstanding debt. 57 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) October 29, 2022 October 30, 2021 Principal Amount Outstanding Fair Value Principal Amount Outstanding Fair Value Maxim 2023 Notes, due March 2023 $ — $ — $ 500,000 $ 520,236 2024 Notes, due October 2024 500,000 491,982 500,000 500,482 2025 Notes, due April 2025 400,000 383,378 400,000 423,265 2026 Notes, due December 2026 900,000 851,479 900,000 986,243 Maxim 2027 Notes, due June 2027 59,788 54,771 500,000 542,942 2027 Notes, due June 2027 440,212 410,091 — — 2028 Notes, due October 2028 750,000 621,093 750,000 743,109 2031 Notes, due October 2031 1,000,000 786,772 1,000,000 996,702 2032 Notes, due October 2032 300,000 278,359 — — 2036 Notes, due December 2036 144,278 126,274 144,278 176,960 2041 Notes, due October 2041 750,000 513,709 750,000 758,246 2045 Notes, due December 2045 332,587 313,931 332,587 469,592 2051 Notes, due October 2051 1,000,000 640,766 1,000,000 1,029,830 Total Debt $ 6,576,865 $ 5,472,605 $ 6,776,865 $ 7,147,607 k. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates relate to the useful lives of fixed assets and identified intangible assets; allowances for doubtful accounts and customer returns; the net realizable value of inventory; potential reserves relating to litigation matters; accrued liabilities, including estimates of variable consideration related to distributor sales; accrued taxes; uncertain tax positions; deferred tax valuation allowances; assumptions pertaining to stock-based compensation payments and defined benefit plans; and fair value of acquired assets and liabilities, including inventory, property, plant and equipment, goodwill, and acquired intangibles; and other reserves. Actual results could differ from those estimates and such differences may be material to the financial statements. l. Concentrations of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments and trade accounts receivable. The Company maintains cash and cash equivalents with high credit quality counterparties, continuously monitors the amount of credit exposure to any one issuer and diversifies its investments in order to minimize its credit risk. The Company sells its products to distributors and original equipment manufacturers (OEMs) involved in a variety of industries including industrial, communications, automotive and consumer end markets. The Company has adopted credit policies and standards to accommodate growth in these markets. The Company performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, the Company may require letters of credit from customers in certain circumstances. The Company provides reserves for estimated amounts of accounts receivable that may not be collected. The Company's largest customer, which is a distributor rather than an end customer, accounted for approximately 22 %, 26 %, and 29 % of net revenues in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The Company's next largest customer, which is also a distributor, accounted for approximately 10 % and 11 % of net revenues in fiscal 2022 and fiscal 2021, respectively. This next largest customer accounted for less than 10% of net revenues in fiscal 2020. No other customer accounted for greater than 10% of revenue in any period presented. m. Concentration of Other Risks The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. The Company’s financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new 58 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) manufacturing technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors, third-party wafer fabricators and independent distributors. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. The Company is exposed to the risk of obsolescence of its inventory depending on the mix of future business. Additionally, more than half of the Company’s purchases of external wafer and foundry services are from a limited number of suppliers, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others. If these suppliers or any of the Company’s other key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components, on the time schedule and of the quality that the Company requires, the Company may be forced to engage additional or replacement suppliers, which could result in significant expenses and disruptions or delays in manufacturing, product development and shipment of product to the Company’s customers. Given the current demand environment in the semiconductor industry, the Company expects to face a constrained supply environment in the near term. Management is working to balance these constraints as it shifts the Company's global resources and adds capacity where appropriate. n. Revenue Recognition Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company recognizes revenue when all of the following criteria are met: (1) the Company has entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. The majority of the Company's shipping terms permit the Company to recognize revenue at point of shipment or delivery. Certain shipping terms require the goods to be through customs or be received by the customer before title passes. In those instances, the Company defers the revenue recognized until title has passed. Shipping costs are charged to selling, marketing, general and administrative expense as incurred. Sales taxes are excluded from revenue. Revenue from contracts with the United States government, government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion. These measures are used to measure results directly and is generally the best measure of progress toward completion in circumstances in which a reliable measure of output can be established. Estimated revenue in excess of amounts billed is reported as unbilled receivables. Contract accounting requires judgment in estimating costs and assumptions related to technical issues and delivery schedule. Contract costs include material, subcontract costs, labor and an allocation of indirect costs. The estimation of costs at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract. Changes in contract performance, estimated gross margin, including the impact of final contract settlements, and estimated losses are recognized in the period in which the changes or losses are determined. Performance Obligations : Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit products. Such sales represent a single performance obligation because the sale is one type of good or includes multiple goods that are neither capable of being distinct nor separable from the other promises in the contract. This performance obligation is satisfied when control of the product is transferred to the customer, which occurs upon shipment or delivery. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with an original expected duration of one year or less. The Company generally offers a twelve-month warranty for its products. The Company’s warranty policy provides for replacement of defective products. Specific accruals are recorded for known product warranty issues. Product warranty expenses during fiscal 2022, fiscal 2021 and fiscal 2020 were not material. Transaction Price : The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts. Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period. Variable consideration includes sales in which the amount of consideration that the Company will receive is unknown as of the end of a reporting period. The vast majority of such consideration are credits issued to the distributor due to price protection, but also include sales made to distributors under agreements that allow certain rights of return, referred to as stock rotation. Price protection represents price discounts granted to certain distributors to allow the distributor to earn an appropriate margin on sales negotiated with certain customers and in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor. Stock rotation allows distributors limited levels of returns in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory. A liability for distributor credits covering variable consideration is made based on the Company's estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially 59 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) consistent with the provisions the Company has made based on its historical estimates. For fiscal 2022 and fiscal 2021, sales to distributors were approximately $ 7.5 billion and $ 4.6 billion, respectively, net of variable consideration for which the liability balances as of October 29, 2022 and October 30, 2021 were $ 749.4 million and $ 664.2 million, respectively, and were recorded in Accrued liabilities on the Consolidated Balance Sheets. Contract Balances : Accounts receivable represents the Company’s unconditional right to receive consideration from its customers. Payments are typically due within 30 to 45 days of invoicing and do not include a significant financing component. To date, there have been no material credit losses on accounts receivable. There were no material contract assets or contract liabilities recorded on the Consolidated Balance Sheets in any of the periods presented. o. Accumulated Other Comprehensive (Loss) Income AOCI includes certain transactions that have generally been reported in the Consolidated Statement of Shareholders’ Equity. The changes in components of AOCI at October 29, 2022 and October 30, 2021 consisted of the following: Foreign currency translation adjustment Unrealized holding gains/losses on derivatives Pension plans Total October 30, 2021 $ ( 25,795 ) $ ( 123,754 ) $ ( 37,016 ) $ ( 186,565 ) Other comprehensive income before reclassifications ( 46,341 ) ( 33,233 ) 36,035 ( 43,539 ) Amounts reclassified out of other comprehensive loss — 39,526 2,334 41,860 Tax — ( 2,152 ) ( 7,756 ) ( 9,908 ) Other comprehensive income ( 46,341 ) 4,141 30,613 ( 11,587 ) October 29, 2022 $ ( 72,136 ) $ ( 119,613 ) $ ( 6,403 ) $ ( 198,152 ) The amounts reclassified out of AOCI into the Consolidated Statements of Income, with presentation location during each period were as follows: Comprehensive Income Component 2022 2021 Location Changes in unrealized holding gains/losses on derivatives Currency forwards $ 9,474 $ ( 2,682 ) Cost of sales 5,637 ( 1,622 ) Research and development 9,492 ( 958 ) Selling, marketing, general and administrative Interest rate derivatives 14,923 12,550 Interest expense 39,526 7,288 Total before tax ( 5,054 ) ( 189 ) Tax $ 34,472 $ 7,099 Net of tax Amortization of pension components included in the computation of net periodic benefit cost Actuarial losses 2,334 2,979 (1) ( 361 ) 339 Tax $ 1,973 $ 3,318 Net of tax Total amounts reclassified out of AOCI, net of tax $ 36,445 $ 10,417 _______________________________________ (1) The amortization of pension components is included in the computation of net periodic benefit cost. See Note 11, Retirement Plans, of the Notes to Consolidated Financial Statements for further information . 60 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) p. Income Taxes The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of income tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of the recognition of certain expenses for tax and financial statement purposes. The likelihood of the realization of deferred tax assets is assessed and a corresponding valuation allowance is recorded as necessary if management determines those deferred tax assets may not be realized due to the uncertainty of the timing and amount to be realized of certain state and international tax credit carryovers. In reaching this conclusion, the Company evaluates certain relevant criteria including the existence of deferred tax liabilities that can be used to realize deferred tax assets, the taxable income in prior carryback years in the impacted state and international jurisdictions that can be used to absorb net operating losses and taxable income in future years. Judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to these deferred tax assets, which may result in an increase or decrease to the income tax provision in future periods. The Company accounts for uncertain tax positions by first determining if it is “more likely than not” that a tax position will be sustained by the appropriate taxing authorities prior to recording any benefit in the Consolidated Financial Statements. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. For those tax positions where it is more likely than not that a tax position will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Management classifies interest and penalties related to uncertain tax positions within the provision for (benefit from) income taxes line of the Consolidated Statements of Income. Management reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in known facts or circumstances, changes in tax law, effectively settled issues under audit, and new guidance on legislative interpretations. A change in these factors could result in the recognition of an increase or decrease to the Company's income tax provision which could materially impact its consolidated financial position and results of operations. In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities. Although the Company believes its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in the historical income tax provisions and income tax liabilities. In the event management's assumptions are incorrect, the differences could have a material impact on its income tax provision and operating results in the period in which such determination is made. In addition to the factors described above, the current and expected effective tax rate is based on then-current tax law. Significant changes in enacted tax law could affect these estimates. See Note 12, Income Taxes, of the Notes to Consolidated Financial Statements for further information related to income taxes. q. Earnings Per Share of Common Stock Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options and restricted stock units is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money and restricted stock units. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of in-the-money stock options. Potential shares related to certain of the Company’s outstanding stock options and restricted stock units were excluded because they were anti-dilutive. Those potential shares, determined based on the weighted average exercise prices during the respective periods, could be dilutive in the future. In connection with the acquisition of Linear Technology Corporate (Linear), the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees. These restricted stock awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant. These unvested stock-based compensation awards are considered participating securities and the two-class method is used for purposes of calculating earnings per share. 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, as shown in the table below. The difference between the income allocated to participating securities under the basic and diluted two-class methods is not material. 61 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the computation of basic and diluted earnings per share: 2022 2021 2020 Net income (1) $ 2,748,561 $ 1,390,422 $ 1,220,761 Basic shares: Weighted-average shares outstanding 519,226 397,462 368,633 Earnings per common share basic $ 5.29 $ 3.50 $ 3.31 Diluted shares: Weighted-average shares outstanding 519,226 397,462 368,633 Assumed exercise of common stock equivalents 3,952 3,826 3,340 Weighted-average common and common equivalent shares 523,178 401,288 371,973 Earnings per common share diluted $ 5.25 $ 3.46 $ 3.28 Anti-dilutive shares related to: Outstanding stock options 608 424 460 _______________________________________ (1) For all fiscal years presented, income allocated to participating securities is not material. r. Stock-Based Compensation Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards ultimately expected to vest and is recognized as an expense on a straight-line basis over the vesting period, which is generally four years for stock options and restricted stock units, or in annual installments of 25 % on each of the first, second, third and fourth anniversaries of the date of grant. Restricted stock units with service and performance or market conditions generally vest in one installment on the third anniversary of the date of grant. For grants issued prior to fiscal 2018, the vesting period was generally five years for stock options, or in annual installments of 20 % on each of the first, second, third, fourth and fifth anniversaries of the date of grant and in one installment on the third anniversary of the date of grant for restricted stock units/awards. The maximum contractual term of all stock options is ten years . Determining the amount of stock-based compensation expense to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of awards. These estimates may be based on different valuation models depending upon the type of award and may include assumptions, such as expected volatility, expected term, risk-free interest rate, expected dividend yield, forfeiture rate and others. The Company uses the Black-Scholes valuation model to calculate the grant-date fair value of stock option awards. The grant-date fair value of restricted stock units with a service condition and restricted stock units with both service and performance conditions is calculated using the value of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting. For restricted stock units with both service and performance conditions, this grant-date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability of achievement of that performance condition. If the Company determines that an award is unlikely to vest, any previously recorded stock-based compensation expense is reversed in the period of that determination. The grant date fair value of restricted stock units and performance-based stock options with both service and market conditions is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the performance condition stipulated in the award grant, including the possibility that the market condition may not be satisfied. The fair value of shares to be issued under the Company's employee stock purchase plan (ESPP) is computed using the Black-Scholes model at the commencement of an offering period in June and December of each year. Stock-based compensation for the ESPP is expensed using an accelerated amortization model. Additionally, the Company estimates forfeitures at least annually based on historical experience and revises the estimates of forfeiture in subsequent periods if actual forfeitures differ from those estimates. See Note 3, Stock-Based Compensation and Shareholders' Equity , of the Notes to Consolidated Financial Statements for additional information relating to stock-based compensation. 62 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) s. New Accounting Pronouncements Standards Implemented During Fiscal 2022 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 adopted this standard in the first quarter of fiscal 2022 with no material impact on the Company's financial position and results of operations. Standards to Be Implemented Acquired Contract Assets and Contract Liabilities In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance (ASC 805-20-30-28), the acquirer should determine what contract assets and/or contract liabilities it would have recorded under ASC 606 (the revenue guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 is effective for the Company in the first quarter of fiscal 2024. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations. 3. Stock-Based Compensation and Shareholders’ Equity Equity Compensation Plans The Company grants, or has granted, stock options and other stock and stock-based awards under the Company's 2020 Equity Incentive Plan (2020 Plan), which was approved by shareholders in March 2020. The 2020 Plan provides for the grant of up to 21.2 million shares of the Company’s common stock, which includes shares under the Company’s previous equity compensation plans, including the Amended and Restated 2006 Stock Incentive Plan and the Amended and Restated 2010 Equity Incentive Plan. The 2020 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Employees, officers, directors, consultants and advisors of the Company and its subsidiaries are eligible to be granted awards under the 2020 Plan. No award may be made under the 2020 Plan after March 11, 2030, but awards previously granted may extend beyond that date. The Company does not intend to grant further equity awards under any previous legacy equity compensation plans. In connection with the Acquisition, the Company assumed the Maxim 1996 Stock Incentive Plan (1996 Plan) and may grant stock options and other stock and stock-based awards under the 1996 Plan. As of October 29, 2022, a total of 16.8 million common shares were available for future grant under the 2020 Plan and 8.7 million common shares were available for future grant under the 1996 Plan. Maxim Replacement Awards In connection with the Acquisition, the Company issued equity awards, consisting of restricted stock awards and restricted stock units (replacement awards), to certain Maxim employees in replacement of Maxim equity awards. The replacement awards consist of restricted stock and restricted stock unit awards for approximately 3.7 million shares of the Company's common stock with a weighted average grant date fair value of $ 161.63 . The terms and intrinsic value of these replacement awards are substantially the same as the converted Maxim awards. The fair value of the replacement awards associated with services rendered through the Acquisition Date was recognized as a component of the total acquisition consideration, and the remaining fair value of the replacement awards associated with post-Acquisition services will be recognized as an expense on a straight-line basis over the remaining vesting period. 63 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Modification of Awards The Company has, from time to time, modified the terms of its equity awards to employees and directors. The modifications made to the Company’s equity awards in fiscal 2022, fiscal 2021 and fiscal 2020 did not result in significant incremental compensation costs, either individually or in the aggregate. Grant-Date Fair Value of Stock Options Information pertaining to the Company’s stock option awards and the related estimated weighted-average assumptions to calculate the fair value of stock options using the Black-Scholes valuation model granted in fiscal 2021 and fiscal 2020 is below. The Company did no t grant stock option awards in fiscal 2022. 2021 2020 Options granted (in thousands) 644 359 Weighted-average exercise price $ 145.04 $ 94.41 Weighted-average grant-date fair value $ 33.35 $ 18.81 Assumptions: Weighted-average expected volatility 35.3 % 29.5 % Weighted-average expected term (in years) 5.0 5.0 Weighted-average risk-free interest rate 0.8 % 0.7 % Weighted-average expected dividend yield 1.9 % 2.6 % Expected volatility — The Company is responsible for estimating volatility and has considered a number of factors, including third-party estimates. The Company currently believes that the exclusive use of implied volatility results in the best estimate of the grant-date fair value of employee stock options because it reflects the market’s current expectations of future volatility. In evaluating the appropriateness of exclusively relying on implied volatility, the Company concluded that: (1) options in the Company’s common stock are actively traded with sufficient volume on several exchanges; (2) the market prices of both the traded options and the underlying shares are measured at a similar point in time to each other and on a date close to the grant date of the employee share options; (3) the traded options have exercise prices that are both near-the-money and close to the exercise price of the employee share options; and (4) the remaining maturities of the traded options used to estimate volatility are at least one year . Expected term — The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company believes that this historical data is currently the best estimate of the expected term of a new option, and that generally its employees exhibit similar exercise behavior. Risk-free interest rate — The yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption is used as the risk-free interest rate. Expected dividend yield — Expected dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors for the current quarter and dividing that result by the closing stock price on the date of grant. Until such time as the Company’s Board of Directors declares a cash dividend for an amount that is different from the current quarter’s cash dividend, the current dividend will be used in deriving this assumption. Cash dividends are not paid on options, restricted stock, replacement awards or restricted stock units. In connection with the acquisition of Linear, the Company granted restricted stock awards to replace outstanding restricted stock awards of Linear employees. These restricted stock awards specific to legacy Linear awards entitle recipients to voting and nonforfeitable dividend rights from the date of grant. 64 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Employee Stock Purchase Plan (ESPP) Beginning in fiscal 2022, the Company offers an ESPP to eligible employees, providing the opportunity to purchase shares of the Company's common stock at a discount through payroll deductions. Offering periods begin in June and December each year. U.S. employees are allowed to purchase the Company's common stock at the lesser of 85 % of the fair market value of the common stock at either the beginning or end of the offering period. Eligible employees outside of the U.S. are allowed to purchase the Company's common stock at the lesser of 80 % of the fair market value of the common stock at either the beginning or end of the offering period. Stock-Based Compensation Expense The amount of stock-based compensation expense recognized during a period is based on the value of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award. Based on an analysis of its historical forfeitures, the Company has applied an annual forfeiture rate of 5.0 % to all unvested stock-based awards as of October 29, 2022. This analysis will be re-evaluated annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those awards that vest. Total stock-based compensation expense recognized is as follows: 2022 2021 2020 Cost of sales $ 36,773 $ 22,028 $ 17,684 Research and development 121,298 86,820 73,366 Selling, marketing, general and administrative 133,900 80,099 56,838 Special charges, net 31,516 54,664 1,630 Total stock-based compensation expense $ 323,487 $ 243,611 $ 149,518 As of October 29, 2022 and October 30, 2021, the Company capitalized $ 13.1 million and $ 8.7 million, respectively, of stock-based compensation in inventory. Stock-Based Compensation Activity A summary of the activity under the Company’s stock option plans as of October 29, 2022 and changes during the fiscal year then ended is presented below: Options Outstanding (in thousands) Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term in Years Aggregate Intrinsic Value Options outstanding at October 30, 2021 3,746 $ 85.22 Options exercised ( 545 ) $ 62.16 Options forfeited ( 7 ) $ 97.94 Options outstanding at October 29, 2022 3,194 $ 89.13 4.9 $ 178,511 Options exercisable at October 29, 2022 2,351 $ 73.93 3.8 $ 166,927 Options vested or expected to vest at October 29, 2022 (1) 3,161 $ 88.67 4.9 $ 178,134 _______________________________________ (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. The total intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) during fiscal 2022, fiscal 2021 and fiscal 2020 was $ 56.2 million, $ 93.2 million and $ 76.3 million, respectively. 65 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary of the Company’s restricted stock unit and award activity as of October 29, 2022 and changes during the fiscal year then ended is presented below: Restricted Stock Units/Awards Outstanding (in thousands) Weighted- Average Grant- Date Fair Value Per Share Restricted stock units/awards outstanding at October 30, 2021 5,924 $ 132.59 Units/Awards granted 2,173 $ 154.46 Restrictions lapsed ( 2,156 ) $ 128.19 Forfeited ( 619 ) $ 139.12 Restricted stock units/awards outstanding at October 29, 2022 5,322 $ 142.54 As of October 29, 2022, there was $ 545.2 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options, restricted stock awards and restricted stock unit awards. That cost is expected to be recognized over a weighted-average period of 1.4 years. The total grant-date fair value of awards that vested during fiscal 2022, fiscal 2021 and fiscal 2020 was approximately $ 283.0 million, $ 207.0 million and $ 174.1 million, respectively. Common Stock Repurchases In fiscal 2021, the Company entered into accelerated share repurchase agreements (ASR) with third party financial institutions, paid $ 2.5 billion and received an initial delivery of 12.3 million shares of common stock, which represented approximately 80 % of the notional amount of the ASR. As of October 30, 2021, the Company recorded the remaining 20 %, or $ 500.0 million, within Prepaid expenses and other current assets on the Consolidated Balance Sheet, which was utilized during the first quarter of fiscal 2022. During the first quarter of fiscal 2022, the ASR was completed and an additional 2.1 million shares of common stock were received as final settlement of the ASR. In total, the Company repurchased 14.4 million shares of common stock under the ASR at an average price per share of $ 173.77 . The Company’s share repurchase program has been in place since August 2004. In the aggregate, the Board of Directors has authorized the Company to repurchase $ 16.7 billion of the Company’s common stock under the program, which includes the $ 8.5 billion authorization approved by the Board of Directors on August 25, 2021. The Company may repurchase outstanding shares of its common stock from time to time in the open market and through privately negotiated transactions. Unless terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized under the program. As of October 29, 2022, the Company had repurchased a total of approximately 189.6 million shares of its common stock for approximately $ 11.7 billion under this program. An additional $ 4.9 billion remains available for repurchase of shares under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. Future repurchases of common stock will be dependent upon the Company's financial position, results of operations, outlook, liquidity, and other factors deemed relevant by the Company. The Company also, from time to time, repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options. The withholding amount is based on the employee's minimum statutory withholding requirement. Any future common stock repurchases will be dependent upon several factors, including the Company's financial performance, outlook, liquidity and the amount of cash the Company has available in the United States. Analog Devices Foundation During the first quarter of fiscal 2020, the Company contributed 335,654 shares of its common stock to the Analog Devices Foundation. As of the date of the charitable contribution, the shares had a fair value of approximately $ 40.0 million. This expense was recorded in Selling, marketing, general and administrative expense in the Consolidated Statement of Income. Preferred Stock The Company has 471,934 authorized shares of $ 1.00 par value preferred stock, none of which is issued or outstanding. The Board of Directors is authorized to fix designations, relative rights, preferences and limitations on the preferred stock at the time of issuance. 4. Industry, Segment and Geographic Information The Company operates and tracks its results in one reportable segment based on the aggregation of its operating segments. The Company designs, develops, manufactures and markets a broad range of integrated circuits (ICs). The Chief 66 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Executive Officer has been identified as the Company's Chief Operating Decision Maker. The Company has determined that all of the Company's operating segments share the following similar economic characteristics, and therefore meet the criteria established for operating segments to be aggregated into one reportable segment, namely: • The primary source of revenue for each operating segment is the sale of ICs. • The ICs sold by each of the Company's operating segments are manufactured using similar semiconductor manufacturing processes and raw materials in either the Company’s own production facilities or by third-party wafer fabricators using proprietary processes. • The Company sells its products to tens of thousands of customers worldwide. Many of these customers use products spanning all operating segments in a wide range of applications. • The ICs marketed by each of the Company's operating segments are sold globally through a direct sales force, third-party distributors, independent sales representatives and via the Company's website to the same types of customers. All of the Company's operating segments share a similar long-term financial model as they have similar economic characteristics. The causes for variation in operating and financial performance are the same among the Company's operating segments and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. Lastly, the number and composition of employees and the amounts and types of tools and materials required for production of products are proportionally similar for each operating segment. Revenue Trends by End Market The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the "ship to" customer information and the end customer product or application into which the Company’s product will be incorporated. As data systems for capturing and tracking this data and the Company's methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, the Company reclassifies revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within each end market. 2022 2021 2020 Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Industrial $ 6,069,332 51 % $ 4,026,909 55 % $ 3,005,585 54 % Automotive 2,515,513 21 % 1,248,169 17 % 778,714 14 % Communications 1,880,697 16 % 1,206,867 16 % 1,193,809 21 % Consumer 1,548,411 13 % 836,341 11 % 624,948 11 % Total revenue $ 12,013,953 100 % $ 7,318,286 100 % $ 5,603,056 100 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding. Revenue by Sales Channel The following tables summarize revenue by sales channel. The Company sells its products globally through a direct sales force, third party distributors, independent sales representatives and via its website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers (OEMs). Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time. 67 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2022 2021 2020 Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Distributors $ 7,458,478 62 % $ 4,589,944 63 % $ 3,216,302 57 % Direct customers 4,423,883 37 % 2,600,353 36 % 2,300,493 41 % Other 131,592 1 % 127,989 2 % 86,261 2 % Total revenue $ 12,013,953 100 % $ 7,318,286 100 % $ 5,603,056 100 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding. Geographic Information Geographic revenue information for fiscal 2022, fiscal 2021 and fiscal 2020 reflects the geographic location of the distributors or OEMs who purchased the Company's products. This may differ from the geographic location of the end customers. In all periods presented, the predominant countries comprising “Rest of North and South America” are Canada and Mexico; the predominant countries comprising “Europe” are Germany, Sweden, and the Netherlands; and the predominant countries comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore. 2022 2021 2020 Revenue United States $ 4,025,398 $ 2,389,439 $ 1,887,443 Rest of North and South America 72,497 42,830 41,250 Europe 2,534,423 1,592,989 1,245,695 Japan 1,221,549 787,966 521,720 China 2,563,536 1,614,396 1,348,011 Rest of Asia 1,596,550 890,666 558,937 Subtotal all foreign countries 7,988,555 4,928,847 3,715,613 Total revenue $ 12,013,953 $ 7,318,286 $ 5,603,056 Property, plant and equipment United States $ 1,117,404 $ 956,624 $ 579,755 Ireland 343,728 206,353 169,968 Philippines 608,474 524,128 256,470 Thailand 143,558 126,040 — Singapore (1) — — 18,518 Malaysia 119,670 84,971 53,616 All other countries 68,470 80,935 42,234 Subtotal all foreign countries 1,283,900 1,022,427 540,806 Total property, plant and equipment $ 2,401,304 $ 1,979,051 $ 1,120,561 _______________________________________ (1) As further discussed in Note 5, Special Charges , Net, of the Notes to Consolidated Financial Statements, the Company sold this facility in fiscal 2021. 5. Special Charges, Net The Company monitors global macroeconomic conditions on an ongoing basis and continues to assess opportunities for improved operational effectiveness and efficiency, as well as a better alignment of expenses with revenues. As a result of these assessments, the Company has undertaken various actions resulting in special charges over the past several years. Liabilities related to special charges, net are presented in Accrued Liabilities in the Consolidated Balance Sheets. The activity is detailed below: 68 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Accrued Special Charges Closure of Manufacturing Facilities Global Repositioning Actions Balance at November 2, 2019 $ 50,401 $ 58,895 Employee severance and benefit costs — 47,326 Facility closure costs 2,918 — Severance and benefit payments ( 5,098 ) ( 85,301 ) Facility closure cost payments ( 2,969 ) — Effect of foreign currency on accrual ( 76 ) ( 146 ) Balance at October 31, 2020 $ 45,176 $ 20,774 Employee severance and benefit costs 200 28,731 Facility closure costs 11,880 — Severance and benefit payments ( 19,602 ) ( 28,604 ) Facility closure cost payments ( 11,880 ) — Effect of foreign currency on accrual — 164 Balance at October 30, 2021 $ 25,774 $ 21,065 Employee severance and benefit costs 75 149,853 Facility closure costs 12,076 — Severance and benefit payments ( 22,805 ) ( 118,567 ) Facility closure cost payments ( 12,491 ) — Effect of foreign currency on accrual — ( 281 ) Balance at October 29, 2022 $ 2,629 $ 52,070 Closure of Manufacturing Facilities The Company recorded special charges of $ 63.8 million on a cumulative basis through October 29, 2022 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear. During the third quarter of fiscal 2022, the Company completed the sale of its Hillview wafer fabrication facility and certain equipment located in Milpitas, California, which were previously classified as held for sale, for proceeds of approximately $ 31.8 million, which resulted in a gain of $ 4.4 million. During fiscal 2021, the Company completed the sale of its facility and certain equipment in Singapore, which were previously classified as held for sale, for approximately $ 35.7 million, which resulted in a gain of $ 13.6 million. Global Repositioning Actions The Company recorded net special charges of $ 487.6 million on a cumulative basis through October 29, 2022, as part of the integration of the Acquisition and continued organizational initiatives to consolidate its global footprint related to certain manufacturing, engineering, sales, marketing and administrative offices and to better align its global workforce with the Company's long-term strategic plan. The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations, and the write-off of acquired intellectual property due to the Company's decision to discontinue certain product development strategies. 69 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In connection with the Company’s decision during the third quarter of fiscal 2022 to transition its engineering, sales, marketing and administrative activities from its leased property in Santa Clara, California to its owned property in San Jose, California, the Company entered into a sublease agreement for a portion of the leased property and intends to sublease the remainder of this property. As a result of the sublease transaction, the Company recorded an impairment charge of $ 91.9 million in net special charges which represented the excess carrying value of the associated asset group over its estimated fair value. The Company estimated fair value using cash flows from the estimated net sublease rental income discounted at a market rate. The Company allocated $ 60.6 million, $ 28.1 million and $ 3.2 million of the impairment charge to right of use assets, leasehold improvements and office equipment, respectively. The Company also recorded special charges of $ 174.8 million in fiscal 2022 primarily consisting of $ 180.4 million of severance and benefit costs, as well as charges recorded from the acceleration of equity awards in connection with the termination of certain employees in manufacturing, engineering and selling, marketing, general and administrative roles at sites assumed related to the Acquisition and various locations throughout the world, partially offset by a gain of $ 8.3 million recognized upon the sale of a business. 6. Acquisitions Maxim Integrated Products, Inc. On the Acquisition Date, the Company completed its acquisition of all of the voting interests of Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies. Under the terms of the agreement pursuant to which the Company acquired Maxim (Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company's common stock at the closing. The Company believes the combination creates an expanded suite of top-performing mixed-signal and power management technology offerings and complements the Company's legacy offerings. The results of operations of Maxim from the Acquisition Date are included in the Company’s Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and Consolidated Statement of Shareholders’ Equity for fiscal 2021. The amount of revenue attributable to Maxim included in the Company's Consolidated Statement of Income for fiscal 2021 was $ 558.8 million. The amount of Maxim's earnings included in the Consolidated Statement of Income for fiscal 2021 is impracticable to calculate. The Acquisition Date fair value of the consideration transferred in the Acquisition consisted of the following: Cash consideration (a) $ 47 Issuance of common stock (b) 27,754,161 Fair value of partially vested restricted stock and restricted stock unit replacement awards (c) 194,890 Total purchase consideration $ 27,949,098 ____________________ (a) This reflects the cash paid for fractional shares of the Company’s common stock in respect of shares of Maxim common stock outstanding. (b) The fair value is based on the issuance of approximately 169.2 million shares of the Company's common stock with a per share value of $ 164.00 on the Acquisition Date. (c) In connection with the Acquisition, the Company issued equity awards, consisting of restricted stock and restricted stock units, to certain Maxim employees in replacement of Maxim equity awards that were cancelled at closing. The replacement awards consist of restricted stock and restricted stock unit awards for approximately 3.7 million shares of the Company's common stock with a weighted average grant date fair value of $ 161.63 . This amount represents the portion of the fair value of the replacement equity awards associated with services rendered through the Acquisition Date and has been included as a component of the total purchase consideration. During fiscal 2022, the Company completed the acquisition accounting for the Acquisition. The following is a summary of the amounts recognized in accounting for the Acquisition: 70 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Cash and cash equivalents $ 2,450,597 Accounts receivable 609,245 Inventories 858,300 Prepaid expenses and other current assets 59,310 Property, plant and equipment 759,544 Intangible assets (Note 2f) 12,429,100 Goodwill (Note 2f) 14,660,343 Other long-term assets 80,373 Total assets $ 31,906,812 Accounts payable 112,828 Income taxes payable 156,592 Accrued liabilities 592,432 Long-term debt 1,072,150 Deferred income taxes 1,661,907 Other non-current liabilities 361,805 Total liabilities $ 3,957,714 Total purchase consideration $ 27,949,098 The acquired intangible assets consisted of the following, which are being amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use. Fair Value (in thousands) Weighted Average Useful Life (in Years) Customer relationships $ 5,642,100 14 Developed technology 6,425,800 8 Backlog 361,200 2 Total amortizable intangible assets $ 12,429,100 10 The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and Maxim’s assembled workforce. Future technologies do not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business. There were no significant contingencies assumed as part of the Acquisition. In aggregate, the Company recognized $ 166.9 million of transaction-related costs, including legal, accounting and other related fees that were expensed in fiscal 2022, fiscal 2021 and fiscal 2020. These costs are included in the Consolidated Statements of Income in operating expenses within Selling, marketing, general and administrative expenses (SMG&A). The following unaudited pro forma consolidated financial information for the twelve months ended October 30, 2021 combines the results of the Company for fiscal 2021 and the unaudited results of Maxim for the corresponding period through the Acquisition Date. The following unaudited pro forma consolidated financial information for the twelve months ended October 31, 2020 combines the results of the Company for fiscal 2020 and the unaudited results of Maxim for the corresponding period. The unaudited pro forma consolidated financial information assumes that the Acquisition, which closed on August 26, 2021, was completed on November 3, 2019 (the first day of fiscal 2020). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, fair value adjustments for acquired inventory, property, plant and equipment and long-term debt and compensation expense for ongoing share-based compensation arrangements that were replaced in conjunction with the Acquisition, together with the consequential tax effects. For fiscal 2020, non-recurring pro forma adjustments directly attributable to the Acquisition included pre-tax amounts of $ 602.5 million related to the acquisition accounting effect of inventories acquired and $ 54.2 million of accelerated stock-based compensation expense, together with the consequential tax effects. Additionally, $ 309.0 million of pre-tax transaction costs, together with the consequential tax effects, that were incurred 71 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) related to the Acquisition are reflected in the pro forma results for fiscal 2020. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on November 3, 2019. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition. Pro Forma Twelve Months Ended (unaudited) October 30, 2021 October 31, 2020 Revenue $ 9,541,488 $ 7,897,855 Net income (loss) $ 1,578,274 $ ( 144,198 ) Basic net income (loss) per common share $ 2.94 $ ( 0.27 ) Diluted net income (loss) per common share $ 2.91 $ ( 0.27 ) Other Acquisitions The Company has not provided pro forma results of operations for any other acquisitions completed in fiscal 2022, fiscal 2021 or fiscal 2020 herein as they were not material to the Company on either an individual or an aggregate basis. The Company included the results of operations of each acquisition in its Consolidated Statements of Income from the closing date of each acquisition. 7. Other Investments Other investments consist of interests in venture capital funds and other long-term investments. Investments are accounted for using the equity method of accounting or cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. For equity method investments, realized gains and losses are reflected in Other, net based upon the Company's ownership share of the investee's financial results. 8. Accrued Liabilities Accrued liabilities at October 29, 2022 and October 30, 2021 consisted of the following: 2022 2021 Distributor price adjustments and other revenue reserves $ 749,402 $ 664,198 Accrued compensation and benefits 465,536 381,678 Accrued special charges 54,699 46,839 Lease liabilities 53,628 52,576 Accrued interest 33,298 29,361 Accrued withholdings related to ESPP 28,131 — Accrued taxes 22,815 29,321 Accrued professional fees 7,955 152,689 Other 179,186 120,868 Total accrued liabilities $ 1,594,650 $ 1,477,530 9. Leases The Company enters into operating leases which primarily relate to certain facilities and, to a lesser extent, finance leases. Finance leases were not a material component of the Company's lease portfolio in the periods presented. 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 72 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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-three years , some of which may include options to extend the initial term of the lease. These options are included in determining the initial lease term at lease commencement only if the Company is reasonably certain to exercise the option. Lease costs are recognized on a straight-line basis as lease expense over the lease term. For leases with terms of twelve months or less the Company recognizes the related lease payments as expense either on a straight-line basis over the lease term or as incurred depending on whether the lease payments are fixed or variable. The Company subleases certain properties that are not used in its core business operations (See Note 5, Special Charges, Net , of the Notes to Consolidated Financial Statements). Sublease income was not significant for the periods presented. The following table presents supplemental balance sheet information related to the Company's operating leases: October 29, 2022 October 30, 2021 Assets Operating lease right-of-use assets in Other assets $ 262,997 $ 279,542 Liabilities Operating lease liabilities in Accrued liabilities $ 53,628 $ 52,576 Operating lease liabilities in Other non-current liabilities $ 337,279 $ 295,782 Details of the Company's operating leases are as follows: October 29, 2022 October 30, 2021 Lease expense $ 60,660 $ 50,799 Cash paid for amounts included in the measurement of operating lease liabilities Operating cash flows from operating leases $ 61,915 $ 53,724 Lease assets obtained in exchange for new lease liabilities $ 107,631 $ 25,946 Weighted average remaining lease term 7.6 years 7.9 years Weighted average discount rate 3.3 % 2.9 % The following table presents the maturities of the Company's operating lease liabilities as of October 29, 2022: Fiscal year 2023 $ 31,199 2024 68,433 2025 63,065 2026 59,156 2027 54,027 Thereafter 178,663 Total future minimum operating lease payments 454,543 Less: imputed interest ( 63,636 ) Present value of operating lease liabilities $ 390,907 The following table presents the future minimum cash receipts as a result of subleases as of October 29, 2022: Fiscal year 2023 $ 1,928 2024 12,664 2025 13,843 2026 14,259 2027 14,687 Thereafter 42,734 Total future minimum cash receipts $ 100,115 73 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 10. Commitments and Contingencies From time to time, in the ordinary course of the Company’s business, various claims, charges and litigation are asserted or commenced against the Company arising from, or related to, among other things, contractual matters, acquisitions, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits. As to such claims and litigation, the Company can give no assurance that it will prevail. On March 17, 2022, Walter E. Ryan and Ryan Asset Management, LLC, purported stockholders of Maxim, filed a putative class action in the Court of Chancery of the State of Delaware (C.A. No. 2022—0255) against the Company and the former directors of Maxim. The complaint alleges breach of fiduciary duties by the individual defendants in connection with Maxim’s agreement, as part of the merger negotiations with the Company, to suspend Maxim dividends for up to four quarters prior to the closing of the Acquisition. The complaint further alleges that the Company aided and abetted that alleged breach of fiduciary duties. The plaintiffs seek damages in an amount to be determined at trial, plaintiffs’ costs and disbursements, including reasonable attorneys’ and experts’ fees, costs and other expenses. The Company believes that it and the other defendants have meritorious defenses to these allegations; however, the Company is currently unable to determine the ultimate outcome of this matter or determine an estimate, or a range of estimates, of potential losses, if any. The Company has a supplier commitment of approximately $ 428.4 million for the purchase of materials and supplies in advance or with minimum purchase quantities through 2031. 11. Retirement Plans The Company and its subsidiaries have various savings and retirement plans covering substantially all employees. Defined Contribution Plans The Company maintains a defined contribution plan for the benefit of its eligible U.S. employees. This plan provides for Company contributions of up to 5 % of each participant’s total eligible compensation. In addition, the Company contributes an amount equal to each participant’s pre-tax contribution, if any, up to a maximum of 3 % of each participant’s total eligible compensation. The total expense related to the defined contribution plans for all eligible U.S. employees was $ 65.2 million in fiscal 2022, $ 52.1 million in fiscal 2021 and $ 48.7 million in fiscal 2020. Non-Qualified Deferred Compensation Plan The Deferred Compensation Plan (DCP) allows certain members of management and other highly-compensated employees and non-employee directors to defer receipt of all or any portion of their compensation. The DCP was established to provide participants with the opportunity to defer receiving all or a portion of their compensation, which includes salary, bonus, commissions and director fees. Under the DCP, the Company provides all participants (other than non-employee directors) with Company contributions equal to 8 % of eligible deferred contributions. The DCP is a non-qualified plan that is maintained in a rabbi trust. The fair value of the investments held in the rabbi trust are included within other investments, with the current portion of the investment included in prepaid expenses and other current assets in the Consolidated Balance Sheets. See Note 2j, Fair Value , of the Notes to Consolidated Financial Statements for further information on these investments. The deferred compensation obligation represents DCP participant accumulated deferrals and earnings thereon since the inception of the DCP net of withdrawals. The deferred compensation obligation is included within other non-current liabilities, with the current portion of the obligation in accrued liabilities in the Consolidated Balance Sheets. The Company’s liability under the DCP is an unsecured general obligation of the Company. Defined Benefit Pension and Post Retirement Benefit Plans The Company also has various defined benefit pension and other retirement plans for certain non-U.S. employees that are consistent with local statutory requirements and practices. The total expense related to the various defined benefit pension, contribution and other retirement plans for certain non-U.S. employees was $ 51.4 million in fiscal 2022, $ 45.9 million in fiscal 2021 and $ 37.6 million in fiscal 2020. The Company’s funding policy for its foreign defined benefit pension plans is consistent with the local requirements of each country. The plans’ assets consist primarily of U.S. and non-U.S. equity securities, bonds, property and cash. The Company has elected to measure defined benefit plan assets and obligations as of October 31, which is the month-end that is closest to its fiscal year-ends, which were October 29, 2022 for fiscal 2022 and October 30, 2021 for fiscal 2021. As a result of the Acquisition, the Company acquired a postretirement plan that provides postretirement medical expenses to certain former employees of a Maxim acquired company and certain former Maxim executives in the U.S. 74 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Components of Net Periodic Benefit Cost Net annual periodic benefit cost of the Company’s pension and postretirement benefit plans for fiscal 2022, fiscal 2021 and fiscal 2020 is presented in the following table: 2022 2021 2020 Service cost $ 10,914 $ 9,207 $ 8,587 Interest cost 6,148 4,071 3,917 Expected return on plan assets ( 4,540 ) ( 3,759 ) ( 5,296 ) Recognized actuarial loss 2,299 2,973 2,583 Subtotal $ 14,821 $ 12,492 $ 9,791 Curtailment impact — — ( 203 ) Settlement impact $ ( 35 ) $ ( 6 ) $ — Net periodic benefit cost $ 14,786 $ 12,486 $ 9,588 The service cost component of net periodic benefit cost above is recorded in Cost of sales, Research and development, Selling, marketing, general and administrative expenses within the Consolidated Statements of Income, while the remaining components are recorded to Other, net . Benefit Obligations and Plan Assets Obligation and asset data of the Company’s pension and postretirement benefit plans at October 29, 2022 and October 30, 2021 is presented in the following table: 2022 2021 Change in Benefit Obligation Benefit obligation at beginning of year $ 242,593 $ 186,735 Service cost 10,914 9,207 Interest cost 6,148 4,071 Acquisition of Maxim benefit obligation — 49,807 Settlement ( 1,052 ) ( 885 ) Actuarial gain ( 68,806 ) ( 4,005 ) Benefits paid ( 3,596 ) ( 3,983 ) Exchange rate adjustment ( 28,471 ) 1,646 Benefit obligation at end of year $ 157,730 $ 242,593 Change in Plan Assets Fair value of plan assets at beginning of year $ 128,283 $ 107,505 Actual return on plan assets ( 34,231 ) 10,637 Employer contributions 11,344 11,035 Settlements ( 1,052 ) ( 885 ) Benefits paid ( 3,596 ) ( 3,983 ) Acquisitions — 1,728 Exchange rate adjustment ( 16,719 ) 2,246 Fair value of plan assets at end of year $ 84,029 $ 128,283 Reconciliation of Funded Status Funded status $ ( 73,701 ) $ ( 114,310 ) Amounts Recognized in the Balance Sheet Non-current assets $ 1,185 $ 1,709 Current liabilities $ ( 2,638 ) $ ( 2,730 ) Non-current liabilities ( 72,248 ) ( 113,289 ) Net amount recognized $ ( 73,701 ) $ ( 114,310 ) 75 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2022 2021 Reconciliation of Amounts Recognized in the Statement of Financial Position Prior service credit ( 29 ) ( 38 ) Net loss ( 5,302 ) ( 43,662 ) Accumulated other comprehensive loss ( 5,331 ) ( 43,700 ) Accumulated contributions less than net periodic benefit cost ( 68,370 ) ( 70,610 ) Net amount recognized $ ( 73,701 ) $ ( 114,310 ) Changes Recognized in Other Comprehensive Income (Loss) Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) Net gain/loss arising during the year $ ( 31,223 ) $ ( 10,884 ) Effect of exchange rates on amounts included in AOCI ( 4,882 ) 1,565 Amounts recognized as a component of net periodic benefit cost Amortization or settlement recognition of net loss ( 2,264 ) ( 2,967 ) Total recognized in other comprehensive gain/loss $ ( 38,369 ) $ ( 12,286 ) Total recognized in net periodic cost and other comprehensive loss $ ( 23,583 ) $ 200 Estimated amounts that will be amortized from AOCI over the next fiscal year Net loss $ ( 1,067 ) $ ( 2,413 ) The accumulated benefit obligation for the Company’s pension and postretirement benefit plans was $ 111.3 million and $ 178.2 million at October 29, 2022 and October 30, 2021, respectively. Information relating to the Company’s pension and postretirement benefit plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets at October 29, 2022 and October 30, 2021 is presented in the following table: 2022 2021 Plans with projected benefit obligations in excess of plan assets: Projected benefit obligation $ 120,763 $ 161,803 Fair value of plan assets $ 45,879 $ 45,784 Plans with accumulated benefit obligations in excess of plan assets: Projected benefit obligation $ 62,980 $ 94,038 Accumulated benefit obligation $ 49,429 $ 77,337 Fair value of plan assets $ 2,573 $ 3,544 Assumptions The range of assumptions used for the Company’s pension and postretirement benefit plans reflects the different economic environments within the various countries as well as the differences in the attributes of the participants. The projected benefit obligation was determined using the following weighted-average assumptions: 2022 2021 Discount rate 5.44 % 2.77 % Rate of increase in compensation levels 4.08 % 3.70 % Net annual periodic benefit cost was determined using the following weighted average assumptions: 2022 2021 Discount rate 2.77 % 2.15 % Expected long-term return on plan assets 3.73 % 3.32 % Rate of increase in compensation levels 3.70 % 3.19 % 76 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The expected long-term rate of return on assets is a weighted-average of the long-term rates of return selected for the various countries where the Company has funded pension plans. The expected long-term rate of return on assets assumption is selected based on the facts and circumstances that exist as of the measurement date and the specific portfolio mix of plan assets. Management, in conjunction with its actuaries, reviewed anticipated future long-term performance of individual asset categories and considered the asset allocation strategy adopted by the Company and/or the trustees of the plans. While the review considered recent fund performance and historical returns, the assumption is primarily a long-term prospective rate. The Company’s investment strategy is based on an expectation that equity securities will outperform debt securities over the long term. Investments within each asset class are diversified to reduce the impact of losses in single investments. The use of derivative instruments is permitted where appropriate and necessary to achieve overall investment policy objectives and asset class targets. The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for each significant asset class to obtain a prudent balance between return and risk. The interaction between plan assets and benefit obligations is periodically studied by the Company and its actuaries to assist in the establishment of strategic asset allocation targets. Fair value of plan assets The following table presents plan assets measured at fair value on a recurring basis by investment categories as of October 29, 2022 and October 30, 2021 using the same three-level hierarchy described in Note 2j, Fair Value , of the Notes to Consolidated Financial Statements: October 29, 2022 October 30, 2021 Fair Value Measurement at Reporting Date Using: Fair Value Measurement at Reporting Date Using: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Unit trust funds(1) $ — $ 3,625 $ 3,625 $ — $ 5,874 $ 5,874 Equities(1) 6,700 7,767 14,467 8,010 24,613 32,623 Fixed income securities(2) — 28,214 28,214 — 29,957 29,957 Property (3) — 4,773 4,773 — 5,431 5,431 Investment Funds (4) — 29,760 29,760 — 52,380 52,380 Cash and cash equivalents 3,190 — 3,190 2,018 — 2,018 Total assets measured at fair value $ 9,890 $ 74,139 $ 84,029 $ 10,028 $ 118,255 $ 128,283 _______________________________________ (1) The majority of the assets in these categories are invested in a mix of equities, including those from North America, Europe and Asia. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund. Due to the nature of the underlying assets of these funds, changes in market conditions and the economic environment may significantly impact the net asset value of these investments and, consequently, the fair value of the investments. These investments are redeemable at net asset value to the extent provided in the documentation governing the investments. However, these redemption rights may be restricted in accordance with governing documents. Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded. (2) Consists of funds primarily concentrated in non-U.S. debt instruments. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund. (3) Consists of funds that primarily invest in global real estate and infrastructure funds. The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund. (4) Consists of liability driven investment funds that may hold a range of low-risk hedging instruments including but not limited to government bonds, interest rate and inflation swaps, physical inflation-linked and nominal gilts, synthetic gilts, cash and money market instruments. The investment funds are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings. 77 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Estimated future cash flows Expected fiscal 2023 Company contributions and estimated future benefit payments are as follows: Expected Company Contributions 2023 $ 10,579 Expected Benefit Payments 2024 $ 6,575 2025 $ 5,506 2026 $ 5,789 2027 $ 6,524 2028 $ 7,060 2029 through 2033 $ 48,355 12. Income Taxes The Company's effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where the Company's income is earned. The reconciliation of income tax computed at the U.S. federal statutory rates to income tax expense for fiscal 2022, fiscal 2021 and fiscal 2020 is as follows: 2022 2021 2020 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Income tax provision reconciliation: Tax at statutory rate $ 650,737 $ 279,030 $ 275,439 Net foreign income subject to lower tax rate ( 358,725 ) ( 227,470 ) ( 225,937 ) State income taxes, net of federal benefit ( 15,615 ) ( 28,052 ) ( 23,537 ) Valuation allowance 29,737 13,263 13,655 Federal research and development tax credits ( 58,625 ) ( 37,902 ) ( 31,055 ) Change in uncertain tax positions 19,394 ( 1,061 ) ( 13,304 ) Amortization of purchased intangibles 142,375 146,094 101,906 Acquisition and integration costs — 11,367 1,714 U.S. effects of international operations ( 47,665 ) ( 24,624 ) 11,903 Windfalls (under ASU 2016-09) ( 16,717 ) ( 26,365 ) ( 16,240 ) Intra-entity transfer of intangible assets — ( 188,804 ) — Other, net 5,292 22,816 ( 3,688 ) Total income tax provision (benefit) $ 350,188 $ ( 61,708 ) $ 90,856 Income before income taxes for fiscal 2022, fiscal 2021 and fiscal 2020 includes the following components: Income before income taxes (1) 2022 2021 2020 Domestic $ 958,465 $ 508,100 $ 355,442 Foreign 2,140,284 820,614 956,175 Income before income taxes $ 3,098,749 $ 1,328,714 $ 1,311,617 _______________________________________ (1) Income before income taxes reflects deemed intercompany royalties in all periods presented. 78 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The components of the provision for (benefit from) income taxes for fiscal 2022, fiscal 2021 and fiscal 2020 are as follows: 2022 2021 2020 Current: Federal tax $ 304,556 $ 134,652 $ 64,876 State 13,214 7,772 4,882 Foreign 359,173 202,790 135,046 Total current $ 676,943 $ 345,214 $ 204,804 Deferred: Federal $ ( 341,777 ) $ 515,541 $ ( 159,229 ) State ( 612 ) ( 12,444 ) ( 12,684 ) Foreign 15,634 ( 910,019 ) 57,965 Total deferred $ ( 326,755 ) $ ( 406,922 ) $ ( 113,948 ) Provision for (benefit from) income tax $ 350,188 $ ( 61,708 ) $ 90,856 U.S. tax legislation subjects a U.S. shareholder to tax on global intangible low-taxed income (GILTI). Under U.S. GAAP, an accounting policy election can be made to either treat taxes due on the GILTI inclusion as a current period expense or to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years. The Company elected the deferral method and recorded the corresponding GILTI deferred tax assets and liabilities on its Consolidated Balance Sheets. The Company carries other outside basis differences in its subsidiaries, primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested. As of October 29, 2022, the Company has not recognized deferred income tax on $ 33.6 billion of outside basis differences because of its intent and ability to indefinitely reinvest these basis differences. These basis differences could be reversed through a sale of the subsidiaries or the receipt of dividends from the subsidiaries, as well as various other events, none of which are considered probable at this time. Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable. 79 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The significant components of the Company’s deferred tax assets and liabilities for fiscal 2022 and fiscal 2021 are as follows: 2022 2021 Deferred tax assets: Inventory reserves $ 16,584 $ — Reserves for compensation and benefits 60,871 64,274 Tax credit carryovers 327,671 295,345 Stock-based compensation 25,059 26,541 Net operating losses 43,696 62,876 Intangible assets 1,975,096 2,002,041 Lease liability 76,709 60,954 Other 248,796 248,075 Total gross deferred tax assets 2,774,482 2,760,106 Valuation allowance ( 339,105 ) ( 315,434 ) Total deferred tax assets 2,435,377 2,444,672 Deferred tax liabilities: Inventory reserves — ( 18,570 ) Depreciation ( 96,660 ) ( 91,846 ) Deferred GILTI tax liabilities ( 2,824,332 ) ( 3,059,919 ) Right of use asset ( 55,858 ) ( 53,686 ) Acquisition-related intangibles ( 816,177 ) ( 892,212 ) Total gross deferred tax liabilities ( 3,793,027 ) ( 4,116,233 ) Net deferred tax liabilities $ ( 1,357,650 ) $ ( 1,671,561 ) The valuation allowances of $ 339.1 million and $ 315.4 million as of October 29, 2022 and October 30, 2021, respectively, are primarily for the Company’s state R&D credit carryforwards, foreign net operating loss and international credit carryforwards. The Company believes that it is more-likely-than-not that these credit carryovers will not be realized and as a result has recorded a partial valuation allowance. The federal and state net operating losses of $ 142.4 million will begin to expire in fiscal 2023 while foreign net operating loss carryovers of $ 144.8 million have no expiration date. There are also $ 312.7 million of state credit carryovers and $ 15.0 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending November 1, 2025. As of October 29, 2022 and October 30, 2021, the Company had unrealized tax benefits, net of indirect tax benefits, of $ 165.3 million and $ 132.5 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded. Liabilities for unrealized tax benefits are primarily classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities will not occur within the next twelve months. As of October 29, 2022 and October 30, 2021, the Company had liabilities of approximately $ 45.5 million and $ 38.0 million, respectively, for interest and penalties, which is included within the provision for (benefit from) income taxes in the Consolidated Statements of Income. 80 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table summarizes the changes in the total amounts of unrealized tax benefits for fiscal 2020 through fiscal 2022: Unrealized Tax Benefits Balance, November 2, 2019 $ 34,343 Additions for tax positions related to current year 3,270 Reductions for tax positions related to prior years ( 16,152 ) Reductions due to lapse of applicable statute of limitations ( 170 ) Balance, October 31, 2020 $ 21,291 Additions for tax positions related to current year 4,713 Additions for tax positions related to prior years 19,790 Additions for tax positions related to the Acquisition 91,179 Reductions due to lapse of applicable statute of limitations ( 4,452 ) Balance, October 30, 2021 $ 132,521 Additions for tax positions related to the Acquisition 15,267 Additions for tax positions related to current year 11,800 Additions for tax positions related to prior years 9,704 Reductions due to lapse of applicable statute of limitations ( 3,965 ) Balance, October 29, 2022 $ 165,327 In fiscal 2020, the Company released reserves of $ 18.6 million, which included accrued interest as a result of the resolution of the amended tax return that was previously under review by the Joint Committee on Taxation, combined with other tax positions resolved by the closing of the Internal Revenue Service audit of Linear’s pre-acquisition federal income tax returns for fiscal 2015 through fiscal 2017. In fiscal 2021, the Company acquired $ 125.5 million in reserves as part of the Acquisition consisting of $ 91.2 million in tax and $ 34.3 million in accrued interest. In fiscal 2022, the Company continued to engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of unrealized tax benefits, including accrued interest and penalties, could decrease by up to $ 127.0 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $ 127.0 million primarily relates to matters involving federal taxation of international income and cross-border transactions. The Company has numerous audits ongoing at any time throughout the world including: an IRS income tax audit for fiscal 2019 and fiscal 2018, a pre-Acquisition IRS income tax audit for Maxim's fiscal years ended June 27, 2015 through August 26, 2021, and various U.S. state and local tax audits and international audits. The Company’s U.S. federal tax returns prior to fiscal 2018 are no longer subject to examination, except for the applicable Maxim pre-Acquisition fiscal years noted above. 13. Revolving Credit Facility On June 23, 2021, the Company entered into a Third Amended and Restated Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. as administrative agent and the other banks identified therein as lenders. The Revolving Credit Agreement provides for a five year , unsecured, revolving credit facility in an aggregate principal amount not to exceed $ 2.5 billion (subject to certain terms and conditions). In June 2022, the Company borrowed $ 400.0 million under this revolving credit facility and utilized the proceeds for the repayment of existing indebtedness and working capital requirements. The Company repaid the $ 400.0 million plus interest in July 2022. As of October 29, 2022, the Company had no outstanding borrowings under this revolving credit facility but may borrow in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. Revolving loans under the Revolving Credit Agreement can be Eurocurrency Rate Loans or Base Rate Loans (each as defined in the Revolving Credit Agreement) at the Company's option. Each Eurocurrency Rate Loan will bear interest at a rate per annum equal to the applicable Eurocurrency Rate plus a margin based on the Company's Debt Ratings (as defined in the Revolving Credit Agreement) from time to time of between 0.690 % and 1.175 %. Each Base Rate Loan will bear interest at a rate per annum equal to the Base Rate plus a margin based on the Company's debt ratings from time to time of between 0.00 % and 0.175 %. In addition, the Company has agreed to pay a facility fee based on the Company's Debt Ratings from time to time of between 0.060 % and 0.200 % multiplied by the actual daily amount of the Commitments (as defined in the Revolving Credit 81 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Agreement) in effect. The Revolving Credit Agreement also contains a sustainability-linked pricing component which provides for interest rate and facility fee reductions or increases based on the Company meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage. For calendar year 2021, the Company did not achieve its greenhouse gas emissions reduction threshold goal related to this sustainability-linked pricing component due in part to increased demand for product, which did not have a material impact on the Company's business, net income or financing costs. The Revolving Credit Agreement includes a multicurrency borrowing feature for certain specified foreign currencies. The Company will guarantee the obligations of each subsidiary that is named a Designated Borrower under the Revolving Credit Agreement. The Revolving Credit Agreement contains customary representations and warranties, and affirmative and negative covenants and events of default applicable to the Company and its subsidiaries. As of October 29, 2022, the Company was in compliance with these covenants. 14. Debt On December 14, 2015, the Company issued $ 850.0 million aggregate principal amount of 3.9 % senior unsecured notes due December 15, 2025 (the December 2025 Notes) and $ 400.0 million aggregate principal amount of 5.3 % senior unsecured notes due December 15, 2045 (the 2045 Notes) with semi-annual fixed interest payments due on June 15 and December 15 of each year, commencing June 15, 2016. The net proceeds of the offering were $ 1.2 billion, after discounts and issuance costs. On October 5, 2021 and October 7, 2021, $ 325.5 million, or 38.3 %, of the $ 850.0 million aggregate principal amount of the December 2025 Notes at a price of $1,112.13 for each $1,000 principal amount of December 2025 Notes, and $ 67.4 million, or 16.85 %, of the $ 400.0 million aggregate principal amount of the 2045 Notes at a price of $1,400.67 for each $1,000 principal amount of 2045 Notes, were tendered for repurchase and canceled. On October 20, 2021, the remaining December 2025 Notes were redeemed for cash at a redemption price equal to $1,103.81 for each $1,000 principal amount of the December 2025 Notes. Debt discounts and issuance costs will be amortized through interest expense over the term of the 2045 Notes. The 2045 Notes are subordinated to any future secured debt and to the other liabilities of the Company's subsidiaries. The 2045 Notes were issued pursuant to a base indenture (the ADI Base Indenture) between the Company and The Bank of New York Mellon Trust Company as trustee, as supplemented by a supplemental indenture, which contain certain covenants, events of default and other customary provisions. The covenants applicable to the 2045 Notes limit the Company's ability to incur, create, assume or guarantee any debt secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of its assets to, any other party. As of October 29, 2022, the Company was in compliance with these covenants. On December 5, 2016, the Company issued $ 400.0 million aggregate principal amount of 2.5 % senior unsecured notes due December 5, 2021 (the 2021 Notes), $ 550.0 million aggregate principal amount of 3.125 % senior unsecured notes due December 5, 2023 (the December 2023 Notes), $ 900.0 million aggregate principal amount of 3.5 % senior unsecured notes due December 5, 2026 (the 2026 Notes) and $ 250.0 million aggregate principal amount of 4.5 % senior unsecured notes due December 5, 2036 (the 2036 Notes) with semi-annual fixed interest payments due on June 5 and December 5 of each year, commencing June 5, 2017. The net proceeds of the offering were $ 2.1 billion, after discounts and issuance costs. On October 5, 2021, (i) $ 71.2 million, or 17.80 %, of the $ 400.0 million aggregate principal amount of the 2021 Notes at a price of $1,001.77 for each $1,000 principal amount of 2021 Notes, (ii) $ 282.7 million, or 51.41 %, of the $ 550.0 million aggregate principal amount of the December 2023 Notes at a price of $1,053.78 for each $1,000 principal amount of December 2023 Notes and (iii) $ 105.7 million, or 42.29 %, of the $ 250.0 million aggregate principal amount of the 2036 Notes at a price of $1,239.96 for each $1,000 principal amount of 2036 Notes were tendered for redemption. On October 20, 2021, the remaining 2021 Notes and December 2023 Notes were redeemed for cash at a redemption price equal to $1,000.98 for each $1,000 principal amount of 2021 Notes and $1,050.17 for each $1,000 principal amount of December 2023 Notes. Debt discounts and issuance costs will be amortized through interest expense over the term of the respective notes. The 2026 Notes and 2036 Notes rank without preference or priority among themselves and equally in right of payment with all other existing and future senior unsecured debt and senior in right of payment to all of the Company's future subordinated debt. The 2026 Notes and 2036 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of October 29, 2022, the Company was in compliance with these covenants. 82 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) On April 8, 2020, in an underwritten public offering of green bonds, the Company issued $ 400.0 million aggregate principal amount of 2.95 % senior unsecured notes due April 1, 2025 (the April 2025 Notes), with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing on October 1, 2020. The Company used the net proceeds of $ 395.6 million from the green bond offering to finance or refinance new and existing eligible projects involving renewable energy, green buildings, and eco-efficient products, production technologies and processes. Debt discounts and underwriting fees will be amortized through interest expense over the term of the April 2025 Notes. At any time prior to March 1, 2025, the Company may, at its option, redeem some or all of the April 2025 Notes at a redemption price equal to the greater of 100 % of the principal amount of the April 2025 Notes being redeemed and the make-whole premium, plus accrued and unpaid interest on the April 2025 Notes being redeemed, if any, to but excluding the date of redemption. The April 2025 Notes are unsecured and rank equally in right of payment with all of the Company's other existing and future unsecured senior indebtedness. The April 2025 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of October 29, 2022, the Company was in compliance with these covenants. In conjunction with the Acquisition, the Company recognized $ 500.0 million aggregate principal amount of Maxim’s 3.375 % senior unsecured and unsubordinated notes due March 15, 2023 (the Maxim 2023 Notes) and $ 500.0 million aggregate principal amount of Maxim’s 3.45 % senior unsecured and unsubordinated notes due June 15, 2027 (the Maxim 2027 Notes), which were recognized at fair value as of the Acquisition Date. On October 5, 2021, Maxim gave notice that it would redeem the Maxim 2023 Notes, and in November 2021 (fiscal 2022), the Maxim 2023 Notes were redeemed for cash. On October 7, 2022, the Company completed an offer to exchange any and all outstanding Maxim 2027 Notes, for new 3.450 % Senior Notes due June 15, 2027 (the ADI 2027 Notes) to be issued by the Company and cash. Pursuant to the exchange offer, $ 440.2 million aggregate principal amount of the Maxim 2027 Notes were tendered and subsequently accepted for exchange, and the Company retired and canceled all Maxim 2027 Notes accepted for exchange. In exchange for the tendered Maxim 2027 Notes, the Company issued approximately $ 440.2 million aggregate principal amount of ADI 2027 Notes pursuant to a private exchange offer exempt from, or not subject to, registration under the Securities Act of 1933, as amended and $ 0.5 million in cash. The ADI 2027 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain certain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. The ADI 2027 Notes bear interest at a rate of 3.450 % per annum, with semi-annual fixed interest payments due on June 15 and December 15 of each year, commencing on December 15, 2022 and will mature on June 15, 2027. As of October 29, 2022, the Company was in compliance with the covenants in the ADI 2027 Notes and the outstanding Maxim 2027 Notes. The indenture and supplemental indentures with respect to the outstanding Maxim 2027 Notes have been modified to, among other things, eliminate (i) substantially all of the restrictive covenants, (ii) certain of the events of default (other than for the failure to pay principal, premium or interest), (iii) the obligation to offer to repurchase the Maxim 2027 Notes upon certain change of control transactions and (iv) any restrictions on consolidating with or merging into any other person or conveying, transferring or leasing all or any of its properties and assets to any person. Following settlement of the exchange offer, $ 59.8 million aggregate principal amount of the Maxim 2027 Notes remain outstanding. On October 5, 2021, in an underwritten public offering, the Company issued $ 500.0 million aggregate principal amount of floating rate senior notes due October 1, 2024 (the Floating Rate Notes), $ 750.0 million aggregate principal amount of 1.7 % sustainability-linked senior notes due October 1, 2028 (the Sustainability-Linked Senior Notes), $ 1.0 billion aggregate principal amount of 2.1 % senior notes due October 1, 2031 (the 2031 Notes), $ 750.0 million aggregate principal amount of 2.8 % senior notes due October 1, 2041 (the 2041 Notes), and $ 1.0 billion aggregate principal amount of 2.95 % senior notes due October 1, 2051 (the 2051 Notes, and, together with the Floating Rate Notes, the Sustainability-Linked Senior Notes, the 2031 Notes and the 2041 Notes, the Notes). The Floating Rate Notes bear interest at a floating annual rate equal to a benchmark rate, which initially is Compounded SOFR (as defined in the Supplemental Indenture) plus 25 basis points. As of October 29, 2022, the interest rate on the Floating Rate Notes was 0.3 % per annum. Interest payments on the Floating Rate Notes are due on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2022. The Sustainability-Linked Senior Notes initially bear interest at a rate of 1.7 % per annum and are subject to an increase of an additional 30 basis points from April 1, 2026 to the maturity date unless the Sustainability Performance Target (as defined in the Sustainability-Linked Senior Notes) has been satisfied. Semi-annual fixed interest payments on the Sustainability-Linked Senior Notes, the 2031 Notes, the 2041 Notes and the 2051 Notes are due on April 1 and October 1 of each year, beginning on April 1, 2022. At any time prior to August 1, 2028 in the case of the Sustainability-Linked Senior Notes, July 1, 2031 in the case of the 2031 Notes, April 1, 2041 in the case of the 2041 Notes and April 1, 2051 in the case of the 2051 Notes (each, a Par Call Date), the Company may, at its option, redeem some or all of the applicable series of Notes at a redemption price equal to the greater of (i) 100 % of the principal amount of such series of Notes being redeemed and (ii) the make-whole redemption price (as described in the Supplemental Indenture). On and after the applicable Par Call Date, the Company may, at its option, redeem some or all of the applicable series of Notes at a redemption price equal to 100 % of the principal amount of the Notes being redeemed. In each case, the Company will also pay the accrued and unpaid interest on the Notes being redeemed to, but 83 ANALOG DEVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) excluding, the date of redemption. The Company may not redeem the Floating Rate Notes prior to their maturity. The Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. Debt discounts and issuance costs will be amortized through interest expense over the term of the respective Notes. The Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture, and the indenture and supplemental indenture contain certain covenants, events of default and other customary provisions. As of October 29, 2022, the Company was in compliance with these covenants. On September 15, 2022, in an underwritten public offering, the Company issued $ 300.0 million aggregate principal amount of 4.250 % senior notes due October 1, 2032 (the 2032 Notes) with semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing April 1, 2023. The net proceeds of the offering were $ 296.1 million, after discounts and issuance costs. Prior to July 1, 2032 (three months prior to the maturity date), the Company may, at its option, redeem the 2032 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the notes matured on July 1, 2032) on a semi-annual basis at the Treasury Rate plus 20 basis points less (b) interest accrued to the date of redemption, and (2) 100 % of the principal amount of the notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date. On or after July 1, 2032, the Company may, at its option, redeem the 2032 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100 % of the principal amount of the 2032 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date. The 2032 Notes are unsecured and rank equally in right of payment with all of the Company’s other existing and future unsecured senior indebtedness. The 2032 Notes were issued pursuant to the ADI Base Indenture, as supplemented by a supplemental indenture, which contain covenants similar to those applicable to the 2045 Notes, events of default and other customary provisions. As of October 29, 2022, the Company was in compliance with these covenants. The Company’s debt consisted of the following as of October 29, 2022 and October 30, 2021: October 29, 2022 October 30, 2021 Principal Unamortized discounts, debt issuance costs and fair value adjustments Principal Unamortized discount and debt issuance costs 2024 Notes, due October 2024 $ 500,000 $ 1,973 $ 500,000 $ 3,091 2025 Notes, due April 2025 400,000 2,145 400,000 3,029 2026 Notes, due December 2026 900,000 5,258 900,000 6,534 Maxim 2027 Notes, due June 2027 59,788 ( 5,311 ) 500,000 ( 51,646 ) 2027 Notes, due June 2027 440,212 ( 37,182 ) — — 2028 Notes, due October 2028 750,000 8,795 750,000 10,419 2031 Notes, due October 2031 1,000,000 12,381 1,000,000 13,956 2032 Notes, due October 2032 300,000 3,822 — — 2036 Notes, due December 2036 144,278 1,696 144,278 1,814 2041 Notes, due October 2041 750,000 12,868 750,000 13,690 2045 Notes, due December 2045 332,587 3,787 332,587 3,952 2051 Notes, due October 2051 1,000,000 18,008 1,000,000 18,814 Total Long-Term Debt $ 6,576,865 $ 28,240 $ 6,276,865 $ 23,653 Maxim 2023 Notes, due March 2023 — — 500,000 ( 16,663 ) Total Current Debt $ — $ — $ 500,000 $ ( 16,663 ) Total Debt $ 6,576,865 $ 28,240 $ 6,776,865 $ 6,990 15. Subsequent Events On November 21, 2022, the Board of Directors of the Company declared a cash dividend of $ 0.76 per outstanding share of common stock. The dividend will be paid on December 15, 2022 to all shareholders of record at the close of business on December 5, 2022 and is expected to total approximately $ 387.1 million. 84 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.