Analog Devices 10-Q 2024-05-04

Filed 2024-05-22. 8 sections, 132K characters. Original on sec.gov · Markdown · JSON

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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 May 4, 2024

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 May 4, 2024 there were 496,216,857 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 EndedSix Months Ended
May 4, 2024April 29, 2023May 4, 2024April 29, 2023
Revenue$2,159,039$3,262,930$4,671,743$6,512,560
Cost of sales979,0041,118,3842,017,7672,243,673
Gross margin1,180,0352,144,5462,653,9764,268,887
Operating expenses:
Research and development354,862415,754746,289829,849
Selling, marketing, general and administrative244,129324,251534,207650,535
Amortization of intangibles188,944253,021379,276506,163
Special charges, net5,97723,13622,11723,136
Total operating expenses793,9121,016,1621,681,8892,009,683
Operating income:386,1231,128,384972,0872,259,204
Nonoperating expense (income):
Interest expense77,10363,252154,244123,705
Interest income(15,269)(12,575)(24,438)(23,404)
Other, net(314)(10,216)4,260(2,493)
Total nonoperating expense (income)61,52040,461134,06697,808
Income before income taxes324,6031,087,923838,0212,161,396
Provision for income taxes22,361110,26773,052222,266
Net income$302,242$977,656$764,969$1,939,130
Shares used to compute earnings per common share – basic496,130504,715495,947505,918
Shares used to compute earnings per common share – diluted498,533508,725498,637509,955
Basic earnings per common share$0.61$1.94$1.54$3.83
Diluted earnings per common share$0.61$1.92$1.53$3.80

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023May 4, 2024April 29, 2023
Net income$302,242$977,656$764,969$1,939,130
Foreign currency translation adjustments264(864)6491,635
Change in fair value of derivative instruments designated as cash flow hedges, net1,306(2,109)9,32623,358
Changes in pension plans, net2,5143441,126796
Other comprehensive income (loss)4,084(2,629)11,10125,789
Comprehensive income$306,326$975,027$776,070$1,964,919

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

May 4, 2024October 28, 2023
ASSETS
Current Assets
Cash and cash equivalents$1,939,695$958,061
Short-term investments424,117—
Accounts receivable1,004,6281,469,734
Inventories1,479,0811,642,214
Prepaid expenses and other current assets346,100314,013
Total current assets5,193,6214,384,022
Non-current Assets
Net property, plant and equipment3,415,2203,219,157
Goodwill26,909,77526,913,134
Intangible assets, net10,434,77611,311,957
Deferred tax assets2,146,3212,223,272
Other assets762,153742,936
Total non-current assets43,668,24544,410,456
TOTAL ASSETS$48,861,866$48,794,478
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$422,683$493,041
Income taxes payable360,951309,046
Debt, current898,776499,052
Commercial paper notes548,235547,224
Accrued liabilities1,066,6771,352,608
Total current liabilities3,297,3223,200,971
Non-current Liabilities
Long-term debt6,611,6815,902,457

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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 28, 2023 (fiscal 2023).

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; our plans to borrow under our third amended and restated revolving credit agreement, as amended, and issue notes under our commercial paper program and the planned use of proceeds from such borrowing and issuing; our expected tax rate; 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 Global Repositioning Actions and Q4 2023 Plan; 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 actual results to differ materially from those described in the forward-looking statements: economic, political, legal and regulatory uncertainty or conflicts; changes in demand for semiconductor products; manufacturing delays, product and raw materials availability and supply chain disruptions; products that may be diverted from our authorized distribution channels; changes in export classifications, import and export regulations or duties and tariffs; our development of technologies and research and development investments; our future liquidity, capital needs and capital expenditures; our ability to compete successfully in the markets in which we operate; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; security breaches or other cyber incidents; adverse results in litigation matters; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; unanticipated difficulties or expenditures relating to integrating Maxim; 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; and uncertainty as to the long-term value of our common stock. Additional factors that could cause actual results to differ materially from those described 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 2023. 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
May 4, 2024April 29, 2023$ Change% Change
Revenue$2,159,039$3,262,930$(1,103,891)(34)%
Gross margin %54.7%65.7%
Net income$302,242$977,656$(675,414)(69)%
Net income as a % of revenue14.0%30.0%
Diluted EPS$0.61$1.92$(1.31)(68)%
Six Months Ended
May 4, 2024April 29, 2023$ Change% Change
Revenue$4,671,743$6,512,560$(1,840,817)(28)%
Gross margin %56.8%65.5%
Net income$764,969$1,939,130$(1,174,161)(61)%
Net income as a % of revenue16.4%29.8%
Diluted EPS$1.53$3.80$(2.27)(60)%

We have a 52-53 week fiscal year that ends on the Saturday closest to the last day in October. The fiscal year ending November 2, 2024 (fiscal 2024) is a 53-week fiscal year and fiscal 2023 was a 52-week fiscal year. The additional week in fiscal 2024 was included in the first quarter ended February 3, 2024. Therefore, the first six months of fiscal 2024 included an additional week of operations as compared to the first six months of fiscal 2023.

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 results within, each end market.

Three Months Ended
May 4, 2024April 29, 2023
Revenue% of Revenue*Y/Y%Revenue% of Revenue*
Industrial$1,014,84747%(44)%$1,823,83156%
Automotive658,23830%(10)%732,86922%
Communications240,77611%(45)%436,54213%
Consumer245,17811%(9)%269,6888%
Total revenue$2,159,039100%(34)%$3,262,930100%
Six Months Ended
May 4, 2024April 29, 2023
Revenue% of Revenue*Y/Y%Revenue% of Revenue*
Industrial$2,210,22647%(38)%$3,573,21155%
Automotive1,395,92330%(1)%1,411,43022%
Communications543,79112%(41)%914,79414%
Consumer521,80311%(15)%613,1259%
Total revenue$4,671,743100%(28)%$6,512,560100%
* The sum of the individual percentages may not equal the total due to rounding.

Revenue decreased 34% and 28% in the three- and six-month periods ended May 4, 2024, respectively, as compared to the same periods of the prior fiscal year, primarily as a result of broad-based decline in demand for our products. The decrease in the six-month period was partially offset by an additional week of operations in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

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
May 4, 2024April 29, 2023
Revenue% of Revenue*Revenue% of Revenue*
Channel
Distributors$1,248,38258%$1,996,41061%
Direct customers873,59340%1,224,78638%
Other37,0642%41,7341%
Total revenue$2,159,039100%$3,262,930100%
Six Months Ended
May 4, 2024April 29, 2023
Revenue% of Revenue*Revenue% of Revenue*
Channel
Distributors$2,783,59260%$4,007,73362%
Direct customers1,813,56839%2,420,32037%
Other74,5832%84,5071%
Total revenue$4,671,743100%$6,512,560100%
* 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 EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
Gross margin$1,180,035$2,144,546$(964,511)(45)%$2,653,976$4,268,887$(1,614,911)(38)%
Gross margin %54.7%65.7%56.8%65.5%

Gross margin percentage decreased by 1,100 and 870 basis points in the three- and six-month periods ended May 4, 2024, respectively, as compared to the same periods of the prior fiscal year, primarily due to lower utilization of our factories due to decreased customer demand, and unfavorable product mix.

Research and Development (R&D)

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
R&D expenses$354,862$415,754$(60,892)(15)%$746,289$829,849$(83,560)(10)%
R&D expenses as a % of revenue16%13%16%13%

R&D expenses decreased in the three- and six-month periods ended May 4, 2024, as compared to the same periods of the prior fiscal year, primarily as a result of lower R&D employee-related variable compensation expenses, partially offset by higher salary and benefit expenses. The decrease in the six-month period was partially offset by an additional week of operations in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

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 EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
SMG&A expenses$244,129$324,251$(80,122)(25)%$534,207$650,535$(116,328)(18)%
SMG&A expenses as a % of revenue11%10%11%10%

SMG&A expenses decreased in the three- and six-month periods ended May 4, 2024, as compared to the same periods of the prior fiscal year, primarily as a result of lower SMG&A employee-related variable compensation expenses and discretionary spending. The decrease in the six-month period was partially offset by an additional week of operations in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Amortization of Intangibles

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
Amortization expenses$188,944$253,021$(64,077)(25)%$379,276$506,163$(126,887)(25)%
Amortization expenses as a % of revenue9%8%8%8%

Amortization expenses decreased in the three- and six-month periods ended May 4, 2024, as compared to the same periods of the prior fiscal year primarily as a result of a portion of our acquired intangible assets becoming fully amortized during fiscal 2023.

Special Charges, Net

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
Special charges, net$5,977$23,136$(17,159)(74)%$22,117$23,136$(1,019)(4)%

Special charges, net decreased in the three- and six-month periods ended May 4, 2024, as compared to the same periods of the prior fiscal year primarily due to the timing of charges recorded in each period. Fiscal 2023 charges were primarily related to Global Repositioning Actions, while fiscal 2024 charges were primarily related to the Q4 2023 Plan.

Operating Income

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
Operating income$386,123$1,128,384$(742,261)(66)%$972,087$2,259,204$(1,287,117)(57)%
Operating income as a % of revenue17.9%34.6%20.8%34.7%

The year-over-year decrease in operating income in the three-month period ended May 4, 2024 was primarily the result of a decrease in revenue, which contributed to a decrease in gross margin of $964.5 million, partially offset by a decrease of $222.3 million in net operating expenses.

The year-over-year decrease in operating income in the six-month period ended May 4, 2024 was primarily the result of a decrease in revenue, which contributed to a decrease in gross margin of $1,614.9 million, partially offset by a decrease of $327.8 million in net operating expenses.

Nonoperating Expense (Income)

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ ChangeMay 4, 2024April 29, 2023$ Change
Total nonoperating expense (income)$61,520$40,461$21,059$134,066$97,808$36,258

The year-over-year increases in nonoperating expense (income) in the three- and six-month periods ended May 4, 2024, as compared to the same periods of the prior fiscal year, were primarily the result of higher interest expense related to our commercial paper obligations and higher interest rates on certain of our existing debt obligations.

Provision for Income Taxes

Three Months EndedSix Months Ended
May 4, 2024April 29, 2023$ ChangeMay 4, 2024April 29, 2023$ Change
Provision for income taxes$22,361$110,267$(87,906)$73,052$222,266$(149,214)
Effective income tax rate6.9%10.1%8.7%10.3%

The effective tax rates for the three- and six-month periods ended May 4, 2024 and April 29, 2023 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 six-month periods ended May 4, 2024 and April 29, 2023 was primarily generated in Ireland at a tax rate of 12.5%.

See Note 12, 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 EndedSix Months Ended
May 4, 2024April 29, 2023$ Change% ChangeMay 4, 2024April 29, 2023$ Change% Change
Net income$302,242$977,656$(675,414)(69)%$764,969$1,939,130$(1,174,161)(61)%
Net income as a % of revenue14.0%30.0%16.4%29.8%
Diluted EPS$0.61$1.92$1.53$3.80

Net income decreased in the three-month period ended May 4, 2024, as compared to the same period of the prior fiscal year, as the result of a $742.3 million decrease in operating income and a $21.1 million increase in nonoperating expense (income), partially offset by a $87.9 million decrease in provision for income taxes.

Net income decreased in the six-month period ended May 4, 2024, as compared to the same period of the prior fiscal year, as the result of a $1,287.1 million decrease in operating income and a $36.3 million increase in nonoperating expense (income), partially offset by a $149.2 million decrease in provision for income taxes.

Liquidity and Capital Resources

At May 4, 2024, our principal source of liquidity was $2.4 billion of cash, cash equivalents and short-term investments, of which approximately $1.5 billion was held in the United States, and the balance of our cash, cash equivalents and short-term investments 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, cash equivalents and short-term investments consist of highly liquid investments, including money market funds and corporate obligations. 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.

Six Months Ended
May 4, 2024April 29, 2023
Net cash provided by operating activities$1,946,685$2,487,886
Net cash provided by operations as a % of revenue42%38%
Net cash used for investing activities$(821,178)$(460,577)
Net cash used for financing activities$(143,873)$(2,320,272)

The following changes contributed to the net change in cash and cash equivalents in the six-month period ended May 4, 2024 as compared to the same period in fiscal 2023.

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities. The decrease in cash provided by operating activities during the six-month period ended May 4, 2024, as compared to the same period of the prior fiscal year, was mainly the result of lower 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 six-month period ended May 4, 2024, as compared to the same period of the prior fiscal year, was primarily the result of the purchase of short-term available-for-sale investments, partially offset by a decrease 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 change in cash used for financing activities during the six-month period ended May 4, 2024, as compared to the same period of the prior fiscal year, was primarily the result of lower common stock repurchases and net proceeds from the issuance of debt during fiscal 2024. For additional information, see Note 11, Debt, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Working Capital

May 4, 2024October 28, 2023$ Change% Change
Accounts receivable$1,004,628$1,469,734$(465,106)(32)%
Days sales outstanding*4652
Inventory$1,479,081$1,642,214$(163,133)(10)%
Days cost of sales in inventory*141143

*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.

The decrease in accounts receivable in dollars was primarily the result of variations in the timing of collections and billings and decreased revenue levels in the second quarter of fiscal 2024 as compared to the fourth quarter of fiscal 2023.

Inventory decreased 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 $3,297.3 million at May 4, 2024 as compared to $3,201.0 million at the end of fiscal 2023 due to higher current debt, partially offset by lower accrued liabilities.

Debt

As of May 4, 2024, our debt obligations consisted of the following:

Principal Amount Outstanding
Commercial paper notes$548,235
2024 Notes, due October 2024500,000
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
2034 Notes, due April 2034550,000
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
2054 Notes, due April 2054550,000
Total debt$8,165,312

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 May 4, 2024, we were in compliance with these covenants.

Commercial Paper Program

Under our commercial paper program, 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 of up to 397 days from the date of issuance. As of May 4, 2024, we had $548.2 million of outstanding borrowings under the commercial paper program recorded in the Condensed Consolidated Balance Sheet. We 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 May 4, 2024, 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 May 4, 2024, an additional $1.8 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 $411.2 million in the first six months of fiscal 2024. We expect capital expenditures for fiscal 2024 to be between approximately $600 million and $800 million. 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 May 21, 2024, our Board of Directors declared a cash dividend of $0.92 per outstanding share of common stock. The dividend will be paid on June 17, 2024 to all shareholders of record at the close of business on June 4, 2024 and is expected to total approximately $456.5 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 of Directors and will be dependent upon our financial position, results of operations, outlook, liquidity and other factors deemed relevant by the Board of Directors.

Contractual Obligations

In the second quarter of fiscal 2024, we issued $550.0 million aggregate principal amount of 5.050% senior unsecured notes due April 1, 2034 and $550.0 million aggregate principal amount of 5.300% senior unsecured notes due April 1, 2054. The 2034 Notes and the 2054 Notes have semi-annual fixed interest payments due on April 1 and October 1 of each year, commencing October 1, 2024. For additional information, see Note 11, Debt, in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have not been any other material changes during the six-month period ended May 4, 2024 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 28, 2023.

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 13, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the six-month period ended May 4, 2024 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 28, 2023.

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 May 4, 2024. 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 May 4, 2024, 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 May 4, 2024 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 6, 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 28, 2023, which was filed with the Securities and Exchange Commission on November 21, 2023.

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
February 4, 2024 through March 2, 2024271,611$189.78227,258$1,920,121,368
March 3, 2024 through March 30, 2024626,241$194.54231,167$1,875,416,710
March 31, 2024 through May 4, 2024279,741$192.69273,830$1,822,640,104
Total1,177,594$193.00732,255$1,822,640,104

(a)Includes 445,339 shares withheld by us from employees to satisfy 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. 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

The following table describes contracts, instructions or written plans for the sale or purchase of our securities adopted by our directors or officers during the second quarter of fiscal 2024 that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (Rule 10b5-1 trading arrangement).

Name and TitleDate of AdoptionDuration of Rule 10b5-1 Trading ArrangementAggregate Number of Securities to Be Purchased or Sold
Vincent Roche Chief Executive Officer and Chair of the Board of DirectorsMarch 1, 2024Until May 1, 2025, or such earlier date upon which all transactions are completed or expire without executionSale of up to 90,017 shares

None of our directors or officers terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the second quarter of fiscal 2024.

Item 6. Exhibits

Exhibit No.Description
4.1Supplemental Indenture, dated April 3, 2024, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (including the forms of note contained therein), filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (File No. 001-07819) as filed with the Commission on April 3, 2024 and incorporated herein by reference.
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.
*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 six-months ended May 4, 2024 and April 29, 2023, (ii) Condensed Consolidated Statements of Comprehensive Income for the three- and six-months ended May 4, 2024 and April 29, 2023, (iii) Condensed Consolidated Balance Sheets at May 4, 2024 and October 28, 2023, (iv) Condensed Consolidated Statements of Shareholders' Equity for the three- and six-months ended May 4, 2024 and April 29, 2023, (v) Condensed Consolidated Statements of Cash Flows for the six months ended May 4, 2024 and April 29, 2023 and (vi) Notes to Condensed Consolidated Financial Statements for the three- and six-months ended May 4, 2024.

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: May 22, 2024By:/s/ Vincent Roche
Vincent Roche
Chief Executive Officer and Chair of the Board of Directors
(Principal Executive Officer)
Date: May 22, 2024By:/s/ Richard C. Puccio, Jr.
Richard C. Puccio, Jr.
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)