Analog Devices 10-Q 2023-07-29

Filed 2023-08-23. 8 sections, 133K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

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 July 29, 2023

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)

Massachusetts04-2348234
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Analog Way,Wilmington,MA01887
(Address of principal executive offices)(Zip Code)

(781) 935-5565

(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 July 29, 2023 there were 498,313,956 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 EndedNine Months Ended
July 29, 2023July 30, 2022July 29, 2023July 30, 2022
Revenue$3,076,495$3,109,880$9,589,055$8,766,237
Cost of sales1,114,8801,066,7383,358,5533,376,578
Gross margin1,961,6152,043,1426,230,5025,389,659
Operating expenses:
Research and development423,751431,8291,253,6001,279,510
Selling, marketing, general and administrative334,113326,942984,648929,615
Amortization of intangibles250,719252,864756,882759,707
Special charges, net23,539138,20146,675244,603
Total operating expenses1,032,1221,149,8363,041,8053,213,435
Operating income:929,493893,3063,188,6972,176,224
Nonoperating expense (income):
Interest expense69,34651,189193,051152,701
Interest income(8,794)(1,797)(32,198)(2,578)
Other, net(5,880)(4,023)(8,373)(24,636)
Total nonoperating expense (income)54,67245,369152,480125,487
Income before income taxes874,821847,9373,036,2172,050,737
(Benefit from) provision for income taxes(2,198)98,952220,068238,402
Net income$877,019$748,985$2,816,149$1,812,335
Shares used to compute earnings per common share – basic500,018517,011503,951521,557
Shares used to compute earnings per common share – diluted503,503520,550507,804525,652
Basic earnings per common share$1.75$1.45$5.59$3.47
Diluted earnings per common share$1.74$1.44$5.55$3.45

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022July 29, 2023July 30, 2022
Net income$877,019$748,985$2,816,149$1,812,335
Foreign currency translation adjustments(1,292)(9,028)343(31,500)
Change in fair value of derivative instruments designated as cash flow hedges, net2,3792,23925,737(471)
Changes in pension plans, net actuarial gain/loss and foreign currency translation adjustments, net4221,7701,2185,902
Other comprehensive income (loss)1,509(5,019)27,298(26,069)
Comprehensive income$878,528$743,966$2,843,447$1,786,266

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

July 29, 2023October 29, 2022
ASSETS
Current Assets
Cash and cash equivalents$1,149,246$1,470,572
Accounts receivable1,616,2431,800,462
Inventories1,709,3131,399,914
Prepaid expenses and other current assets360,383267,044
Total current assets4,835,1854,937,992
Non-current Assets
Net property, plant and equipment2,922,7812,401,304
Goodwill26,913,13426,913,134
Intangible assets, net11,762,65513,265,406
Deferred tax assets2,224,8802,264,888
Other assets688,104519,626
Total non-current assets44,511,55445,364,358
TOTAL ASSETS$49,346,739$50,302,350
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$585,570$582,160
Income taxes payable423,438265,845
Commercial paper notes544,710—
Accrued liabilities1,277,3001,594,650
Total current liabilities2,831,0182,442,655
Non-current Liabilities
Long-term debt6,437,650

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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 29, 2022 (fiscal 2022).

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,” “potential,” “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 or results; our anticipated growth and trends in our businesses; the effects of business, economic, political, legal and regulatory impacts or conflicts upon our global operations; changes in demand for semiconductors and the related changes in demand and supply for our products; manufacturing delays, product availability and supply chain disruptions; our ability to recruit or retain our key personnel; our future liquidity, capital needs and capital expenditures; our development of technologies and processes and research and development investments; our future market position and expected competitive changes in the marketplace for our products; the anticipated result of litigation matters; our plans to pay dividends or repurchase stock; servicing our outstanding debt, including our plans to offer to exchange existing unregistered notes for new registered notes; our plans to borrow under our Revolving Credit Agreement and issue notes under our commercial paper program and the planned use of proceeds from such borrowing and issuing; 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 plans to integrate or realize the benefits or synergies expected of acquired businesses and technologies; our continued initiatives to consolidate our footprint related to our business units; and other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.

The following important factors and uncertainties, among others, could cause results to differ materially from those described in the forward-looking statements: political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending or cancellations of orders for our products; unavailability of raw materials, services, supplies or manufacturing capacity; disruptions to our manufacturing operations or our ability to execute our business strategy; changes in geographic, product or customer mix; changes in export classifications, import and export regulations or duties and tariffs; changes in our estimates of our expected tax rates based on current tax law; adverse results in litigation matters; the risk that we will be unable to retain and hire key personnel including as a result of labor shortages; changes in demand for semiconductors; attempted or actual security breaches and other cybersecurity incidents that disrupt our operations; unanticipated difficulties or expenditures relating to integrating Maxim Integrated Products, Inc. (Maxim); uncertainty as to the long-term value of our common stock; the discretion of our board of directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; the diversion of management time on integrating Maxim's business and operations; our ability to successfully integrate acquired business and technologies, including Maxim; and the risk that expected benefits, synergies and growth prospects of acquisitions, including our acquisition of Maxim, may not be fully achieved in a timely manner, or at all. Additional factors that could cause actual results to differ materially from those in these forward-looking statements include the risk factors included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for fiscal 2022 and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q. 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.

Results of Operations

Overview

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

Three Months Ended
July 29, 2023July 30, 2022$ Change% Change
Revenue$3,076,495$3,109,880$(33,385)(1)%
Gross margin %63.8%65.7%
Net income$877,019$748,985$128,03417%
Net income as a % of revenue28.5%24.1%
Diluted EPS$1.74$1.44$0.3021%
Nine Months Ended
July 29, 2023July 30, 2022$ Change% Change
Revenue$9,589,055$8,766,237$822,8189%
Gross margin %65.0%61.5%
Net income$2,816,149$1,812,335$1,003,81455%
Net income as a % of revenue29.4%20.7%
Diluted EPS$5.55$3.45$2.1061%

Revenue Trends by End Market

The following tables summarize 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 revenue within, each end market.

Three Months Ended
July 29, 2023July 30, 2022
Revenue% of Revenue*Y/Y%Revenue% of Revenue*
Industrial$1,629,20153%4%$1,566,88550%
Automotive747,55424%15%648,15321%
Communications380,50412%(23)%491,51516%
Consumer319,23610%(21)%403,32713%
Total revenue$3,076,495100%(1)%$3,109,880100%
Nine Months Ended
July 29, 2023July 30, 2022
Revenue% of Revenue*Y/Y%Revenue% of Revenue*
Industrial$5,092,87953%15%$4,439,23251%
Automotive2,226,27723%23%1,810,80321%
Communications1,319,93114%(4)%1,378,35216%
Consumer949,96810%(17)%1,137,85013%
Total revenue$9,589,055100%9%$8,766,237100%
* The sum of the individual percentages may not equal the total due to rounding.

Revenue decreased 1% in the three-month period ended July 29, 2023 as compared to the same period of the prior fiscal year, primarily the result of a decrease in revenue in the Consumer end market, primarily due to weakening market trends and a decrease in revenue in the Communications end market due to the timing of infrastructure deployment cycles, partially offset by

increases in our Industrial end market, namely sustainable energy and aerospace and defense and our Automotive end market, namely cabin electronics and battery management systems.

Revenue increased 9% in the nine-month period ended July 29, 2023 as compared to the same period of the prior fiscal year, primarily the result of broad-based demand for our products sold into the Industrial end market, namely sustainable energy and aerospace and defense and the Automotive end market, namely cabin electronics and battery management systems, partially offset by a decrease in revenue in the Consumer end market primarily due to weakening market trends and a decrease in revenue in the Communications end market due to the timing of infrastructure deployment cycles.

Revenue by Sales Channel

The following tables summarize 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. Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.

Three Months Ended
July 29, 2023July 30, 2022
Revenue% of Revenue*Revenue% of Revenue*
Channel
Distributors$1,904,49662%$1,922,98262%
Direct customers1,126,79637%1,146,53837%
Other45,2031%40,3601%
Total revenue$3,076,495100%$3,109,880100%
Nine Months Ended
July 29, 2023July 30, 2022
Revenue% of Revenue*Revenue% of Revenue*
Channel
Distributors$5,912,22962%$5,426,02462%
Direct customers3,547,11637%3,241,42937%
Other129,7101%98,7841%
Total revenue$9,589,055100%$8,766,237100%
* The sum of the individual percentages may not equal the total due to rounding.

As indicated in the tables 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 EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
Gross margin$1,961,615$2,043,142$(81,527)(4)%$6,230,502$5,389,659$840,84316%
Gross margin %63.8%65.7%65.0%61.5%

Gross margin percentage decreased by 190 basis points and increased by 350 basis points in the three- and nine-month periods ended July 29, 2023, respectively, as compared to the same periods of the prior fiscal year. The decrease in the three-month period ended July 29, 2023 primarily relates to lower utilization of our factories due to decreased customer demand. The increase in the nine-month period ended July 29, 2023 was primarily the result of additional cost of goods sold of $271.4 million related to a nonrecurring fair value adjustment recorded to inventory in the nine-month period ended July 30, 2022 as a result of the acquisition of Maxim Integrated Products, Inc. (Maxim).

Research and Development (R&D)

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
R&D expenses$423,751$431,829$(8,078)(2)%$1,253,600$1,279,510$(25,910)(2)%
R&D expenses as a % of revenue14%14%13%15%

R&D expenses decreased both in the three- and nine-month periods ended July 29, 2023, as compared to the same periods of the prior fiscal year. The decrease in the three-month period was primarily the result of lower R&D employee-related variable compensation expenses, partially offset by higher salary and benefit expenses. The decrease in the nine-month period was primarily the result of lower R&D employee-related variable compensation expenses.

R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.

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

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
SMG&A expenses$334,113$326,942$7,1712%$984,648$929,615$55,0336%
SMG&A expenses as a % of revenue11%11%10%11%

SMG&A expenses increased in both the three- and nine-month periods ended July 29, 2023, as compared to the same periods of the prior fiscal year, primarily the result of higher salary and benefit expenses and discretionary spending, partially offset by lower SMG&A employee-related variable compensation expenses and acquisition-related transaction costs.

Amortization of Intangibles

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
Amortization expenses$250,719$252,864$(2,145)(1)%$756,882$759,707$(2,825)—%
Amortization expenses as a % of revenue8%8%8%9%

Amortization expenses were relatively flat in both the three- and nine-month periods ended July 29, 2023, as compared to the same periods of the prior fiscal year.

Special Charges, Net

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
Special charges, net$23,539$138,201$(114,662)(83)%$46,675$244,603$(197,928)(81)%
Special charges, net as a % of revenue1%4%—%3%

Special charges, net decreased in both the three- and nine-month periods ended July 29, 2023, as compared to the same periods of the prior fiscal year, primarily the result of higher charges recorded in fiscal 2022 as part of the integration of Maxim and continued organizational initiatives to better align our global workforce with our long-term strategic plan.

Operating Income

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
Operating income$929,493$893,306$36,1874%$3,188,697$2,176,224$1,012,47347%
Operating income as a % of revenue30.2%28.7%33.3%24.8%

The year-over-year increase in operating income in the three-month period ended July 29, 2023 was primarily the result of decreases of $114.7 million in special charges, net and $8.1 million in R&D expenses, partially offset by decreases in gross margin of $81.5 million and an increase of $7.2 million in SMG&A expenses.

The year-over-year increase in operating income in the nine-month period ended July 29, 2023 was primarily the result of an increase in revenue of $822.8 million and an increase in gross margin percent, which contributed to an increase in gross margin of $840.8 million, and decreases of $197.9 million in special charges, net and $25.9 million in R&D expenses, partially offset by an increase of $55.0 million in SMG&A expenses*.*

Nonoperating Expense (Income)

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ ChangeJuly 29, 2023July 30, 2022$ Change
Total nonoperating expense (income)$54,672$45,369$9,303$152,480$125,487$26,993

The year-over-year increase in nonoperating expense (income) in the three-month period ended July 29, 2023 as compared to the same period of the prior year was the result of higher interest expense related to our debt obligations partially offset by higher interest income.

The year-over-year increase in nonoperating expense (income) in the nine-month period ended July 29, 2023 as compared to the same period of the prior year was the result of higher interest expense related to our debt obligations and lower net gains from other investments partially offset by higher interest income.

(Benefit from) Provision for Income Taxes

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ ChangeJuly 29, 2023July 30, 2022$ Change
(Benefit from) provision for income taxes$(2,198)$98,952$(101,150)$220,068$238,402$(18,334)
Effective income tax rate(0.3)%11.7%7.2%11.6%

The effective tax rates for both the three- and nine-month periods ended July 29, 2023 and July 30, 2022 were below the U.S. statutory tax rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income. Our pretax income for the three- and nine-month periods ended July 29, 2023 and July 30, 2022 was primarily generated in Ireland at a tax rate of 12.5%. The Company's effective tax rate for the three- and nine-month periods ended July 29, 2023 also included 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. The mandatory capitalization requirement decreased our effective tax rate primarily by increasing the foreign-derived intangible income deduction.

Our effective tax rate for the third quarter of fiscal 2023 was also impacted by a discrete income tax benefit recorded of $81.1 million resulting from the approval granted by the Joint Committee on Taxation of our federal corporate income tax relief claim which reduced the amount of transition tax owed under the Tax Cuts and Jobs Act.

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

Net Income

Three Months EndedNine Months Ended
July 29, 2023July 30, 2022$ Change% ChangeJuly 29, 2023July 30, 2022$ Change% Change
Net income$877,019$748,985$128,03417%$2,816,149$1,812,335$1,003,81455%
Net income as a % of revenue28.5%24.1%29.4%20.7%
Diluted EPS$1.74$1.44$5.55$3.45

Net income increased in the three-month period ended July 29, 2023, as compared to the same period of the prior fiscal year, the result of a $36.2 million increase in operating income and a $101.2 million decrease in (benefit from) provision for income taxes, partially offset by a $9.3 million increase in nonoperating expense (income).

Net income increased in the nine-month period ended July 29, 2023, as compared to the same period of the prior fiscal year, the result of a $1,012.5 million increase in operating income and a $18.3 million decrease in (benefit from) provision for income taxes, partially offset by a $27.0 million increase in nonoperating expense (income).

Liquidity and Capital Resources

At July 29, 2023, our principal source of liquidity was $1,149.2 million of cash and cash equivalents, of which approximately $253.9 million was held in the United States, and the balance of our cash and cash equivalents was held outside the United States in various foreign subsidiaries. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. We do not expect current regulatory restrictions or taxes on repatriation to have a material adverse effect on our overall liquidity, financial condition or results of operations. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.

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

Nine Months Ended
July 29, 2023July 30, 2022
Net cash provided by operating activities$3,630,340$3,326,066
Net cash provided by operations as a % of revenue38%38%
Net cash used for investing activities$(787,324)$(351,035)
Net cash used for financing activities$(3,164,342)$(3,403,860)

The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended July 29, 2023 as compared to the same period in fiscal 2022.

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities. The increase in cash provided by operating activities during the nine-month period ended July 29, 2023, as compared to the same period of the prior fiscal year, was the result of higher net income adjusted for noncash items offset by changes in working capital.

Investing Activities

Investing cash flows generally consist of capital expenditures and cash used for acquisitions. The increase in cash used for investing activities during the nine-month period ended July 29, 2023, as compared to the same period of the prior fiscal year, was primarily the result of an increase in cash used for capital expenditures.

Financing Activities

Financing cash flows generally consist of payments of dividends to stockholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans. The decrease in cash used for financing activities during the nine-month period ended July 29, 2023, as compared to the same

period of the prior fiscal year, was primarily the result of higher net proceeds from the issuance of commercial paper notes and lower debt repayments, partially offset by higher common stock repurchases.

Working Capital

July 29, 2023October 29, 2022$ Change% Change
Accounts receivable$1,616,243$1,800,462$(184,219)(10)%
Days sales outstanding*4850
Inventory$1,709,313$1,399,914$309,39922%
Days cost of sales in inventory*137107

*We use the average of the current quarter and prior quarter ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively. Cost of sales amounts used in the calculation of days cost of sales in inventory include accounting adjustments related to amortization of developed technology intangible assets acquired and depreciation related to the write-up of fixed assets to fair value as a result of the acquisition of Maxim.

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

Inventory increased primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.

Current liabilities increased to $2,831.0 million at July 29, 2023 as compared to $2,442.7 million at the end of fiscal 2022 due to an increase in commercial paper notes and income taxes payable, partially offset by lower accrued liabilities.

Debt

As of July 29, 2023, our debt obligations consisted of the following:

Principal Amount Outstanding
2024 Notes, due October 2024$500,000
2025 Notes, due April 2025400,000
2026 Notes, due December 2026900,000
2027 Notes, due June 2027440,212
2028 Notes, due October 2028750,000
2031 Notes, due October 20311,000,000
2032 Notes, due October 2032300,000
2036 Notes, due December 2036144,278
2041 Notes, due October 2041750,000
2045 Notes, due December 2045332,587
2051 Notes, due October 20511,000,000
Total debt$6,517,077

The indentures governing our outstanding notes contain covenants that may limit our ability to: incur, create, assume or guarantee any debt for borrowed money secured by a lien upon a principal property; enter into sale and lease-back transactions with respect to a principal property; and consolidate with or merge into, or transfer or lease all or substantially all of our assets to, any other party. As of July 29, 2023, we were in compliance with these covenants.

Commercial Paper Program

On April 14, 2023, we established a commercial paper program under which we may issue short-term, unsecured commercial paper notes in amounts up to a maximum aggregate face amount of $2.5 billion outstanding at any time, with maturities up to 397 days from the date of issuance. As of July 29, 2023, we had $544.7 million of outstanding borrowings under the commercial paper program recorded in the Condensed Consolidated Balance Sheet. We intend to use the net proceeds of the commercial paper program for general corporate purposes, including without limitation, repayment of indebtedness, stock repurchases, acquisitions, capital expenditures and working capital.

Revolving Credit Facility

Our Third Amended and Restated Revolving Credit Agreement, dated as of June 23, 2021 and as amended (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).

We may borrow under this revolving credit facility in the future and use the proceeds for repayment of existing indebtedness, stock repurchases, acquisitions, capital expenditures, working capital and other lawful corporate purposes. The terms of the Revolving Credit Agreement impose restrictions on our ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness. In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0. As of July 29, 2023, we were in compliance with these covenants.

Stock Repurchase Program

In the aggregate, our Board of Directors has authorized us to repurchase $16.7 billion of our common stock under our common stock repurchase program. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized under the program. As of July 29, 2023, an additional $2.6 billion remains available for repurchase under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. We also repurchase shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options as well as for our employee stock purchase plan. Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant.

Capital Expenditures

Net additions to property, plant and equipment were $785.1 million in the first nine months of fiscal 2023. We expect capital expenditures for fiscal 2023 to be between approximately 7% to 9% of revenue, which is above our historical levels primarily due to our plans to expand internal manufacturing capacity. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.

Dividends

On August 22, 2023, our Board of Directors declared a cash dividend of $0.86 per outstanding share of common stock. The dividend will be paid on September 14, 2023 to all shareholders of record at the close of business on September 5, 2023 and is expected to total approximately $428.6 million. We currently expect quarterly dividends to continue in future periods. The payment of any future quarterly dividends, or a future increase in the quarterly dividend amount, will be at the discretion of the Board and will be dependent upon our financial position, results of operations, outlook, liquidity and other factors deemed relevant by the Board.

Contractual Obligations

There have not been any material changes during the nine-month period ended July 29, 2023 to the amounts presented in the table summarizing our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended October 29, 2022.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards will not have a material impact on our future financial condition and results of operations. See Note 14, New Accounting Pronouncements, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impact on our historical financial condition and results of operations.

Critical Accounting Policies and Estimates

There were no material changes in the nine-month period ended July 29, 2023 to the information provided under the heading “Critical Accounting Policies and Estimates” in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended October 29, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the nine-month period ended July 29, 2023 to the information provided under Item 7A. “Quantitative and Qualitative Disclosures about Market Risk,” set forth in our Annual Report on Form 10-K for the fiscal year ended October 29, 2022.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of July 29, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of July 29, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes in Internal Control over Financial Reporting. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended July 29, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is provided in Note 7, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

We are subject to a number of risks that could adversely affect our business, results of operations, financial condition and future prospects, including those identified in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended October 29, 2022, which was filed with the Securities and Exchange Commission on November 22, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

PeriodTotal Number of Shares Purchased (a)Average Price Paid Per Share (b)Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (c)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 30, 2023 through May 27, 2023839,984$183.15798,922$3,084,226,115
May 28, 2023 through June 24, 20231,137,405$183.651,124,642$2,877,944,546
June 25, 2023 through July 29, 20231,709,380$191.041,701,370$2,552,750,403
Total3,686,769$186.963,624,934$2,552,750,403

(a)Includes 61,835 shares withheld by us from employees to satisfy minimum employee tax obligations upon vesting of restricted stock units/awards granted to our employees under our equity compensation plans.

(b)The average price paid for shares in connection with vesting of restricted stock units/awards are averages of the closing stock price at the vesting date which is used to calculate the number of shares to be withheld.

(c)Shares repurchased pursuant to the stock repurchase program publicly announced on August 12, 2004 and updated thereafter. Under the repurchase program, we may repurchase outstanding shares of our common stock from time to time in the open market and through privately negotiated transactions in an aggregate amount of up to $16.7 billion. Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

Item 5. Other Information

None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the third quarter of fiscal 2023.

Item 6. Exhibits

Exhibit No.Description
10.1†Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of July 24, 2023, among the Company, each lender party thereto, and Bank of America, N.A., as Administrative Agent.
31.1†Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
31.2†Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1†*Certification Pursuant to 18 U.S.C. Section 1350 (Chief Executive Officer).
32.2†*Certification Pursuant to 18 U.S.C. Section 1350 (Chief Financial Officer).
101.INSThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.**
101.SCHInline XBRL Schema Document.**
101.CALInline XBRL Calculation Linkbase Document.**
101.LABInline XBRL Labels Linkbase Document.**
101.PREInline XBRL Presentation Linkbase Document.**
101.DEFInline XBRL Definition Linkbase Document.**
104Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
†Filed or furnished herewith.
#Indicates management contract or compensatory plan, contract or agreement.
*The certification furnished in each of Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates each by reference. Such certification will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
**Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three- and nine-months ended July 29, 2023 and July 30, 2022, (ii) Condensed Consolidated Statements of Comprehensive Income for the three- and nine-months ended July 29, 2023 and July 30, 2022, (iii) Condensed Consolidated Balance Sheets at July 29, 2023 and October 29, 2022, (iv) Condensed Consolidated Statements of Shareholders' Equity for the three- and nine-months ended July 29, 2023 and July 30, 2022, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended July 29, 2023 and July 30, 2022 and (vi) Notes to Condensed Consolidated Financial Statements for the three- and nine-months ended July 29, 2023.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ANALOG DEVICES, INC.
Date: August 23, 2023By:/s/ Vincent Roche
Vincent Roche
Chief Executive Officer and Chair of the Board of Directors
(Principal Executive Officer)
Date: August 23, 2023By:/s/ Prashanth Mahendra-Rajah
Prashanth Mahendra-Rajah
Executive Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)