What changed in this filing

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Item 1. Financial Statements

2023-02-15 compared with 2022-08-17 · 87 added, 233 removed, 283 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended

July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021

Three Months Ended

January 28, 2023 January 29, 2022

Revenue $ 3,249,630 $ 2,684,293

25 unchanged sentences

(in thousands)

Three Months Ended Nine Months Ended

July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021

Three Months Ended

January 28, 2023 January 29, 2022

Net income $ 961,474 $ 280,077

Foreign currency translation adjustments 2,499 ( 4,603 )

Change in fair value of derivative instruments designated as cash flow hedges (net of taxes of $ 854 , $ 10,657 , $ 1,103 and $ 6,452 , respectively)

2,239 ( 40,040 ) ( 471 ) 19,853

Changes in pension plans, net actuarial loss and foreign currency translation adjustments (net of taxes of $ 88 , $ 85 , $ 275 and $ 257 , respectively)

1,770 964 5,902 ( 408 )

Other comprehensive (loss) income ( 5,019 ) ( 42,028 ) ( 26,069 ) 24,518

Change in fair value of derivative instruments designated as cash flow hedges, net 25,467 1,046

Changes in pension plans, net actuarial gain/loss and foreign currency translation adjustments, net 452 1,504

Other comprehensive income (loss) 28,418 ( 2,053 )

Comprehensive income $ 989,892 $ 278,024

1 unchanged sentence

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except share and per share amounts)

July 30, 2022 October 30, 2021

January 28, 2023 October 29, 2022

Current Assets

16 unchanged sentences

Income taxes payable 513,943 265,845

Debt, current — 516,663

Accrued liabilities 1,385,075 1,594,650

19 unchanged sentences

(in thousands)

Three Months Ended July 30, 2022

Capital in Accumulated

Common Stock Excess of Retained Comprehensive

Shares Amount Par Value Earnings Loss

BALANCE, APRIL 30, 2022

519,806 $ 86,636 $ 29,400,284 $ 7,820,477 $ ( 207,615 )

Net income 748,985

Dividends declared and paid - $ 0.76 per share

Issuance of stock under stock plans and other 413 69 9,891

Stock-based compensation expense 84,874

Other comprehensive loss ( 5,019 )

Common stock repurchased ( 5,878 ) ( 980 ) ( 904,993 )

BALANCE, JULY 30, 2022

514,341 $ 85,725 $ 28,590,056 $ 8,175,444 $ ( 212,634 )

Nine Months Ended July 30, 2022

Three Months Ended January 28, 2023

Capital in Accumulated

5 unchanged sentences

Dividends declared and paid - $ 0.76 per share

( 1,154,207 )

Issuance of stock under stock plans and other 617 103 41,135

Stock-based compensation expense 75,041

Other comprehensive loss ( 26,069 )

Common stock repurchased ( 13,386 ) ( 2,229 ) ( 2,256,603 )

BALANCE, JULY 30, 2022

514,341 $ 85,725 $ 28,590,056 $ 8,175,444 $ ( 212,634 )

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

Three Months Ended July 31, 2021

Capital in Accumulated

Common Stock Excess of Retained Comprehensive

Shares Amount Par Value Earnings Loss

BALANCE, MAY 1, 2021 368,827 $ 61,472 $ 4,724,493 $ 7,564,054 $ ( 182,915 )

Net income 503,311

Dividends declared and paid - $ 0.69 per share

Issuance of stock under stock plans and other 396 66 11,610

Stock-based compensation expense 41,687

Other comprehensive loss ( 42,028 )

Other comprehensive income 28,418

Common stock repurchased ( 4,061 ) ( 677 ) ( 653,880 )

BALANCE, JULY 31, 2021

BALANCE, JANUARY 28, 2023

505,852 $ 84,306 $ 27,319,566 $ 9,297,347 $ ( 169,734 )

Nine Months Ended July 31, 2021

Three Months Ended January 29, 2022

Capital in Accumulated

6 unchanged sentences

Stock-based compensation expense 86,939

Other comprehensive income 24,518

Other comprehensive loss ( 2,053 )

Common stock repurchased ( 2,595 ) ( 433 ) ( 575,586 )

BALANCE, JULY 31, 2021

BALANCE, JANUARY 29, 2022

523,315 $ 87,221 $ 30,093,961 $ 7,434,748 $ ( 188,618 )

3 unchanged sentences

(in thousands)

Nine Months Ended

July 30, 2022 July 31, 2021

Three Months Ended

January 28, 2023 January 29, 2022

Cash flows from operating activities:

3 unchanged sentences

Amortization of intangibles 502,177 504,645

Stock-based compensation expense 242,809 118,683

Non-cash impairment charge 91,953 —

Gain on sale of property, plant, and equipment ( 4,352 ) ( 13,557 )

Cost of goods sold for inventory acquired — 271,396

Stock-based compensation expense 75,041 86,939

Deferred income taxes ( 146,354 ) ( 34,651 )

9 unchanged sentences

Cash flows from financing activities:

Proceeds from revolver 400,000 —

Payments on revolver ( 400,000 ) —

Early termination of debt — ( 519,116 )

5 unchanged sentences

Effect of exchange rate changes on cash — ( 3,401 )

Net (decrease) increase in cash and cash equivalents ( 453,004 ) 424,841

Net increase (decrease) in cash and cash equivalents 199,890 ( 187,565 )

Cash and cash equivalents at beginning of period 1,470,572 1,977,964

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED JULY 30, 2022 (UNAUDITED)

FOR THE THREE MONTHS ENDED JANUARY 28, 2023 (UNAUDITED)

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

4 unchanged sentences

Certain amounts reported in previous periods have been reclassified to conform to the fiscal 2023 presentation.

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.

The acquisition of Maxim is referred to as the Acquisition.

The consolidated financial statements included in this Quarterly Report on Form 10-Q include the financial results of Maxim prospectively from the Acquisition Date.

See Note 14, Acquisitions , in these Notes to Condensed Consolidated Financial Statements for additional information.

Note 2 – Shareholders' Equity

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 under the ASR at an average price per share of $ 173.77 .

As of July 30, 2022, the Company had repurchased a total of approximately 184.3 million shares of its common stock for approximately $ 10.9 billion under the Company's share repurchase program.

As of July 30, 2022, an additional $ 5.7 billion remains available for repurchase of shares under the current authorized program.

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

As of January 28, 2023, the Company had repurchased a total of approximately 193.6 million shares of its common stock for approximately $ 12.4 billion under the Company's share repurchase program.

As of January 28, 2023, an additional $ 4.3 billion remains available for repurchase of shares under the current authorized program.

The Company also repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options as well as for the Company's employee stock purchase plan.

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.

Note 3 – Accumulated Other Comprehensive (Loss) Income

The following table provides the changes in accumulated other comprehensive (loss) income (AOCI) by component and the related tax effects during the first nine months of fiscal 2022.

The following table provides the changes in accumulated other comprehensive (loss) income (AOCI) by component and the related tax effects during the first three months of fiscal 2023.

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

October 29, 2022 $ ( 72,136 ) $ ( 119,613 ) $ ( 6,403 ) $ ( 198,152 )

Other comprehensive (loss) income before reclassifications ( 31,500 ) ( 27,471 ) 4,513 ( 54,458 )

Other comprehensive income before reclassifications 2,499 28,211 82 30,792

Amounts reclassified out of other comprehensive income — 924 370 1,294

Tax effects — ( 3,668 ) — ( 3,668 )

Other comprehensive (loss) income ( 31,500 ) ( 471 ) 5,902 ( 26,069 )

July 30, 2022 $ ( 57,295 ) $ ( 124,225 ) $ ( 31,114 ) $ ( 212,634 )

Other comprehensive income 2,499 25,467 452 28,418

January 28, 2023 $ ( 69,637 ) $ ( 94,146 ) $ ( 5,951 ) $ ( 169,734 )

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

Three Months Ended Nine Months Ended

Comprehensive (Loss) Income Component July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021 Location

Three Months Ended

Comprehensive (Loss) Income Component January 28, 2023 January 29, 2022 Location

Unrealized holding (gains) losses on derivatives:

7 unchanged sentences

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

Actuarial losses 529 747 1,664 2,245

( 88 ) ( 85 ) ( 275 ) ( 257 ) Tax

$ 441 $ 662 $ 1,389 $ 1,988 Net of tax

Actuarial losses $ 370 $ 489 Net of tax

Total amounts reclassified out of AOCI, net of tax $ 492 $ 7,753

1 unchanged sentence

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

Three Months Ended Nine Months Ended

July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021

Three Months Ended

January 28, 2023 January 29, 2022

Net Income $ 961,474 $ 280,077

14 unchanged sentences

The activity is detailed below:

Accrued Special Charges Closure of Manufacturing Facilities Global Repositioning Actions

Accrued Special Charges Global Repositioning Actions

Balance at October 29, 2022 $ 52,070

Employee severance and benefit costs 75 44,411

Facility closure costs 6,513 —

Severance and benefit payments ( 16,298 )

Facility closure cost payments ( 6,513 ) —

Effect of foreign currency on accrual — ( 54 )

Balance at January 28, 2023 $ 35,772

Employee severance and benefit costs — 39,610

Facility closure costs 4,287 —

Severance and benefit payments ( 14,026 ) ( 25,608 )

Facility closure cost payments ( 4,287 ) —

Effect of foreign currency on accrual — ( 156 )

Balance at April 30, 2022 $ 7,807 $ 53,492

Employee severance and benefit costs — 49,712

Facility closure costs 888 —

Severance and benefit payments ( 4,663 ) ( 44,638 )

Facility closure cost payments ( 1,303 ) —

Effect of foreign currency on accrual — ( 35 )

Balance at July 30, 2022 $ 2,729 $ 58,531

Closure of Manufacturing Facilities

The Company recorded net special charges of $ 63.4 million on a cumulative basis through July 30, 2022 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear Technology Corporation.

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 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 $ 458.1 million on a cumulative basis through July 30, 2022, as part of the integration of the Acquisition and continued organizational initiatives to consolidate its 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.

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.

Special charges also included $ 145.2 million in the first nine months of fiscal 2022 primarily consisting of $ 153.5 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.

These charges were partially offset by a gain of $ 8.3 million recognized upon the sale of a business.

Note 6 - Commitments and Contingencies

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.

Ryan and Ryan Asset Management, LLC, purported stockholders of Maxim Integrated Products, Inc.

(Maxim), filed a putative class action in the Court of Chancery of the State of Delaware (C.A.

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.

10 unchanged sentences

Three Months Ended

July 30, 2022 July 31, 2021

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

Industrial $ 1,555,070 50 % 55 % $ 1,006,383 57 %

Automotive 659,090 21 % 127 % 290,182 16 %

Communications 490,732 16 % 69 % 290,391 17 %

Consumer 404,988 13 % 136 % 171,897 10 %

Total revenue $ 3,109,880 100 % 77 % $ 1,758,853 100 %

Nine Months Ended

July 30, 2022 July 31, 2021

January 28, 2023 January 29, 2022

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

9 unchanged sentences

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).

Direct customers are non-distributor customers and consist primarily of original equipment manufacturers.

Other customers include the U.S.

1 unchanged sentence

Three Months Ended

July 30, 2022 July 31, 2021

Channel Revenue % of Revenue* Revenue % of Revenue*

Distributors $ 1,922,982 62 % $ 1,123,301 64 %

Direct customers 1,146,538 37 % 588,001 33 %

Other 40,360 1 % 47,551 3 %

Total revenue $ 3,109,880 100 % $ 1,758,853 100 %

Nine Months Ended

July 30, 2022 July 31, 2021

January 28, 2023 January 29, 2022

Channel Revenue % of Revenue* Revenue % of Revenue*

5 unchanged sentences

Note 8 – 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.

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 July 30, 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 July 30, 2022 and October 30, 2021, the Company held $ 951.9 million and $ 1,315.0 million, respectively, of cash that was excluded from the tables below.

July 30, 2022

January 28, 2023 and October 29, 2022, the Company held $ 702.6 million and $ 1,016.0 million, respectively, of cash that was excluded from the tables below.

January 28, 2023

Fair Value measurement at

7 unchanged sentences

Deferred compensation plan investments 70,236 — 70,236

Total assets measured at fair value $ 641,147 $ — $ 641,147

Forward foreign currency exchange contracts — 15,099 15,099

Total assets measured at fair value $ 1,038,133 $ 15,099 $ 1,053,232

Interest rate derivatives (1) $ — $ 5,078 $ 5,078

Total liabilities measured at fair value $ — $ 5,078 $ 5,078

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

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

(1) The carrying value of the related debt was adjusted by an equal and offsetting amount.

The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives.

See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements.

October 29, 2022

11 unchanged sentences

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

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

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 interest 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, maturity date and volatility.

Assets amd Liabilities 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 , in these Notes to Condensed Consolidated Financial Statements for additional information.

Assets and Liabilities Not Recorded at Fair Value on a Recurring Basis

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.

July 30, 2022 October 30, 2021

January 28, 2023 October 29, 2022

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 $ 493,553 $ 500,000 $ 491,982

2 unchanged sentences

Maxim 2027 Notes, due June 2027 59,788 56,272 59,788 54,771

2027 Notes, due June 2027 440,212 423,393 440,212 410,091

2028 Notes, due October 2028 750,000 652,779 750,000 621,093

2031 Notes, due October 2031 1,000,000 839,410 1,000,000 786,772

2032 Notes, due October 2032 300,000 293,118 300,000 278,359

2036 Notes, due December 2036 144,278 136,279 144,278 126,274

4 unchanged sentences

Note 9 – Derivatives

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, South Korean Won 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 derivative is recorded as a component of AOCI in shareholders’ equity and is reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction in the same period during which the hedged transaction affects earnings.

The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges denominated in Euros, British Pounds, Philippine Pesos, Thai Baht, South Korean Won and Japanese Yen as of July 30, 2022 and October 30, 2021 were $ 296.6 million and $ 343.6 million, respectively.

The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Condensed Consolidated Balance Sheets as of July 30, 2022 and October 30, 2021 were as follows:

Foreign Exchange Exposure Management — The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges denominated in Euros, British Pounds, Philippine Pesos, Thai Baht, South Korean Won and Japanese Yen as of January 28, 2023 and October 29, 2022 were $ 310.3 million and $ 307.1 million, respectively.

The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Condensed Consolidated Balance Sheets as of January 28, 2023 and October 29, 2022 were as follows:

Fair Value At

Balance Sheet Location July 30, 2022 October 30, 2021

Balance Sheet Location January 28, 2023 October 29, 2022

Forward foreign currency exchange contracts Prepaid expenses and other current assets $ 8,631 $ —

Forward foreign currency exchange contracts Accrued liabilities $ — $ 18,050

As of July 30, 2022 and October 30, 2021, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $ 222.6 million and $ 120.0 million, respectively.

The fair values of these hedging instruments in the Company’s Condensed Consolidated Balance Sheets were immaterial as of July 30, 2022 and October 30, 2021.

The Company estimates $ 14.8 million, net of tax, of losses on forward foreign currency derivative instruments included in AOCI will be reclassified into earnings within the next twelve 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 Condensed Consolidated Balance Sheets on a net basis.

As of July 30, 2022 and October 30, 2021, none of the netting arrangements involved collateral.

As of January 28, 2023 and October 29, 2022, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $ 334.9 million and $ 246.4 million, respectively.

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

July 30, 2022 October 30, 2021

January 28, 2023 October 29, 2022

Gross amounts of recognized liabilities $ ( 1,815 ) $ ( 19,846 )

Gross amount of recognized assets 16,914 2,862

Net liabilities offset and presented in the Condensed Consolidated Balance Sheets $ ( 23,677 ) $ ( 8,085 )

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 July 30, 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.

Accumulated Other Comprehensive (Loss) Income, in these Notes to Condensed Consolidated Financial Statements for further information.

Net assets (liabilities) presented in the Condensed Consolidated Balance Sheets $ 15,099 $ ( 16,984 )

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 changes in interest rates.

During fiscal 2023, the Company entered into interest rate swap transactions related to its outstanding $ 1,000.0 million aggregate principal amount of 2.1 % senior unsecured notes (the 2031 Notes) where the Company swapped the notional amount of its $ 1,000.0 million of fixed rate debt at 2.1 % into floating interest rate debt through April 1, 2031.

The fair value of the swaps at inception was zero and subsequent changes in the fair value of the interest rate swaps were reflected in the carrying value of the interest rate swaps on the balance sheet.

The carrying value of the debt on the balance sheet was adjusted by an equal and offsetting amount.

The interest rate swaps were designated and qualified as fair value hedges.

The Company does not consider the risk of counterparty default to be significant.

The gain or loss on the hedged item attributable to the hedged benchmark interest rate risk and the offsetting gain or loss on the related interest rate swaps were recorded as follows:

January 28, 2023

Balance Sheet location Loss on Swaps Gain on Note

Accrued liabilities $ 5,078 $ —

Long term debt $ — $ 5,078

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

Note 10 – Inventories

Inventories at July 30, 2022 and October 30, 2021 were as follows:

July 30, 2022 October 30, 2021

Inventories at January 28, 2023 and October 29, 2022 were as follows:

January 28, 2023 October 29, 2022

Raw materials $ 118,737 $ 110,908

3 unchanged sentences

Note 11 – Debt

In conjunction with the Acquisition, the Company acquired $ 500.0 million aggregate principal amount of Maxim’s 3.375 % senior unsecured and unsubordinated notes due March 15, 2023 (the Maxim March 2023 Notes).

On November 4, 2021, the Maxim March 2023 Notes were redeemed for cash at a redemption price equal to $1,038.23 for each $1,000 principal amount.

On June 23, 2021, the Company entered into a Third Amended and Restated Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A.

1 unchanged sentence

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 working capital requirements.

The Company repaid the $ 400.0 million plus interest in July 2022.

As of July 30, 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.

In the first quarter of fiscal 2023, the Company amended the Revolving Credit Agreement, replacing the LIBOR interest rate provisions with interest rate provisions based on a forward-looking term rate based on the secured overnight financing rate (SOFR) plus a 10 basis point credit spread adjustment.

After the amendment, revolving loans under the Revolving Credit Agreement can be Term SOFR Loans or Base Rate Loans (each as defined in the Revolving Credit Agreement, as amended) at the Company's option.

Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable adjusted term SOFR plus a margin based on the Company's Debt Ratings (as defined in the Revolving Credit Agreement, as amended) from time to time of between 0.690 % and 1.175 %.

As of January 28, 2023, 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.

Note 12 – Income Taxes

The Company’s effective tax rates for the three- and nine-month periods ended July 30, 2022 and July 31, 2021 were below the U.S.

The Company’s effective tax rates for the three-month periods ended January 28, 2023 and January 29, 2022 were below the U.S.

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

During the first nine months of fiscal 2022, the Company increased acquisition related tax reserves by $ 15.6 million consisting of $ 12.3 million in tax and $ 3.3 million in accrued interest primarily relating to tax audits.

It is reasonably possible that the balance of gross unrecognized tax benefits, including accrued interest and penalties, could decrease by as much as $ 148.0 million within the next twelve months due to the completion of tax audits, including any administrative appeals.

The Company's effective tax rate also includes the effects of the mandatory capitalization and amortization of research and development expenses which began in fiscal 2023 under the Tax Cuts and Jobs Act of 2017.

The mandatory capitalization requirement decreases the Company's effective tax rate primarily by increasing the foreign-derived intangible income deduction.

It is reasonably possible that the balance of gross unrealized tax benefits, including accrued interest and penalties, could decrease by as much as $ 129.0 million within the next twelve months due to the completion of tax audits, including any administrative appeals.

The Company has numerous audits ongoing throughout the world including:

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

a pre-acquisition IRS income tax audit for Maxim's fiscal years ended June 27, 2015 through June 26, 2021;

a pre-acquisition IRS income tax audit for Maxim's fiscal years ended June 27, 2015 through August 26, 2021;

state and local audits and various international audits.

The Company's U.S.

federal tax returns prior to the fiscal year ended November 3, 2018 are no longer subject to examination, except for the applicable Maxim pre-Acquisition fiscal years noted above.

federal income tax returns prior to the fiscal year ended November 3, 2018 are no longer subject to examination, except for the applicable Maxim pre-acquisition fiscal years noted above.

Note 13 – New Accounting Pronouncements

Standards Implemented

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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.

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update (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.

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.

4 unchanged sentences

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.

Note 14 – 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.

The total consideration paid to acquire Maxim, which consisted of cash, common stock of the Company and share-based compensation awards, was approximately $ 28.0 billion.

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 Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statement of Shareholders’ Equity for the three- and nine-month periods ended July 30, 2022.

In the nine-month period ended July 30, 2022, the Company recorded acquisition accounting adjustments of $ 15.3 million to goodwill comprised of $ 19.0 million to income tax payable and $ 1.6 million to accrued liabilities offset by decreases of $ 3.5 million to deferred income taxes and $ 1.8 million to other non-current liabilities.

The Acquisition accounting is not complete and additional information relating to conditions that existed at the Acquisition Date may become known to the Company during the remainder of the measurement period.

As of the filing date of this Quarterly Report on Form 10-Q, the Company is still in the process of valuing Maxim's assets, including fixed assets, intangible assets, and liabilities, including related income tax accounting.

The following unaudited pro forma consolidated financial information for the three- and nine-month periods ended July 31, 2021 combines the results of the Company for the three- and nine-month periods ended July 31, 2021 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.

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.

Three Months Ended

Nine Months Ended

July 31, 2021 July 31, 2021

$ 2,506,950 $ 7,005,648

$ 485,904 $ 1,111,411

Basic net income per common share

$ 0.90 $ 2.07

Diluted net income per common share

$ 0.89 $ 2.04

Note 14 – Subsequent Events

On August 16, 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 September 8, 2022 to all shareholders of record at the close of business on August 30, 2022 and is expected to total approximately $ 390.9 million.

On February 14, 2023, the Board of Directors of the Company declared a cash dividend of $ 0.86 per outstanding share of common stock.

The dividend will be paid on March 8, 2023 to all shareholders of record at the close of business on February 27, 2023 and is expected to total approximately $ 435.0 million.

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

What changed 10-Q

Item 1. Financial Statements