FinanceLooker

Excrept from filing document 2024-11-02

The aggregate market value of the voting and non voting common equity held by non affiliates of the registrant was approximately 76 694 000 000 based on the last reported sale of the Common Stock on The Nasdaq Global Select Market on May 4 2024 Shares of voting and non voting stock beneficially owned by executive officers directors and holders of more than 5 of the outstanding stock have been excluded from this calculation because such persons or institutions may be deemed affiliates This determination of affiliate status is not a conclusive determination for other purposes
This Annual Report on Form 10 K including Management s Discussion and Analysis of Financial Condition and Results of Operations 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 including the effects of customer inventory adjustments 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 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 the effect of tax examinations and audits and 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 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 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 I Item 1A Risk Factors and elsewhere in this Annual Report on Form 10 K 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
Analog Devices Inc we Analog Devices or the Company is a global semiconductor leader dedicated to solving our customers most complex engineering challenges We deliver innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense measure interpret connect and power We design manufacture test and market a broad portfolio of solutions including integrated circuits ICs software and subsystems that leverage high performance analog mixed signal and digital signal processing technologies Our comprehensive product portfolio deep domain expertise and advanced manufacturing capabilities extend across high performance precision and high speed mixed signal power management and processing technologies including data converters amplifiers power management radio frequency RF ICs edge processors and other sensors
The Intelligent Edge is characterized by ubiquitous sensing hyper scale and edge computing artificial intelligence AI and pervasive connectivity These technological trends are driving a continuous evolution of new generations of applications that are increasing the demand for Analog Devices high performance analog mixed signal power and RF ICs We have positioned our business to capitalize on the secular growth opportunities across our markets and to deliver innovative solutions Central to our strategy is our focus on challenges that our customers have across the most impactful application areas That is built around the following key priorities which we believe will continue to drive our long term success
Research and development R D is critical to continue our cycle of innovation driven by a diverse array of engineering talent who engineer good for our planet and society We are also deeply committed to realizing targeted shareholder value creation from our acquisitions to complement our R D and drive long term value creation Through the development of cutting edge innovations and our ability to solve difficult problems across a broad array of applications we generate significant cash flow and are deeply committed to delivering strong shareholder returns
Close customer relationships influence all aspects of our business from our broad range of product portfolios and applications expertise to manufacturing capabilities in high performance power management and precision and high speed signal processing technologies We believe that our engineering talent continues to be an important competitive differentiator in the semiconductor space that will enable us to continue to deepen our relationships with customers We strive to be the destination for the world s best engineering talent with a team of more than 13 000 engineers Together our products and our engineering talent enable us to partner with our customers leveraging our analog domain expertise and receive the full benefit of our technology capabilities to develop complete and innovative solutions
We are positioned to capitalize on important secular growth trends to drive advancements in digitized factories mobility and digital healthcare combat climate change and reliably connect humans and the world We are well aligned with the key B2B markets driving the increase in data at the Intelligent Edge and we will continue to be a critical partner in the collection creation and communication of our customers edge data In addition we are increasingly incorporating AI capabilities into the development of technologies and our business operations and into our products and services
with our corporate headquarters near Boston in Wilmington Massachusetts We have manufacturing facilities primarily in the United States Ireland and Southeast Asia Our common stock is listed on the Nasdaq Global Select Market under the symbol ADI and is included in the Standard Poor s 500 Index Our fiscal year is the 52 week or 53 week period ending on the Saturday closest to the last day in October November 2 2024 fiscal 2024 was a 53 week fiscal period while the fiscal year ended October 28 2023 fiscal 2023 and the fiscal year ended October 29 2022 fiscal 2022 were 52 week fiscal periods The additional week in fiscal 2024 is included in the first quarter ended February 3 2024 Therefore fiscal 2024 includes an additional week of operations as compared to fiscal 2023 and fiscal 2022
We maintain a website with the address www analog com We make available free of charge through our website our Annual Reports on Form 10 K Quarterly Reports on Form 10 Q and Current Reports on Form 8 K including exhibits and amendments to these reports as soon as reasonably practicable after we electronically file such material with or furnish such material to the Securities and Exchange Commission SEC We also make available on our website our by laws corporate governance guidelines the charters for the committees of our Board of Directors and our code of business conduct and ethics which applies to our directors officers and employees and other governance documents Such information is available in print and free of charge to any shareholder of Analog Devices who requests it In addition we intend to disclose on our website any amendments to or waivers from our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC or Nasdaq
We have included our website address in this Annual Report on Form 10 K as an inactive textual reference We are not including the information contained on our website as a part of or incorporating it by reference into this Annual Report on Form 10 K
Semiconductor components are the building blocks used in electronic systems and equipment These components are classified as either discrete devices such as individual transistors or as ICs in which a number of transistors and other elements are combined to form a more complicated electronic circuit
Our ICs are designed to address a wide range of real world signal processing applications We sell our ICs to customers worldwide many of whom use products spanning our core technologies in a wide range of applications Our IC product portfolio includes both general purpose products used by a broad range of customers and applications as well as application specific products designed for specific target markets By using readily available high performance general purpose products in their systems our customers can reduce the time they need to bring new products to market Given the high cost of developing more customized ICs our standard products often provide a cost effective solution for many low to medium volume applications Our analog ICs monitor condition amplify or transform continuous analog signals associated with physical properties such as temperature pressure weight light sound or motion and play an important role in bridging real world phenomena to a variety of electronic systems Our analog ICs also provide voltage regulation and power control to electronic systems
We also work with customers to design application specific solutions We begin with our existing core technologies which leverage our analog and mixed signal power management RF and microwave edge processors and other sensors and devise solutions that more closely meet the needs of a specific customer or group of customers In certain cases because we have already developed the core technology platform for our general purpose products we can create application specific solutions quickly and efficiently
Our analog and mixed signal IC technology have been the foundation of our business for nearly six decades and we are one of the world s largest suppliers of high performance analog ICs Our analog signal processing ICs are primarily high performance devices offering higher dynamic range greater bandwidth and other enhanced features We believe that the principal advantages these products have as compared to competitors products include higher accuracy higher speed lower cost per function smaller size lower power consumption and fewer components resulting in improved performance and reliability Our product portfolio includes several thousand analog ICs many of which can have several hundred end customers Our analog ICs typically have long product life cycles Our customers include original equipment manufacturers OEMs and customers who build electronic subsystems for integration into larger systems
We are a leading supplier of data converter products Data converters translate real world analog signals into digital data and also translate digital data into analog signals Data converters remain our largest and most diverse product family and an area where we are continuously innovating to enable our customers to redefine and differentiate their products Our converter products combine sampling rates and accuracy with the low noise power price and small package size required by industrial automotive consumer and communications electronics
Power management and reference products which include functions such as power conversion driver monitoring sequencing and energy management provide efficient solutions for power management and conversion applications in the automotive communications industrial and high end consumer markets Our high performance power ICs include powerful performance integration and software design simulation tools to provide fast and accurate power supply designs
We are also a leading supplier of high performance amplifiers which are used to condition analog signals High performance amplifiers emphasize the performance dimensions of speed and precision Within this product portfolio we provide precision instrumentation high speed intermediate frequency RF microwave broadband and other amplifiers Our analog product line also includes a broad portfolio of high performance RF and microwave ICs covering the entire RF signal chain Our high performance RF and microwave ICs support the high performance requirements of cellular infrastructure and a broad range of applications in our target markets including instrumentation aerospace and automotive
Our analog technology portfolio is comprised of sensor and actuator products including products based on micro electro mechanical systems MEMS technology MEMS technology enables us to build extremely small sensors that incorporate an electromechanical structure and the supporting analog circuitry for conditioning signals obtained from the sensing element Our MEMS product portfolio includes accelerometers used to sense acceleration gyroscopes used to sense rotation inertial measurement units used to sense multiple degrees of freedom combining multiple sensing types along multiple axes and broadband switches suitable for radio and instrument systems We offer other high performance sensors from temperature to magnetic fields that are deployed in a variety of systems In addition to sensor products our other analog product category includes isolators that enable designers to implement isolation in designs without the cost size power performance and reliability constraints found with optocouplers
DSPs are optimized for high speed numeric calculations which are essential for instantaneous or real time processing of digital data generated in most cases from analog to digital signal conversion Our DSPs are designed to be fully programmable and to efficiently execute specialized software programs or algorithms associated with processing digitized real time real world data Programmable DSPs are designed to provide the flexibility to modify the device s function quickly and inexpensively using software Our general purpose DSP IC customers typically write their own algorithms using software development tools provided by us and third party suppliers Our DSPs are designed in families of products that share common architectures and therefore can execute the same software across a range of products
Includes general purpose analog ICs whose primary function is to modify or shape the signal in order to ensure signal integrity for transmission over a distance through a physical medium such as a wire cable waveguide or tracks within a printed circuit board These include devices that shape the signal for transmission over the medium or reconstruct the received signal after transmission to recover the intended signal integrity
We sell our products globally through a direct sales force third party distributors independent sales representatives and via our website We have direct sales offices sales representatives and or distributors in approximately 50 countries We support our worldwide sales efforts through our website and with extensive promotional programs that include editorial coverage and paid advertising in online and printed trade publications webinars social media and communities promotional and training videos direct mail programs technical seminars and participation in trade shows We publish share and distribute technical content such as data sheets application guides and catalogs We maintain a staff of field application engineers who aid customers in incorporating our products into their products In addition we offer a variety of web based tools that ease product selection and aid in the design process for our customers
We believe distributors provide a cost effective means of reaching a broad range of customers while providing efficient logistics services From time to time we may add or terminate distributors in specific geographies or move customers to a direct support or fulfillment model as we deem appropriate given our strategies the level of distributor business activity and distributor performance and financial condition
These distributors typically maintain an inventory of our products Some of them also sell products that compete with our products including those for which we are an alternate source We make sales to distributors under agreements that allow certain distributors to receive price adjustment credits and to return qualifying products for credit typically as determined by us in order to reduce the amounts of slow moving discontinued or obsolete product from their inventory These agreements limit such returns to a certain percentage of our shipments to that distributor during the prior quarter In addition certain distributors are allowed to return unsold products if we terminate the relationship with the distributor Additional information relating to our revenue and customer concentration is set forth in Note 2l
We typically do not have long term sales contracts with our customers In some of our markets where end user demand may be particularly volatile and difficult to predict some customers place orders that require us to manufacture product and have it available for shipment even though the customer is unwilling to make a binding commitment to purchase all or even
any of the product In other instances we manufacture product based on forecasts of customer demand As a result we may incur inventory and manufacturing costs in advance of anticipated sales and are subject to the risk of cancellation of orders leading to a sharp reduction of sales and backlog Further those orders or forecasts may be for products that meet the customer s unique requirements such that those canceled orders would result in an inventory of unsaleable products causing potential inventory write offs
We are a leader in industrial automation because we deliver robust high performance solutions from our deep motion and process control expertise and precision sensing measurement and interpretation to expansive connectivity and power capabilities We take real world phenomena in the most complex environments on the factory floor and translate them into valuable insights and outcomes We co create with customers to architect robotics systems and solutions that improve dynamic behavior and precision while enhancing worker safety machine health and manufacturing flexibility Our industrial automation market includes applications such as
Trusted measurement is at the forefront of innovation With the rapid pace of global transformation from ubiquitous connectivity to electrification to AI to human health and environmental sustainability all of these trends require reliable and efficient test solutions from R D to manufacturing to field deployment We enable high performance measurement through our components and system solutions Our RF high speed and power management products are designed to enable solutions for complying with evolving communications standards Our high voltage isolation and precision products are a key part of the systems that are designed for safety longevity and efficiency in electric vehicles and renewable energy Beyond electrical testing our precision and power technology enable analytical instruments for drug or vaccine R D and manufacturing food safety and quality and environmental monitoring Our instrumentation and measurement market includes applications such as
The defense commercial avionics and space markets all require high performance ICs that meet rigorous environmental and reliability specifications Many of our ICs can be supplied in versions that meet these standards In addition many products can be supplied to meet the standards required for broadcast satellites and other commercial space applications Most of our products sold in this market are specially tested versions of products derived from our standard product offering As end systems are becoming more complex many of our customers in this market also look for us to provide higher levels of integration in order to minimize size weight and power and to improve ease of use As such we also sell products in the form of system in package SiPs printed circuit board assemblies modules and subsystems Customer products include applications such as
The healthcare market is evolving in response to the need for increased access to better and more affordable care as well as a growing focus on preventative healthcare and the need to better and more cost effectively manage chronic conditions To help achieve this we are collaborating with customers and partners on innovative solutions that are designed to achieve better outcomes for patients and more efficient workflows for physicians at reduced costs Our offerings include both standard and application specific hardware software and service based products and are used in applications such as
The global drive towards improved energy efficiency conservation reliability and clean energy is driving investments in electrification across many different application areas including electric vehicle charging infrastructure renewable energy power transmission and distribution systems electric meters and other innovative areas The common characteristic behind these efforts is the addition of sensing measurement and communication technologies to electrical infrastructure Our offerings include both standard and application specific products and are used in applications such as
We develop differentiated high performance signal processing solutions which enable sophisticated transportation systems that span infotainment electrification and autonomous applications Through collaboration with manufacturers worldwide we have developed a broad portfolio of analog digital power and sensor ICs that address the emerging needs of this evolving industry Our focus is on audio video applications that lead to an enriched in cabin experience electrification applications that improve vehicle range and reduce emissions and mission critical perception and navigation applications that enable vehicles to more clearly sense the external environment Specifically we have developed products used in applications such as
The development of broadband wireless and internet infrastructures around the world has created an important market for our communications products Communications technology involves the processing of signals that are converted from analog to digital and digital to analog form during the process of transmitting and receiving data The need for higher speed and reduced power consumption coupled with more reliable bandwidth efficient communications creates demand for our products which are used in the full spectrum of signal processing for data video voice and machine to machine communications In wireless and wireline communication applications our products are incorporated into
To address the market demand for state of the art personal and professional entertainment systems and the consumer demand for high quality user interfaces music movies and photographs we have developed analog digital and mixed signal and power solutions that meet the rigorous cost and time to market requirements of the consumer electronics market The emergence of high performance feature rich consumer products has created a market for our high performance ICs with a high level of specific functionality that enables best in class user experience and battery management These products include
We believe that competitive performance in the marketplace for integrated circuits depends upon multiple factors including technological innovation strength of brand diversity of product portfolio product performance technical support delivery capabilities customer service quality reliability and price with the relative importance of these factors varying among products markets and customers We compete with a number of semiconductor companies in markets that are highly competitive Many companies have sufficient financial manufacturing technical sales and marketing resources to develop and market products that compete with our products Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the U S including entities associated with well funded efforts by foreign governments to create indigenous semiconductor industries
We believe that our technical innovation emphasizing product performance and reliability supported by our commitment to strong customer service and technical support enables us to make a fundamental difference to our customers competitiveness in our chosen markets
Our sales are subject to a varying degree of seasonality Historically sales to customers during our first fiscal quarter have been lower than other quarters due to plant shutdowns at some of our customers In general the seasonality for any specific period of time has not had a material impact on our results of operations In addition as explained in our risk factors contained in Item 1A of this Annual Report on Form 10 K our revenue is more likely to be influenced on a quarter to quarter basis by cyclicality in the semiconductor industry
We believe that a number of factors should be used to assess future customer demand including backlog macroeconomic trends customer insights and current customer bookings as compared to billings book to bill ratio We define backlog to mean firm orders from a customer or distributor with a requested delivery date within thirteen weeks However backlog may be impacted by the tendency of customers to rely on shorter lead times available from suppliers including us in periods of depressed demand In periods of increased demand there is a tendency towards longer lead times that has the effect of increasing backlog and in some instances we may not have manufacturing capacity sufficient to fulfill all orders As is customary in the semiconductor industry we allow most orders to be canceled within a reasonable notification period or deliveries to be delayed by customers without significant penalty while also allowing certain distributors to receive price adjustment credits and to return qualifying products for credit typically as determined by us in order to reduce the amounts of slow moving discontinued or obsolete product from their inventory
Monolithic IC components are manufactured in a sequence of semiconductor production steps that include wafer fabrication wafer testing dicing the wafer into individual chips or dice assembly of the dice into packages and electrical testing of the devices in final packaged form The raw materials used to manufacture these devices include silicon wafers processing chemicals including liquefied gases precious metals laminates ceramic and plastic used for packaging We utilize develop and employ a wide variety of manufacturing processes primarily based on bipolar and complementary metal oxide semiconductor CMOS transistors which are specifically tailored for use in fabricating high performance analog DSP and mixed signal ICs Devices such as MEMS
Our IC products are fabricated on proprietary processes at our internal production facilities in Wilmington Massachusetts Camas Washington Beaverton Oregon and Limerick Ireland and also on a mix of proprietary and non proprietary processes at third party wafer fabricators We currently source more than half of our wafer requirements annually from third party wafer fabrication foundries such as Taiwan Semiconductor Manufacturing Company TSMC and others and the remainder is sourced internally In addition we operate an assembly wafer sort and testing facility in Penang Malaysia and wafer sort and test facilities in the Philippines and Thailand We also make extensive use of third party subcontractors for the assembly and testing of our products
Our products require a wide variety of components raw materials and external foundry services most of which we purchase from third party suppliers We have multiple sources for many of the components and materials that we purchase and incorporate into our products If any of our key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components to us on the time schedule and of the quality that we require we may be forced to seek to engage additional or replacement suppliers which could result in significant expenses and disruptions or delays in manufacturing product development and shipment of product to our customers Although we have experienced shortages of components materials and external foundry services from time to time we work to balance these constraints by shifting global resources and capacity where appropriate
We seek to establish and maintain our proprietary rights in our technology and products through the use of patents copyrights mask works trademarks and trade secrets We have a program to file applications for and obtain patents copyrights mask works and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements We have obtained a substantial number of patents and trademarks in the United States and in other countries As of November 2 2024 we held approximately 4 660 U S patents and approximately 470 published pending U S patent applications There can be no assurance however that the rights obtained can be successfully enforced against infringing products in every jurisdiction While our patents copyrights mask works trademarks and trade secrets provide some advantage and protection we believe our competitive position and future success is largely determined by such factors as the system and application knowledge innovative skills technological expertise and management ability and experience of our personnel the range and success of new products being developed by us our market brand recognition and ongoing marketing efforts and customer service and technical support Although it is generally our policy to seek patent protection for significant inventions that may be patented we may elect in certain cases not to seek patent protection even for significant inventions if we determine other protection such as maintaining the invention as a trade secret to be more advantageous We also have trademarks that are used in the conduct of our business to distinguish genuine Analog Devices products and we maintain cooperative advertising programs to promote our brands and identify products containing genuine Analog Devices components
Our business activities are subject to various federal state local and foreign laws and regulations including those related to financial and other disclosures accounting standards corporate governance intellectual property tax trade including import export and customs antitrust environment health and safety employment immigration and travel cybersecurity privacy data protection and localization and anti corruption These laws and regulations may differ among jurisdictions and compliance with them may have a materially adverse impact on our business and results of operations For more information about these potential impacts see the section titled Risk Factors Risks Related to Cyber Artificial Intelligence Intellectual Property Legal and Regulatory of this Annual Report on Form 10 K
We are a signatory to the United Nations Global Compact and the Business Ambition for 1 5 C campaign as well as a member of the Responsible Business Alliance Our Environment Social and Governance ESG aspirations and programs including our climate targets and our approach to ethical business conduct and ethics and applying fair labor standards are communicated in our 2023 ESG Report The ESG Report is available on our website at www analog com corporate responsibility The contents of our website and the information contained in our ESG Report are not incorporated by reference into this Annual Report on Form 10 K
To support our commitment to ESG we have implemented an oversight structure which includes a quarterly reporting cadence both to senior management and the Nominating and Corporate Governance Committee of the Board of Directors These quarterly reports include updates on programs as well as updates on topics such as stakeholder value risks and opportunities regulatory preparedness and key ESG focus areas
We have programs and management systems in place to protect the environment and the health and safety of our employees customers and the public We endeavor to adhere to applicable environment health and safety EHS regulatory and industry standards across all of our facilities and to encourage pollution prevention reduce our water and energy consumption manage waste streams to divert from landfills and strive towards continual improvement We strive to achieve excellence in EHS management practices as an integral part of our total quality management system
Our EHS management systems in all of our manufacturing facilities are certified to ISO 14001 2015 for environmental management and ISO 45001 2018 for occupation health and safety Our industrial hygiene surveillance program is designed to minimize and prevent exposures in the workplace We use two industry standard metrics to assess injury performance and trends worldwide In fiscal 2024 and fiscal 2023 our global injury rates were lower than the U S semiconductor industry benchmark
Our manufacturing facilities are subject to numerous and increasingly strict federal state local and foreign EHS laws and regulations particularly with respect to the transportation storage handling use emission discharge and disposal of certain chemicals used or produced in the semiconductor manufacturing process Our products are subject to increasingly stringent regulations regarding substance content in jurisdictions where we do business Contracts with many of our customers reflect these and additional EHS compliance standards Substance content of our products includes materials that are subject to reporting requirements including conflict minerals Compliance with these laws and regulations has not had a material impact
on our capital expenditures earnings financial condition or competitive position There can be no assurance however that current or future environmental laws and regulations will not impose costly requirements upon us Any failure by us to comply with applicable EHS laws regulations and contractual obligations could result in fines suspension of production the need to alter manufacturing processes and legal liability
Our company was founded on the principle that people are our greatest asset Our future success depends in large part on the continued service of our key technical and senior management personnel and on our ability to continue to attract retain and motivate qualified employees particularly highly skilled engineers involved in the design development support and manufacture of new and existing products and processes In order for us to attract the best talent we aim to offer challenging work in an environment that enables our employees to learn grow and reach their full potential
Core to our empowerment strategy is embracing diversity and building a culture of inclusion across the organization We are working to achieve this by expanding the diversity of our workforce creating growth and development opportunities for our employees embracing different perspectives and fostering an inclusive work environment for all In addition we encourage employees to develop different networks which contribute to our broader diversity and inclusion initiatives Our current employee networks include the Analog Veterans Network Neurodiversity Network People of Color and Allies Network Pride Network Women s Leadership Network Young Professionals Network the Green Team and the Communities Activities Board As noted in Environment Social and Governance above we published our 2023 ESG Report which details our sustainability efforts operations efficiency employee engagement and governance and also provides a look at the state of our organization and an overview of some of the initiatives we have launched to drive continuous improvements across diversity and inclusion
As of November 2 2024 we had approximately 24 000 employees of whom approximately 13 000 are in engineering roles Approximately 62 of our workforce is male and 38 female Our senior leadership team is 64 male and 36 female while manager roles are approximately 75 male and 25 female 36 of the members of our Board of Directors are female For fiscal 2024 our voluntary employee turnover rate was approximately 8
Our human capital resource objectives include identifying recruiting retaining incentivizing and integrating our existing and future employees We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health financial and emotional well being Our compensation philosophy is based on rewarding each employee s individual contributions and striving to achieve equal pay for equal work regardless of gender race or ethnicity We use a combination of fixed and variable pay including base salary bonuses performance awards and equity compensation The principal purposes of our equity incentive plans are to attract retain and motivate selected employees and directors through the granting of stock based compensation awards We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace Examples of benefits offered in the U S include a 401 k plan with employer contributions health benefits life business travel and disability insurance additional voluntary insurance paid time off and parental leave education assistance paid counseling assistance backup child and adult care adoption support and family college planning For further information concerning our equity incentive plans see Note 3
In order to ensure that we are meeting our human capital objectives we frequently utilize employee surveys to understand the effectiveness of our employee and compensation programs and where we can improve across the company Our latest survey completed in fiscal 2024 had a 92 participation rate among all employees and the survey results indicated employee satisfaction in areas such as purpose demonstrating culture fostering belonging aligning with our strategy and leadership commitment while also supporting decision speed and reducing barriers to execution Our dual focus of being a great place to work and providing industry leading benefits and work culture has led to strong employee satisfaction and pride that has been recognized across the globe as evidenced with the following awards
Set forth below and elsewhere in this report are descriptions of certain risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward looking statements in this report Additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business For more information see the section titled Note About Forward Looking Statements of this Annual Report on Form 10 K
Global political and economic uncertainty and adverse conditions related to our international operations could materially and adversely affect our business financial condition and results of operations
We have significant operations and manufacturing facilities outside the United States including in Ireland the Philippines Thailand and Malaysia A significant portion of our revenue is derived from customers in international markets and we expect that international sales will continue to account for a significant portion of our revenue in the future As a result of our international operations our business financial condition and results of operations could be negatively impacted by among others the following factors
political legal and economic changes crises or instability and civil unrest that may impact markets in which we do business such as macroeconomic weakness related to trade and political disputes between the United States and Europe or China tensions across the Taiwan Strait that may adversely affect our operations in Taiwan our customers and the technology industry supply chain and the ongoing conflicts between Russia and Ukraine and in Israel and the Middle East
instability of global credit and financial markets due to adverse macroeconomic conditions such as elevated inflation high interest rates bank failures and slower economic growth or recession that could among other impacts affect our ability to timely access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers suppliers and distributors exposing us to late payments cancelled orders and inventory challenges
trade policy commercial travel export or taxation disputes or restrictions import or export tariffs changes to export classifications or other restrictions imposed by the U S government or by the governments of the countries in which we do business particularly with respect to China
complex varying and changing government regulations and legal standards and requirements particularly with respect to tax price protection competition practices export control customs immigration anti boycott AI data privacy cyber and product security sustainability climate and other ESG matters intellectual property anti corruption including the Foreign Corrupt Practices Act and environmental compliance
Many of these factors and risks are present and may be exacerbated within our business operations in China For example changes in U S China relations the political environment or international trade policies could result in further revisions to laws or regulations or their interpretation and enforcement increased taxation trade sanctions the imposition of import or export duties and tariffs restrictions on imports or exports currency revaluations or retaliatory actions which have had and may continue to have an adverse effect on our business plans and operating results The incoming administration has
indicated that it intends to impose or significantly increase tariffs on imports to the United States which could exacerbate many of these issues In addition expanded export restrictions limit our ability to sell to certain Chinese companies and to third parties that do business with those companies These restrictions have created and these and similar restrictions may continue to create uncertainty and caution with our current or prospective customers and may cause them to amass large inventories of our products replace our products with products from another supplier that is not subject to the export restrictions or focus on building indigenous semiconductor capacity to reduce reliance on U S suppliers Furthermore if these export restrictions cause our current or potential customers to view U S companies as unreliable we could suffer reputational damage or lose business to foreign competitors who are not subject to such export restrictions and our business could be materially harmed We are continuing to evaluate the impact of these restrictions on our business but these actions may have direct and indirect adverse impacts on our revenues and results of operations in China and elsewhere In addition our success may be adversely affected by China s continuously evolving policies laws and regulations including those relating to imports and exports antitrust AI cybersecurity data protection and data privacy the environment indigenous innovation the promotion of a domestic semiconductor industry intellectual property rights and enforcement and protection of those rights
The cyclical nature of the semiconductor industry has resulted in periods when demand for our products has increased or decreased rapidly The demand for our products may vary based on market conditions in our major end markets Demand in these end markets can fluctuate significantly based upon for example consumer spending consumer preferences the development of new technologies and macroeconomic conditions If we overbuild inventory in a period of decreased demand or we expand our operations and workforce too rapidly or procure excessive resources in anticipation of increased demand for our products and that demand does not materialize at the pace at which we expect or declines our operating results may be adversely affected as a result of underutilization of capacity charges related to obsolete inventory asset impairment or inventory write downs increased operating expenses or reduced margins For example we have experienced and may in the future experience periods of customer inventory adjustments and other customer behaviors that may adversely affect our operating results Further any capacity expansions by us or other semiconductor manufacturers could also lead to overcapacity in our target markets which could lead to price erosion that could adversely impact our operating results Conversely during periods of rapid increases in demand our available capacity may not be sufficient to satisfy the demand In addition we may not be able to expand our workforce and operations in a sufficiently timely manner procure adequate resources and raw materials locate suitable third party suppliers or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers and our current or future business could be materially and adversely affected
We rely on third parties for supply of raw materials and parts semiconductor wafer foundry services assembly and test services and transportation among other things and we generally cannot control their availability or conditions of supply or services
We rely and plan to continue to rely on third party suppliers and service providers including raw material and components suppliers semiconductor wafer foundries assembly and test contractors and freight carriers collectively vendors in manufacturing and shipping our products This reliance involves several risks including reduced control over availability capacity utilization delivery schedules manufacturing yields costs and supply chain allocations We currently source more than half of our wafer requirements annually from third party wafer foundries including Taiwan Semiconductor Manufacturing Company TSMC and others These foundries often provide wafer foundry services to our competitors and therefore periods of increased industry demand may result in capacity constraints With respect to TSMC in particular tensions across the Taiwan Strait or other geopolitical events could disrupt TSMC s operations which would adversely affect our ability to manufacture certain products and as a result could adversely affect our business and results of operations
Our manufacturing processes require availability of certain raw materials and supplies Limited or delayed access to these items including as a result of global trade issues supply chain constraints difficulties obtaining import or export licenses natural disasters public health emergencies or changes in or new laws or regulations could adversely affect our results of operations In certain instances one of our vendors may be the sole source of highly specialized processing services or materials If such vendor is unable or unwilling to manufacture and deliver components to us on the time schedule and of the quality or quantity that we require we may be forced to seek to engage an additional or replacement vendor which could result in additional expenses and delays in product development or shipment of product to our customers If additional or replacement vendors are not available we may also experience delays in product development or shipment which could in turn result in reputational harm or the temporary or permanent loss of customers and as a result could adversely affect our business and results of operations
Our industry faces challenges associated with products diverted from authorized distribution channels which could result in reputational harm and have a material adverse effect on our business and results of operations
We market and sell our products directly and through third party distributors In the past certain of our products have been and there is a risk that our products may continue to be diverted from our authorized distribution channels and sold on the gray market in ways that are not in accordance with our established agreements controls policies and procedures Purchasers that acquire our products via the gray market or through other unauthorized channels may resell or otherwise use our products for purposes for which they were not intended or that may be contrary to our ethical legal and regulatory obligations Organizations may also purchase counterfeit or substandard products including products that have been altered mishandled or damaged or purchase used products presented as new each of which could result in damage to property or persons and adversely affect our reputation and customer satisfaction In addition governments and regulatory bodies may inquire into our processes to mitigate risks related to product diversion For example during 2024 we participated in an inquiry from the U S Senate Permanent Subcommittee on Investigations related to the unauthorized misuse of U S chips in Russian weapon systems As new challenges and information arise our processes and policies will evolve and we may be required to incur additional costs to continue to enhance our compliance efforts which may include costs associated with distributor audits or responding to inquiries from governments and regulatory bodies These situations could have a material adverse effect on our reputation and business and operating results
In addition to leveraging an outsourcing model for certain manufacturing operations we also rely on our internal manufacturing operations located in the United States Ireland the Philippines Thailand and Malaysia A prolonged disruption at or inability to utilize one or more of our or our third parties manufacturing facilities loss of raw materials or damage to our or our third parties manufacturing equipment for any reason including due to natural or man made disasters civil unrest or other events outside of our control such as widespread outbreaks of illness or the failure to maintain our labor force at one or more of these facilities may disrupt our operations delay production shipments and revenue and result in us being unable to timely satisfy customer demand As a result we could forgo revenue opportunities potentially lose market share and damage our customer relationships all of which could materially and adversely affect our business financial condition and results of operations
Sales to third party distributors accounted for approximately 58 of our revenue in the year ended November 2 2024 These independent distributors generally represent product lines offered by several companies and thus could reduce their sales efforts for our products Further our distributors could terminate their representation of us with little advance notice In addition we generally do not require letters of credit from our distributors including our largest distributor and are not protected against accounts receivable default or declarations of bankruptcy by these distributors Our inability to collect open accounts receivable could adversely affect our operating results Termination of a significant distributor or a group of distributors whether at our initiative or the distributor s initiative or through consolidation in the distribution industry could disrupt our business and if we are unable to find suitable replacements with the appropriate scale and resources our operating results could be adversely affected
We are required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor If our estimates of such credits and rights are materially understated it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period
Our future success depends upon our ability to execute our business strategy continue to innovate improve our existing products design develop produce and market new products and identify and enter new markets
Our future success significantly depends on our ability to execute our business strategy continue to innovate improve our existing products and design develop produce and market innovative new products and system level solutions including those that may incorporate or are based upon software or AI technology Product design development innovation and enhancement is often a complex time consuming and costly process involving significant investment in research and development with no assurance of return on investment There can be no assurance that we will be able to develop and introduce new and improved products in a timely or efficient manner or that new and improved products if developed will achieve market acceptance Our products generally must conform to various evolving and sometimes competing industry and regulatory standards which may adversely affect our ability to compete in certain markets or require us to incur significant costs In addition our customers generally impose very high quality and reliability standards on our products which often change and may be difficult or costly to satisfy Any inability to satisfy customer quality and reliability standards or comply with industry and regulatory standards and technical requirements may adversely affect demand for our products and our results of operations
Our growth is also dependent on our ability to identify and penetrate new markets where we have limited experience yet require significant investments resources and technological advancements in order to compete effectively and there can be no assurance that we will achieve success in these markets Further there can be no assurance that the markets we serve and target based on our business strategy will grow in the future that our existing and new products will meet the requirements of these markets that our products or the end products in which our products are used will achieve customer acceptance in these markets that competitors will not force price reductions or take market share from us or that we can achieve or maintain adequate gross margins or profits in these markets
the effects of adverse economic or geopolitical conditions in the markets in which we sell our products including inflationary pressures which has resulted and may continue to result in increased interest rates fuel prices wages and other costs
the effects of issued threatened or retaliatory government sanctions trade barriers or economic restrictions changes in law regulations or other restrictions including executive orders and changes in import and export regulations including restrictions on exports to certain companies or to third parties that do business with such companies export classifications or duties and tariffs including with respect to China
the timing of new product announcements or introductions including products that may incorporate or are based upon software or AI technology by us our customers or our competitors and the market acceptance of such products
political changes in the United States including those related to the incoming administration and executive offices of the U S government a decline in the U S government defense budget changes in spending or budgetary priorities a prolonged U S government shutdown or delays in contract awards
the effects of public health emergencies civil unrest natural disasters or other severe weather events widespread travel disruptions security risks terrorist activities international conflicts and other events beyond our control
In addition the semiconductor market has historically been cyclical and subject to significant economic upturns and downturns Our business and certain of the end markets we serve are also subject to rapid technological changes and material fluctuations in demand based on end user preferences There can be no assurance that products stocked in our inventory will not be rendered obsolete before we ship them or that we will be able to design develop and produce products in a timely fashion to accommodate changing customer demand
As a result of these and other factors we may experience material fluctuations in future revenue gross margins operating results net income and earnings per share on a quarterly or annual basis Our historical financial performance and results of operations should not be relied upon as indicators of future performance or results In addition if our revenue gross margins operating results net income and earnings per share results or expectations do not meet the expectations of securities analysts or investors the market price of our common stock may decline
We face intense competition in the semiconductor industry and we expect this competition to increase in the future including from companies located outside of the United States Competition is generally based on innovation design quality and reliability of products product performance features and functionality product pricing availability and capacity technological service and support and the availability of integrated system solutions with the relative importance of these factors varying among products markets and customers Many companies have sufficient financial manufacturing technical sales and marketing resources to develop and market products that compete with our products Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the United States including entities associated with well funded efforts by foreign governments to create indigenous semiconductor industries From time to time governments around the world may provide incentives or make other investments that could benefit and give competitive advantages to our competitors For example in August 2022 the CHIPS and Science Act of 2022 CHIPS Act was signed into law to provide financial incentives to the U S semiconductor industry Government incentives including any that may be offered in connection with the CHIPS Act may not be available to us on acceptable terms or at all and to the extent that the incoming administration modifies or repeals the CHIPS Act the availability of any such incentives may be even less certain Further such programs typically require companies to adhere to various performance obligations which we may not achieve If our competitors can benefit from such government incentives and we cannot it could strengthen our competitors relative position and have a material adverse effect on our reputation and business Existing or new competitors may develop products or technologies that more effectively address the demands of our customers and markets with enhanced performance features and functionality lower power requirements greater levels of integration or lower cost which may increase our obsolete or excess inventory and result in inventory write offs In addition as we seek to expand our business including the design and production of products and services for developing and emerging markets we may encounter increased competition from our current and new competitors Increased competition in certain markets has resulted in and may continue to result in declining average selling prices reduced gross margins and loss of market share in those markets There can be no assurance that we will be able to compete successfully in the future against existing or new competitors or that our operating results will not be adversely affected by increased competition In addition the semiconductor industry has experienced significant consolidation over the past several years Consolidation among our competitors could lead to a changing competitive landscape which could negatively impact our competitive position and market share and harm our results of operations
Our continued success depends to a significant extent upon the recruitment retention and effective succession of our key personnel including our leadership team management and technical personnel particularly our experienced engineers The competition for these employees is intense and the labor market is tight The loss of key personnel or the inability to attract timely hire and retain key employees with critical technical skills to achieve our strategy including as a result of changes to immigration policies and the increased uncertainty surrounding such policies in light of the incoming administration s expected immigration agenda could cause business disruptions increased expenses to address any disruptions and could have a material adverse effect on our business
We believe that a critical contributor to our success to date has been our corporate culture which we have built to foster innovation teamwork and employee satisfaction As we grow including from the integration of employees and businesses
acquired in connection with previous or future acquisitions we may find it difficult to maintain important aspects of our corporate culture which could negatively affect our ability to retain and recruit personnel who are essential to our future success
We do not maintain any key person life insurance policy on any of our officers or other employees The loss of one or more of our key employees and any failure to have in place and execute an effective succession plan for key executives could seriously harm our business and results of operations
Our customers typically do not make long term product purchase commitments and incorrect forecasts or reductions cancellations or delays in orders for our products could adversely affect our operating results
We typically do not have sales contracts with our customers that include long term product purchase commitments In certain markets where end user demand may be particularly volatile and difficult to predict some customers place orders that require us to manufacture product and have it available for shipment even though the customer is unwilling to make a binding commitment to purchase all or even any of the product In other instances we manufacture product based on non binding forecasts of customer demands which may fluctuate significantly on a quarterly or annual basis and at times may prove to be inaccurate Additionally our U S government contracts and subcontracts may be funded in increments over a number of government budget periods and typically can be terminated by the government for its convenience As a result we may incur inventory and manufacturing costs in advance of anticipated sales and we are subject to the risk of lower than expected orders or cancellations of orders leading to a sharp reduction of sales and backlog Further if orders or forecasts for products that meet a customer s unique requirements are canceled or unrealized we may be left with an inventory of unsaleable products causing potential inventory write offs and hindering our ability to recover our costs The foregoing risks may be exacerbated in times of macroeconomic uncertainty including as a result of elevated inflation high interest rates bank failures and slower economic growth or recession Incorrect forecasts or reductions cancellations or delays in orders for our products could adversely affect our operating results
Our semiconductor products are complex and we may be subject to warranty indemnity or product liability claims which could result in significant costs and damage to our reputation and adversely affect customer relationships the market acceptance of our products and our operating results
Semiconductor products are highly complex and may contain defects that affect their quality or performance Failures in our products and services or in the products of our customers could result in damage to our reputation for reliability and increase our legal or financial exposure to third parties Certain of our products and services including those that may incorporate or are based upon software or AI technology could also contain security vulnerabilities defects bugs and errors which could also result in significant data losses security breaches and theft of intellectual property We generally warrant that our products will meet their published specifications and that we will repair or replace defective products for one year from the date title passes from us to the customer We invest significant resources in the testing of our products however if any of our products contain security vulnerabilities defects bugs or errors we may be required to incur additional development and remediation costs pursuant to warranty and indemnification provisions in our customer contracts and purchase orders These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others including liability for costs and expenses associated with product defects including recalls which may adversely impact our reputation and operating results We may also be subject to customer intellectual property indemnity claims Our customers have on occasion been sued and may be sued in the future by third parties alleging infringement of intellectual property rights or damages resulting from use of our products Those customers may seek indemnification from us under the terms and conditions of our sales contracts with them In certain cases our potential indemnification liability may be significant
Further we sell to customers in industries such as automotive including autonomous vehicles aerospace defense and healthcare where failure of the systems in which our products are integrated could cause damage to property or persons We may be subject to product liability claims if our products or the integration of our products cause system failures Any product liability claim whether or not determined in our favor could result in significant expense divert the efforts of our technical and management personnel and harm our business In addition if any of our products contain defects or have reliability quality or compatibility problems not capable of being resolved our reputation may be damaged which could make it more difficult for us to sell our products to customers and which could also adversely affect our operating results
The fabrication of integrated circuits is highly complex and precise and our manufacturing processes utilize a substantial amount of technology Minute impurities contaminants in the manufacturing environment difficulties in the fabrication process defects in the masks used in the wafer manufacturing process manufacturing equipment failures wafer breakage or other factors can cause a substantial percentage of wafers to be rejected or numerous dice on each wafer to be nonfunctional While we have significant expertise in semiconductor manufacturing it is possible that some processes could become unstable This instability could result in manufacturing delays and product shortages which could have a material adverse effect on our operating results
To remain competitive we may need to invest in or acquire other companies purchase or license technology from third parties or enter into other strategic transactions in order to introduce new products or enhance our existing products
An element of our business strategy involves expansion through the acquisitions of businesses assets products or technologies that allow us to complement our existing product offerings diversify our product portfolio expand our market coverage increase our engineering workforce expand our technical skill sets or enhance our technological capabilities We may not be able to identify businesses that have the technology or resources we need and if we find such businesses we may not be able to invest in purchase or license the technology or resources on commercially favorable terms or at all Acquisitions investments and technology licenses are challenging to complete for a number of reasons including difficulties in identifying potential targets the cost of potential transactions competition among prospective buyers and licensees the need for regulatory approvals and difficulties related to integration efforts In addition investments in companies are subject to a risk of a partial or total loss of our investment Both in the United States and abroad governmental regulation of acquisitions including antitrust and other regulatory reviews and approvals has become more complex increasing the costs and risks of undertaking and may prevent us from consummating significant acquisitions In order to finance a potential transaction we may need to raise additional funds by issuing securities or borrowing money We may not be able to obtain financing on favorable terms and the sale of our stock may result in the dilution of our existing shareholders or the issuance of securities with rights that are superior to the rights of our common shareholders
If we are unable to successfully address these risks we may not realize some or all of the expected benefits of our acquisitions which may have an adverse effect on our business strategy plans and operating results
Our computer systems and networks are subject to attempted security breaches and other cyber incidents and a significant disruption in or breach in security of our information technology systems or certain products could materially and adversely affect our business or reputation
We rely on information technology systems throughout our company to keep financial records and customer data process orders manage inventory coordinate shipments to customers maintain confidential and proprietary information assist in semiconductor engineering and other technical activities and operate other critical functions such as internet connectivity network communications and email In addition we provide our confidential and proprietary information to our strategic partners in certain cases who may maintain such information on their information technology systems While in the past we have experienced cybersecurity attacks and incidents we believe that they have not had a material impact on our business Our security measures or those of our third party service providers or strategic partners may not detect or prevent security breaches cyberattacks defects bugs or errors Further geopolitical tensions and conflicts have escalated the volume and sophistication of cyberattacks Because the tactics and techniques used by threat actors to obtain unauthorized access to or sabotage systems change frequently and in some cases are not recognized until they are launched or even later we may be unable to anticipate these techniques or to implement adequate preventative measures in advance and security breaches may remain undetected for an extended period of time Our use of AI may also increase vulnerability to cybersecurity risks including through unauthorized use or misuse of AI tools and bad inputs or logic or the introduction of malicious code incorporated into AI
generated code AI and machine learning also may be used for certain cybersecurity attacks improving or expanding the existing capabilities of threat actors in manners we cannot predict at this time resulting in greater risks of security incidents and breaches We and our third party service providers or strategic partners are susceptible to security breaches of information technology systems or certain products and other incidents such as unauthorized access supply chain attacks exfiltration or destruction of data disruption of service viruses or other malicious code illegal break ins or hacking sabotage phishing attempts and other forms of social engineering malware ransomware and other forms of cyber extortion and similar events These threats may come from cybercriminals cyberterrorists and hacktivists nation state and nation state supported actors including advanced persistent threat intrusions and computer hackers They also may result from the malicious or accidental acts of our employees contractors or third party providers In the event of unauthorized access to or a security breach of our systems or those of our third party service providers or strategic partners our operations may be disrupted and our proprietary information or that of our employees contractors partners customers suppliers or other third parties may be misappropriated In the event of a cybersecurity attack or incident we could be exposed to potential liability litigation and regulatory action as well as the loss of existing or potential customers damage to our reputation and other financial loss In addition the cost and operational consequences of responding to breaches and implementing remediation measures could be significant Furthermore the continuing and evolving threat of cyberattacks has resulted in increased regulatory focus and we may be required to invest significant additional resources to comply with evolving cybersecurity regulations For example the SEC adopted rules requiring the disclosure of cybersecurity incidents that we determine to be material to be made within four business days of such determination which can be complex requiring a number of assumptions based on several factors It is possible that the SEC may not agree with our determinations which could result in fines civil litigation or damage to our reputation
Our information technology systems and those of our third party service providers and strategic partners may also be susceptible to damage disruptions or shutdowns due to power outages hardware failures telecommunication failures user errors catastrophes or other unforeseen events A prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers could result in the loss of sales and customers and significant incremental costs which could adversely affect our business
We are increasingly incorporating AI capabilities into the development of technologies and our business operations and into our products and services The development and deployment of AI involves significant competitive legal regulatory and other risks The implementation of AI is costly requires a significant amount of data and there can be no assurance that AI will enhance our products or services or be beneficial to our business including our efficiency or profitability In addition we face significant competition from other companies that are incorporating AI into their products and technologies These other companies may incorporate AI in products or technologies that are similar to or that customers perceive as superior to our technologies or are more cost effective to develop and deploy AI technology is complex and rapidly evolving and if we are unable to innovate quickly enough to keep pace with these rapid technological developments our business could be harmed
AI technology may also give rise to significant legal and regulatory liability Governments around the world have adopted and may continue to adopt laws and regulations related to AI including the European Union s AI Act and several U S government agencies have increased investigations and enforcement efforts related to the use of AI technology which could increase our compliance costs and limit our ability to use AI in the development of our products and services While the incoming administration has signaled that AI policy will be a priority the scope and impact of any such policies cannot yet be determined In addition the use of AI in the development of our products and services or by our customers in end products that incorporate our products could cause loss of intellectual property or subject us to risks related to intellectual property infringement or misappropriation data privacy or cybersecurity AI algorithms or training methodologies may also be flawed and datasets may contain irrelevant insufficient or biased information Further AI technology has many applications and our products could be used in applications that are not in accordance with our controls policies and procedures Any failure or perceived failure by us to comply with any legal or regulatory requirement could subject us to legal liabilities damage our reputation or otherwise adversely affect our business
Our future success depends in part on our ability to protect our intellectual property We primarily rely on patent mask work copyright trademark and trade secret laws as well as nondisclosure agreements information security practices and other methods to protect our proprietary information technologies and processes Despite our efforts to protect our intellectual property it is possible that competitors or other unauthorized parties may obtain or disclose our confidential information reverse engineer or copy our technologies products or processes make unlicensed copies or engage in unapproved distributions of our technology for unauthorized uses or otherwise misappropriate our intellectual property Moreover the laws of foreign countries in which we design manufacture market and sell our products may afford little or no effective protection of our intellectual property
There can be no assurance that the claims allowed in our issued patents will be sufficiently broad to protect our technology In addition any of our existing or future patents may be challenged invalidated or circumvented As such any rights granted under these patents may not prevent others from exploiting our proprietary technology We may not be able to obtain foreign patents or pending applications corresponding to our U S patents and applications Even if patents are granted we may not be able to effectively enforce our rights If our patents and mask works do not adequately protect our technology or if our registrations expire prior to end of life of our products our competitors may be able to offer products similar to ours Our competitors may also be able to develop similar technology independently or design around our patents
We generally enter into confidentiality agreements with our employees consultants and strategic partners We also try to control access to and distribution of our technologies documentation and other proprietary information Despite these efforts internal or external parties may attempt to copy disclose obtain or use our products or technology without our authorization Also former employees may seek employment with our business partners customers or competitors and may improperly use our proprietary information at their employer
We are or may become subject to a variety of laws and regulations such as the European Union s General Data Protection Regulation GDPR China s Personal Information Protection Law PIPL or California s Consumer Privacy Act CCPA regarding privacy data protection and data security These laws and regulations are continuously evolving and developing The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting particularly with respect to foreign laws
In particular there are numerous U S federal state and local laws and regulations and foreign laws and regulations regarding privacy and the collection sharing use processing disclosure and protection of personal data Such laws and regulations often vary in scope may be subject to differing interpretations and may be inconsistent among different jurisdictions For example the GDPR and PIPL include operational requirements for companies that receive or process personal data of residents of the European Union or China as applicable that are broader and more stringent than those in many other jurisdictions around the world The GDPR includes significant penalties for non compliance and China s PIPL imposes additional operational requirements relating to processing personal information and provides comprehensive penalty and enforcement mechanisms In the United States California enacted the CCPA that requires covered companies to provide additional disclosures and data rights to data subjects including employees The California Privacy Rights Act expands the CCPA and establishes the California Privacy Protection Agency to enforce Californians privacy rights under the CCPA Since the CCPA was enacted other states including Virginia and Colorado have enacted or are in the process of enacting comprehensive privacy schemes
The costs of compliance with and other burdens imposed by the GDPR CCPA and similar laws may limit the use and adoption of our products and services and require us to incur substantial compliance costs which could have an adverse impact on our business Further our product offerings in the digital healthcare solutions space which include the collection and processing of sensitive personal information subject us to heightened requirements under data privacy laws such as the Health Insurance Portability and Accountability Act
Given that the scope interpretation and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices Any failure or perceived failure by us or third party service providers to comply with our privacy or security policies or privacy related legal obligations or any compromise of security that results in the unauthorized release or transfer of personal data may result in governmental enforcement actions litigation or negative publicity and could have an adverse effect on our operating results and financial condition
We are occasionally involved in litigation administrative proceedings and regulatory proceedings which could be costly to resolve and could require us to redesign products pay significant royalties or fines or refrain from engaging in specific conduct
From time to time we are involved in various legal administrative and regulatory proceedings claims demands and investigations relating to our business including inquiries from and discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations which may result in claims fines or penalties with respect to commercial product liability intellectual property AI cybersecurity privacy data protection antitrust breach of contract employment class action whistleblower mergers and acquisitions and other matters
We could also be subject to litigation or arbitration disputes arising under our contractual obligations customer indemnity warranty or product liability claims or other matters that could lead to significant costs and expenses as we defend those claims or pay damage awards
Further the semiconductor industry is characterized by frequent claims and litigation involving patent and other intellectual property rights Other companies or individuals have obtained patents covering a variety of semiconductor designs and processes and we might be required to obtain licenses under some of these patents or be precluded from making and selling infringing products if those patents are found to be valid and infringed by us In the event a third party makes a valid intellectual property claim against us and a license is not available to us on commercially reasonable terms or at all we could be forced either to redesign or to stop production of products incorporating that intellectual property and our operating results could be materially and adversely affected Litigation may be necessary to enforce our patents or other of our intellectual property rights or to defend us against claims of infringement
These matters can be time consuming divert management s attention and resources and cause us to incur significant expenses Allegations made in the course of regulatory or legal proceedings may also harm our reputation regardless of whether there is merit to such claims Because litigation and the outcome of regulatory proceedings are inherently unpredictable our business financial condition or operating results could be materially affected by one or more of these proceedings claims demands or investigations
There can be no assurance that we are adequately insured to protect against all claims and potential liabilities and we may elect to self insure with respect to certain matters An adverse outcome in litigation or arbitration could have a material adverse effect on our financial position or on our operating results or cash flows
There is an increasing focus from regulators investors customers employees and potential talent as well as other stakeholders concerning ESG matters including climate change and sustainability human rights support for local communities Board of Directors and employee diversity human capital management employee health and safety practices product quality worker rights supply chain management and corporate governance and transparency If our ESG practices fail to meet our or the evolving expectations of investors customers employees or other stakeholders our reputation brand and employee retention may be negatively impacted and our customers and suppliers may be unwilling to continue to do business with us Current and prospective investors are increasingly utilizing ESG data to inform their decisions including investment and voting decisions using a multitude of evolving score and rating frameworks Further customers utilize ESG data to inform their purchasing decisions Additionally public interest and legislative and regulatory pressure related to companies ESG practices including those related to sourcing practices carbon emissions and human rights protections continue to grow This will require us to align our programs to such expectations and disclose an increasing amount of information and data to illustrate our position and progress and to support our customers to comply with regulations and other requirements If we do not adapt our strategy or execution quickly enough to meet evolving regulatory requirements or the expectations of our investors customers employees regulators or other stakeholders or if our ESG disclosures including data input processing and reporting are incomplete or inaccurate our business financial condition results of operations brand and reputation could be adversely affected
Our industry is subject to EHS requirements and laws particularly those that control and restrict the sourcing use transportation emission discharge storage and disposal of certain substances and materials and those that help promote the health and safety of our employees and the communities in which we operate For certain facilities we are required to obtain environmental permits from governmental authorities for our operations which may limit or restrict our operations In addition our operations may be interrupted or restricted by the phase out or ban of certain substances materials or processes which may impact the sourcing supply and pricing of materials used in manufacturing our products For example several jurisdictions have sought or may seek to restrict the use of per and polyfluoroalkyl substances PFAS which may be found in process chemicals parts components and other materials used in semiconductor manufacturing and have limited technically and commercially feasible alternatives Any such restriction in our ability to access supplies may adversely affect our results of operations Further public attention to environmental and social responsibility remains high and our customers routinely include stringent environmental and other standards in their contracts with us It is expected that there will be changes to EHS laws or regulations by the incoming administration but the impacts of any such changes on us are not currently known Changes in EHS laws or regulations uncertainties about those laws or regulations or customer requirements may require us to invest in equipment make manufacturing process or material changes or re assess current and planned expenditures and initiatives any of which could adversely affect our business financial condition and results of operations
In addition we use hazardous and other regulated materials that subject us to risks of liability for damages caused by potential or actual releases of such materials Any failure to control such materials adequately or to comply with existing or future EHS statutory or regulatory standards requirements or contractual obligations could result in any of the following each of which could have a material adverse effect on our business and operating results
Some of our revenue is derived from contracts with agencies of the United States government and subcontracts with its prime contractors As a United States government contractor or subcontractor we are subject to federal contracting regulations including the Federal Acquisition Regulations which govern the allowability of costs incurred by us in the performance of United States government contracts Certain contract pricing is based on estimated direct and indirect costs which are subject to change Additionally the United States government is entitled after final payment on certain negotiated contracts to examine all of our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that we failed to furnish complete accurate and current cost or pricing data in connection with the negotiation of the price of the contract Further United States government contracts contain provisions and are subject to laws and regulations that may give the United States government rights and remedies not typically found in commercial contracts including certain intellectual property rights and restrictions on future business
In connection with our United States government business we are subject to evolving procurement rules and regulations as well as government audits and to review and approval of our policies procedures and internal controls for compliance with procurement regulations and applicable laws such as the Cybersecurity Maturity Model Certification In certain circumstances if we do not comply with the terms of a government contract or with regulations or statutes we could be subject to downward contract price adjustments or refund obligations or could in extreme circumstances be assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period of time Any such suspension or debarment or other sanction could have an adverse effect on our business and reputation
Under some of our government subcontracts we are required to maintain secure facilities and to obtain security clearances for personnel involved in performance of the contract which can be time consuming and costly If we are unable to comply with these requirements or if personnel critical to our performance of these contracts are unable to obtain or maintain their security clearances we may be unable to perform these contracts or compete for other projects of this nature which could adversely affect our revenue
Our reputation is a critical factor in our relationships with customers employees governments suppliers and other stakeholders Our failure to address or the appearance of our failure to address issues that give rise to reputational risk including those described in this Risk Factors section could significantly harm our reputation and our brands
We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and services It may also limit our ability to be seen as an employer of choice when competing for highly skilled employees and repairing our reputation and brands may be difficult time consuming and expensive To the extent we fail to respond quickly and effectively to address corporate and brand crises the ensuing negative public reaction could significantly harm our reputation and our brands which could lead to increases in litigation claims and asserted damages or subject us to regulatory actions or restrictions If we fail to maintain enhance and protect our brands if we incur excessive expenses in this effort or if customers or potential customers are confused by others trademarks our business operating results and financial condition may be materially and adversely affected
Increases in our effective tax rate exposure to additional tax liabilities or substantial changes in domestic or international corporate tax policies regulations or guidance may adversely impact our results of operations
Our effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where our income is earned Our effective tax rate for the fiscal year ended November 2 2024 was below the U S federal statutory rate of 21 This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income
A number of factors may increase our future effective tax rate including new or revised tax laws or legislation or the interpretation of such laws or legislation by governmental authorities increases in tax rates in various jurisdictions variation in the mix of jurisdictions in which our profits are earned and taxed deferred taxes arising from basis differences in investments in foreign subsidiaries any adverse resolution of ongoing tax audits or adverse rulings from taxing authorities worldwide changes
in the valuation of our deferred tax assets and liabilities adjustments to income taxes upon finalization of various tax returns increases in expenses not deductible for tax purposes including executive compensation subject to the limitations of Section 162 m of the Internal Revenue Code and amortization of assets acquired in connection with strategic transactions decreased availability of tax deductions for stock based compensation awards worldwide and changes in available tax credits Any significant increase in our future effective tax rate could adversely impact our net income during future periods
Tax legislation and regulation may require the collection of information not regularly produced by us and therefore necessitate the use of estimates in our Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions which may subject us to additional tax liability tax examination and other risks As regulations and guidance evolve with respect to tax legislation and regulation and as more information is gathered and analyzed our results may differ from previous estimates and may materially affect our Consolidated Financial Statements Further we are subject to and are under tax examination and audit in various jurisdictions including an IRS income tax audit for the fiscal years ended October 30 2021 November 2 2019 fiscal 2019 and November 3 2018 a pre Acquisition IRS income tax audit for Maxim Integrated Products Inc s Maxim fiscal years ended June 27 2015 through August 26 2021 and various U S state and local tax audits and international audits including an Irish corporate tax audit for fiscal 2019 Such jurisdictions may assess additional income tax against us The final determination of tax audits or any administrative appeals relating thereto could be materially different from our income tax provisions and accruals The ultimate result of any current or future audit could have a material adverse effect on our results of operations and cash flows in the period or periods for which that determination is made
We are also subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction In the United States for example the Inflation Reduction Act IRA imposes a 15 book minimum tax on corporations with three year average annual adjusted financial statement income exceeding 1 billion We do not believe that the IRA will materially impact our effective tax rate Corporate tax reform anti base erosion rules and tax transparency continue to be high legislative or regulatory priorities in many jurisdictions Changes in laws and regulations regarding these matters could impact the jurisdictions where we are deemed to earn income which could in turn adversely affect our tax liability and results of operations For example the Organization for Economic Cooperation and Development s OECD Base Erosion and Profit Sharing Plans which implement a minimum global effective tax rate of 15 will apply to us beginning in fiscal year 2025 We continue to monitor potential impacts related to this legislation as countries implement it and the OECD provides additional guidance As additional jurisdictions enact such legislation our effective tax rate and cash tax payments could increase
We have substantial existing indebtedness and the ability to incur significant additional indebtedness which could limit our operations and our use of our cash flow and negatively impact our credit ratings
As of November 2 2024 we had approximately 7 6 billion in outstanding indebtedness including 0 5 billion of short term commercial paper In addition we had the ability to incur approximately 2 0 billion of additional indebtedness in direct borrowings under our outstanding commercial paper facility based on amounts available under our unsecured revolving credit facility that were not being used to backstop our outstanding commercial paper balance Our leverage could have negative consequences including increasing our vulnerability to adverse economic and industry conditions limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions Further our net interest expense is exposed to changes in market interest rates We may also incur additional debt including debt with variable interest rates in the future which would exacerbate these risks
Our ability to make payments of principal and interest on our indebtedness when due depends upon our future operating performance which may be impacted by general economic conditions industry cycles and other factors beyond our control If we are unable to service or refinance our debt we may be required to divert funds that would otherwise be invested in growing our business operations or returned to shareholders repatriate earnings as dividends from foreign locations with potential negative tax consequences or sell selected assets Such measures might not be sufficient to enable us to service our debt which could negatively impact our financial results In addition we may not be able to obtain any such financing refinancing or complete a sale of assets on economically favorable terms In the case of financing or refinancing favorable interest rates will depend on conditions in the debt capital markets In addition if our credit ratings are downgraded or put on watch for a potential downgrade the applicable interest rate on borrowings under our current revolving credit facility and commercial paper issuances may rise and our ability to obtain additional financing or refinance our existing debt may be negatively affected
Our current revolving credit facility and outstanding debt instruments impose and future debt instruments to which we may become subject may impose restrictions that limit our ability to engage in activities that could otherwise benefit us including to undertake certain transactions to create certain liens on our assets and to incur certain subsidiary indebtedness Our ability to comply with these financial restrictions and covenants is dependent on our future performance which is subject to prevailing economic conditions and other factors including factors that are beyond our control such as changes in technology government regulations and the level of competition in our markets In addition our revolving credit facility requires us to maintain compliance with specified financial ratios If we breach any of the covenants under our revolving credit facility the indentures governing our outstanding senior unsecured notes or any future debt instruments to which we may become subject and do not obtain appropriate waivers then subject to applicable cure periods our outstanding indebtedness thereunder could be declared immediately due and payable and we may be restricted from further borrowing under our revolving credit facility
From time to time we may enter into green financing arrangements that require us to use proceeds for environmental sustainability purposes or have targets related to environmental sustainability For example we entered into a revolving credit agreement on June 23 2021 which as amended contains a sustainability linked pricing component which provides for interest rate and facility fee reductions or increases based on meeting or missing targets related to environmental sustainability specifically greenhouse gas emissions and renewable energy usage For calendar year 2023 we exceeded the target thresholds for greenhouse gas emissions and renewable energy usage related to this sustainability linked pricing component which resulted in immaterial adjustments to administrative and interest fees due under the facility On October 5 2021 we issued 750 million sustainability linked senior notes Sustainability Linked Senior Notes Our Sustainability Linked Senior Notes initially bear interest at a rate of 1 7 per annum and are subject to an increase of an additional 30 basis points per annum from April 1 2026 to their maturity on October 1 2028 unless the Sustainability Performance Target as defined in the Sustainability Linked Senior Notes has been satisfied Failing to use the net proceeds under green financing arrangements that satisfies investor criteria and expectations regarding environmental impact or achieve targets related to environmental sustainability under such financing arrangements could result in reputational harm and our business and operating results could be negatively impacted
If we are not able to meet our U S cash requirements it may be necessary for us to consider repatriation of foreign earnings which could have a material adverse effect on our results of operations and financial condition
We carry outside basis differences in certain of our subsidiaries primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested We intend to reinvest these funds in our international operations and our current plans do not demonstrate a need to repatriate these earnings to fund our U S cash requirements However we require a substantial amount of cash in the United States for operating requirements stock repurchases cash dividends and acquisitions If we are not able to meet our U S cash requirements through operations borrowings under our current revolving credit facility issuances under our commercial paper program future debt or equity offerings or other sources of cash obtained at an acceptable cost it may be necessary for us to consider repatriation of earnings that are indefinitely reinvested and we may be required to pay additional taxes under current tax laws which could have a material adverse effect on our results of operations and financial condition
We like many companies in the semiconductor industry rely on supplies services internal manufacturing capacity wafer fabrication foundries and other subcontractors in locations around the world that are susceptible to natural disasters and other significant disruptions Earthquakes fires tsunamis extreme precipitation and flooding public health emergencies or other catastrophic events may disrupt local semiconductor related businesses and adversely affect manufacturing capacity availability and cost of key raw materials utilities and equipment and availability of key services including transport of our products worldwide Our insurance may not adequately cover losses resulting from such disruptions Any prolonged inability to utilize one of our manufacturing facilities or those of our subcontractors or third party wafer fabrication foundries or to access key raw materials utilities and equipment as a result of fire flood natural disaster unavailability of utilities or otherwise could result in a temporary or permanent loss of customers for affected products which could have a material adverse effect on our results of operations and financial condition In addition global climate change may result in certain natural disasters or other severe weather events occurring more frequently or with greater intensity such as drought wildfires storms sea level rise extreme temperatures and flooding and could disrupt the availability of water necessary for the operation of our fabrication
changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications or our failure to perform in line with those estimates or statements or our published guidance
announcements by us our customers or our competitors of significant new products technical innovations material transactions acquisitions or dispositions litigation capital commitments including share repurchases and dividend policies or revised earnings estimates
The stock market has historically experienced volatility especially within the semiconductor industry that often has been unrelated to the performance of particular companies such as the response to elevated inflation and high interest rates These market fluctuations may cause our stock price to fall regardless of our operating results
Our directors and executive officers periodically buy or sell shares of our common stock in the market including pursuant to Rule 10b5 1 trading plans Regardless of the individual s reasons for such purchases or sales securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result
As part of our enterprise security program we perform risk assessments relating to cybersecurity and technology risks Our enterprise security program has been developed based on industry standards including those published by the International Organization for Standardization ISO and the National Institute of Standards and Technology The program includes a comprehensive set of enterprise security policies and procedures that guide our protection strategy Our policies procedures and practices include but are not limited to
regular collaboration with leading global security providers intelligence and law enforcement communities and industry peers to exchange information on trends and best practices in order to address new and evolving cybersecurity risks
We have in place a third party risk management program to evaluate the cyber postures of our critical partners who handle the Company s sensitive data in order to identify monitor and address material cybersecurity risks that may arise from such third party relationships
While we have experienced cybersecurity incidents in the past in the last three years we have not experienced any cybersecurity incidents that have materially affected or are currently viewed as reasonably likely to materially affect us including our business strategy results of operations or financial condition However the scope and impact of any future incidents cannot be predicted and there can be no assurance that our enterprise security program will be effective in preventing material cybersecurity incidents in the future
See the risk factor titled Our computer systems and networks are subject to attempted security breaches and other cyber incidents and a significant disruption in or breach in security of our information technology systems or certain products could materially and adversely affect our business or reputation in Risk Factors in Part I Item 1A of this Annual Report on Form 10 K for further information
Management is responsible for assessing and managing our day to day risks and control systems and our Board is responsible for overseeing our enterprise risk management programs as a whole The Board has delegated the oversight of cybersecurity risk assessment and management to the audit committee As reflected in its charter the audit committee is responsible for overseeing and reviewing the Company s cybersecurity and information security programs practices and risk mitigation efforts The audit committee receives quarterly reports on cybersecurity risks or more frequent reports if circumstances dictate
We have established a cross functional Cybersecurity Steering Committee comprised of our Chief Information Officer CIO our Chief Information Security Officer CISO and other senior management The Cybersecurity Steering Committee is charged with overseeing the management of our enterprise security program including reviewing and prioritizing cybersecurity risks monitoring potential incidents establishing key mitigation initiatives overseeing cybersecurity governance and promoting and supporting cybersecurity best practices The Cybersecurity Steering Committee is chaired by our CISO who reports to our CIO Both our CISO and our CIO have extensive experience in assessing and managing cybersecurity programs and risk management through serving in various senior roles in information technology and cybersecurity serving on external Boards of Directors and holding multiple industry recognized certifications
The prevention detection mitigation and remediation of cybersecurity incidents is accomplished pursuant to various policies procedures and processes including our incident response and recovery plan and the other elements of our enterprise security program described above under Risk Management and Strategy These measures include escalation protocols through which the Cybersecurity Steering Committee is informed about cybersecurity and incidents by our CISO As part of our enterprise security program we have communication processes enabled for employees to identify and report threats or potential vulnerabilities
Our CIO and CISO provide regular updates to the full Board on the performance of and enhancements to key information technology projects our enterprise security program and risk mitigation efforts including relevant findings of the Cybersecurity Steering Committee The full Board also receives updates from the audit committee In addition there are protocols in place for immediate escalation in the event of any cybersecurity issues or developments that may require consideration between regularly scheduled audit committee or Board meetings Our internal audit team also provides regular updates to the audit committee on the performance of our enterprise security program from an internal audit perspective In addition our Chief Compliance and Risk Officer who oversees our overall enterprise risk management and compliance programs and chairs our Enterprise Risk Management Committee provides regular reports to the full Board including periodic updates on risk management
In addition to the properties listed in the above tables we also own or lease a number of other facilities in various locations in the United States and internationally that are used for manufacturing engineering sales and marketing and administration activities Leases for these leased facilities expire at various dates through the year 2039 We do not anticipate experiencing significant difficulty in retaining occupancy of any of our facilities through lease renewals prior to expiration or through month to month occupancy or in replacing them with equivalent facilities For information concerning our obligations under all operating leases see Note 9
From time to time in the ordinary course of our business we are involved in various claims charges and litigation arising from or related to among other things contractual matters patents trademarks personal injury environmental matters product liability insurance coverage employment or employee benefits As to such claims and litigation we can give no assurance that we will prevail We do not believe that any current legal matters will have a material adverse effect on our financial position results of operations or cash flows For information regarding material pending legal proceedings in which we are involved see Note 10
Our common stock is listed on The Nasdaq Global Select Market under the symbol ADI The number of holders of record of our common stock at November 22 2024 was 2 230 This number does not include shareholders for whom shares are held in a nominee or street name On November 1 2024 the last reported sales price of our common stock on The Nasdaq Global Select Market was 225 48 per share
On November 25 2024 our Board of Directors declared a cash dividend of 0 92 per outstanding share of common stock The dividend will be paid on December 20 2024 to all shareholders of record at the close of business on December 9 2024 and is expected to total approximately 456 6 million We currently expect quarterly dividends to continue in future periods although they remain subject to determination and declaration by our Board of Directors The payment of future dividends if any will be based on several factors including our financial performance outlook and liquidity
The table below summarizes the activity related to stock repurchases for the three months ended November 2 2024 We have an ongoing authorization originally approved by our Board of Directors in 2004 and subsequently amended to repurchase shares of our common stock in open market or negotiated transactions As of November 2 2024 the Company had repurchased a total of approximately 207 7 million shares of its common stock for approximately 15 0 billion under our share repurchase program An additional 1 7 billion remains available for repurchase of shares under the current authorized program Future repurchases of common stock will be dependent upon our financial position results of operations outlook liquidity and other factors we deem relevant
The average price paid for shares in connection with vesting of restricted stock units awards are averages of the closing stock prices at the vesting dates which are used to calculate the number of shares to be withheld
The following graph compares cumulative total shareholder return on our common stock since November 2 2019 with the cumulative total return of the Standard Poor s S P 500 Index and the S P Semiconductors Index This graph assumes the investment of 100 on November 2 2019 in our common stock the S P 500 Index and the S P Semiconductors Index and assumes all dividends are reinvested Measurement points are the last trading day for each respective fiscal year
The following discussion includes results of operations and financial condition for the fiscal year ended November 2 2024 fiscal 2024 and the fiscal year ended October 28 2023 fiscal 2023 and year over year comparisons between fiscal 2024 and fiscal 2023 For discussion on results of operations and financial condition for fiscal 2023 and the fiscal year ended October 29 2022 fiscal 2022 and year over year comparisons between fiscal 2023 and fiscal 2022 please refer to Management s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of our Annual Report on Form 10 K for fiscal 2023 filed with the Securities and Exchange Commission on November 21 2023 Our fiscal year is the 52 week or 53 week period ending on the Saturday closest to the last day in October Fiscal 2024 was a 53 week fiscal period while fiscal 2023 was a 52 week fiscal period The additional week in fiscal 2024 is included in the first quarter ended February 3 2024 Therefore fiscal 2024 includes an additional week of operations as compared to fiscal 2023
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
Revenue decreased 23 in fiscal 2024 as compared to fiscal 2023 primarily as a result of weaker macroeconomic trends This was pronounced in our Industrial end market as customers decreased their inventory balances
and in the Communications end market primarily due to the timing of infrastructure deployment cycles The Automotive and Consumer end markets declined to a lesser extent as demand weakened driven by reduced consumer spending
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
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 market revenue trends As a percentage of total revenue the decrease in the distributor channel is primarily due to the decrease in revenue in our Industrial end market
Geographic revenue information for fiscal 2024 and fiscal 2023 reflects the geographic location of the distributors or OEMs who purchased the Company s products This may differ from the geographic location of the end customers particularly in cases where a third party contract manufacturer purchases the Company s products through distributors
In all periods presented the predominant regions comprising Rest of North and South America are Canada and Mexico the predominant regions comprising Europe are Germany Sweden Israel and the Netherlands and the predominant regions comprising Rest of Asia are Taiwan Malaysia South Korea and Singapore
Gross margin percentage in fiscal 2024 decreased by 690 basis points compared to fiscal 2023 primarily due to lower utilization of our factories due to decreased customer demand and unfavorable product mix
R D expenses decreased in fiscal 2024 as compared to fiscal 2023 primarily as a result of lower R D employee related variable compensation expenses partially offset by the impact of an additional week of operations in fiscal 2024 as compared to 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
SMG A expenses decreased in fiscal 2024 as compared to fiscal 2023 primarily as a result of lower variable compensation expenses SMG A employee related salary and benefit expenses and discretionary spending The decrease was partially offset by an additional week of operations in fiscal 2024 as compared to fiscal 2023
The decrease in operating income in fiscal 2024 as compared to fiscal 2023 was primarily the result of a decrease in revenue which contributed to a decrease in gross margin of 2 495 9 million partially offset by a 204 9 million decrease in SMG A expenses a 204 8 million decrease in amortization expenses a 172 3 million decrease in R D expenses and a 123 5 million decrease in special charges net as more fully described above
The year over year increase in nonoperating expense in fiscal 2024 as compared to fiscal 2023 was primarily the result of higher interest expense related to our debt obligations and lower net gains from other investments partially offset by higher interest income
Our effective tax rates for fiscal 2024 and fiscal 2023 were below the U S statutory rate of 21 due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income For fiscal 2024 and fiscal 2023 our pretax income was primarily generated in Ireland at a tax rate of 12 5 Our effective tax rate for fiscal 2023 was also impacted by a discrete income tax benefit recorded of 81 7 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 of 2017
The decrease in net income in fiscal 2024 as compared to fiscal 2023 was a result of a 1 790 3 million decrease in operating income and a 40 3 million increase in nonoperating expense partially offset by a 151 4 million decrease in provision for income taxes
At November 2 2024 our principal source of liquidity was 2 4 billion of cash cash equivalents and short term investments of which approximately 1 3 billion was held in the United States with the balance 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 and bank 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
The decrease in cash provided by operating activities during fiscal 2024 as compared to fiscal 2023 was primarily a result of lower net income adjusted for noncash items partially offset by changes in working capital
Investing cash flows generally consist of capital expenditures and cash used for acquisitions The decrease in cash used for investing activities during fiscal 2024 as compared to fiscal 2023 was primarily the result of a decrease in cash used for capital expenditures partially offset by the net impact of purchases and maturities of short term investments during fiscal 2024
Financing cash flows generally consist of payments of dividends to shareholders 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
We use the average of the current year and prior year 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 for fiscal 2024 compared to fiscal 2023 was primarily the result of variations in the timing of collections and billings and decreased revenue levels in the fourth quarter of fiscal 2024 as compared to the fourth quarter of fiscal 2023
Inventory decreased in fiscal 2024 as compared to fiscal 2023 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 decreased to 3 0 billion at November 2 2024 from 3 2 billion recorded at the end of fiscal 2023 primarily due to decreases in accrued liabilities and current debt partially offset by increases in income taxes payable
Our Third Amended and Restated Revolving Credit Agreement dated as of June 23 2021 with Bank of America N A as administrative agent and the other banks identified therein as lenders which was subsequently amended on December 20 2022 and July 24 2023 as amended the Revolving Credit Agreement provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed 2 5 billion subject to certain terms and conditions
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 November 2 2024 we were in compliance with these covenants See Note 13
As of November 2 2024 we had approximately 7 0 billion of carrying value outstanding on our senior notes The difference in the carrying value of the debt and the principal is due to the unamortized discount and issuance fees and other adjustments on these instruments The indentures governing certain of our debt instruments contain covenants that may limit our ability to incur create assume or guarantee any debt or 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 November 2 2024 we were compliant with these covenants See Note 14
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 November 2 2024 we had 547 7 million of outstanding borrowings under the commercial paper program recorded in the 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
Our common stock repurchase program has been in place since August 2004 Since inception our Board of Directors has authorized us to repurchase 16 7 billion of our common stock under the program which includes the 8 5 billion authorization approved by the Board of Directors on August 25 2021 Under the 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 the full dollar amount of the authorization has been used to repurchase shares under the program
As of November 2 2024 1 7 billion remained available for repurchase under the current authorized program The repurchased shares are held as authorized but unissued shares of common stock Future repurchases of common stock will be dependent upon our financial position results of operations outlook liquidity and other factors we deem relevant
Net additions to property plant and equipment were 730 5 million in fiscal 2024 as we invested to enhance our global resiliency and continue to diversify our global manufacturing footprint We expect capital expenditures for fiscal 2025 to be between approximately 4 and 6 of fiscal 2025 revenue 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
On November 25 2024 our Board of Directors declared a cash dividend of 0 92 per outstanding share of common stock The dividend will be paid on December 20 2024 to all shareholders of record at the close of business on December 9 2024 and is expected to total approximately 456 6 million We currently expect quarterly dividends to continue in future periods although they remain subject to determination and declaration by our Board of Directors The payment of future dividends if any will be based on several factors including our financial performance outlook and liquidity
As of November 2 2024 our total liabilities associated with uncertain tax positions was 185 8 million which are included in non current income taxes payable in our Consolidated Balance Sheets contained in Item 8 of this Annual Report on Form 10 K Due to the complexity associated with our tax uncertainties we cannot make a reasonably reliable estimate of the period in which we expect to settle the non current liabilities associated with these uncertain tax positions Therefore we have not included these uncertain tax positions in the above contractual obligations table
From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board FASB and 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 2s
of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10 K for a description of recently issued and adopted accounting pronouncements including the dates of adoption and impact on our financial condition and results of operations
Management s discussion and analysis of the financial condition and results of operations is based upon the Consolidated Financial Statements which have been prepared in accordance with U S GAAP The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets liabilities revenue and expenses and related disclosure of contingent assets and liabilities We base our estimates and judgments on historical experience knowledge of current conditions and beliefs of what could occur in the future based on available information We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment If actual results differ significantly from management s estimates and projections there could be a material effect on our financial statements We also have other policies that we consider key accounting policies however the application of these policies does not require us to make significant estimates or judgments that are difficult or subjective
Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services We recognize revenue when all of the following criteria are met 1 we have entered into a binding agreement 2 the performance obligations have been identified 3 the transaction price to the customer has been determined 4 the transaction price has been allocated to the performance obligations in the contract and 5 the performance obligations have been satisfied The majority of our shipping terms permit us to recognize revenue at point of shipment or delivery Certain shipping terms require the goods to be through customs or be received by the customer before title passes In those instances we defer the revenue recognized until title and control of the promised goods
Revenue from contracts with the United States government government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion These measures are used to measure results directly and is generally the best measure of progress toward completion in circumstances in which a reliable measure of output can be established Estimated revenue in excess of amounts billed is reported as unbilled receivables Contract accounting requires judgment in estimating costs and assumptions related to technical issues and delivery schedule Contract costs include material subcontract costs labor and an allocation of indirect costs The estimation of costs at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract Changes in contract performance estimated gross margin including the impact of final contract settlements and estimated losses are recognized in the period in which the changes or losses are determined
Substantially all of our contracts with customers contain a single performance obligation the sale of mixed signal integrated circuit IC products Such sales represent a single performance obligation because the sale is one type of good or includes multiple goods that are neither capable of being distinct nor separable from the other promises in the contract This performance obligation is satisfied when control of the product is transferred to the customer which occurs upon shipment or delivery Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with an original expected duration of one year or less We generally warrant that our products will meet their published specifications and that we will repair or replace defective products for one year from the date title passes from us to the customer Specific accruals are recorded for known product warranty issues
The transaction price reflects our expectations about the consideration we will be entitled to receive from the customer and may include fixed or variable amounts Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period Variable consideration includes sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period The vast majority of such consideration are credits issued to the distributor due to price protection but also include sales made to distributors under agreements that allow certain rights of return referred to as stock rotation Price protection represents price discounts granted to certain distributors to allow the distributor to earn an appropriate margin on sales negotiated with certain customers and in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor Stock rotation allows distributors limited levels of returns in order to reduce the amounts of slow moving discontinued or obsolete product from their inventory A liability for distributor credits covering variable consideration is made based on management s estimate of historical experience rates as well as considering economic conditions and contractual terms To date actual distributor claims activity has been materially consistent with the provisions we have made based on our historical estimates
Accounts receivable represents our unconditional right to receive consideration from our customers Payments are typically due within 30 to 45 days of invoicing and do not include a significant financing component To date there have been no material impairment losses on accounts receivable There were no material contract assets or contract liabilities recorded on the Consolidated Balance Sheets in any of the periods presented
We value inventories at the lower of cost first in first out method or net realizable value Because of the cyclical nature of the semiconductor industry changes in inventory levels obsolescence of technology and product life cycles we write down inventories to net realizable value We employ a variety of methodologies to determine the net realizable value of inventory While a portion of the calculation is determined via reference to the age of inventory and lower of cost or net realizable value calculations an element of the calculation is subject to significant judgments made by us about future demand for our inventory If actual demand for our products is less than our estimates additional adjustments to existing inventories may need to be recorded in future periods To date our actual results have not been materially different than our estimates
Goodwill is subject to impairment tests annually or more frequently if events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable utilizing either the qualitative or quantitative method We test goodwill for impairment at the reporting unit level which we determined is consistent with our identified operating segments on an annual basis on the first day of the fourth quarter on or about August 4
We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value When using the qualitative method we consider several factors including the following
the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment
changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting units had significantly decreased and
whether there had been any significant increases to the weighted average cost of capital rates for each reporting unit which could materially lower our prior valuation conclusions under a discounted cash flow approach
If we elect not to use this option or we determine that it is more likely than not that the fair value of a reporting unit is less than its net book value then we perform the quantitative goodwill impairment test The quantitative goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount If fair value is determined to be less than carrying value an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit s fair value not to exceed the total amount of goodwill allocated to the reporting unit Additionally we consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss if applicable We determine the fair value of our reporting units using a weighting of the income and market approaches Under the income approach we use a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues gross profit margins operating income margins working capital cash flow perpetual growth rates and long term discount rates among others For the market approach we use the guideline public company method Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units to create valuation multiples that are applied to the operating performance of the reporting unit being tested in order to obtain their respective fair values In order to assess the reasonableness of the calculated reporting unit fair values we reconcile the aggregate fair values of our reporting units determined as described above to our total company market capitalization allowing for a reasonable control premium
During fiscal 2024 and fiscal 2023 we elected to use the qualitative method of assessing goodwill for all of our reporting units In all periods presented we concluded the reporting units fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed
We make certain estimates and judgments in determining income tax expense for financial statement purposes These estimates and judgments occur in the calculation of income tax credits benefits and deductions and in the calculation of certain tax assets and liabilities which arise from differences in the timing of the recognition of certain expenses for tax and financial statement purposes We assess the likelihood of the realization of deferred tax assets and record a corresponding valuation allowance as necessary if we determine those deferred tax assets may not be realized due to the uncertainty of the timing and amount to be realized of certain state and international tax credit carryovers In reaching our conclusion we evaluate certain relevant criteria including the existence of deferred tax liabilities that can be used to realize deferred tax assets the taxable income in prior carryback years in the impacted state and international jurisdictions that can be used to absorb net operating losses and taxable income in future years Our judgments regarding future profitability may change due to future market conditions changes in U S or international tax laws and other factors These changes if any may require material adjustments to these deferred tax assets which may result in an increase or decrease to our income tax provision in future periods
We account for uncertain tax positions by first determining if it is more likely than not that a tax position will be sustained by the appropriate taxing authorities prior to recording any benefit in the financial statements An uncertain income tax position is not recognized if it has less than a 50 likelihood of being sustained For those tax positions where it is more likely than not that a tax position will be sustained we have recorded the largest amount of tax benefit with a greater than 50 likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information For those income tax positions where it is not more likely than not that a tax benefit will be sustained no tax benefit has been recognized in the financial statements We classify interest and penalties related to uncertain tax positions within the provision for income taxes line of the Consolidated Statements of Income We reevaluate these uncertain tax positions on a quarterly basis This evaluation is based on factors including but not limited to changes in known facts or circumstances changes in tax law effectively settled issues under audit and new guidance on legislative interpretations A change in these factors could
In the ordinary course of global business there are many transactions and calculations where the ultimate tax outcome is uncertain Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities Although we believe our estimates are reasonable no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our historical income tax provisions and income tax liabilities In the event our assumptions are incorrect the differences could have a material impact on our income tax provision and operating results in the period in which such determination is made In addition to the factors described above our current and expected effective tax rate is based on then current tax law Significant changes during the year in enacted tax law could affect these estimates
Our interest income and expense are sensitive to changes in the general level of interest rates In this regard changes in interest rates affect the interest earned or paid on our marketable securities and debt as well as the fair value of our investments and debt
Based on our floating rate debt outstanding as of November 2 2024 and October 28 2023 inclusive of our commercial paper notes and interest rate swap outstanding as applicable our annual interest expense would change by approximately 15 5 million and 20 5 million respectively for each 100 basis point increase in interest rates
Based on our cash and marketable securities outstanding as of November 2 2024 and October 28 2023 our annual interest income would change by approximately 19 9 million and 9 6 million respectively for each 100 basis point increase in interest rates
To provide a meaningful assessment of the interest rate risk associated with our investment portfolio we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our investment portfolio assuming an immediate 100 basis point parallel shift in the yield curve Based on investment positions as of November 2 2024 and October 28 2023 a hypothetical 100 basis point increase in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period If significant such losses would only be realized if we sold the investments prior to maturity
As of November 2 2024 we had 1 0 billion notional of fixed for floating interest rate swaps outstanding with the swap payable having a fair value of 36 9 million A hypothetical 100 basis point increase in interest rates would increase the swap payable by approximately 54 0 million with a corresponding adjustment to the carrying value of the related debt
As of November 2 2024 we had 7 1 billion in principal amount of senior unsecured notes outstanding with a fair value of 6 3 billion We also had 547 7 million of commercial paper notes outstanding As commercial paper notes issuances are at then current rates and with very short maturities the carrying value will approximate the fair value The fair value of our notes is subject to interest rate risk market risk and other factors Generally the fair value of our notes will increase as interest rates fall and decrease as interest rates rise The fair values of our notes as of November 2 2024 and October 28 2023 assuming a hypothetical 100 basis point increase in market interest rates are as follows
of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10 K we regularly hedge our non U S dollar based exposures by entering into forward foreign currency exchange contracts The terms of these contracts are for periods matching the duration of the underlying exposure and generally range from one to twelve months Currently our largest foreign currency exposure is the Euro primarily because our European operations have the highest proportion of our local currency denominated expenses Relative to the net unhedged foreign currency exposures existing at November 2 2024 and October 28 2023 an immediate 10 unfavorable movement in foreign currency exchange rates would result in approximately 32 2 million of losses and 66 5 million of losses respectively in changes in earnings or cash flows over the course of the year
The market risk associated with our derivative instruments results from currency exchange rates that are expected to offset the market risk of the underlying transactions assets and liabilities being hedged The counterparties to the agreements relating to our foreign exchange instruments consist of a number of major international financial institutions with high credit ratings Based on the credit ratings of our counterparties as of November 2 2024 we do not believe that there is significant risk of nonperformance by them 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 our 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 our obligations to the counterparties
The following table illustrates the effect that an immediate 10 unfavorable or favorable movement in foreign currency exchange rates relative to the U S dollar would have on the fair value of our forward exchange contracts as of November 2 2024 and October 28 2023
The calculation assumes that each exchange rate would change in the same direction relative to the U S dollar In addition to the direct effects of changes in exchange rates such changes typically affect the volume of sales or the foreign currency sales price as competitors products become more or less attractive Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency selling prices
We have audited the accompanying consolidated balance sheets of Analog Devices Inc the Company as of November 2 2024 and October 28 2023 the related consolidated statements of income comprehensive income shareholders equity and cash flows for each of the three years in the period ended November 2 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a 2 collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at November 2 2024 and October 28 2023 and the results of its operations and its cash flows for each of the three years in the period ended November 2 2024 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of November 2 2024 based on criteria established in Internal Control
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates
As described in Note 2n to the consolidated financial statements the Company s sales contracts provide certain distributors with credits for price protection and rights of return which results in variable consideration During 2024 sales to distributors were 5 5 billion net of expected price protection credits and rights of return for which the liability balance as of November 2 2024 was 508 7 million of which the vast majority relates to the price protection credits
Auditing the Company s measurement for price protection credits under distributor contracts involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of expected price protection credits For example estimated price protection credits included in the transaction price reflects management s evaluation of contractual terms historical experience and assumptions about future economic conditions Changes in those assumptions can have a material effect on the amount recognized for price protection credits
We obtained an understanding evaluated the design and tested the operating effectiveness of controls over the Company s process to calculate the price protection credits For example we tested controls over the appropriateness of assumptions management used as well as controls over the completeness and accuracy of the data underlying estimates of expected price protection credits
Our audit procedures included among others inspecting contractual terms in distributor agreements and testing the underlying data used in management s calculation for completeness and accuracy as well as evaluating the significant assumptions used in the estimation of the price protection credits We evaluated the Company s methods and assumptions used in the estimates which included comparing the assumptions to historical trends We inspected and tested the results of the Company s retrospective review analysis of actual price protection credits claimed by distributors evaluated the estimates made based on historical experience and performed sensitivity analyses of the Company s significant assumptions to assess the impact on the price protection credits We also evaluated whether the Company appropriately considered new information that could significantly change the estimated future price protection credits
Analog Devices Inc Analog Devices or the Company is a global semiconductor leader dedicated to solving its customers most complex engineering challenges Since its inception in 1965 the Company has played a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense measure interpret connect and power The Company designs manufactures tests and markets a broad portfolio of solutions including integrated circuits ICs software and subsystems that leverage high performance analog mixed signal and digital signal processing technologies The Company s comprehensive product portfolio deep domain expertise and advanced manufacturing capabilities extend across high performance precision and high speed mixed signal power management and processing technologies including data converters amplifiers power management radio frequency ICs edge processors and other sensors The Company s focus is largely on the business to business end markets of Industrial Automotive and Communications and related applications as well as Consumer applications with the goal of driving sustainable and profitable growth over the long term
The Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries Upon consolidation all intercompany accounts and transactions are eliminated Certain amounts reported in previous years have been reclassified to conform to the presentation for the fiscal year ended November 2 2024 fiscal 2024 Such reclassified amounts are immaterial
The Company s fiscal year is the 52 week or 53 week period ending on the Saturday closest to the last day in October Fiscal 2024 was a 53 week fiscal period while the fiscal year ended October 28 2023 fiscal 2023 and the fiscal year ended October 29 2022 fiscal 2022 were 52 week fiscal periods The additional week in fiscal 2024 is included in the first quarter ended February 3 2024 Therefore fiscal 2024 includes an additional week of operations as compared to fiscal 2023 and fiscal 2022
On August 26 2021 Acquisition Date the Company completed the acquisition of Maxim Integrated Products Inc Maxim an independent manufacturer of innovative analog and mixed signal products and technologies The acquisition of Maxim is referred to as the Acquisition See Note 6
Cash and cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition Short term investments have original maturities of greater than ninety days at the time of acquisition Cash cash equivalents and short term investments consist primarily of government and institutional money market funds corporate obligations such as commercial paper and floating rate notes bonds demand deposit accounts money market deposit accounts and bank time deposits
The Company classifies its investments in readily marketable debt and equity securities as held to maturity available for sale or trading at the time of purchase The Company s readily marketable cash equivalents and short term investments are classified as available for sale Available for sale securities are carried at fair value with unrealized gains and losses net of related tax reported in accumulated other comprehensive loss income AOCI Adjustments to the fair value of investments classified as available for sale are recorded as an increase or decrease in AOCI unless the adjustment is considered an other than temporary impairment in which case the adjustment is recorded as a charge in the Consolidated Statements of Income
The Company reviews available for sale securities and evaluates impairment whenever the fair value of the security is less than its amortized cost If the Company intends to sell the security or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis the Company will write down the security to its fair value at the reporting date recognizing the difference as a charge in the Consolidated Statements of Income If the impairment is partially or wholly due to a credit loss the Company will recognize the portion of the fair value adjustment due to credit loss in the Consolidated Statements of Income
Realized gains or losses on investments are determined based on the specific identification basis and are recognized in nonoperating income expense There were no material net realized gains or losses from the sales of available for sale investments during any of the fiscal periods presented
Inventories are valued at the lower of cost first in first out method or net realizable value The valuation of inventory requires the Company to estimate obsolete or excess inventory as well as inventory that is not of saleable quality The Company employs a variety of methodologies to determine the net realizable value of its inventory While a portion of the calculation to record inventory at its net realizable value is based on the age of the inventory and lower of cost or net realizable value calculations a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products If actual demand is less than the Company s estimates impairment charges which are recorded to cost of sales may need to be recorded in future periods Inventory in excess of saleable amounts is not valued and the remaining inventory is valued at the lower of cost or net realizable value
PP E is recorded at cost less allowances for depreciation and amortization The straight line method of depreciation is used for all classes of assets for financial statement purposes while both straight line and accelerated methods are used for income tax purposes Leasehold improvements are depreciated over the lesser of the term of the lease or the useful life of the asset Repairs and maintenance charges are expensed as incurred Depreciation is based on the following ranges of estimated useful lives
The Company reviews PP E for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable Recoverability of these assets is determined by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate over their remaining economic lives If such assets are considered to be impaired the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price if any or a value determined by utilizing a discounted cash flow technique If such assets are not impaired but their useful lives have decreased the remaining net book value is depreciated over the revised useful life
ASC 360 Depreciation is not recorded for assets that are classified as held for sale When an asset meets the held for sale criteria the lower of its carrying value or fair value less costs to sell is reclassified from the relevant PP E line items and into current assets on the balance sheet where it remains until it is either sold or it no longer meets the held for sale criteria If the assets held for sale were carried at fair value it would be considered a Level 3 fair value measurement and determined based on the use of appraisals and input from market participants
The Company determined its campus facility located in Milpitas California met the held for sale criteria specified in Accounting Standards Codification ASC 360 No write downs to fair value were required upon this determination as the fair value of the asset group less costs to sell was greater than the carrying value As of November 2 2024 prepaid expenses and other current assets includes the following assets held for sale
The Company evaluates goodwill for impairment annually as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable utilizing either the qualitative or quantitative method The Company tests goodwill for impairment at the reporting unit level which the Company has determined is consistent with its identified operating segments on an annual basis on the first day of the fourth quarter on or about August 4th or more frequently if indicators of impairment exist or the Company reorganizes its operating segments or reporting units
The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value When using the qualitative method the Company considers several factors including the following
the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment
changes in the Company s market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of its reporting units had significantly decreased and
whether there had been any significant increases to the weighted average cost of capital rates for each reporting unit which could materially lower the Company s prior valuation conclusions under a discounted cash flow approach
If the Company elects not to use this option or it determines that it is more likely than not that the fair value of a reporting unit is less than its net book value then the Company performs the quantitative goodwill impairment test The quantitative goodwill impairment test requires an entity to compare the fair value of a reporting unit with its carrying amount If fair value is determined to be less than carrying value an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting unit s fair value not to exceed the total amount of goodwill allocated to the reporting unit Additionally the Company considers income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss if applicable Management determines the fair values of the reporting units using a weighting of the income and market approaches Under the income approach it uses a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues gross profit margins operating income margins working capital cash flow perpetual growth rates and long term discount rates among others For the market approach it uses the guideline public company method Under this method management utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units to create valuation multiples that are applied to the operating performance of the reporting unit being tested in order to obtain its respective fair value In order to assess the reasonableness of the calculated values the aggregate fair values of the reporting units are reconciled to the Company s total market capitalization allowing for a reasonable control premium
During fiscal 2024 and fiscal 2023 the Company elected to use the qualitative method of assessing goodwill for all of its reporting units In all periods presented management concluded the reporting units fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed
The Company s next annual impairment assessment will be performed as of the first day of the fourth quarter of the fiscal year ending November 1 2025 fiscal 2025 unless indicators arise that would require the Company to reevaluate at an earlier date
The Company reviews finite lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable If required recoverability of these assets is determined by comparison of their carrying value to the estimated future undiscounted cash flows the assets are expected to generate over their remaining estimated useful lives If such assets are considered to be impaired the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their estimated fair value determined by either a quoted market price if any or a value determined by utilizing a discounted cash flow technique
Amortization expense related to intangible assets was 1 7 billion 2 0 billion and 2 0 billion in fiscal 2024 2023 and 2022 respectively and is recorded in cost of sales and amortization of intangibles on the Consolidated Statements of Income The remaining amortization expense will be recognized over the remaining weighted average life of approximately 3 7 years
Certain of the Company s subsidiaries have received grants from governmental agencies These grants include capital employment and research and development grants Capital grants for the acquisition of property plant and equipment are netted against the related capital expenditures and amortized as a credit to depreciation expense over the estimated useful life of the related asset Employment grants which relate to employee hiring and training and research and development grants are recognized in earnings in the period in which the related expenditures are incurred by the Company
In August 2022 the U S government enacted the CHIPS and Science Act of 2022 CHIPS Act which provides funding for manufacturing grants and research investments and establishes a 25 investment tax credit for certain investments in U S semiconductor manufacturing As of November 2 2024 the Company recorded 106 3 million and 174 5 million as offsets within current income taxes payable and in other assets respectively with a corresponding reduction to the carrying amounts of the qualifying manufacturing assets on the Consolidated Balance Sheet As of October 28 2023 the Company recognized 174 3 million in other assets with a corresponding reduction to these fixed asset carrying amounts
Generally the functional currency of the Company s foreign operations is the U S dollar In certain entities where that is not the case gains and losses resulting from translation of the foreign currencies into U S dollars are recorded in AOCI Transaction gains and losses and re measurement of foreign currency denominated assets and liabilities are included in income currently including those at the Company s principal foreign manufacturing operations where the functional currency is the U S dollar Foreign currency transaction gains or losses are included in other net in the Consolidated Statements of Income
The Company enters into forward foreign currency exchange contracts to offset certain operational and balance sheet exposures from the impact of changes in foreign currency exchange rates Such exposures result from the portion of the Company s operations assets and liabilities that are denominated in currencies other than the U S dollar primarily the Euro other significant exposures include the British Pound Philippine Peso Thai Baht Malaysian Ringgit and the Japanese Yen Derivative instruments are employed to eliminate or minimize certain foreign currency exposures that can be confidently identified and quantified These foreign currency exchange contracts are entered into to support transactions made in the normal course of business and accordingly are not speculative in nature The contracts are for periods consistent with the terms of the underlying transactions generally one year or less Hedges related to anticipated transactions are matched with the underlying exposures at inception and designated and documented as cash flow hedges They are qualitatively evaluated for effectiveness on a quarterly basis The gain or loss on the derivatives are reported as a component of AOCI in shareholders equity and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction in the same period during which the hedged transaction affects earnings
The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges as of November 2 2024 and October 28 2023 was 257 0 million and 322 6 million respectively The fair values of forward foreign currency derivative instruments designated as hedging instruments in the Company s Consolidated Balance Sheets as of November 2 2024 and October 28 2023 were as follows
Additionally the Company enters into forward foreign currency contracts that economically hedge the gains and losses generated by the re measurement of certain recorded assets and liabilities in a non functional currency Changes in the fair value of these undesignated hedges are recognized in other income expense immediately as an offset to the changes in the fair value of the asset or liability being hedged As of November 2 2024 and October 28 2023 the total notional amounts of undesignated hedges related to forward foreign currency exchange contracts were 176 8 million and 334 7 million respectively
All of the Company s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other As of November 2 2024 and October 28 2023 none of the netting arrangements involved collateral
The Company s current and future debt may be subject to interest rate risk The Company utilizes interest rate derivatives to alter interest rate exposure in an attempt to reduce the effects of changes in interest rates During fiscal 2023 the Company entered into interest rate swap transactions related to its outstanding 1 0 billion aggregate principal amount of 2 1 senior unsecured notes the 2031 Notes where the Company swapped the notional amount of its 1 0 billion of fixed rate debt at 2 1 into floating interest rate debt through April 1 2031 The fair value of the swaps at inception was zero and subsequent changes in the fair value of the interest rate swaps were reflected in the carrying value of the interest rate swaps on the balance sheet The carrying value of the debt on the balance sheet was adjusted by an equal and offsetting amount The interest rate swaps were designated and qualified as fair value hedges The Company does not consider the risk of counterparty default to be significant The gain or loss on the hedged item attributable to the hedged benchmark interest rate risk and the offsetting gain or loss on the related interest rate swaps were recorded as follows
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 November 2 2024 and October 28 2023 nonperformance is not perceived to be a material risk Furthermore none of the Company s derivatives are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company s credit ratings from any credit rating agency While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions they do not represent the amount of the Company s exposure to credit risk The amounts potentially subject to credit risk arising from the possible inability of counterparties to meet the terms of their contracts are generally limited to the amounts if any by which the counterparties obligations under the contracts exceed the obligations of the Company to the counterparties As a result of the above considerations the Company does not consider the risk of counterparty default to be significant
The Company records the fair value of its derivative financial instruments in its Consolidated Financial Statements in other current assets other assets accrued liabilities other non current liabilities and long term debt depending on their net position regardless of the purpose or intent for holding the derivative contract Changes in the fair value of cash flow hedges are recorded in AOCI and reclassified into earnings in the same line item on the Consolidated Statements of Income as the impact of the hedged transaction when the underlying contract matures Changes in the fair value of designated fair value hedges are recorded on the Consolidated Balance Sheets as a swap asset or an accrued liability with an offsetting increment decrement to the long term debt balance which is the underlying item being hedged Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur
For information on the unrealized holding gains losses on derivatives included in and reclassified out of AOCI into the Consolidated Statements of Income related to forward foreign currency exchange contracts see Note 2o
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 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
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 November 2 2024 and October 28 2023 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 November 2 2024 and October 28 2023 the Company held 1 4 billion and 642 1 million respectively of cash that was
3 The carrying value of the related debt was adjusted by an equal and offsetting amount The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives See Note 2i
2 The carrying value of the related debt was adjusted by an equal and offsetting amount The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives See Note 2i
The estimated fair value of forward foreign currency exchange contracts which includes derivatives that are accounted for as cash flow hedges and those that are not designated as cash flow hedges is based on the estimated amount the Company would receive if it sold these agreements at the reporting date taking into consideration current exchange rates as well as the creditworthiness of the counterparty for assets and the Company s creditworthiness for liabilities The fair value of these instruments is based upon valuation models using current market information such as strike price spot rate forward points and maturity date
As a result of a sublease transaction involving a leased property in Santa Clara California during fiscal 2022 the Company estimated the fair value of the sublease assets using discounted cash flows from the estimated net sublease rental income discounted at a market rate and recorded an impairment charge which represented the excess carrying value of the asset group associated with the Santa Clara California leased property over its estimated fair value These assets are considered a Level 2 fair value measurement See Note 5
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
The table below presents the estimated fair value of certain financial instruments not recorded at fair value on a recurring basis Given the short tenure of the Company s commercial paper notes the carrying value of the outstanding commercial paper notes approximates the fair values and therefore are excluded from the table below 547 7 million and 547 2 million as of November 2 2024 and October 28 2023 respectively The fair values of the senior unsecured notes are obtained from broker prices and are classified as Level 1 measurements according to the fair value hierarchy See Note 14
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period Such estimates relate to the useful lives of fixed assets and identified intangible assets allowances for doubtful accounts and customer returns the net realizable value of inventory potential reserves relating to litigation matters accrued liabilities including estimates of variable consideration related to distributor sales accrued taxes uncertain tax positions deferred tax valuation allowances assumptions pertaining to stock based compensation payments and defined benefit plans and fair value of acquired assets and liabilities including inventory property plant and equipment goodwill and acquired intangibles and other reserves Actual results could differ from those estimates and such differences may be material to the financial statements
The Company maintains cash cash equivalents and short term investments with high credit quality counterparties continuously monitors the amount of credit exposure to any one issuer and diversifies its investments in order to minimize its credit risk
The Company sells its products to distributors and original equipment manufacturers OEMs involved in a variety of industries including industrial communications automotive and consumer end markets The Company has adopted credit policies and standards to accommodate growth in these markets The Company performs continuing credit evaluations of its customers financial condition and although the Company generally does not require collateral the Company may require letters of credit from customers in certain circumstances The Company provides reserves for estimated amounts of accounts receivable that may not be collected
The semiconductor industry is characterized by rapid technological change competitive pricing pressures and cyclical market patterns The Company s financial results are affected by a wide variety of factors including general economic conditions worldwide economic conditions specific to the semiconductor industry the timely implementation of new manufacturing technologies the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors third party wafer fabricators and independent distributors In addition the semiconductor market has historically been cyclical and subject to significant economic downturns at various times The Company is exposed to the risk of obsolescence of its inventory depending on the mix of future business Additionally more than half of the Company s purchases of external wafer and foundry services are from a limited number of suppliers such as Taiwan Semiconductor Manufacturing Company TSMC and others If these suppliers or any of the Company s other key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components on the time schedule and of the quality that the Company requires the Company may be forced to engage additional or replacement suppliers which could result in significant expenses and disruptions or delays in manufacturing product development and shipment of product to the Company s customers
Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services The Company recognizes revenue when all of the following criteria are met 1 the Company has entered into a binding agreement 2 the performance obligations have been identified 3 the transaction price to the customer has been determined 4 the transaction price has been allocated to the performance obligations in the contract and 5 the performance obligations have been satisfied The majority of the Company s shipping terms permit the Company to recognize revenue at point of shipment or delivery Certain shipping terms require the goods to be through customs or be received by the customer before title passes In those instances the Company defers the revenue recognized until title and control of the promised goods have passed to the customer Shipping costs are charged to selling marketing general and administrative expense as incurred Sales taxes are excluded from revenue
Revenue from contracts with the United States government government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion These measures are used to measure results directly and is generally the best measure of progress toward completion in circumstances in which a reliable measure of output can be established Estimated revenue in excess of amounts billed is reported as unbilled receivables Contract accounting requires judgment in estimating costs and assumptions related to technical issues and delivery schedule Contract costs include material subcontract costs labor and an allocation of indirect costs The estimation of costs at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract Changes in contract performance estimated gross margin including the impact of final contract settlements and estimated losses are recognized in the period in which the changes or losses are determined
Substantially all of the Company s contracts with customers contain a single performance obligation the sale of mixed signal integrated circuit products Such sales represent a single performance obligation because the sale is one type of good or includes multiple goods that are neither capable of being distinct nor separable from the other promises in the contract This performance obligation is satisfied when control of the product is transferred to the customer which occurs upon shipment or delivery Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with an original expected duration of one year or less The Company generally offers a twelve month
warranty for its products The Company s warranty policy provides for replacement of defective products Specific accruals are recorded for known product warranty issues Product warranty expenses during fiscal 2024 fiscal 2023 and fiscal 2022 were not material
The transaction price reflects the Company s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period Variable consideration includes sales in which the amount of consideration that the Company will receive is unknown as of the end of a reporting period The vast majority of such consideration are credits issued to the distributor due to price protection but also include sales made to distributors under agreements that allow certain rights of return referred to as stock rotation Price protection represents price discounts granted to certain distributors to allow the distributor to earn an appropriate margin on sales negotiated with certain customers and in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor Stock rotation allows distributors limited levels of returns in order to reduce the amounts of slow moving discontinued or obsolete product from their inventory A liability for distributor credits covering variable consideration is made based on the Company s estimate of historical experience rates as well as considering economic conditions and contractual terms To date actual distributor claims activity has been materially consistent with the provisions the Company has made based on its historical estimates For fiscal 2024 and fiscal 2023 sales to distributors were approximately 5 5 billion and 7 5 billion respectively net of variable consideration for which the liability balances as of November 2 2024 and October 28 2023 were 508 7 million and 525 4 million respectively and were recorded in accrued liabilities on the Consolidated Balance Sheets
Accounts receivable represents the Company s unconditional right to receive consideration from its customers Payments are typically due within 30 to 45 days of invoicing and do not include a significant financing component To date there have been no material credit losses on accounts receivable There were no material contract assets or contract liabilities recorded on the Consolidated Balance Sheets in any of the periods presented
AOCI includes certain transactions that have generally been reported in the Consolidated Statement of Shareholders Equity The changes in components of AOCI at November 2 2024 and October 28 2023 consisted of the following
The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes These estimates and judgments occur in the calculation of income tax credits benefits and deductions and in the calculation of certain tax assets and liabilities which arise from differences in the timing of the recognition of certain expenses for tax and financial statement purposes The likelihood of the realization of deferred tax assets is assessed and a corresponding valuation allowance is recorded as necessary if management determines those deferred tax assets may not be realized due to the uncertainty of the timing and amount to be realized of certain state and international tax credit carryovers In reaching this conclusion the Company evaluates certain relevant criteria including the existence of deferred tax liabilities that can be used to realize deferred tax assets the taxable income in prior carryback years in the impacted state and international jurisdictions that can be used to absorb net operating losses and taxable income in future years Judgments regarding future profitability may change due to future market conditions changes in U S or international tax laws and other factors These changes if any may require material adjustments to these deferred tax assets which may result in an increase or decrease to the income tax provision in future periods
The Company accounts for uncertain tax positions by first determining if it is more likely than not that a tax position will be sustained by the appropriate taxing authorities prior to recording any benefit in the Consolidated Financial Statements An uncertain income tax position is not recognized if it has less than a 50 likelihood of being sustained For those tax positions where it is more likely than not that a tax position will be sustained the Company has recorded the largest amount of tax benefit with a greater than 50 likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information For those income tax positions where it is not more likely than not that a tax benefit will be sustained no tax benefit has been recognized in the financial statements Management classifies interest and penalties related to uncertain tax positions within the provision for income taxes line of the Consolidated Statements of Income Management reevaluates these uncertain tax positions on a quarterly basis This evaluation is based on factors including but not limited to changes in known facts or circumstances changes in tax law effectively settled issues under audit and new guidance on legislative interpretations A change in these factors could result in the recognition of an increase or decrease to the Company s income tax provision which could materially impact its consolidated financial position and results of operations
In the ordinary course of global business there are many transactions and calculations where the ultimate tax outcome is uncertain Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities Although the Company believes its estimates are reasonable no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in the historical income tax provisions and income tax liabilities In the event management s assumptions are incorrect the differences could have a material impact on its income tax provision and operating results in the period in which such determination is made In addition to the factors described above the current and expected effective tax rate is based on then current tax law Significant changes in enacted tax law could affect these
Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method In calculating diluted earnings per share the dilutive effect of stock options and restricted stock units is computed using the average market price for the respective period In addition the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in the money and restricted stock units This results in the assumed buyback of additional shares thereby reducing the dilutive impact of in the money stock options Potential shares related to certain of the Company s outstanding stock options and restricted stock units were excluded because they were anti dilutive Those potential shares determined based on the weighted average exercise prices during the respective periods could be dilutive in the future
Stock based compensation is measured at the grant date based on the grant date fair value of the awards ultimately expected to vest and is recognized as an expense on a straight line basis over the vesting period which is generally four years for stock options and restricted stock units or in annual installments of 25 on each of the first second third and fourth anniversaries of the date of grant Restricted stock units with service and performance or market conditions generally vest in one installment on the third anniversary of the date of grant For grants issued prior to fiscal 2018 the vesting period was generally five years for stock options or in annual installments of 20 on each of the first second third fourth and fifth anniversaries of the date of grant and in one installment on the third anniversary of the date of grant for restricted stock units awards The maximum contractual term of all stock options is ten years
Determining the amount of stock based compensation expense to be recorded requires the Company to develop estimates used in calculating the grant date fair value of awards These estimates may be based on different valuation models depending upon the type of award and may include assumptions such as expected volatility expected term risk free interest rate expected dividend yield forfeiture rate and others The Company uses the Black Scholes valuation model to calculate the grant date fair value of stock option awards The grant date fair value of restricted stock units with a service condition and restricted stock units with both service and performance conditions is calculated using the value of the Company s common stock on the date of grant reduced by the present value of dividends expected to be paid on the Company s common stock prior to vesting For restricted stock units with both service and performance conditions this grant date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock based compensation expense at each reporting period based on the probability of achievement of that performance condition If the Company determines that an award is unlikely to vest any previously recorded stock based compensation expense is reversed in the period of that determination The grant date fair value of restricted stock units and performance based stock options with both service and market conditions is calculated using the Monte Carlo simulation model to estimate the probability of
The fair value of shares issued under the Company s employee stock purchase plan ESPP is computed using the Black Scholes model at the commencement of an offering period in June and December of each year and the related expense is recorded over the offering period
Under this guidance ASC 805 20 30 28 the acquirer should determine what contract assets and or contract liabilities it would have recorded under ASC 606 the revenue guidance as of the acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date ASU 2021 08 is effective for fiscal years beginning after December 15 2022 including interim periods within those fiscal years The Company adopted ASU 2021 08 in the first quarter of fiscal 2024 Upon adoption ASU 2021 08 did not have a material impact on the Company s financial position and results of operations
which enhances the disclosure requirements for reportable segments ASU 2023 07 requires segment disclosure to include significant segment expense categories and amounts and qualitative detail of other segment items Disclosure of multiple measures of segment profit and loss may also be reported ASU 2023 07 is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 with early adoption permitted The Company is currently evaluating the impact if any adoption will have on its financial position and results of operations
ASU 2023 09 requires the disaggregation of information in existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid ASU 2023 09 is effective for fiscal years beginning after December 15 2024 with early adoption permitted The Company is currently evaluating the impact if any adoption will have on its financial position and results of operations
requiring public companies to disaggregate key expense categories such as inventory purchases employee compensation and depreciation in their financial statements This aims to improve investor insights into company performance ASU 2024 03 is effective for fiscal years beginning after December 15 2024 and interim periods within fiscal years beginning after December 15 2025 with early adoption permitted The Company is currently evaluating the impact if any adoption will have on its financial position and results of operations
The Company grants or has granted stock options and other stock and stock based awards under the Company s 2020 Equity Incentive Plan 2020 Plan which was approved by shareholders in March 2020 The 2020 Plan provides for the issuance of up to 21 2 million shares of the Company s common stock which includes shares that remained available or became available under the Company s previous equity compensation plans including the Amended and Restated 2006 Stock
Incentive Plan and the Amended and Restated 2010 Equity Incentive Plan The 2020 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986 as amended non statutory stock options stock appreciation rights restricted stock restricted stock units and other stock based awards Employees officers directors consultants and advisors of the Company and its subsidiaries are eligible to be granted awards under the 2020 Plan No award may be made under the 2020 Plan after March 11 2030 but awards previously granted may extend beyond that date The Company does not intend to grant further equity awards under any previous legacy equity compensation plans Additionally in connection with the Acquisition the Company assumed the Maxim 1996 Stock Incentive Plan 1996 Plan which expired by its terms in July 2024 As of November 2 2024 a total of 13 5 million shares of the Company s common stock were available for future issuance under the 2020 Plan
The Company has from time to time modified the terms of its equity awards to employees and directors The modifications made to the Company s equity awards in fiscal 2024 fiscal 2023 and fiscal 2022 did not result in significant incremental compensation costs either individually or in the aggregate
The Company offers an ESPP to eligible employees providing the opportunity to purchase shares of the Company s common stock at a discount through payroll deductions Offering periods begin in June and December each year U S employees are allowed to purchase the Company s common stock at the lesser of 85 of the fair market value of the common stock at either the beginning or end of the offering period Eligible employees outside of the U S are allowed to purchase the Company s common stock at the lesser of 80 of the fair market value of the common stock at either the beginning or end of the offering period As of November 2 2024 a total of 4 1 million shares of the Company s common stock were available for future grant under the ESPP
The amount of stock based compensation expense recognized during a period is based on the value of the awards that are ultimately expected to vest Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates The term forfeitures is distinct from cancellations or expirations and represents only the unvested portion of the surrendered stock based award Based on an analysis of its historical forfeitures the Company has applied an annual forfeiture rate of 5 0 to all unvested stock based awards as of November 2 2024 This analysis will be re evaluated annually and the forfeiture rate will be adjusted as necessary Ultimately the actual expense recognized over the vesting period will only be for those awards that vest
In addition to the vested options the Company expects a portion of the unvested options to vest at some point in the future The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options
The total intrinsic value of options exercised i e the difference between the market price at exercise and the price paid by the employee to exercise the options during fiscal 2024 fiscal 2023 and fiscal 2022 was
As of November 2 2024 there was 607 8 million of total unrecognized compensation cost related to unvested stock based awards comprised of stock options restricted stock awards and restricted stock unit awards That cost is expected to be recognized over a weighted average period of 1 5 years The total grant date fair value of awards that vested during fiscal 2024 fiscal 2023 and fiscal 2022 was approximately 309 0 million 298 2 million and 283 0 million respectively
In fiscal 2021 the Company entered into accelerated share repurchase agreements ASR with third party financial institutions paid 2 5 billion and received an initial delivery of 12 3 million shares of common stock which represented approximately 80 of the notional amount of the ASR As of October 30 2021 the Company recorded the remaining 20 or 500 0 million within Prepaid expenses and other current assets on the Consolidated Balance Sheets which was utilized during the first quarter of fiscal 2022 During the first quarter of fiscal 2022 the ASR was completed and an additional 2 1 million shares of common stock were received by the Company as final settlement of the ASR In total the Company repurchased 14 4 million shares of common stock under the ASR at an average price per share of 173 77
The Company s share repurchase program has been in place since August 2004 In the aggregate the Board of Directors has authorized the Company to repurchase 16 7 billion of the Company s common stock under the program which includes the 8 5 billion authorization approved by the Board of Directors on August 25 2021 The Company may repurchase outstanding shares of its common stock from time to time in the open market and through privately negotiated transactions Unless terminated earlier by resolution of the Company s Board of Directors the repurchase program will expire when the Company has repurchased all shares authorized under the program As of November 2 2024 the Company had repurchased a total of approximately 207 7 million shares of its common stock for approximately 15 0 billion under this program An additional 1 7 billion remains available for repurchase of shares under the current authorized program The repurchased shares are held as authorized but unissued shares of common stock
The Company also from time to time repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units awards or the exercise of stock options The withholding amount is based on the employee s minimum statutory withholding requirement
The Company has 471 934 authorized shares of 1 00 par value preferred stock none of which is issued or outstanding The Board of Directors is authorized to fix designations relative rights preferences and limitations on the preferred stock at the time of issuance
The Company operates and tracks its results in one reportable segment based on the aggregation of its operating segments The Company designs develops manufactures and markets a broad range of integrated circuits ICs The Chief Executive Officer has been identified as the Company s Chief Operating Decision Maker The Company has determined that all of the Company s operating segments share the following similar economic characteristics and therefore meet the criteria established for operating segments to be aggregated into one reportable segment namely
The ICs sold by each of the Company s operating segments are manufactured using similar semiconductor manufacturing processes and raw materials in either the Company s own production facilities or by third party wafer fabricators using proprietary processes
The ICs marketed by each of the Company s operating segments are sold globally through a direct sales force third party distributors independent sales representatives and via the Company s website to the same types of customers
All of the Company s operating segments share a similar long term financial model as they have similar economic characteristics The causes for variation in operating and financial performance are the same among the Company s operating segments and include factors such as i life cycle and price and cost fluctuations ii number of competitors iii product differentiation and iv size of market opportunity Additionally each operating segment is subject to the overall cyclical nature of the semiconductor industry Lastly the number and composition of employees and the amounts and types of tools and materials required for production of products are proportionally similar for each operating segment
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
The following tables summarize revenue by sales channel The Company sells its products globally through a direct sales force third party distributors independent sales representatives and via its website Distributors are customers that buy
products with the intention of reselling them Direct customers are non distributor customers and consist primarily of original equipment manufacturers OEMs Other customers include the U S government government prime contractors and certain commercial customers for which revenue is recorded over time
Geographic revenue information for fiscal 2024 fiscal 2023 and fiscal 2022 reflects the geographic location of the distributors or OEMs who purchased the Company s products This may differ from the geographic location of the end customers particularly in cases where a third party contract manufacturer purchases the Company s products through distributors In all periods presented the predominant regions comprising Rest of North and South America are Canada and Mexico the predominant regions comprising Europe are Germany Sweden Israel and the Netherlands and the predominant regions comprising Rest of Asia are Taiwan Malaysia South Korea and Singapore
The Company monitors global macroeconomic conditions on an ongoing basis and continues to assess opportunities for improved operational effectiveness and efficiency as well as a better alignment of expenses with revenues As a result of these assessments the Company has undertaken various actions resulting in special charges over the past several years
The Company recorded net special charges of 155 9 million on a cumulative basis through November 2 2024 related to the Q4 2023 Plan In fiscal 2023 the Company committed to a plan to reorganize its business the Q4 2023 Plan The Q4 2023 Plan consisting of voluntary and involuntary reductions in force and other cost savings initiatives was commenced to adjust the Company s cost structure and business activities to better align with weaker market demand and continued economic uncertainty in its end markets as well as to make certain strategic shifts in its workforce necessary to achieve its long term vision The reductions in force impacted positions in manufacturing engineering and selling marketing general and administrative functions
The Company recorded net special charges of 527 6 million on a cumulative basis through November 2 2024 as part of the integration of the Acquisition and continued organizational initiatives to consolidate its global footprint related to certain manufacturing engineering sales marketing and administrative offices and to better align its global workforce with the Company s long term strategic plan The special charges include severance and fringe benefit costs in accordance with the Company s ongoing benefit plan or statutory requirements at foreign locations and the write off of acquired intellectual property due to the Company s decision to discontinue certain product development strategies
In connection with the Company s decision during fiscal 2022 to transition its engineering sales marketing and administrative activities from its leased property in Santa Clara California to its owned property in San Jose California the Company entered into a sublease agreement for a portion of the leased property and intends to sublease the remainder of this property As a result of the sublease transaction the Company recorded an impairment charge of 91 9 million in net special charges which represented the excess carrying value of the associated asset group over its estimated fair value The Company estimated fair value using cash flows from the estimated net sublease rental income discounted at a market rate The Company allocated 60 6 million 28 1 million and 3 2 million of the impairment charge to right of use assets leasehold improvements and office equipment respectively
On the Acquisition Date the Company completed its acquisition of all of the voting interests of Maxim an independent manufacturer of innovative analog and mixed signal products and technologies Under the terms of the agreement pursuant to which the Company acquired Maxim Maxim stockholders received for each outstanding share of Maxim common stock
0 6300 of a share of the Company s common stock at the closing The results of operations of Maxim from the Acquisition Date are included in the Company s Consolidated Financial Statements for the year ended October 30 2021
Other investments consist of interests in venture capital funds and other long term investments and are recorded in Other assets on the Consolidated Balance Sheets Investments are accounted for using the equity method of accounting or cost less any impairment plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer For equity method investments realized gains and losses are reflected in other net based upon the Company s ownership share of the investee s financial results
The Company enters into operating leases which primarily relate to certain facilities and to a lesser extent finance leases Finance leases were not a material component of the Company s lease portfolio in the periods presented The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement Lease assets represent the Company s right to use underlying assets for the lease term and lease liabilities represent the obligation to make lease payments over the lease term At lease commencement leases are evaluated for classification and assets and liabilities are recognized based on the present value of lease payments over the lease term The interest rate implicit in lease contracts is typically not readily determinable As such the Company utilizes the appropriate incremental borrowing rate which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment Certain adjustments to the right of use asset may be required for items such as initial direct costs paid or incentives received such as construction allowances from landlords and or rent abatements subsequent to taking possession of the leased property The Company has agreements with lease and non lease components which are accounted for as a single lease component Non lease components may include real estate taxes insurance maintenance parking and other operating costs If these costs are variable costs they are not included in the measurement of the right of use assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs The Company s leases have remaining lease terms of less than one year to approximately twenty one years some of which may include options to extend the initial term of the lease These options are included in determining the initial lease term at lease commencement only if the Company is reasonably certain to exercise the option Lease costs are recognized on a straight line basis as lease expense over the lease term For leases with terms of twelve months or less the Company recognizes the related lease payments as expense either on a straight line basis over the lease term or as incurred depending on whether the lease payments are fixed or variable The Company subleases certain properties that are not used in its core business operations See Note 5
From time to time in the ordinary course of the Company s business The Company is involved in various claims charges and litigation arising from or related to among other things contractual matters acquisitions patents trademarks personal injury environmental matters product liability insurance coverage employment or employment benefits As to such claims and litigation the Company can give no assurance that it will prevail
The Company maintains a defined contribution plan for the benefit of its eligible U S employees This plan provides for Company contributions of up to 5 of each participant s total eligible compensation In addition the Company contributes an amount equal to each participant s pre tax contribution if any up to a maximum of 3 of each participant s total eligible compensation The total expense related to the defined contribution plans for all eligible U S employees was 74 3 million in fiscal 2024 76 0 million in fiscal 2023 and 65 2 million in fiscal 2022
The Deferred Compensation Plan DCP allows certain members of management and other highly compensated employees and non employee directors to defer receipt of all or any portion of their compensation The DCP was established to provide participants with the opportunity to defer receiving all or a portion of their compensation which includes salary bonus commissions and director fees Under the DCP the Company provides all participants other than non employee directors with Company contributions equal to 8 of eligible deferred contributions The DCP is a non qualified plan that is maintained in a rabbi trust The fair value of the investments held in the rabbi trust are included within other investments with the current portion of the investment included in prepaid expenses and other current assets in the Consolidated Balance Sheets See Note 2j
of the Notes to Consolidated Financial Statements for further information on these investments The deferred compensation obligation represents DCP participant accumulated deferrals and earnings thereon since the inception of the DCP net of withdrawals The deferred compensation obligation is included within other non current liabilities with the current portion of the obligation in accrued liabilities in the Consolidated Balance Sheets The Company s liability under the DCP is an unsecured general obligation of the Company
The Company also has various defined benefit pension and other retirement plans for certain non U S employees that are consistent with local statutory requirements and practices The total expense related to these plans was 56 9 million in fiscal 2024 55 3 million in fiscal 2023 and 51 4 million in fiscal 2022
The Company s funding policy for its foreign defined benefit pension plans is consistent with the local requirements of each country The plans assets consist primarily of U S and non U S equity securities bonds property and cash The Company has elected to measure defined benefit plan assets and obligations as of October 31 which is the month end that is closest to its fiscal year ends which were November 2 2024 for fiscal 2024 and October 28 2023 for fiscal 2023
As a result of the Acquisition the Company acquired a postretirement plan that provides postretirement medical expenses to certain former employees of a Maxim acquired company and certain former Maxim executives in the U S
The service cost component of net periodic benefit cost above is recorded in Cost of sales Research and development Selling marketing general and administrative expenses within the Consolidated Statements of Income while the remaining components are recorded to Other net
Information relating to the Company s pension and postretirement benefit plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets at November 2 2024 and October 28 2023 is presented in the following table
The range of assumptions used for the Company s pension and postretirement benefit plans reflects the different economic environments within the various countries as well as the differences in the attributes of the participants
The expected long term rate of return on assets is a weighted average of the long term rates of return selected for the various countries where the Company has funded pension plans The expected long term rate of return on assets assumption is selected based on the facts and circumstances that exist as of the measurement date and the specific portfolio mix of plan assets Management in conjunction with its actuaries reviewed anticipated future long term performance of individual asset categories and considered the asset allocation strategy adopted by the Company and or the trustees of the plans While the review considered recent fund performance and historical returns the assumption is primarily a long term prospective rate
The Company s investment strategy is based on an expectation that equity securities will outperform debt securities over the long term Investments within each asset class are diversified to reduce the impact of losses in single investments The use of derivative instruments is permitted where appropriate and necessary to achieve overall investment policy objectives and asset class targets The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for each significant asset class to obtain a prudent balance between return and risk The interaction between plan assets and benefit obligations is periodically studied by the Company and its actuaries to assist in the establishment of strategic asset allocation targets
The following table presents plan assets measured at fair value on a recurring basis by investment categories as of November 2 2024 and October 28 2023 using the same three level hierarchy described in Note 2j
The majority of the assets in these categories are invested in a mix of equities including those from North America Europe and Asia The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund Due to the nature of the underlying assets of these funds changes in market conditions and the economic environment may significantly impact the net asset value of these investments and consequently the fair value of the investments These investments are redeemable at net asset value to the extent provided in the documentation governing the investments However these redemption rights may be restricted in accordance with governing documents Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded
Consists of funds primarily concentrated in non U S debt instruments The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund
Consists of funds that primarily invest in global real estate and infrastructure funds The funds are valued using the net asset value method in which an average of the market prices for underlying investments is used to value the fund
Consists of liability driven investment funds that may hold a range of low risk hedging instruments including but not limited to government bonds interest rate and inflation swaps physical inflation linked and nominal gilts synthetic gilts cash and money market instruments The investment funds are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings
The Company s effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where the Company s income is earned The reconciliation of income tax computed at the U S federal statutory rates to income tax expense for fiscal 2024 fiscal 2023 and fiscal 2022 is as follows
The Company s effective tax rate for fiscal 2023 was impacted by a discrete income tax benefit recorded of 81 7 million resulting from the approval granted by the Joint Committee on Taxation of its federal corporate income tax relief claim which reduced the amount of transition tax owed under the Tax Cuts and Jobs Act
U S tax legislation subjects a U S shareholder to tax on global intangible low taxed income GILTI Under U S GAAP an accounting policy election can be made to either treat taxes due on the GILTI inclusion as a current period expense or to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years The Company elected the deferral method and recorded the corresponding GILTI deferred tax assets and liabilities on its Consolidated Balance Sheets
The Company carries other outside basis differences in its subsidiaries primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested As of November 2 2024 the Company has not recognized deferred income tax on 33 6 billion of outside basis differences because of its intent and ability to indefinitely reinvest these basis differences These basis differences could be reversed through a sale of the subsidiaries or the receipt of dividends from the subsidiaries as well as various other events none of which are considered probable at this time Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable
The valuation allowances of 343 1 million and 332 5 million as of November 2 2024 and October 28 2023 respectively are primarily for the Company s state R D credit carryforwards foreign net operating losses and international credit carryforwards The Company believes that it is more likely than not that these credit carryovers will not be realized and as a result has recorded a partial valuation allowance
The federal and state net operating losses of 89 1 million will begin to expire in fiscal 2035 while foreign net operating loss carryovers of 145 5 million have no expiration date There are also 304 8 million of federal and state credit carryovers and 13 7 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending October 31 2026
As of November 2 2024 and October 28 2023 the Company had unrealized tax benefits net of indirect tax benefits of 162 7 million and 187 4 million respectively which if settled in the Company s favor would lower the Company s effective tax rate in the period recorded Liabilities for unrealized tax benefits are primarily classified as non current because the Company believes that the ultimate payment or settlement of these liabilities will not occur within the next twelve months As of November 2 2024 and October 28 2023 the Company had liabilities of approximately 73 7 million and 70 7 million respectively for interest and penalties which is included within the provision for income taxes in the Consolidated Statements of Income
In fiscal 2024 the Company continued to engage in discussions with tax authorities regarding tax matters in various jurisdictions It is reasonably possible that the balance of unrealized tax benefits including accrued interest and penalties could decrease by up to 140 0 million within the next twelve months due to the completion of federal tax audits including any administrative appeals The 140 0 million primarily relates to matters involving federal taxation of international income and cross border transactions
The Company has numerous audits ongoing at any time throughout the world including an IRS income tax audit for the fiscal years ended October 30 2021 fiscal 2021 November 2 2019 fiscal 2019 and November 3 2018 fiscal 2018 a pre Acquisition IRS income tax audit for Maxim s fiscal years ended June 27 2015 through August 26 2021 and various U S state and local tax audits and international audits including an Irish corporate tax audit for fiscal 2019 The Company s U S federal tax returns prior to fiscal 2018 are no longer subject to examination except for the applicable Maxim pre Acquisition fiscal years noted above
On June 23 2021 the Company entered into a Third Amended and Restated Credit Agreement with Bank of America N A as administrative agent and the other banks identified therein as lenders which was subsequently amended on December 20 2022 and July 24 2023 as amended the Revolving Credit Agreement The Revolving Credit Agreement provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed 2 5 billion subject to certain terms and conditions
In the first quarter of fiscal 2023 the Company amended the Revolving Credit Agreement replacing the LIBOR interest rate provisions with interest rate provisions based on a forward looking term rate based on the Secured Overnight Financing Rate SOFR plus a 10 basis point credit spread adjustment After the amendment revolving loans under the Revolving Credit Agreement can be Term SOFR Loans or Base Rate Loans each as defined in the Revolving Credit Agreement at the Company s option Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable adjusted term SOFR plus a margin based on the Company s Debt Ratings as defined in the Revolving Credit Agreement from time to time of between 0 690 and 1 175 As of November 2 2024 the Company had no outstanding borrowings under this revolving credit facility but may borrow in the future and use the proceeds for repayment of existing indebtedness stock repurchases acquisitions capital expenditures working capital and other lawful corporate purposes
In addition the Company has agreed to pay a facility fee based on the Company s Debt Ratings from time to time of between 0 060 and 0 200 multiplied by the actual daily amount of the Commitments as defined in the Revolving Credit Agreement in effect The Revolving Credit Agreement also contains a sustainability linked pricing component which provides for interest rate and facility fee reductions or increases based on the Company meeting or missing targets related to environmental sustainability specifically greenhouse gas emissions and renewable energy usage For calendar year 2023 the Company exceeded the target thresholds for greenhouse gas emission and renewable energy usage which resulted in immaterial adjustments to administrative and interest fees due under the facility The Revolving Credit Agreement includes a multicurrency
The Revolving Credit Agreement contains customary representations and warranties and affirmative and negative covenants and events of default applicable to the Company and its subsidiaries As of November 2 2024 the Company was in compliance with these covenants
On December 14 2015 the Company issued 850 0 million aggregate principal amount of 3 9 senior unsecured notes due December 15 2025 the December 2025 Notes and 400 0 million aggregate principal amount of 5 3 senior unsecured notes due December 15 2045 the 2045 Notes with semi annual fixed interest payments due on June 15 and December 15 of each year commencing June 15 2016 The net proceeds of the offering were 1 2 billion after discounts and issuance costs Debt discounts and issuance costs will be amortized through interest expense over the term of the 2045 Notes The 2045 Notes are subordinated to any future secured debt and to the other liabilities of the Company s subsidiaries The 2045 Notes were issued pursuant to a base indenture the ADI Base Indenture between the Company and The Bank of New York Mellon Trust Company as trustee as supplemented by a supplemental indenture which contain certain covenants events of default and other customary provisions The covenants applicable to the 2045 Notes limit the Company s ability to incur create assume or guarantee any debt secured by a lien upon a principal property enter into sale and lease back transactions with respect to a principal property and consolidate with or merge into or transfer or lease all or substantially all of its assets to any other party As of November 2 2024 the Company was in compliance with these covenants
On December 5 2016 the Company issued 400 0 million aggregate principal amount of 2 5 senior unsecured notes due December 5 2021 the 2021 Notes 550 0 million aggregate principal amount of 3 125 senior unsecured notes due December 5 2023 the December 2023 Notes 900 0 million aggregate principal amount of 3 5 senior unsecured notes due December 5 2026 the 2026 Notes and 250 0 million aggregate principal amount of 4 5 senior unsecured notes due December 5 2036 the 2036 Notes with semi annual fixed interest payments due on June 5 and December 5 of each year commencing June 5 2017 The net proceeds of the offering were 2 1 billion after discounts and issuance costs On October 5 2021 i 71 2 million or 17 80 of the 400 0 million aggregate principal amount of the 2021 Notes at a price of 1 001 77 for each 1 000 principal amount of 2021 Notes ii 282 7 million or 51 41 of the 550 0 million aggregate principal amount of the December 2023 Notes at a price of
were tendered for redemption On October 20 2021 the remaining 2021 Notes and December 2023 Notes were redeemed for cash at a redemption price equal to 1 000 98 for each 1 000 principal amount of 2021 Notes and 1 050 17 for each 1 000 principal amount of December 2023 Notes Debt discounts and issuance costs will be amortized through interest expense over the term of the respective notes The 2026 Notes and 2036 Notes rank without preference or priority among themselves and equally in right of payment with all other existing and future senior unsecured debt and senior in right of payment to all of the Company s future subordinated debt The 2026 Notes and 2036 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
On April 8 2020 in an underwritten public offering of green bonds the Company issued 400 0 million aggregate principal amount of 2 95 senior unsecured notes due April 1 2025 the April 2025 Notes with semi annual fixed interest payments due on April 1 and October 1 of each year commencing on October 1 2020 The Company used the net proceeds of 395 6 million from the green bond offering to finance or refinance new and existing eligible projects involving renewable energy green buildings and eco efficient products production technologies and processes Debt discounts and underwriting fees will be amortized through interest expense over the term of the April 2025 Notes At any time prior to March 1 2025 the Company may at its option redeem some or all of the April 2025 Notes at a redemption price equal to the greater of 100 of the principal amount of the April 2025 Notes being redeemed and the make whole premium plus accrued and unpaid interest on the April 2025 Notes being redeemed if any to but excluding the date of redemption The April 2025 Notes are unsecured and rank equally in right of payment with all of the Company s other existing and future unsecured senior indebtedness The April 2025 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
In conjunction with the Acquisition 500 0 million aggregate principal amount of Maxim s 3 375 senior unsecured and unsubordinated notes due March 15 2023 the Maxim 2023 Notes and 500 0 million aggregate principal amount of Maxim s 3 45 senior unsecured and unsubordinated notes due June 15 2027 the Maxim 2027 Notes were recognized by the Company at fair value as of the Acquisition Date In November 2021 fiscal 2022 the Maxim 2023 Notes were redeemed for cash
On October 5 2021 in an underwritten public offering the Company issued 500 0 million aggregate principal amount of floating rate senior notes due October 1 2024 the Floating Rate Notes 750 0 million aggregate principal amount of 1 7 sustainability linked senior notes due October 1 2028 the Sustainability Linked Senior Notes 1 0 billion aggregate principal amount of 2 1 senior notes due October 1 2031 the 2031 Notes 750 0 million aggregate principal amount of 2 8 senior notes due October 1 2041 the 2041 Notes and 1 0 billion aggregate principal amount of 2 95 senior notes due October 1 2051 the 2051 Notes and together with the Floating Rate Notes the Sustainability Linked Senior Notes the 2031 Notes and the 2041 Notes the Notes The Floating Rate Notes bore interest at a floating annual rate equal to a benchmark rate which initially is Compounded SOFR as defined in the supplemental indenture governing such notes plus 25 basis points On October 1 2024 the Floating Rate Notes were paid in full at maturity The Sustainability Linked Senior Notes initially bear interest at a rate of 1 7 per annum and are subject to an increase of an additional 30 basis points from April 1 2026 to the maturity date unless the Sustainability Performance Target as defined in the Sustainability Linked Senior Notes has been satisfied Semi annual fixed interest payments on the Sustainability Linked Senior Notes the 2031 Notes the 2041 Notes and the 2051 Notes are due on April 1 and October 1 of each year beginning on April 1 2022
At any time prior to August 1 2028 in the case of the Sustainability Linked Senior Notes July 1 2031 in the case of the 2031 Notes April 1 2041 in the case of the 2041 Notes and April 1 2051 in the case of the 2051 Notes each a Par Call Date the Company may at its option redeem some or all of the applicable series of Notes at a redemption price equal to the greater of i 100 of the principal amount of such series of Notes being redeemed and ii the make whole redemption price as described in the supplemental indenture governing such notes On and after the applicable Par Call Date the Company may at its option redeem some or all of the applicable series of Notes at a redemption price equal to 100 of the principal amount of the Notes being redeemed In each case the Company will also pay the accrued and unpaid interest on the Notes being redeemed to but excluding the date of redemption The Notes are unsecured and rank equally in right of payment with all of the Company s other existing and future unsecured senior indebtedness Debt discounts and issuance costs will be amortized through interest expense over the term of the respective Notes The Notes were issued pursuant to an indenture as supplemented by a supplemental indenture and the indenture and supplemental indenture contain certain covenants events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
On September 15 2022 in an underwritten public offering the Company issued 300 0 million aggregate principal amount of 4 250 senior notes due October 1 2032 the 2032 Notes with semi annual fixed interest payments due on April 1 and October 1 of each year commencing April 1 2023 The net proceeds of the offering were 296 1 million after discounts and issuance costs Prior to July 1 2032 three months prior to the maturity date the Company may at its option redeem the 2032 Notes in whole or in part at any time and from time to time at a redemption price equal to the greater of 1 a the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date assuming the notes matured on July 1 2032 on a semi annual basis at the Treasury Rate plus 20 basis points less b interest accrued to the date of redemption and 2 100 of the principal amount of the notes to be redeemed plus in either case accrued and unpaid interest thereon to the redemption date On or after July 1 2032 the Company may at its option redeem the 2032 Notes in whole or in part at any time and from time to time at a redemption price equal to 100 of the principal amount of the 2032 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date The 2032 Notes are unsecured and rank equally in right of payment with all of the Company s other existing and future unsecured senior indebtedness The 2032 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
On October 7 2022 the Company completed an offer to exchange any and all outstanding Maxim 2027 Notes for new 3 450 Senior Notes due June 15 2027 to be issued by the Company the Unregistered 2027 Notes and cash Pursuant to the exchange offer 440 2 million aggregate principal amount of the Maxim 2027 Notes were tendered and subsequently accepted for exchange and the Company retired and canceled all Maxim 2027 Notes accepted for exchange In exchange for the tendered Maxim 2027 Notes the Company issued approximately 440 2 million aggregate principal amount of Unregistered 2027 Notes pursuant to a private exchange offer exempt from or not subject to registration under the Securities Act of 1933 as amended the Securities Act and 0 5 million in cash Following settlement of the exchange offer 59 8 million aggregate principal amount of the Maxim 2027 Notes remained outstanding The Unregistered 2027 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain certain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions The Unregistered 2027 Notes bear interest at a rate of 3 450 per annum with semi annual fixed interest payments due on June 15 and December 15 of each year commencing on December 15 2022 and will mature on June 15 2027 On April 26 2023 the Company redeemed for cash the 59 8 million aggregate principal amount of Maxim 2027 Notes that remained outstanding at a redemption price equal to 1 012 55 for each 1 000 principal of the Maxim 2027 Notes and included accrued interest On September 19 2023 the Company completed a registered exchange offer in which the Company exchanged the Unregistered 2027 Notes for a like principal amount of new notes registered under the Securities Act with the same interest rates and maturity dates as the Unregistered 2027 Notes the 2027 Notes As of October 28 2023 the Company was in compliance with the covenants contained in the indenture and supplemental indenture governing the 2027 Notes
On April 14 2023 the Company established a commercial paper program under which the Company may issue short term unsecured commercial paper notes CP 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 The CP Notes will be sold under customary market terms in the U S commercial paper market at a discount from par or at par and bear interest at rates determined at the time of issuance The net proceeds of the CP Notes are used for general corporate purposes including without limitation repayment of indebtedness stock repurchases acquisitions capital expenditures and working capital As of November 2 2024 the Company had 547 7 million of outstanding borrowings under the commercial paper program recorded in the Consolidated Balance Sheets The carrying value of the outstanding CP Notes approximated fair value at November 2 2024
5 050 senior notes due April 1 2034 the 2034 Notes with semi annual fixed interest payments due on April 1 and October 1 of each year commencing October 1 2024 The net proceeds of the offering were 545 5 million after discounts and issuance costs Prior to January 1 2034 three months prior to the maturity date of the 2034 Notes the Company may at its option redeem the 2034 Notes in whole or in part at any time and from time to time at a redemption price equal to the greater of 1 a the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date assuming the 2034 Notes matured on January 1 2034 on a semi annual basis at the applicable treasury rate plus 15 basis points less b interest accrued to the date of redemption and 2 100 of the principal amount of the 2034 Notes to be redeemed plus in either case accrued and unpaid interest thereon to the redemption date On or after January 1 2034 the Company may at its option redeem the 2034 Notes in whole or in part at any time and from time to time at a redemption price equal to 100 of the principal amount of the 2034 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date The 2034 Notes are unsecured and rank equally in right of payment with all of the Company s other existing and future unsecured senior indebtedness The 2034 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
On April 3 2024 in an underwritten public offering the Company issued 550 0 million aggregate principal amount of 5 300 senior notes due April 1 2054 the 2054 Notes with semi annual fixed interest payments due on April 1 and October 1 of each year commencing October 1 2024 The net proceeds of the offering were 542 3 million after discounts and issuance costs Prior to October 1 2053 six months prior to the maturity date of the 2054 Notes the Company may at its option redeem the 2054 Notes in whole or in part at any time and from time to time at a redemption price equal to the greater of 1 a the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date assuming the 2054 Notes matured on October 1 2053 on a semi annual basis at the applicable treasury rate plus 15 basis points less b interest accrued to the date of redemption and 2 100 of the principal amount of the 2054 Notes to be redeemed plus in either case accrued and unpaid interest thereon to the redemption date On or after October 1 2053 the Company may at its option redeem the 2054 Notes in whole or in part at any time and from time to time at a redemption price equal to 100 of the principal amount of the 2054 Notes being redeemed plus accrued and unpaid interest thereon to the redemption date The 2054 Notes are unsecured and rank equally in right of payment with all of the Company s other existing and future unsecured senior indebtedness The 2054 Notes were issued pursuant to the ADI Base Indenture as supplemented by a supplemental indenture which contain covenants similar to those applicable to the 2045 Notes events of default and other customary provisions As of November 2 2024 the Company was in compliance with these covenants
On November 25 2024 the Board of Directors of the Company declared a cash dividend of 0 92 per outstanding share of common stock The dividend will be paid on December 20 2024 to all shareholders of record at the close of business on December 9 2024 and is expected to total approximately 456 6 million
Our management with the participation of our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of Analog s disclosure controls and procedures as of November 2 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 the 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 SEC 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 November 2 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
Our management is responsible for establishing and maintaining adequate internal control over financial reporting Internal control over financial reporting is defined in Rule 13a 15 f or 15d 15 f promulgated under the Securities Exchange Act of 1934 as a process designed by or under the supervision of the company s principal executive and principal financial officers and effected by the company s board of directors management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Our management assessed the effectiveness of our internal control over financial reporting as of November 2 2024 In making this assessment the company s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission COSO in Internal Control Integrated 2013 Framework
Our independent registered public accounting firm that audited the financial statements included in this annual report has issued an attestation report on our internal control over financial reporting This report appears below
We have audited Analog Devices Inc s internal control over financial reporting as of November 2 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework the COSO criteria In our opinion Analog Devices Inc the Company maintained in all material respects effective internal control over financial reporting as of November 2 2024 based on the COSO criteria
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of November 2 2024 and October 28 2023 the related consolidated statements of income comprehensive income shareholders equity and cash flows for each of the three years in the period ended November 2 2024 and the related notes and schedule listed in the Index at Item 15 a 2 and our report dated November 26 2024 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
No change in our internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Securities Exchange Act occurred during the fiscal quarter ended November 2 2024 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting
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 fourth 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
None of our officers or directors 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 fourth quarter of fiscal 2024
We have adopted a written code of business conduct and ethics that applies to our principal executive officer principal financial officer principal accounting officer or controller or persons performing similar functions and have posted it in the Corporate Governance section of our website which is located at
To the extent permitted by Nasdaq and SEC regulations we intend to satisfy any disclosure requirement under Item 5 05 of Form 8 K regarding any amendments to or waivers from our code of business conduct and ethics by posting such information on our website which is located at
We have adopted an insider trading policy governing the purchase sale and other dispositions of our securities by our directors officers and employees that we believe is reasonably designed to promote compliance with insider trading laws rules and regulations and any applicable listing standards
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements or the Notes thereto
Third Amended and Restated Credit Agreement dated as of June 23 2021 among Analog Devices Inc as Borrower Bank of America N A as Administrative Agent Swing Line Lender and L C Issuer and each lender from time to time party thereto
filed as exhibit 10 28 to Maxim Integrated Products Inc s Annual Report on Form 10 K for the fiscal year ended June 27 2020 as filed with the Commission on August 19 2020 and incorporated herein by reference
filed as exhibit 10 5 to Maxim Integrated Products Inc s Quarterly Report on Form 10 Q for the fiscal quarter ended September 26 2020 as filed with the Commission on October 28 2020 and incorporated herein by reference
Pursuant to the requirements of Section 13 or 15 d 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
Pursuant to the requirements of the Securities and Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	ANALOG DEVICES INC Vist SEC web-site
Category	SEMICONDUCTORS & RELATED DEVICES
Trading Symbol	ADI