0000006281--10-202021Q1FALSEus-gaap:AccountingStandardsUpdate201802MemberP5YP5YP2Yus-gaap:AccountingStandardsUpdate201802Member00000062812020-11-012021-01-30xbrli:shares00000062812021-01-30iso4217:USD00000062812019-11-032020-02-01iso4217:USDxbrli:shares00000062812020-10-310000006281us-gaap:CommonStockMember2020-10-310000006281us-gaap:AdditionalPaidInCapitalMember2020-10-310000006281us-gaap:RetainedEarningsMember2020-10-310000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-310000006281us-gaap:RetainedEarningsMember2020-11-012021-01-300000006281us-gaap:CommonStockMember2020-11-012021-01-300000006281us-gaap:AdditionalPaidInCapitalMember2020-11-012021-01-300000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-11-012021-01-300000006281us-gaap:CommonStockMember2021-01-300000006281us-gaap:AdditionalPaidInCapitalMember2021-01-300000006281us-gaap:RetainedEarningsMember2021-01-300000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-300000006281us-gaap:CommonStockMember2019-11-020000006281us-gaap:AdditionalPaidInCapitalMember2019-11-020000006281us-gaap:RetainedEarningsMember2019-11-020000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-11-020000006281us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-11-020000006281us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-11-020000006281us-gaap:RetainedEarningsMember2019-11-032020-02-010000006281us-gaap:CommonStockMember2019-11-032020-02-010000006281us-gaap:AdditionalPaidInCapitalMember2019-11-032020-02-010000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-11-032020-02-010000006281us-gaap:CommonStockMember2020-02-010000006281us-gaap:AdditionalPaidInCapitalMember2020-02-010000006281us-gaap:RetainedEarningsMember2020-02-010000006281us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-0100000062812019-11-0200000062812020-02-010000006281us-gaap:EmployeeStockOptionMember2020-10-310000006281us-gaap:EmployeeStockOptionMember2020-11-012021-01-300000006281us-gaap:EmployeeStockOptionMember2021-01-300000006281adi:PerformanceStockOptionMember2021-01-300000006281adi:PerformanceStockOptionMember2020-11-012021-01-30xbrli:pure0000006281srt:MinimumMemberadi:PerformanceStockOptionMember2020-11-012021-01-300000006281srt:MaximumMemberadi:PerformanceStockOptionMember2020-11-012021-01-300000006281us-gaap:RestrictedStockUnitsRSUMember2020-10-310000006281us-gaap:RestrictedStockUnitsRSUMember2020-11-012021-01-300000006281us-gaap:RestrictedStockUnitsRSUMember2021-01-300000006281adi:PerformanceBasedRestrictedStockUnitsMemberadi:MaximMember2020-11-012021-01-300000006281srt:MinimumMemberadi:PerformanceBasedRestrictedStockUnitsMemberadi:MaximMember2020-11-012021-01-300000006281srt:MaximumMemberadi:PerformanceBasedRestrictedStockUnitsMemberadi:MaximMember2020-11-012021-01-300000006281us-gaap:CostOfSalesMember2020-11-012021-01-300000006281us-gaap:CostOfSalesMember2019-11-032020-02-010000006281us-gaap:ResearchAndDevelopmentExpenseMember2020-11-012021-01-300000006281us-gaap:ResearchAndDevelopmentExpenseMember2019-11-032020-02-010000006281adi:SellingMarketingGeneralAndAdministrativeExpenseMember2020-11-012021-01-300000006281adi:SellingMarketingGeneralAndAdministrativeExpenseMember2019-11-032020-02-010000006281srt:MaximumMember2021-01-300000006281us-gaap:AccumulatedTranslationAdjustmentMember2020-10-310000006281us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-10-310000006281us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-10-310000006281us-gaap:AccumulatedTranslationAdjustmentMember2020-11-012021-01-300000006281us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-11-012021-01-300000006281us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-11-012021-01-300000006281us-gaap:AccumulatedTranslationAdjustmentMember2021-01-300000006281us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-01-300000006281us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-11-012021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-11-032020-02-010000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:InterestRateContractMember2020-11-012021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:InterestRateContractMember2019-11-032020-02-010000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-02-010000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-11-012021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-11-032020-02-010000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-11-012021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-11-032020-02-010000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-11-012021-01-300000006281us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-11-032020-02-010000006281us-gaap:FacilityClosingMember2020-10-310000006281adi:RepositionActionMember2020-10-310000006281adi:OtherActionsMember2020-10-310000006281us-gaap:FacilityClosingMember2020-11-012021-01-300000006281adi:RepositionActionMember2020-11-012021-01-300000006281adi:OtherActionsMember2020-11-012021-01-300000006281us-gaap:FacilityClosingMember2021-01-300000006281adi:RepositionActionMember2021-01-300000006281adi:OtherActionsMember2021-01-300000006281us-gaap:FacilityClosingMemberus-gaap:AccruedLiabilitiesMember2021-01-300000006281adi:RepositionActionMemberus-gaap:AccruedLiabilitiesMember2021-01-300000006281adi:OtherActionsMemberus-gaap:AccruedLiabilitiesMember2021-01-300000006281us-gaap:FacilityClosingMemberadi:AccruedLiabilitiesOtherNoncurrentMember2021-01-300000006281adi:RepositionActionMemberadi:AccruedLiabilitiesOtherNoncurrentMember2021-01-300000006281adi:OtherActionsMemberadi:AccruedLiabilitiesOtherNoncurrentMember2021-01-300000006281us-gaap:EmployeeSeveranceMember2021-01-300000006281adi:RepositionActionMemberus-gaap:IntellectualPropertyMember2018-11-042019-11-020000006281us-gaap:FacilityClosingMemberadi:WorkforceReductionPlanMember2021-01-300000006281us-gaap:LandAndBuildingMember2021-01-300000006281us-gaap:MachineryAndEquipmentMember2021-01-300000006281us-gaap:OfficeEquipmentMember2021-01-300000006281us-gaap:LeaseholdImprovementsMember2021-01-30adi:segment0000006281adi:IndustrialMemberus-gaap:OperatingSegmentsMember2020-11-012021-01-300000006281adi:IndustrialMemberus-gaap:OperatingSegmentsMember2019-11-032020-02-010000006281adi:CommunicationsMemberus-gaap:OperatingSegmentsMember2020-11-012021-01-300000006281adi:CommunicationsMemberus-gaap:OperatingSegmentsMember2019-11-032020-02-010000006281adi:AutomotiveMemberus-gaap:OperatingSegmentsMember2020-11-012021-01-300000006281adi:AutomotiveMemberus-gaap:OperatingSegmentsMember2019-11-032020-02-010000006281adi:ConsumerMemberus-gaap:OperatingSegmentsMember2020-11-012021-01-300000006281adi:ConsumerMemberus-gaap:OperatingSegmentsMember2019-11-032020-02-010000006281us-gaap:SalesChannelThroughIntermediaryMember2020-11-012021-01-300000006281us-gaap:SalesChannelThroughIntermediaryMember2019-11-032020-02-010000006281us-gaap:SalesChannelDirectlyToConsumerMember2020-11-012021-01-300000006281us-gaap:SalesChannelDirectlyToConsumerMember2019-11-032020-02-010000006281adi:SalesChannelOtherMember2020-11-012021-01-300000006281adi:SalesChannelOtherMember2019-11-032020-02-010000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-01-300000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-01-300000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberadi:CorporateObligationsMember2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMemberadi:CorporateObligationsMemberus-gaap:FairValueInputsLevel2Member2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMemberadi:CorporateObligationsMember2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-01-300000006281us-gaap:FairValueMeasurementsRecurringMember2021-01-300000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-10-310000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-10-310000006281us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-10-310000006281us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-10-310000006281us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-10-310000006281us-gaap:FairValueMeasurementsRecurringMember2020-10-310000006281us-gaap:LongTermDebtMemberadi:UnsecuredTermLoanThreeYearDueMarch2022Memberus-gaap:UnsecuredDebtMember2020-11-012021-01-300000006281us-gaap:LongTermDebtMemberadi:UnsecuredTermLoanThreeYearDueMarch2022Memberus-gaap:UnsecuredDebtMember2021-01-300000006281us-gaap:LongTermDebtMemberadi:UnsecuredTermLoanThreeYearDueMarch2022Memberus-gaap:UnsecuredDebtMember2020-10-310000006281adi:Senior2.50UnsecuredNotesDueDecember2021Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2021-01-300000006281adi:Senior2.50UnsecuredNotesDueDecember2021Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2020-10-310000006281adi:Senior2.875UnsecuredNotesDueJune2023Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2021-01-300000006281adi:Senior2.875UnsecuredNotesDueJune2023Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2020-10-310000006281us-gaap:LongTermDebtMemberus-gaap:SeniorNotesMemberadi:Senior3.125UnsecuredNotesDueDecember2023Member2021-01-300000006281us-gaap:LongTermDebtMemberus-gaap:SeniorNotesMemberadi:Senior3.125UnsecuredNotesDueDecember2023Member2020-10-310000006281us-gaap:LongTermDebtMemberadi:Senior295UnsecuredNotesDueApril2025Memberus-gaap:SeniorNotesMember2021-01-300000006281us-gaap:LongTermDebtMemberadi:Senior295UnsecuredNotesDueApril2025Memberus-gaap:SeniorNotesMember2020-10-310000006281us-gaap:LongTermDebtMemberadi:Senior3.90UnsecuredNoteDueDecember2025Memberus-gaap:SeniorNotesMember2021-01-300000006281us-gaap:LongTermDebtMemberadi:Senior3.90UnsecuredNoteDueDecember2025Memberus-gaap:SeniorNotesMember2020-10-310000006281us-gaap:LongTermDebtMemberadi:Senior3.50UnsecuredNotesDueDecember2026Memberus-gaap:SeniorNotesMember2021-01-300000006281us-gaap:LongTermDebtMemberadi:Senior3.50UnsecuredNotesDueDecember2026Memberus-gaap:SeniorNotesMember2020-10-310000006281us-gaap:LongTermDebtMemberadi:Senior4.50UnsecuredNotesDuesDecember2036Memberus-gaap:SeniorNotesMember2021-01-300000006281us-gaap:LongTermDebtMemberadi:Senior4.50UnsecuredNotesDuesDecember2036Memberus-gaap:SeniorNotesMember2020-10-310000006281adi:Senior5.30UnsecuredNotesDuesDecember2045Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2021-01-300000006281adi:Senior5.30UnsecuredNotesDuesDecember2045Memberus-gaap:LongTermDebtMemberus-gaap:SeniorNotesMember2020-10-310000006281us-gaap:LongTermDebtMember2021-01-300000006281us-gaap:LongTermDebtMember2020-10-310000006281us-gaap:ForwardContractsMember2021-01-300000006281us-gaap:ForwardContractsMember2020-10-310000006281us-gaap:ForeignExchangeContractMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2021-01-300000006281us-gaap:ForeignExchangeContractMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-10-310000006281us-gaap:InterestRateSwapMemberus-gaap:AccruedLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-300000006281us-gaap:InterestRateSwapMemberus-gaap:AccruedLiabilitiesMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-10-31iso4217:EUR0000006281us-gaap:RevenueCommissionersIrelandMember2020-11-012021-01-300000006281adi:MaximMember2020-07-120000006281us-gaap:SubsequentEventMemberadi:MaximMember2021-02-122021-02-120000006281adi:MaximMemberadi:SellingMarketingGeneralAndAdministrativeExpenseMember2021-01-30adi:numberOfReportingUnit00000062812020-08-012020-09-30adi:purportedShareholder0000006281us-gaap:SubsequentEventMemberus-gaap:CommonStockMember2021-02-162021-02-16


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File No. 1-7819
Analog Devices, Inc.
(Exact name of registrant as specified in its charter) 

Massachusetts 04-2348234
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One Analog Way,Wilmington,MA 01887
(Address of principal executive offices) (Zip Code)
(781) 329-4700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock $0.16 2/3 par value per shareADINasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
As of January 30, 2021 there were 368,893,742 shares of common stock of the registrant, $0.16 2/3 par value per share, outstanding.




PART I - FINANCIAL INFORMATION
 

ITEM 1.Financial Statements


ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)

 Three Months Ended
 January 30, 2021February 1, 2020
Revenue$1,558,458 $1,303,565 
Cost of sales513,087 455,423 
Gross margin1,045,371 848,142 
Operating expenses:
Research and development288,150 257,073 
Selling, marketing, general and administrative185,275 199,280 
Amortization of intangibles107,648 107,225 
Special charges438 11,136 
581,511 574,714 
Operating income:463,860 273,428 
Nonoperating expense (income):
Interest expense42,479 48,813 
Interest income(209)(1,940)
Other, net(15,028)338 
27,242 47,211 
Income before income taxes436,618 226,217 
Provision for income taxes48,099 22,343 
Net income$388,519 $203,874 
Shares used to compute earnings per common share – basic369,203 368,241 
Shares used to compute earnings per common share – diluted373,106 372,264 
Basic earnings per common share$1.05 $0.55 
Diluted earnings per common share$1.04 $0.55 

See accompanying notes.
1




ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)

Three Months Ended
January 30, 2021February 1, 2020
Net income$388,519 $203,874 
Foreign currency translation adjustments8,279 (195)
Change in fair value of derivative instruments designated as cash flow hedges (net of taxes of $6,661 and $5,459, respectively)
24,465 (12,028)
Changes in pension plans including transition obligation, net actuarial loss and foreign currency translation adjustments (net of taxes of $86 and $160, respectively)
(1,784)254 
Other comprehensive income (loss)30,960 (11,969)
Comprehensive income$419,479 $191,905 


See accompanying notes.


2


ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)

January 30, 2021October 31, 2020
ASSETS  
Current Assets
Cash and cash equivalents$1,048,063 $1,055,860 
Accounts receivable826,964 737,536 
Inventories618,640 608,260 
Prepaid expenses and other current assets131,074 116,032 
Total current assets2,624,741 2,517,688 
Property, Plant and Equipment, at Cost
Land and buildings981,717 974,604 
Machinery and equipment2,713,926 2,667,846 
Office equipment89,267 85,291 
Leasehold improvements160,034 157,915 
 3,944,944 3,885,656 
Less accumulated depreciation and amortization2,815,730 2,765,095 
Net property, plant and equipment1,129,214 1,120,561 
Other Assets
Other investments91,720 86,729 
Goodwill12,282,751 12,278,425 
Intangible assets, net3,535,475 3,650,280 
Deferred tax assets1,466,489 1,503,064 
Other assets309,720 311,856 
Total other assets17,686,155 17,830,354 
 $21,440,110 $21,468,603 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$227,423 $227,273 
Income taxes payable148,191 182,080 
Debt, current399,220  
Accrued liabilities901,923 955,633 
Total current liabilities1,676,757 1,364,986 
Non-current liabilities
Long-term debt4,747,347 5,145,102 
Deferred income taxes1,862,068 1,919,595 
Income taxes payable592,281 591,780 
Other non-current liabilities473,911 449,195 
Total non-current liabilities7,675,607 8,105,672 
Commitments and contingencies  
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, 368,893,742 shares outstanding (369,484,899 on October 31, 2020)
61,484 61,582 
Capital in excess of par value4,849,185 4,949,586 
Retained earnings7,395,578 7,236,238 
Accumulated other comprehensive loss(218,501)(249,461)
Total shareholders’ equity12,087,746 11,997,945 
 $21,440,110 $21,468,603 
See accompanying notes.
3


ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands)

Three Months Ended January 30, 2021
Capital inAccumulated
Other
 Common StockExcess ofRetainedComprehensive
SharesAmountPar ValueEarningsLoss
BALANCE, OCTOBER 31, 2020
369,485 $61,582 $4,949,586 $7,236,238 $(249,461)
Net income388,519 
Dividends declared and paid - $0.62 per share
(229,179)
Issuance of stock under stock plans and other488 82 19,838 
Stock-based compensation expense36,638 
Other comprehensive income30,960 
Common stock repurchased(1,079)(180)(156,877)
BALANCE, JANUARY 30, 2021
368,894 $61,484 $4,849,185 $7,395,578 $(218,501)

Three Months Ended February 1, 2020
Capital inAccumulated
Other
Common StockExcess ofRetainedComprehensive
SharesAmountPar ValueEarningsLoss
BALANCE, November 2, 2019368,302 $61,385 $4,936,349 $6,899,253 $(187,799)
Effect of Accounting Standards Update 2018-022,379 (2,379)
Net income203,874 
Dividends declared and paid - $0.54 per share
(199,160)
Issuance of stock as charitable contribution336 56 39,944 
Issuance of stock under stock plans and other491 82 16,031 
Stock-based compensation expense37,501 
Other comprehensive loss(11,969)
Common stock repurchased(909)(152)(105,878)
BALANCE, FEBRUARY 1, 2020
368,220 $61,371 $4,923,947 $6,906,346 $(202,147)

See accompanying notes.
4



ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

  
Three Months Ended
 January 30, 2021February 1, 2020
Cash flows from operating activities:
Net income$388,519 $203,874 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation56,309 59,863 
Amortization of intangibles145,044 144,069 
Stock-based compensation expense36,638 37,501 
Deferred income taxes(27,275)(13,982)
Non-cash contribution to charitable foundation 40,000 
Other non-cash activity(14,553)2,332 
Changes in operating assets and liabilities(156,741)(124,009)
Total adjustments39,422 145,774 
Net cash provided by operating activities427,941 349,648 
Cash flows from investing activities:
Proceeds from other investments18,566  
Additions to property, plant and equipment(67,388)(54,839)
Cash paid for asset acquisition(22,522) 
Payments for acquisitions, net of cash acquired(2,428) 
Changes in other assets(1,299)107 
Net cash used for investing activities(75,071)(54,732)
Cash flows from financing activities:
Dividend payments to shareholders(229,179)(199,160)
Repurchase of common stock(157,057)(106,030)
Proceeds from employee stock plans19,920 16,113 
Changes in other financing activities2,493 (495)
Net cash used for financing activities(363,823)(289,572)
Effect of exchange rate changes on cash3,156 742 
Net (decrease) increase in cash and cash equivalents(7,797)6,086 
Cash and cash equivalents at beginning of period1,055,860 648,322 
Cash and cash equivalents at end of period$1,048,063 $654,408 

See accompanying notes.
5


ANALOG DEVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 30, 2021 (UNAUDITED)
(all tabular amounts in thousands except per share amounts and percentages)

Note 1 – Basis of Presentation
In the opinion of management, the information furnished in the accompanying condensed consolidated financial statements reflects all normal recurring adjustments that are necessary to fairly state the results for these interim periods and should be read in conjunction with Analog Devices, Inc.’s (the Company) Annual Report on Form 10-K for the fiscal year ended October 31, 2020 (fiscal 2020) and related notes. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending October 30, 2021 (fiscal 2021) or any future period.
The Company has a 52-53 week fiscal year that ends on the Saturday closest to the last day in October. Certain amounts reported in previous periods have been reclassified to conform to the fiscal 2021 presentation.
Proposed acquisition of Maxim Integrated Products, Inc.
On July 12, 2020, the Company entered into a definitive agreement (the Merger Agreement) to acquire Maxim Integrated Products, Inc. (Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies. See Note 13, Acquisitions, for additional information.
Note 2 – Stock-Based Compensation and Shareholders' Equity
A summary of the Company’s stock option activity as of January 30, 2021 and changes during the three-month period then ended is presented below:
Options
Outstanding
(in thousands)
Weighted-
Average Exercise
Price Per Share
Weighted-
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
Options outstanding at October 31, 20204,192 $70.73 
Options granted460 $144.06 
Options exercised(349)$56.94 
Options forfeited(21)$85.53 
Options expired(5)$37.52
Options outstanding at January 30, 20214,277 $79.71 5.9$289,219 
Options exercisable at January 30, 20212,332 $61.96 4.4$199,072 
Options vested or expected to vest at January 30, 2021 (1)4,158 $78.63 5.9$285,622 
(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.
In the first quarter of fiscal 2021, the Company issued a special performance stock option award to the Company's chief executive officer. The performance stock option award is exercisable for up to 460,000 shares of the Company's common stock (the Target Number of Shares) at an exercise price per share of $144.06, which was the closing price of the Company's common stock on the date of grant, and vests subject to the satisfaction of certain target stock price thresholds during a five-year period, measured on the basis of the average of the closing prices of the Company's common stock over 70 consecutive trading days. The actual number of shares that will become exercisable will range from 0% to a maximum of 100% of the Target Number of Shares based on the attainment of such target stock price thresholds at any time during a five-year period from December 15, 2020 to December 15, 2025. The grant date fair value of the award was calculated using the Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award to calculate the fair market value. The Monte Carlo simulation model also uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions, including the possibility that the market condition may not be satisfied, and the resulting fair value of the award.
6


During the three-month periods ended January 30, 2021 and February 1, 2020, the total intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $30.4 million and $20.3 million, respectively.
A summary of the Company’s restricted stock unit/award activity as of January 30, 2021 and changes during the three-month period then ended is presented below: 
Restricted
Stock Units/Awards
Outstanding
(in thousands)
Weighted-
Average Grant-
Date Fair Value
Per Share
Restricted stock units/awards outstanding at October 31, 20203,637 $91.54 
Units/Awards granted196 $138.21 
Restrictions lapsed(135)$86.08 
Forfeited(59)$99.73 
Restricted stock units/awards outstanding at January 30, 20213,639 $92.02 
In the first quarter of fiscal 2021, the Company issued approximately 110,000 performance-based restricted stock units (Maxim Integration PRSUs) related to the Company's planned acquisition of Maxim to a select group of employees. The number of Maxim Integration PRSUs that may be earned will range from 0% to a maximum of 200% of the issued amount of Maxim Integration PRSUs and will be determined according to the achievement of certain performance metrics. Any shares earned will vest on the 60th day following the two-year anniversary of the closing of the Maxim acquisition. If the Maxim acquisition does not close, the awards will be cancelled. The grant date fair value of these awards were calculated using the value of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting. The grant-date fair value of these awards is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability of achievement of that performance condition.

As of January 30, 2021, there was $267.1 million of total unrecognized compensation cost related to unvested stock-based awards comprised of stock options and restricted stock units/awards. That cost is expected to be recognized over a weighted-average period of 1.3 years. The total grant-date fair values of awards that vested during the three-month periods ended January 30, 2021 and February 1, 2020 were approximately $15.6 million and $14.8 million, respectively.

Total stock-based compensation expense recognized was as follows:
Three Months Ended
January 30, 2021February 1, 2020
Cost of sales$4,354 $4,564 
Research and development18,321 17,605 
Selling, marketing, general and administrative13,963 15,332 
Total stock-based compensation expense$36,638 $37,501 

As of January 30, 2021 and October 31, 2020, the Company capitalized $5.7 million and $5.8 million, respectively, of stock-based compensation in Inventories on the Condensed Consolidated Balance Sheets.
Common Stock Repurchases
As of January 30, 2021, the Company had repurchased a total of approximately 157.1 million shares of its common stock for approximately $6.4 billion under the Company's share repurchase program. As of January 30, 2021, an additional $1.7 billion remains available for repurchase of shares under the current authorized program. The Company also repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options. 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.
7


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 three months of fiscal 2021.
Foreign currency translation adjustmentUnrealized holding gains (losses) on derivativesPension plansTotal
October 31, 2020$(26,852)$(172,670)$(49,939)$(249,461)
Other comprehensive income (loss) before reclassifications8,279 34,930 (2,446)40,763 
Amounts reclassified out of other comprehensive income (loss) (3,804)748 (3,056)
Tax effects (6,661)(86)(6,747)
Other comprehensive income (loss) 8,279 24,465 (1,784)30,960 
January 30, 2021$(18,573)$(148,205)$(51,723)$(218,501)
The amounts reclassified out of AOCI into the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Shareholders' Equity with presentation location during each period were as follows:

Three Months Ended
Comprehensive Income ComponentJanuary 30, 2021February 1, 2020Location
Unrealized holding losses (gains) on derivatives
Currency forwards $(1,986)$(80)Cost of sales
(1,064)378 Research and development
(1,218)532 Selling, marketing, general and administrative
Interest rate derivatives464 464 Interest expense
(3,804)1,294 Total before tax
204 (370)Tax
Effect of Accounting Standards Update 2018-02
 (2,379)Retained earnings
$(3,600)$(1,455)Net of tax
Amortization of pension components included in the computation of net periodic pension cost
     Actuarial losses748 648 
(86)(160)Tax
$662 $488 Net of tax
Total amounts reclassified out of AOCI, net of tax$(2,938)$(967)

Realized gains or losses on investments are determined based on the specific identification basis and are recognized in nonoperating expense (income). There were no material net realized gains or losses from the sales of available-for-sale investments during any of the fiscal periods presented.
8


Note 4 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
 Three Months Ended
 January 30, 2021February 1, 2020
Net Income$388,519 $203,874 
Basic shares:
Weighted-average shares outstanding369,203 368,241 
Earnings per common share basic:$1.05 $0.55 
Diluted shares:
Weighted-average shares outstanding369,203 368,241 
Assumed exercise of common stock equivalents3,903 4,023 
Weighted-average common and common equivalent shares373,106 372,264 
Earnings per common share diluted:$1.04 $0.55 
Anti-dilutive shares related to:
Outstanding stock-based awards239 397 

Note 5 – Special Charges
The following table is a quarterly roll-forward from October 31, 2020 to January 30, 2021 of the employee separation and exit cost accruals established related to existing restructuring actions:
Accrued RestructuringClosure of Manufacturing Facilities Repositioning ActionOther Actions
Balance at October 31, 2020$45,176 $20,774 $3,489 
First quarter fiscal 2021 special charges438   
Severance and other payments(1,950)(8,128)(333)
Effect of foreign currency on accrual 248  
Balance at January 30, 2021$43,664 $12,894 $3,156 
Current - accrued liabilities$33,433 $12,894 $3,156 
Other non-current liabilities$10,231 $ $ 
Repositioning Action
The Company recorded special charges of $137.5 million on a cumulative basis through January 30, 2021, as a result of organizational initiatives to better align the global workforce with the Company's long-term strategic plan. Approximately $123.3 million of the total charges was for severance and fringe benefit costs in accordance with either the Company's ongoing benefit plan or statutory requirements for the impacted manufacturing, engineering and selling, marketing, general and administrative (SMG&A) employees. The remaining $14.2 million of the charges were recorded in fiscal 2019 and related to the write-off of acquired intellectual property due to the Company's decision to discontinue certain product development strategies.
Closure of Manufacturing Facilities
The Company recorded special charges of $55.4 million on a cumulative basis through January 30, 2021 as a result of its decision to consolidate certain wafer and test facility operations acquired as part of the acquisition of Linear Technology Corporation (Linear). The Company plans to close its Hillview wafer fabrication facility located in Milpitas, California in fiscal 2021 and its Singapore test facility in the fiscal year ending October 29, 2022. The Company intends to transfer Hillview wafer fabrication production to its other internal facilities and to external foundries. In addition, the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines, and also to its outsourced assembly and test partners. The special charges include severance and fringe benefit costs, in accordance with the Company's ongoing benefit plan or statutory requirements at foreign locations, one-time termination benefits for the impacted manufacturing, engineering and SMG&A employees and other exit costs. These one-time termination benefits are being recognized over the future service period required for employees to earn these benefits. 
9


Note 6 – Property, Plant and Equipment
As discussed in Note 5, Special Charges, the Company is planning to transition testing operations currently handled in its Singapore facility to its facilities in Penang, Malaysia and the Philippines, in addition to its outsourced assembly and test partners. Accordingly, management has entered into an agreement to sell the facility in Singapore in May 2021 and has determined that this facility and certain equipment therein have met the held for sale criteria as specified in ASC 360. No write-down to fair value was required upon this designation during fiscal 2020, as the fair value of the asset group, less costs to sell, was greater than its carrying value. As shown below, this carrying value was reclassified from various line items within Property, plant and equipment to Prepaid expenses and other current assets upon designation and remains in Prepaid expenses and other current assets as of January 30, 2021.
Land and buildings$36,451 
Machinery and equipment1,468 
Office equipment197 
Leasehold improvements5,744 
43,860 
Less accumulated depreciation and amortization(21,706)
Net property, plant and equipment reclassified to Prepaid expenses and other current assets$22,154 

Note 7 – Segment Information
The Company designs, develops, manufactures and markets a broad range of integrated circuits. The Company operates and tracks its results in one reportable segment based on the aggregation of eight operating segments.
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.
Three Months Ended
 January 30, 2021February 1, 2020
 Revenue% of Revenue*Y/Y%Revenue% of Revenue*
Industrial$855,454 55 %24 %$687,685 53 %
Communications281,049 18 %16 %241,804 19 %
Automotive245,250 16 %19 %205,712 16 %
Consumer176,705 11 %5 %168,364 13 %
Total revenue$1,558,458 100 %20 %$1,303,565 100 %
* The sum of the individual percentages may not equal the total due to rounding.
Revenue by Sales Channel
The following table summarizes revenue by 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.
10


Three Months Ended
January 30, 2021February 1, 2020
ChannelRevenue% of Revenue*Revenue% of Revenue*
   Distributors$946,386 61 %$747,561 57 %
   Direct customers589,456 38 %529,731 41 %
   Other22,616 1 %26,273 2 %
Total revenue$1,558,458 100 %$1,303,565 100 %
* The sum of the individual percentages may not equal the total due to rounding.

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 January 30, 2021 and October 31, 2020. 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 January 30, 2021 and October 31, 2020, the Company held $205.7 million and $239.6 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below.
 January 30, 2021
 
Fair Value measurement at
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$822,348 $ $822,348 
Corporate obligations (1) 19,998 19,998 
Other assets:
Deferred compensation investments59,490  59,490 
Forward foreign currency exchange contracts (2) 7,386 7,386 
Total assets measured at fair value$881,838 $27,384 $909,222 
Liabilities
Interest rate derivatives$ $185,349 $185,349 
Total liabilities measured at fair value$ $185,349 $185,349 
11


(1)The amortized cost of the Company’s investments classified as available-for-sale as of January 30, 2021 was $20.0 million. 
(2)The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements for more information related to the Company's master netting arrangements.
 October 31, 2020
 
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$816,253 $ $816,253 
Other assets:
Forward foreign currency exchange contracts (1) 5,427 5,427 
Deferred compensation investments52,956  52,956 
Total assets measured at fair value$869,209 $5,427 $874,636 
Liabilities
Interest rate derivatives$ $214,586 $214,586 
Total liabilities measured at fair value$ $214,586 $214,586 
(1)The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements for more information related to the Company's master netting arrangements.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
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.
Interest rate derivatives The fair value of the interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivative.
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.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
Held for sale assets —The Company has classified the assets held for sale at carrying value. However, if they were to be carried at fair value, they would be considered a Level 3 fair value measurement and would be determined based on the use of appraisals and input from market participants.
Debt — The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis. The carrying amounts of the term loan approximates fair value. The term loan is classified as a Level 2 measurement according to the fair value hierarchy. 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.
12


January 30, 2021October 31, 2020
Principal Amount OutstandingFair Value Principal Amount Outstanding Fair Value
3-Year term loan, due March 2022
$925,000 $925,000 $925,000 $925,000 
2.50% Senior unsecured notes, due December 2021
400,000 406,774 400,000 $408,565 
2.875% Senior unsecured notes, due June 2023
500,000 526,131 500,000 $526,855 
3.125% Senior unsecured notes, due December 2023
550,000 590,115 550,000 $590,177 
2.95% Senior unsecured notes, due April 2025
400,000 434,027 400,000 $434,919 
3.90% Senior unsecured notes, due December 2025
850,000 966,168 850,000 $969,033 
3.50% Senior unsecured notes, due December 2026
900,000 1,015,998 900,000 $1,017,505 
4.50% Senior unsecured notes, due December 2036
250,000 321,995 250,000 $298,153 
5.30% Senior unsecured notes, due December 2045
400,000 558,870 400,000 $538,788 
Total debt$5,175,000 $5,745,078 $5,175,000 $5,708,995 
As of January 30, 2021, the Company believed that none of its unrealized losses on its available-for-sale investments were attributable to credit losses and therefore were not impaired. The investments with unrealized losses consisted primarily of corporate debt securities. In making the determination that the decline in fair value of these securities did not indicate impairment, the Company considered various factors, including, but not limited to: the extent to which fair value was less than cost; the financial condition and near-term prospects of the issuers; and the Company’s intent not to sell these securities and the assessment that it is more likely than not that the Company would not be required to sell these securities before the recovery of their amortized cost basis.
Unrealized gains and losses, net of taxes, are reported as a component of AOCI in the Company’s Condensed Consolidated Statements of Stockholders’ Equity. No material amounts were reclassified out of AOCI during the three months ended January 30, 2021 and February 1, 2020 for realized gains or losses on available-for-sale investments.
Note 9 – Derivatives
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 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 and Japanese Yen as of January 30, 2021 and October 31, 2020 were $217.0 million and $202.7 million, respectively. The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company’s Condensed Consolidated Balance Sheets as of January 30, 2021 and October 31, 2020 were as follows:
Fair Value At
Balance Sheet LocationJanuary 30, 2021October 31, 2020
Forward foreign currency exchange contractsPrepaid expenses and other current assets$7,490 $5,550 
As of January 30, 2021 and October 31, 2020, the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were $87.5 million and $62.7 million, respectively. The fair values of these hedging instruments in the Company’s Condensed Consolidated Balance Sheets were immaterial as of January 30, 2021 and October 31, 2020.
The Company estimates that $5.1 million, net of tax, of settlements of forward foreign currency derivative instruments included in AOCI will be reclassified into earnings within the next 12 months.
13


All the Company’s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Condensed Consolidated Balance Sheets on a net basis. As of January 30, 2021 and October 31, 2020, none of the netting arrangements involved collateral.
The following table presents the gross amounts of the Company's forward foreign currency exchange contract derivative assets and liabilities and the net amounts recorded in the Company's Condensed Consolidated Balance Sheets:
 January 30, 2021October 31, 2020
Gross amount of recognized assets$7,737 $6,114 
Gross amounts of recognized liabilities offset in the Condensed Consolidated Balance Sheets(351)(687)
Net assets presented in the Condensed Consolidated Balance Sheets$7,386 $5,427 
As of January 30, 2021 and October 31, 2020, the fair value of the interest rate swap agreement designated as a cash flow hedge was $185.3 million and $214.6 million, respectively, and is included within Accrued liabilities in the Company's Condensed Consolidated Balance Sheets.
The market risk associated with the Company’s derivative instruments results from currency exchange rate or interest rate movements that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to the Company’s derivative instruments consist of a number of major international financial institutions with high credit ratings. Based on the credit ratings of the Company’s counterparties as of January 30, 2021 and October 31, 2020, nonperformance is not perceived to be a material risk. Furthermore, none of the Company’s derivatives are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company’s credit ratings from any credit rating agency. 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.
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 January 30, 2021 and October 31, 2020 were as follows:
January 30, 2021October 31, 2020
Raw materials$35,618 $33,806 
Work in process444,083 443,690 
Finished goods138,939 130,764 
Total inventories$618,640 $608,260 

Note 11 – Income Taxes
The Company’s effective tax rates for the three-month periods ended January 30, 2021 and February 1, 2020 were below the U.S. statutory tax rate of 21.0%, due to lower statutory tax rates applicable to the Company's operations in the foreign jurisdictions in which it earns income.
The Company has numerous audits ongoing throughout the world including: an IRS income tax audit for the fiscal years ended November 3, 2018 (fiscal 2018) and November 2, 2019 (fiscal 2019); various U.S. state and local tax audits; and international audits, including the transfer pricing audit in Ireland discussed below. The Company's U.S. federal tax returns prior to the fiscal year ended October 28, 2017 (fiscal 2017) are no longer subject to examination.
14


The Company’s Ireland tax returns prior to the fiscal year ended November 2, 2013 are no longer subject to examination. During the fourth quarter of fiscal 2018, the Company’s Irish tax resident subsidiary received an assessment for the fiscal year ended November 2, 2013 (fiscal 2013) of approximately €43.0 million, or $52.0 million (as of January 30, 2021), from the Irish Revenue Commissioners (Irish Revenue). This assessment excludes any penalties and interest. The assessment claims that the Company’s Irish entity failed to conform to 2010 OECD Transfer Pricing Guidelines. The Company strongly disagrees with the assessment and maintains that its transfer pricing is appropriate. Therefore, the Company has not recorded any additional tax liability related to fiscal 2013. The Company intends to vigorously defend its originally filed tax return position and is currently preparing for an appeal with the Irish Tax Appeals Commission, which is the normal process for the resolution of differences between Irish Revenue and taxpayers. If Irish Revenue were ultimately to prevail with respect to its assessment for fiscal 2013, such assessment and any potential impact related to other open years subsequent to fiscal 2013 could have a material unfavorable impact on the Company's income tax expense and net earnings in future periods. During fiscal 2019, Irish Revenue commenced transfer pricing audits of the fiscal years ended November 1, 2014 (fiscal 2014); October 31, 2015 (fiscal 2015); October 29, 2016 (fiscal 2016); and fiscal 2017. However, the Company received confirmation from Irish Revenue that the audit relating to fiscal 2014 was complete and that no further tax assessment arose in respect of that period. During fiscal 2020, the Company settled the audit relating to fiscal 2015 for an additional tax payment that was not material. The audits related to fiscal 2016 and fiscal 2017 are on-going.
Note 12 – New Accounting Pronouncements
Standards Implemented
Financial Instruments
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief (ASU 2019-05) and ASU 2019-11, Codification Improvements to Topic 326 (ASU 2019-11). ASU 2019-05 allows an entity to irrevocably elect the fair value option for certain financial instruments. Once elected, an entity would recognize the difference between the carrying amount and the fair value of the financial instrument as part of the cumulative effect adjustments associated with the adoption of ASU 2016-13. ASU 2019-11 allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326.
The Company is exposed to credit losses through sales of its products and certain financial instruments. The Company determines if there is an expected loss on its accounts receivables using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. The Company adopted these standards effective November 1, 2020 using the modified retrospective approach, which did not have a material impact on the Company's financial position and results of operations. See Note 8, Fair Value, in these Notes to Condensed Consolidated Financial Statements for more information related to how the Company assesses credit losses on its available-for-sale debt securities.
Income taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 in the first quarter of fiscal 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's financial position and results of operations.
Retirement Benefits
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post-retirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted ASU 2018-14 in the first quarter of fiscal 2021. Upon adoption, ASU 2018-14 did not have a material impact on the Company's financial position and results of operations.
15


Standards to Be Implemented
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. The Company is currently evaluating the impact of the reference rate reform on its contracts and the resulting impact of adopting this standard on our financial statements.
Note 13 – Acquisitions
Proposed acquisition of Maxim Integrated Products, Inc.
On July 12, 2020, the Company entered into the Merger Agreement to acquire Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies. Under the terms of the Merger Agreement, Maxim stockholders will receive, for each outstanding share of Maxim common stock, 0.630 of a share of the Company’s common stock at the closing. The estimated merger consideration is approximately $27.0 billion based on the closing price of the Company's common stock on February 12, 2021. The value of the merger consideration will fluctuate based upon changes in the price of the Company's common stock and the number of shares of Maxim common stock, restricted stock awards and restricted stock unit awards outstanding on the closing date.
The transaction is subject to customary closing conditions, including receipt of certain non-U.S. regulatory approvals. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired. The Merger Agreement includes termination rights for both the Company and Maxim. The Company may be required to pay Maxim a regulatory termination fee of $830.0 million in cash if the Merger Agreement is terminated in certain circumstances involving the failure to obtain required regulatory approvals. On October 8, 2020, the required shareholder approvals relating to the Merger Agreement were obtained from both the Company's shareholders and Maxim's shareholders.
In the first three months of fiscal 2021, the Company incurred $15.2 million of transaction-related costs recorded within Selling, marketing, general and administrative expenses in the Company's Condensed Consolidated Statement of Income.
Maxim Merger Litigation
As previously disclosed, in August and September 2020, three lawsuits were filed against the Company and/or its board of directors in connection with the Company’s proposed acquisition of Maxim: (1) Joseph Post v. Maxim Integrated Products, Inc., et al., Case No. 1:99-mc-09999 (D. Del., filed August 24, 2020) (the Post Action); (2) Coe Living Trust v. Analog Devices, Inc., et al., Case No. 1:20-cv-11682 (D. Mass., filed September 11, 2020) (the Coe Action); and (3) Delman, et al. v. Stata, et al., Case No. 2082CV00864 (Mass. Sup. Ct., Norfolk Cnty., filed September 11, 2020) (the Delman Action). The Post Action was brought by a purported shareholder of Maxim against Maxim, the members of Maxim’s board of directors, the Company and a subsidiary of the Company. The Coe Action was brought by a purported shareholder of the Company against the Company and the members of the Company’s board of directors. The Delman Action was brought by two purported shareholders of the Company against the members of the Company’s board of directors. In exchange for certain disclosures that the Company and Maxim voluntarily made in Form 8-Ks filed on September 30, 2020, the plaintiff in the Post Action filed a notice of voluntary dismissal on October 8, 2020, the plaintiff in the Coe Action filed a notice of voluntary dismissal on October 22, 2020, and the plaintiffs in the Delman Action filed a notice of dismissal subject to court approval on October 1, 2020. In each case, the notices of dismissal did not affect the rights of any other shareholders.
Note 14 – Subsequent Events
On February 16, 2021, the Board of Directors of the Company declared a cash dividend of $0.69 per outstanding share of common stock. The dividend will be paid on March 9, 2021 to all shareholders of record at the close of business on February 26, 2021 and is expected to total approximately $254.5 million.

16



ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020 (fiscal 2020).
This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance; the proposed acquisition of Maxim Integrated Products, Inc.; our anticipated growth and trends in our businesses; our future liquidity, capital needs and capital expenditures; the impact of the COVID-19 pandemic on our business, financial condition and results of operations; our future market position and expected competitive changes in the marketplace for our products; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; the effect of changes in or the application of new or revised tax laws; expected cost savings; the effect of new accounting pronouncements; our ability to successfully integrate acquired businesses and technologies; and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.

Impact of COVID-19 on our Business
The pandemic caused by the novel strain of the coronavirus (COVID-19) has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns. These measures have impacted and likely will continue to impact our workforce and operations, the operations of our customers and those of our respective vendors and suppliers. We have significant operations worldwide, including in the United States, the Philippines, Ireland, Singapore, Malaysia, China and India. Each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities. Since the beginning of the third quarter of fiscal 2020, our manufacturing operations and supply chain generally stabilized at normal levels, but that could change in the future given that the COVID-19 situation remains dynamic.
The spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, modifying employee work locations and cancelling physical participation in meetings, events and conferences) and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and shareholders.
While we are confident that our strategy and long-term contingency planning have positioned us well to weather the current uncertainty, we cannot at this time fully quantify or forecast the impact of COVID-19 on our business. The degree to which COVID-19 impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain, and we cannot provide assurance as to the duration and scope of the pandemic, its severity, the actions to contain the virus or treat its impact, or how quickly and to what extent normal economic and operating conditions can resume.
Proposed Acquisition of Maxim Integrated Products, Inc.
On July 12, 2020, we entered into a definitive agreement (the Merger Agreement) to acquire Maxim Integrated Products, Inc. (Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies. Under the terms of the Merger Agreement, Maxim stockholders will receive, for each outstanding share of Maxim common stock, 0.630 of a share of our common stock. The estimated merger consideration is approximately $27.0 billion based on the closing price of our common stock on February 12, 2021. Following the approval of Maxim stockholders and our shareholders, as well as the expiration of the waiting-period applicable to U.S. regulatory approval, the transaction is subject to customary closing
17


conditions, including receipt of certain non-U.S. regulatory approvals. See Note 13, Acquisitions, in the Notes to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
Results of Operations
Overview
(all tabular amounts in thousands except per share amounts and percentages)
 Three Months Ended
 January 30, 2021February 1, 2020$ Change% Change
Revenue$1,558,458 $1,303,565 $254,893 20 %
Gross margin %67.1 %65.1 %
Net income$388,519 $203,874 $184,645 91 %
Net income as a % of revenue24.9 %15.6 %
Diluted EPS$1.04 $0.55 $0.49 89 %
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 our product will be incorporated. As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.
Three Months Ended
 January 30, 2021February 1, 2020
 Revenue% of
Revenue*
Y/Y%Revenue% of
Revenue*
Industrial$855,454 55 %24 %$687,685 53 %
Communications281,049 18 %16 %241,804 19 %
Automotive245,250 16 %19 %205,712 16 %
Consumer176,705 11 %%168,364 13 %
Total revenue$1,558,458 100 %20 %$1,303,565 100 %
* The sum of the individual percentages may not equal the total due to rounding.
Revenue increased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher demand for our products across all end markets.
Revenue by Sales Channel
The following table summarizes revenue by sales channel. We sell our products globally through a direct sales force, third party distributors, independent sales representatives and via our 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.
18


Three Months Ended
January 30, 2021February 1, 2020
Revenue% of Revenue*Revenue% of Revenue*
Channel
   Distributors$946,386 61 %$747,561 57 %
   Direct customers589,456 38 %529,731 41 %
   Other22,616 %26,273 %
Total revenue$1,558,458 100 %$1,303,565 100 %
* The sum of the individual percentages may not equal the total due to rounding.
As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end customer demand.
Gross Margin
 Three Months Ended
 January 30, 2021February 1, 2020$ Change% Change
Gross margin$1,045,371 $848,142 $197,229 23 %
Gross margin %67.1 %65.1 %
Gross margin percentage increased by 200 basis points in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher utilization of our factories due to increased customer demand.
Research and Development (R&D) 
 Three Months Ended
 January 30, 2021February 1, 2020$ Change% Change
R&D expenses$288,150 $257,073 $31,077 12 %
R&D expenses as a % of revenue18 %20 %
R&D expenses increased in the three-month period ended January 30, 2021, as compared to the same period of the prior fiscal year, primarily as a result of higher R&D employee-related variable compensation expense and salary and benefit expenses, partially offset by lower discretionary spending.
R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts